Category Archives: Social Security

An open letter to President Obama (Part 39 of my response to State of Union Speech 1-24-12)

March 19, 2012 – 12:55 pm

 

President Obama’s state of the union speech Jan 24, 2012

Barack Obama (Photo by Saul Loeb-Pool/Getty Images)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

The Heritage Foundation website (www.heritage.org ) has lots of good articles and one that caught my attention was concerning your State of Union Speech on January 24, 2012 and here is a short portion of that article:

Social Security Silence – David John

In a night of disappointments, the complete lack of any mention of Social Security other than as an excuse to raise taxes was one of the greatest.  Although the Social Security trustees, several of whom are members of the President’s cabinet, has warned that the program faces perpetual deficits, the President evidently has no plan to protect the retirement security of millions of Americans who face a 25% benefit cut in less than 25 years.  Most officeholders join the President in treating Social Security as an issue that can be discussed later – much later, but the reality is that just like a leaky roof, the longer that the President and Congress waits to fix the program, the more expensive the reforms will be.

Tax Reform? It’s Needed, but There’s A Better Way to Go – Emily Goff

President Obama says he is ready and willing to embark on tax reform. This is a welcome statement, as our current tax system is ripe for overhaul. However, instead of piecemeal approaches or solutions that give preferences to one industry or company over another, the President should look to the fundamental reforms that the New Flat Tax, as part of The Heritage Foundation’s Saving the American Dream, would bring.

Obama Doubles Down on the Worst U.S. Tax Policy – J.D. Foster

One of the universally acknowledged banes of the federal income tax has for years been the individual Alternative Minimum Tax.  Borne in its current form in the 1986 tax reform act, this parallel system which runs in parallel to the regular income tax forces taxpayers to calculate their taxes twice and pay the larger of the two.

Today, this tax makes no sense, and most tax reform proposals of sufficient heft seek as a primary goal the repeal of the AMT.  Tonight, President Obama proposed not merely to embrace the AMT in principle, but to extend the principle robustly to the business income tax – to create a new basic minimum tax for businesses.  Once again, when it comes to tax policy, President Obama sees what needs to be done – and does the exact opposite.

___________________

Got to tackle entitlement reform but your speech did not mention that once.

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

By Everette Hatcher III | Also posted in President Obama, spending out of control, Taxes | Comments (0)

Ark Times reader says Social Security is not Ponzi Scheme

February 28, 2012 – 11:14 pm

Social Security is a Ponzi Scheme but Blake who is a blogger said I was off base.

Ark Times reader says Social Security is not Ponzi Scheme

Social Security Disaster

Politicians who are principled enough to point out the fraud of Social Security, referring to it as a lie and Ponzi scheme, are under siege. Acknowledgment of Social Security’s problems is not the same as calling for the abandonment of its recipients. Instead, it’s a call to take actions now, while there’s time to avert a disaster. Let’s look at it.

The term was derived from the scheme created during the 1920s by Charles Ponzi, a poor but enterprising Italian immigrant. Here’s how it works. You persuade some people to give you their money to invest. After a while, you pay them a nice return, but the return doesn’t come from investments. What you pay them with comes from the money of other people whom you’ve persuaded to “invest” in your scheme. The scheme works so long as you can persuade greater and greater numbers of people to “invest” so that you can pay off earlier “investors.” After a while, Ponzi couldn’t find enough new investors, and his scheme collapsed. He was convicted of fraud and sent to prison.

The very first Social Security check went to Ida May Fuller in 1940. She paid just $24.75 in Social Security taxes but collected a total of $22,888.92 in benefits, getting back all she put into Social Security in a month. According to a Congressional Research Service report titled “Social Security Reform” (October 2002), by Geoffrey Kollmann and Dawn Nuschler, workers who retired in 1980 at age 65 got back all they put into Social Security, plus interest, in 2.8 years. Workers who retired at age 65 in 2002 will have to wait a total of 16.9 years to break even. For those retiring in 2020, it will take 20.9 years. Workers entering the labor force today won’t live long enough to get back even half of what they will put into Social Security. Social Security faces Ponzi’s problem, not enough new “investors.” In 1940, there were 160 workers paying into Social Security per retiree; today there are only 2.9 and falling.

Some politicians claim that Social Security has a huge trust fund and is in good health. An uniformed public and a derelict news media don’t challenge that lie. Back in August, politicians were in a tizzy over raising the federal debt limit. In an effort to frighten seniors, President Barack Obama said in a CBS interview, “I cannot guarantee that those checks go out on Aug. 3 if we haven’t resolved this issue, because there may simply not be the money in the coffers to do it.” Here’s how we reveal the trust fund lie: According to the Social Security Administration, it has a trust fund with $2.6 trillion in it. If those were real assets, then the Social Security Administration could have mailed checks out regardless of what Congress did about the debt limit. The reality is that the Social Security trust fund consists of government IOUs that have no real value at all and probably are not even worth the paper upon which they are printed.

I believe that a person who is 65 years old and has been forced into Social Security is owed something. But the question is, Who owes it to him? Congress has spent every penny of his Social Security “contribution.” Young workers have no obligation to be fleeced in order to make up for the dishonesty and dereliction of Congress. The tragedy is that most seniors just want their money and couldn’t care less about whom Congress takes it from.

Here’s what might be a temporary fix: The federal government owns huge quantities of wasting assets — assets that are not producing anything — 650 million acres of land, almost 30 percent of the land area of the United States. In exchange for those who choose to opt out of Social Security and forsake any future claim, why not pay them off with 40 or so acres of land? Doing so would give us breathing room to develop a free choice method to finance retirement

Related posts:

Social Security is a Ponzi scheme (Part 6)

Further Reforms to Modernize Social Security — Saving the American Dream Uploaded by HeritageFoundation on May 24, 2011 http://www.savingthedream.org | Currently deep in debt, America’s Social Security program doesn’t look very secure. Today there is a new plan to get it back on track. David John, Senior Research Fellow in Retirement Security at The Heritage […]

Republicans need to tackle runaway entitlement spending

Republicans need to tackle runaway entitlement spending Uploaded by NatlTaxpayersUnion on Feb 15, 2011 Dan Mitchell, Senior Fellow at the Cato Institute, speaks at Moving Forward on Entitlements: Practical Steps to Reform, NTUF’s entitlement reform event at CPAC, on Feb. 11, 2011. __________________________ I am disappointed in some of the Republicans who do not want […]

Ron Paul, Rick Perry and Mitt Romney have the money coming in

I really like Ron Paul and Rick Perry. Only three Republican presidential candidates are worth any money _ campaign money, that is. Mitt Romney, Rick Perry and Ron Paul have banked millions. But the other GOP candidates are struggling or broke, putting their candidacies in question four months before the first nominating contests take place. […]

Rick Perry says Social Security is a Ponzi scheme

Rick Perry says Social Security is a Ponzi scheme Rick Perry and Mitt Romney went after each other at the debate over this term “Ponzi scheme.” Over and over Rick Perry has said that Social Security is a Ponzi scheme and I agree with him. John Brummett asserted,”Rick Perry was last week’s savior, but then he […]

Social Security is a Ponzi scheme (Part 5)

 IOUSA Solutions: Part 3 of 5 Uploaded by IOUSAtheMovie on Aug 25, 2010 The award-winning documentary I.O.U.S.A. opened up America’s eyes to the consequences of our nation’s debt and the need for our government to show more fiscal responsibility. Now that more Americans and elected officials are aware of our fiscal challenges, the producers of […]

Social Security is a Ponzi scheme (Part 4)

Social Security is a Ponzi scheme (Part 4) Governor Rick Perry got in trouble for calling Social Security a Ponzi scheme and I totally agree with that. This is a series of articles that look at this issue. Trains, Pensions, and Economic Freedom by Timothy B. Lee This article appeared on Forbes.com on August 17, 2011. recently […]

Social Security is a Ponzi scheme (Part 3)

Social Security is a Ponzi scheme (Part 3) Governor Rick Perry got in trouble for calling Social Security a Ponzi scheme and I totally agree with that. This is a series of articles that look at this issue. Personal Accounts and the Savings Rate by Timothy B. Lee This article appeared on Forbes.com on September 11, 2011 […]

Rick Perry’s Ponzi-scheme claim is in no way unprecedented

Rick Perry and Mitt Romney went after each other at the debate over this term “Ponzi scheme.” Janet M. LaRue   Romney’s Ponzi Phobia 9/19/2011 When it comes to Social Security, Republicans should stop treating seniors like the feeble-minded demographic portrayed in commercials written by 13-year-olds on Madison Avenue. It’s like the home security commercial […]

Social Security is a Ponzi scheme (Part 2)

Social Security is a Ponzi scheme (Part 2) John Stossel – Government’s Ponzi Scheme Uploaded by LibertyPen on Apr 21, 2010 A look at the Social Security system. By contrast, Bernie Madoff seems like a shoplifter. http://www.LibertyPen.com Uploaded by LibertyPen on Jan 8, 2009 Professor Williams explains what’s ahead for Social Security ______________________________ Governor Rick […]

By Everette Hatcher III | Comments (0)

Using permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is stupid

February 2, 2012 – 4:16 pm

The liberal Arkansas Times Blogger Max Brantley wrote on 12-1-11:

Senate Republicans tonight defeated the payroll tax break for working Americans. President Obama’s statement:

Tonight, Senate Republicans chose to raise taxes on nearly 160 million hardworking Americans because they refused to ask a few hundred thousand millionaires and billionaires to pay their fair share. They voted against a bill that would have not only extended the $1,000 tax cut for a typical family, but expanded that tax cut to put an extra $1,500 in their pockets next year, and given nearly six million small business owners new incentives to expand and hire. That is unacceptable.It makes absolutely no sense to raise taxes on the middle class at a time when so many are still trying to get back on their feet. Now is not the time to put the economy and the security of the middle class at risk. Now is the time to rebuild an economy where hard work and responsibility pay off, and everybody has a chance to succeed. Now is the time to put country before party and work together on behalf of the American people. And I will continue to urge Congress to stop playing politics with the security of millions of American families and small business owners and get this done.

Now the Republicans will offer their plan to give a cut by screwing working people.

___________________-

Brantley does not explain why the economy has not been stimulated at all by ANYTHING THAT PRESIDENT OBAMA HAS TRIED SO FAR!!! Then we should this payroll tax holiday be extended?

This article below from the Cato Institute does a good job of showing the Republicans were right to vote against Obama’s plan.

President Obama’s $447 Billion Tax Increase

Posted by Alan Reynolds

In his September 8 lecture to Congress, President Obama promised that “every proposal I’ve laid out tonight will be paid for.”  How?  By raising tax rates on “the wealthiest Americans and biggest corporations.” In other words, the President is proposing a $447 billion tax increase.

When the details are revealed on September 19, the President will be proposing large and permanent increases in the highest income tax rates − mainly to “pay for” a small and temporary cut in payroll taxes (which accounts for 54 percent of his $447 billion package).  The plan is likely to contain elements of the September 7 proposal of Congressional Democrats to the super-committee — such as a draconian “super-Pease” phase-out and cap on itemized deductions, and a top marginal tax rate of 48.8 percent in 2013.

Temporary payroll tax cuts and extended unemployment benefits are bait the President set out to trap House Republicans with their own debt ceiling demands.

“The agreement we passed in July,” said the President, “will cut government spending by about $1 trillion over the next 10 years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I am asking you to increase that amount so that it covers the full cost of the American Jobs Act.”   But the $447 billion budgetary hit can’t be spread over 10 years without triggering another debt ceiling calamity.  Either the debt ceiling has to be promptly raised by an extra $447 billion or tax receipts somehow raised by that amount in fiscal 2012-2013.   Any “modest adjustments to health care” will be too distant and nebulous to help.

Using permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is no “stimulus” under either Keynesian or empirical economics.  Neither is a tax-financed extension of unemployment benefits, which clearly raises the unemployment rate by 0.8 to 1.8 percentage points.   Yet the one-year extension of payroll tax cuts and 99-week unemployment benefits is being held out as irresistible bait to gullible legislators.

By inviting House Republicans to stumble into this trap, the president is also hoping to preempt the congressional super-committee’s option of reducing deficits by trimming tax loopholes.  President Obama is trying to lay claim to any potential revenues from cutting loopholes (or legitimate deductions) for his own pet projects, which include grants to hire more state and local government workers and extended unemployment benefits for the private sector.

This is no “jobs plan.”  It’s a tax-and-spend plan, and a bad one.

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

Norquist is right, Brantley is wrong

February 2, 2012 – 4:08 pm

Max Brantley went on another tyrade about raising taxes instead of cutting spending (“How to raise taxes,” Arkansas Times Blog, November 28, 2011). However, spending is the main problem and it appears that Democrats do not want to cut a dime. Instead, they blame Glover Norquist for all their problems.

Does Norquist deserve all the blame? Charles Krauthammer set the record straight below:

The Grover Norquist myth

Charles KrauthammerNovember 28, 2011

WASHINGTON — Democrats are unanimous in charging that the debt-reduction supercommittee collapsed because Republicans refused to raise taxes. Apparently, Republicans are in the thrall of one Grover Norquist, the anti-tax campaigner, whom Sen. John Kerry, D-Mass., called “the 13th member of this committee without being there.” Senate Majority Leader Harry Reid helpfully suggested “maybe they should impeach Grover Norquist.”

With that, Norquist officially replaces the Koch brothers as the great malevolent manipulator that controls the republic by pulling unseen strings on behalf of the plutocracy.

Nice theory. Except for the following facts:

•Sen. Tom Coburn last year signed on to the Simpson-Bowles tax reform that would have increased tax revenue by $1 trillion over a decade.

•During the debt-ceiling talks, House Speaker John Boehner agreed to an $800 billion revenue increase as part of a Grand Bargain.

•Supercommittee member Pat Toomey, a Club for Growth Republican, proposed increasing tax revenue by $300 billion as part of $1.2 trillion in debt reduction.

Leading, very conservative Republicans proposing tax increases. So why does the myth of the Norquist-controlled anti-tax monolith persist? You might suggest cynicism and perversity. Let me offer a more benign explanation: thickheadedness. Democrats simply can’t tell the difference between tax revenue and tax rates.

In deficit reduction, all that matters is tax revenue. The holders of our national debt care not a whit what tax rates yield the money to pay them back. They care about the sum.

The Republican proposals raise revenue, despite lowering rates, by opening a gusher of new income for the Treasury in the form of loophole elimination. For example, the Toomey plan eliminates deductions by $300 billion more than the reduction in tax rates “cost.” Result: $300 billion in new revenue.

The Simpson-Bowles commission — appointed by President Barack Obama and endorsed by Coburn — used the same formula. Its tax reform would lower tax rates at a “cost” of $1 trillion a year while eliminating loopholes that deprive the Treasury of $1.1 trillion a year. This would leave the Treasury with an excess — i.e., new tax revenue — of $100 billion a year, or $1 trillion over a decade.

Raising revenue through tax reform is better than simply raising rates, which Democrats insist upon with near religious fervor. It is more economically efficient because it eliminates credits, carve-outs and deductions that grossly misallocate capital. And it is more fair because it is the rich who can afford not only the sharp lawyers and accountants who exploit loopholes but the lobbyists who create them in the first place.

Yet the Democrats, who flatter themselves as the party of fairness, are instead obsessed with raising tax rates on the rich as a sign of civic virtue. This is perverse in three ways:

1) Raising rates gratuitously slows economic growth, i.e., expansion of the economic pie for everyone, by penalizing work and by retaining inefficiency-inducing loopholes.

2) We’re talking pennies on the dollar. Obama’s coveted Bush tax cut repeal would yield the Treasury, at the very most, $80 billion a year — offsetting 2 cents on the dollar of government spending ($3.6 trillion).

3) Hiking tax rates ignores the real drivers of debt, which, as Obama himself has acknowledged, are entitlements.

Has the president ever publicly proposed a single significant structural change in any entitlement? After Simpson-Bowles reported? No. In his February budget? No. In his April 13 budget “framework”? No. During the debt-ceiling crisis? No. During or after the supercommittee deliberations? No.

As regarding the supercommittee, Obama was AWOL — then immediately pounced on its failure by going on TV to repeat his incessantly repeated campaign theme of the do-nothing (Republican) Congress.

A swell slogan that fits nicely with the Norquist myth. Except for another inconvenient fact: It is the Republicans who passed — through the House, the only branch of government they control — a real budget that cut $5.8 trillion of spending over the next 10 years. Obama’s February budget, which would have increased spending, was laughed out of the Senate, voted down 97-0. As for the Democratic Senate, it has submitted no budget at all for 2 1/2 years.

Who, then, is do-nothing? Republicans should happily take on this absurd, and central, Democratic campaign plank. Bring Simpson-Bowles to the House floor and pass the most radical of its three deficit-reduction alternatives.

Dare the Senate Democrats to vote down the grandest of all bargains. Dare Obama to veto his own debt commission. Dare the Democrats to actually do something about debt.

Washington Post Writers Group

Charles Krauthammer is a syndicated columnist based in Washington.

letters@charleskrauthammer.com

By Everette Hatcher III | Also posted in Cato Institute, spending out of control, Taxes | Comments (0)

Senator Obama’s ideas on Social Security

February 2, 2012 – 3:54 pm

Senator Obama’s Social Security Tax Plan

Uploaded by on Jul 23, 2008

In addition to several other tax increases, Senator Barack Obama wants to increase the Social Security payroll tax burden by imposing the tax on income above $250,000. This would be a sharp departure from current law, which only requires that the tax be imposed on the amount of income needed to “pay for” promised benefits. But more important, at least from an economic perspective, the Senator’s initiative would increase the top tax rate on productive behavior by as much as 12 percentage points – and this would be in addition to his proposal to kill the 2003 tax rate reductions and further boost the top rate by 4.6 percentage points. This mini-documentary explains why a big tax rate increase on highly productive people would be very damaging to America’s prosperity, especially in a competitive global economy. Simply stated, pushing top tax rates in the United States to French and German levels means at least some degree of French-style and German-style economic stagnation. Visit http://www.freedomandprosperity.org for more information.

By Everette Hatcher III | Also posted in Cato Institute, President Obama | Tagged , , , , , | Comments (0)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (“Thirsty Thursday,” Open letter to Senator Pryor)

February 2, 2012 – 12:40 pm

Dear Senator Pryor,

Why not pass the Balanced Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion).

On my blog www.HaltingArkansasLiberalswithTruth.com I took you at your word and sent you over 100 emails with specific spending cut ideas. However, I did not see any of them in the recent debt deal that Congress adopted. Now I am trying another approach. Every week from now on I will send you an email explaining different reasons why we need the Balanced Budget Amendment. It will appear on my blog on “Thirsty Thursday” because the government is always thirsty for more money to spend.

New CBO Numbers Re-Confirm that Balancing the Budget Is Simple with Modest Fiscal Restraint

Posted by Daniel J. Mitchell

Many of the politicians in Washington, including President Obama during his State of the Union address, piously tell us that there is no way to balance the budget without tax increases. Trying to get rid of red ink without higher taxes, they tell us, would require “savage” and “draconian” budget cuts.

I would like to slash the budget and free up resources for private-sector growth, so that sounds good to me. But what’s the truth?

The Congressional Budget Office has just released its 10-year projections for the budget, so I crunched the numbers to determine what it would take to balance the budget without tax hikes. Much to nobody’s surprise, the politicians are not telling the truth.

The chart below shows that revenues are expected to grow (because of factors such as inflation, more population, and economic expansion) by more than 7 percent each year. Balancing the budget is simple so long as politicians increase spending at a slower rate. If they freeze the budget, we almost balance the budget by 2017. If federal spending is capped so it grows 1 percent each year, the budget is balanced in 2019. And if the crowd in Washington can limit spending growth to about 2 percent each year, red ink almost disappears in just 10 years.

These numbers, incidentally, assume that the 2001 and 2003 tax cuts are made permanent (they are now scheduled to expire in two years). They also assume that the AMT is adjusted for inflation, so the chart shows that we can balance the budget without any increase in the tax burden.

I did these calculations last year, and found the same results. And I also examined how we balanced the budget in the 1990s and found that spending restraint was the key. The combination of a GOP Congress and Bill Clinton in the White House led to a four-year period of government spending growing by an average of just 2.9 percent each year.

We also have international evidence showing that spending restraint – not higher taxes – is the key to balancing the budget. New Zealand got rid of a big budget deficit in the 1990s with a five-year spending freeze. Canada also got rid of red ink that decade with a five-year period where spending grew by an average of only 1 percent per year. And Ireland slashed its deficit in the late 1980s by 10 percentage points of GDP with a four-year spending freeze.

No wonder international bureaucracies such as the International Monetary fund and European Central Bank are producing research showing that spending discipline is the right approach

Daniel J. Mitchell • January 27, 2011 @ 12:00 pm
Filed under: Government and Politics; Health Care; Tax and Budget Policy

By Everette Hatcher III | Comments (0)

Republicans need to tackle runaway entitlement spending

January 2, 2012 – 1:49 pm

Republicans need to tackle runaway entitlement spending

Uploaded by on Feb 15, 2011

Dan Mitchell, Senior Fellow at the Cato Institute, speaks at Moving Forward on Entitlements: Practical Steps to Reform, NTUF’s entitlement reform event at CPAC, on Feb. 11, 2011.

__________________________

I am disappointed in some of the Republicans who do not want to take the bull by the horns on this issue.

GOP Needs an Entitlement Plan

by Michael D. Tanner

Michael Tanner is a senior fellow at the Cato Institute and coauthor of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

Added to cato.org on September 28, 2011

This article appeared on National Review (Online) on September 28, 2011

There was telling moment during the CNN Republican presidential debate: Asked about the possibility of repealing George W. Bush’s Medicare prescription-drug benefit, which is adding some $17 trillion to Medicare’s unfunded liabilities, every one of the candidates pledged varying degrees of fealty to the program. No one came out for significantly cutting this vestige of Bush-style big-government conservatism, let alone repealing it. This put the current crop of Republicans to the left of John McCain, who at least campaigned in favor of means-testing the program in 2008.

The failure to stand up against one of the Bush administration’s most obvious mistakes is not just a case of hypocrisy; it is part of a disturbing trend toward ducking the tough decisions on budget cutting among the Republican aspirants. For all the sound and fury, and the charges and countercharges surrounding entitlement reform, the GOP candidates have been remarkably reluctant to put forward actual proposals.

Former Massachusetts governor Mitt Romney, for example, has been attacking Texas governor Rick Perry over Social Security from the left, praising the program as “an essential federal program,” that has been a “success” for more than 70 years. But for all his criticism of Perry, Romney has been much vaguer about his own plans for reform. At times he has sounded almost like Obama, suggesting that there are lots of reform ideas — raising the retirement age, means testing, changing the wage-price indexing formula — that are “on the table,” but not actually endorsing any of them. One reform that Romney has taken off the table is allowing younger workers to privately invest a portion of their payroll taxes through personal accounts. In his book, No Apology, Romney endorses so-called “add on” accounts, allowing workers to save in addition to Social Security, but not carving out a portion of their current taxes. “Given the volatility of investment values that we have just experienced, I would prefer that individual accounts were added to Social Security, not diverted from it,” Romney wrote.

The Republican candidates all talk about reducing government spending. But they cannot do that unless they commit to real entitlement reform.

On Medicare, Romney has avoided specifics as well, praising Paul Ryan’s proposed reforms for example as “taking important strides in the right direction,” but not endorsing them.

For his part, Governor Perry has been forthright about the flaws of Social Security but has offered nothing in the way of a proposal for reform. As Romney has pointed out endlessly, Perry suggested in his book that Social Security might be returned to the states. But Perry has since disavowed that idea, claiming that he was only referring to state employees, some 7 million of whom are currently outside the Social Security system. Perry has also praised the privatized system for public employees in Galveston and two other Texas counties, suggesting that he might be open to some type of private investment option. But “suggesting” is as far as he goes.

On Medicare, Perry has been equally murky. At times, he has suggested that we should “transition away from” the current Medicare system, but without saying what we should transition to. His aides point out that Perry has only recently joined the race and hasn’t had time to develop specific proposals. But given his fiery talk on the issues, until he does he will seem more hat than cattle.

Rep. Michelle Bachmann has also largely tried to have it both ways on entitlement reform. She voted for the Ryan plan in Congress but promptly put out a statement distancing herself from it, claiming that her vote came with an asterisk. On Social Security, Bachmann once called the program a “monstrous fraud,” but has now joined Romney in attacking Perry’s “Ponzi scheme” description. She says that a key difference between her and Perry is that she believes Social Security “is an important safety net and that the federal government should keep its promise to seniors.” But with Social Security currently facing more than $20 trillion in unfunded liabilities, the question is how it will keep that promise.

Second-tier candidates, with less to lose, have been more willing to spell out their proposals. Businessman Herman Cain, for example, supports both the Ryan plan and Chilean-style personal accounts for Social Security. Former Pennsylvania senator Rick Santorum takes similar positions, as does former New Mexico governor Gary Johnson. Former Utah governor Jon Huntsman has endorsed the Ryan plan but has not spelled out his views on Social Security reform. Newt Gingrich, on the other hand, has focused on cutting “fraud, waste, and abuse,” rather than fundamentally altering the structure of those programs. Ever the iconoclast, Rep. Ron Paul opposes both the Ryan plan and personal accounts for Social Security, since he opposes a federal role in either health care or retirement on principle.

The facts are both simple and frightening. The unfunded liabilities of Social Security and Medicare run between $50 trillion and $110 trillion. Those two programs, along with Medicaid, are the primary drivers of our future indebtedness. In fact, by 2050, those three programs alone will consume 18.4 percent of GDP. If one assumes that revenues return to and stay at their traditional 18 percent of GDP, then those three programs alone will consume all federal revenues. There would not be a single dime available for any other program of government, from national defense to welfare.

The Republican candidates all talk about reducing government spending. But they cannot do that unless they commit to real entitlement reform. There’s time, and lots of debates, to hear specifics from them. But so far, the omens are not auspicious.

By Everette Hatcher III | Also posted in spending out of control | Comments (0)

Take hikes are not the answer to Social Security

December 21, 2011 – 2:30 pm

Further Reforms to Modernize Social Security — Saving the American Dream

Great article from Heritage Foundation on Social Security System that shows that tax hikes are not the answer:

Social Security is currently unsustainable. It began running deficits in 2010 and its trust fund will be exhausted by 2036, which is when seniors will see about a 25 percent cut in benefits. This is the scenario we face if Congress and the President fail to enact meaningful entitlement reform and continue reckless fiscal policies. This course is reversible, however.

At a recent House Budget Committee hearing on the fiscal facts concerning Medicare and Social Security, Members were divided on how to save Social Security. Despite hearing from Steve Goss, Social Security’s chief actuary, that raising taxes is not a necessity, tax hikes remained the leading option among certain lawmakers. Both parties agree that Social Security is insolvent, but they disagree on what to do about it.

Raising taxes, however, is not an option. Amidst the greatest recession in three decades, higher payroll taxes threaten to damage the American economy. Heritage has a new plan for Social Security, as presented in Saving the American Dream. It promises to restore fiscal responsibility and protect Americans from unneeded tax hikes.

At present, workers and their employers each pay 6.2 percent for Social Security retirement and disability benefits, adding up to a 12.4 percent payroll tax that is levied on every single worker’s income. If the government were to increase this tax to pay for Social Security’s deficits, every American worker and his boss would split an increase of at least 2.2 percent. Raising these taxes will discourage employers from hiring new workers and exacerbate unemployment.

Tax-loving lawmakers then turn to the tax cap. Social Security taxes are currently deducted only from the first $106,800 each worker earns. But some lawmakers suggest that any money Americans don’t “need” is fair game for tax hikes. President Obama most recently revealed this philosophy, fundamentally at odds with America’s job creators, during a press conference on the debt limit. Similarly, certain members at the recent House Budget Committee hearing suggested lifting the cap on the Social Security payroll tax to pay for the program’s shortfall. But taking more money out of the private economy limits entrepreneurial exercise—the true source of wealth in any free-market economy.

The Heritage Foundation plan does not call for unnecessary tax increases. Instead, it restores Social Security to its original purpose of being a safeguard against senior poverty. The plan includes both a transition into a flat benefit for those who work more than 35 years, as well as phasing out Social Security benefits for those who have significant non-Social Security retirement income. The plan also contains incentives to encourage Americans to work beyond the age at which they would normally receive benefits. Because Americans are living longer than ever before, they are spending more years in retirement. Therefore, Saving the American Dream calls for gradually increasing the retirement age and then indexing it to life expectancy.

Unemployment remains high, and Social Security faces serious fiscal challenges. It simply cannot afford to pay all of the future benefits it has promised. Elected leaders must realize that tax hikes are not the answer and that there are different ways to save both Social Security and the economy. Saving both requires our attention now, and as Heritage’s David John writes, “ [I]nstead of just blindly defending the current program, both Congress and the Obama Administration should propose comprehensive programs that permanently fix Social Security.”

By Everette Hatcher III | Also posted in Taxes | Tagged , , , , | Comments (2)

Rick Perry says Social Security is a Ponzi scheme

December 8, 2011 – 2:43 pm

Rick Perry says Social Security is a Ponzi scheme

Rick Perry and Mitt Romney went after each other at the debate over this term “Ponzi scheme.”

Over and over Rick Perry has said that Social Security is a Ponzi scheme and I agree with him. 

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The Social Security Rorschach Test

by William Shipman

This article appeared on The Daily Caller on September 21, 2011

Comments by Rick Perry and Mitt Romney on Social Security during the last two Republican presidential debates may have provided more insight into these two men than expected — something to ponder with the next debate coming up.

Mr. Romney told us that he is “committed to saving Social Security” and that “under no circumstances would I ever say by any measure it’s a failure.”

Mr. Perry called the system a “Ponzi scheme” and said it’s “a monstrous lie” to tell young workers that their payroll taxes will provide them with Social Security benefits.

Bill Shipman is chairman of CarriageOaks Partners, LLC and co-chairman of the Cato Institute Project on Social Security Choice.

 

More by William G. Shipman

 Mr. Romney replied that Mr. Perry’s position could disqualify him as the GOP nominee. Apparently, a line has been drawn.

In his 2005 State of the Union Address, President Bush spent about 20 percent of his time talking about Social Security reform, specifically personal investment accounts. Democrats fought this idea with all their strength. Although it’s less well known, Republicans engaged in a family brawl in which many fought Mr. Bush’s investment-accounts idea, too. They were afraid that if they supported the president, they would lose their next elections.

But now the brawl has broken through the Republican skin and is in the open. What can we learn from this?

First, reflect upon Governor Romney’s point that Social Security is not a failure “by any measure,” and try to square that with the fact that Social Security is mandatory. Each worker is compelled to pay 10.6% of his wage, on up to $106,800, to the government for the retirement portion of the system. That means the average-wage earner has no choice on how to allocate 10.6% of his wage income for retirement. That’s bad enough, but it’s made worse by the fact that his Social Security benefits are very low: about half of what his Social Security taxes would provide if they were invested in a diversified portfolio of stocks and bonds.

Second, in 1950, when there were 16 workers per beneficiary, the payroll tax rate was just 3% on $3,000 of wages. Since then the tax rate increased 18 times, and the wage subject to the tax increased 43 times. After adjusting for inflation the maximum tax jumped 1,322%. Benefits rose as well, but proportionally much less. The squeeze in benefits relative to taxes has progressively made the system a worse deal.

Third, Social Security’s actuaries estimate that the mismatch between future taxes and benefits is just under $7 trillion. That number represents what must be invested right now, in addition to all future payroll taxes, in order to pay scheduled benefits.

Finally, in the 1960 Flemming v. Nestor case, the Supreme Court ruled that workers have no property rights to their scheduled benefits. The government can reduce them at will, which it did in 1983 by increasing the retirement age from 65 to 67; or it can increase the tax at will, which it consistently has done. Also, when one member of an elderly couple dies, the government — in most cases — reduces Social Security benefits by a third. Sort of a death tax.

This system of no choice, low benefits relative to taxes, significant tax increases, a massive unfunded liability, the absence of personal property rights and a death tax apparently does not rise to the level of failure “by any measure” according to Gov. Romney.

For his part, Gov. Perry has called Social Security a Ponzi scheme: a fraudulent investment operation that pays subscribers not from investment earnings but from new subscribers’ funds. To entice subscribers, such schemes must provide unusually high and/or stable returns. Given that the high returns require endless new subscribers to pay off previous ones, such schemes ultimately fail.

Although Mr. Perry’s Ponzi analogy is not technically correct, it has some validity in that Social Security benefits are financed by ever more subscribers — that is, wage earners. But unlike a Ponzi scheme, Social Security is not fraudulent, and it doesn’t pay large benefits relative to taxes. Indeed, it pays low benefits. A Ponzi scheme promises high returns. That’s why people freely, although foolishly, play the game. Social Security promises low returns. That’s why people are forced to play the game.

Mr. Romney has stated that the Republican nominee must be committed to saving Social Security, not abolishing it. It’s not clear what he means. Does he want to save the objective of Social Security, which is, broadly speaking, the provision of retirement benefits? Or does he want to save its structure wherein today’s young finance benefits for today’s old?

Mr. Perry says the system is a Ponzi scheme and a lie. Does this mean that he wants to get rid of the structure yet keep the objective? Or does it mean that he wants to get rid of both?

The two candidates’ differences on this issue may shed light on bigger philosophical disagreements they may have. Do they see government as bungling but benign, only in need of a seasoned CEO who can more successfully manage the enterprise? Or do they see government as overreaching, stifling, oppressive and hurtful in its reach, and in need of a strong and principled leader to shove it out of the way?

How these candidates deal with Social Security, the government’s largest program, may shed light on who they really are.

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