Category Archives: Social Security

Social Security is a bad deal for young workers today (Social Security Series Part 4)

January 27, 2011 – 7:36 pm

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Ron Paul’s radio address Dec 27, 2010 on Social Security

Social Security Series Part 4

Ron Paul in his radio address of Dec 27, 2010 noted:

But millions of Americans now realize that the status quo is an illusion that will not last even another 10 or 20 years. The federal government cannot continue to spend a trillion dollars more than it collects in revenue each year because we are running out of creditors. Fiscal reality is setting in and the consequences may be grim, even if Congress finds the courage to take decisive action now.

Courage begins with a commitment to see things as they are, rather than how we wish they were. When it comes to Social Security we must understand that the system does not represent an old age pension, an insurance program or even a forced savings program. It simply represents an enormous transfer of payment with younger workers paying taxes to benefit the other beneficiaries. There is no Social Security trust fund and you don’t have an account. Whether you win or lose the Social Security lottery is a function of when you happen to be born and how long you live to collect benefits. Of course young people today have every reason to believe they will never collect those benefits.

Social Security is a bad deal for young workers today and they are voicing their opinions.

What do you think of the nation’s Social Security system? Do you think that by the time you retire there will be enough money in the system to pay you the benefits you are entitled to, or do you think there will not be enough money left to pay you benefits?

Responses by Age Group:
  18-30 31-44 45-60 61+ All
Yes, will be enough 18% 23% 44% 61% 36%
No, will not be enough 80% 74% 52% 29% 60%
(VOL) Not covered by Social Security 0% 0% 1% 2% 1%
DK/No opinion 2% 3% 4% 7% 4%
Source: A Washington Post-ABC News poll conducted by telephone January 12 – 16, 2005 among 1,007 randomly selected adults nationwide. Margin of sampling error for overall results is plus or minus three percentage points. Fieldwork by TNS of Horsham, PA.

Another idea to help keep the Social Security system funded would let workers put some of their Social Security savings into stocks or bonds if they wanted to. That could produce higher or lower benefits depending on how the investments perform. Would you support or oppose this stock-market option for Social Security?

Responses by Age Group:
  18-30 31-44 45-60 61+ All
Support 71% 65% 47% 35% 55%
Oppose 26% 32% 50% 58% 41%
DK/No opinion 2% 4% 3% 7% 4%
Source: A Washington Post-ABC News poll conducted by telephone January 12 – 16, 2005 among 1,007 randomly selected adults nationwide. Margin of sampling error for overall results is plus or minus three percentage points. Fieldwork by TNS of Horsham, PA.  
By Everette Hatcher III | Also posted in Taxes | Comments (0)

Social Security taxes have risen rapidly (Social Security Series Part 3)

January 26, 2011 – 12:57 pm

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Debate on should the cap be raised on Social Security Payroll Taxes on Fox News.

Social Security Series Part 3

Basically the social security system in the USA has been in such bad shape because of this pay as you go system that there is no way to raise taxes enough to pay all the promised benefits over the next 40 years. Is the problem that we have not raised taxes fast enough in the past. Take a look.

Pat Fleck on his blog noted:

The tax was implemented in 1937 at 1.0% of the first $3,000 of wages. It stands today at 6.20% on the first $106,800 of wages. Inflation between 1937 and 2010 was 3.76% annually, whereas the wage limit has risen at 4.95%. Hence, even if the original 1.0% tax had remained constant, the amount collected on the limit would have increased substantially more than the rate of inflation due to the more rapidly increasing wage limit. However, with increases in both the limit and the rate, the tax in dollar terms has increased on the wage limit from $30 to $6,622, a 7.57% annual increase, which is double the rate of inflation between 1937 and 2010.

The main point I want you to take away from this post is: Social Security Payroll Taxes are two high now. Raising them further kills investment in the economy. Liberals have suggested raising the payroll taxes by 50% but that still would not take care of all the future promises that Social Security has made.

Glenn Beck has observed:

In less than six years, the federal government will be paying out more in Social Security benefits than the taxes that it takes in to fund it. Our Social Security Administration is getting $788 billion in fiscal year 2011. That breaks out to $6,500 per U.S. household.

You write a check for that? Can you write a check for that? ‘Cause that’s what we’re doing

By Everette Hatcher III | Also posted in Taxes | Comments (0)

Brantley criticizes Boozman’s views on Social Security (Social Security Series Part 2)

January 25, 2011 – 10:30 pm

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Social Security Series Part 2

Glenn Beck on Social Security with Chris Edwards, Director of Tax Policy, Cato Institute

Max Brantley on the Arkansas Times Blog on Sept 3, 2010 (“Boozman’s aim on Social Security,”) asserted, “John Boozman has indicated he believes Social Security is unsustainable and needs to be changed by opening the door to to privatization measures.” Then Brantley goes on to mock Boozman’s beliefs on this matter.

The facts however are very clear on the matter. Bill Frezza is a partner at Adams Capital Management, an early-stage venture capital firm. His article “Not in 25 years, Social Security is Bankrupt Now,” August 9, 2010, Real Clear Politics sets the record straight:  

This just in from the trustees that issue the annual report on the health of those two pillars of the modern entitlement state: Medicare and Social Security. For the first time in its history the Social Security program will pay out more money than it takes in. This watershed event will occur this year, to the tune of $41 Billion dollars. Under any rational accounting standards this makes the Social Security program bankrupt. And that’s right now, not in 25 years when the so-called Trust Fund becomes insolvent.

You see, most pension programs hold income producing assets in their Trust Funds. Stocks, bonds, real estate, oil and gas partnerships, that sort of thing. A fully funded pension program owns enough of those assets to pay its liabilities even if the company closes its doors and not a penny more of new money comes in from current employees.

Social Security plays by a different set of rules enshrined under the New Deal and Great Society programs. These are the same rules that landed Bernie Madoff in jail. Although the Social Security system has been regularly taking in billions for decades and socking it into its Trust Fund just like a normal pension plan, Congress has just as regularly been draining the money out for current spending. All of the money collected from every American’s paycheck throughout all of our careers is now gone. In its place are not stocks, bonds, real estate, and oil and gas partnership. In its place are IOUs from Harry Reid, Nancy Pelosi, Charlie Rangel, and Barney Frank. $2.5 Trillion dollars worth of IOUs.

Now, imagine if a private company had a pension plan that its executives had completely drained wining and dining Congressmen in return for IOUs. What do you think would become of those executives when word got out that the only way they could make pension payments was to beg a flat-broke Congress for money?

Tar and feathers come to mind.

Max Brantley and other liberals will keep singing the same song because it brings them political points. However, the facts are out there for all to see. Just wait until those baby boomers double the number of retirees in our nation receiving Social Security in the next few years. Even the liberals may come around when that happens.

By Everette Hatcher III | Also posted in Cato Institute | Comments (0)

Dumas:Republicans opposed Social Security in 1936 through courts(Social Security Series Part 1)

January 25, 2011 – 3:48 pm

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Social Security Series Part 1

Michael Tanner, a senior fellow at the CATO institute, explains that the rate of return on social security will be much lower for todays youth.

Ernest Dumas in his article “Back to 1936,” (Ark Times, Dec 23, 2010), notes, “Now the Republican Party has retreated to 1936, when it fought the Social Security law, which required people to buy old-age and survivors insurance and pay for it with a payroll tax and taxed employers to pay for unemployment insurance.”

Ernest Dumas tries to compare the Republicans of 1936 who fought Social Security through the courts to the Republicans of 2010 who are trying to fight Obamacare through the courts. Over and over again Dumas has repeated in the last few years what a great program Social Security has been. I want to start a series today that looks at the history of Social Security and what the future holds for this program.

Michael Tanner of the Cato Institute shed some light on where we are now 75 years later with this great program that Dumas praises (“Social Security Deficits will soon be Permanent,” Aug 16, 2010):

When last we heard from Senate Majority Leader Harry Reid, he was proclaiming that there was no need to reform Social Security because the program “is on solid ground for decades to come.”

Well, apparently that’s true — if by “decades” Reid, D-Nev., meant “five years.”

Social Security’s trustees this month finally released their long-delayed report on the system’s finances. According to the trustees, who include President Barack Obama’s secretaries of Labor and Treasury, Social Security is actually running a cash-flow deficit today, spending more money on benefits than it takes in through taxes. Most of that deficit has been caused by the recent economic downturn and, hopefully, will be only temporary.

But regardless of how the economy performs in the next few years, the trustees warn that by 2015, just five years from now, Social Security will again start to run deficits — and this time they will be permanent. That’s a year sooner than predicted in last year’s report.

While, in theory, the Social Security Trust Fund will be able to pay benefits until 2037, the same as in last year’s report, that figure is misleading because the trust fund contains no actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system, $2.6 trillion, according to the report.

Of course, no one is saying that the government will default on its obligations, but one might ask where the government will get the money to pay back that $2.6 trillion. It’s not as though the government has it laying around. To say that Social Security is fine because the Treasury will find a way to pay its debts is like saying you have plenty of money for your mortgage — as long as you don’t eat.

By Everette Hatcher III | Also posted in Cato Institute | Comments (0)