7 Jul

Social Security – the Third Rail of Politics [Reader Post]

                                       

or Why There Is A Lot of Talk But Little Action From Either Party

We all have seen the affect of entitlements on the annual budget and deficit. The big items are the entitlement programs – Social Security, Medicare and Medicaid. They are items that are set to take up an ever larger part of the American budget. As can be seen in the above article’s chart, entitlements and interest will absorb all government spending by 2025. Here we examine Social Security ONLY because it is, by far, the largest FY 2012 “mandatory entitlement.”

Social Security and its “Trust Fund”

Social Security has built up a $2.5 trillion surplus since the retirement program was last overhauled in the 1980s. The surplus has been placed in the Social Security Trust Fund, a fund about which we have heard quite a bit lately. But here is the rub (and there is always a rub – there is no “free lunch”). The $2.5 trillion surplus has been “borrowed” over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest. As Office of Management and Budget (OMB) director Jack Lew wrote in USA Today, “the Social Security trust fund is solvent until 2037. Therefore, Social Security is now off the table in debt-reduction talks.” As Charles Krauthammer explains, “This claim is a breathtaking fraud. The pretense is that a flush trust fund will pay retirees for the next 26 years. Lovely, except for one thing: The Social Security trust fund is a fiction.” OMB director Jack Lew (the same guy cited above) says that these trust-fund “balances” are nothing more than a “bookkeeping” device. Says Lew, “They do not consist of real economic assets that can be drawn down in the future to fund benefits.” Krauthammer concludes, “In other words, the Social Security trust fund contains – nothing.”

Paul Hsieh likens what has happened to the Social Security Trust Fund to what Homer Simpson does when he runs out of do-nuts. When he opens his emergency do-nut box, it’s empty except for a note that reads: “Dear Homer, IOU one emergency donut. Signed, Homer.” The Obama administration officials acknowledge that the federal government has already spent the Social Security surpluses of the last decades, replacing the borrowed money with so-called “special issue” bonds. But according to the OMB, these “special issue” bonds “do not consist of real economic assets that can be drawn down in the future to fund benefits.” Instead, they are mere promises to repay the borrowed money.

Thomas Sowell says he saw senior citizens carrying signs that read, “Hands off my Social Security.” They want their Social Security to stay the way it is, and their anger is directed against those who want to change the financial arrangements that pay for these benefits. Their anger should be directed instead against those politicians who were irresponsible enough to set up these costly programs without putting aside enough money to pay for the promises that were made, promises that now cannot be kept, regardless of which political party controls the government. Someone needs to say to those who want Social Security to continue on unchanged: “Don’t you understand? The money is not there any more.”

Social Security a Ponzi Scheme

Let’s define a Ponzi scheme. It is a fraudulent investment operation that pays returns to investors by money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. So you can now begin to see why Social Security has been likened to a Ponzi scheme.

George L. O’Brien, in his excellent article calling for the end of Social Security, calls it a “Legal Ponzi Scheme.” He continues that there are many reasons to like Social Security. It is the only part of the welfare state which promises benefits to nearly every person. It is also seen to relieve adult children of the responsibility of supporting their elderly parents, and it helps the elderly poor for whom there is a great deal of sympathy. There is only one problem: the system is a fraud.

He also examined the Chilean Model. Minister of Labor José Piñera put in a plan that requires each of the country’s 4.8 million workers to put 10% of his pre-tax income into a private pension fund of his own choosing; there are no employer contributions. There are 13 plans to choose from, and workers can switch their funds between plans to get the best returns at the lowest cost. The benefits to the individual worker of this policy have far exceeded expectations. Because the money that goes into these private pension funds is invested in production, a great supply of investment capital was made available to businesses and entrepreneurs at relatively low interest rates.

O’Brien concludes, “At some point people must realize the futility of trying to save the current bankrupt Social Security system. More tinkering with the status quo won’t help – Social Security is both financially and morally bankrupt – and soon this Ponzi scheme will collapse.

Michael Mandel offers an alternative analysis, but even he still calls Social Security a Ponzi scheme. He suggests that there is one enormous difference between Social Security and a Ponzi scheme: Technological change. This long track record of technology-powered growth has enabled the enormous rise in living standards in the U.S. Assuming that technological progress continues over the next 70 years, and output productivity growth continues over the next 70 years, the finances of Social Security are relatively easy to fix. A fairly minor cut in benefits, combined with a relatively small increase in taxes, will bring the system back into balance again. But here’s the rub. Ultimately our ability to make good on the “Ponzi-like” nature of Social Security depends on the continued march of technological progress – and in particular, innovation which boosts output and living standards. If we leave the younger generation a good legacy – a sound scientific and technological base, combined with an innovative and flexible economy and an educated workforce – then Social Security is not a Ponzi scheme. The economy grows, and there’s more than enough resources for everyone. But if instead we invest in homes, flat-screen televisions and SUVs, then we don’t leave the next generation with the technological “seed corn” they need. If the technological progress slows, then Social Security does turn out to be Ponzi-like – with unfortunate consequences for everyone.

Mandel is correct: just look at what the current economic situation, with its slow growth, has done to Social Security.

A Brief History of Social Security

There was no clamor for Social Security when FDR signed it into law in 1935. Few Americans were interested in the kind of government-run program that the German politician Otto von Bismarck had introduced in Europe. President Franklin Roosevelt embraced the German idea that there should be government-run “social insurance.” Perhaps because Social Security promoters didn’t have much confidence in it, they insisted that it must be compulsory. There was considerable opposition to the proposed Social Security Act from both Democrats and Republicans. Senator Bennett Clark of Montana proposed an amendment that would have enabled employers to opt out of Social Security if they had pension plans offering more generous benefits than Social Security. That would have meant freedom of choice for employers and employees alike, but advocates of Social Security were adamantly against freedom of choice.

The Financial Planning Association offers a very good, brief history of Social Security. The Social Security Act was signed into law by President Roosevelt on August 14, 1935. In the beginning, most women and minorities were excluded from the benefits of Social Security. Job categories that were not covered by the act included workers in agricultural labor, domestic service, government employees, and many teachers, nurses, hospital employees, librarians, and social workers. In 1940, benefits paid totaled $35 million. These rose to $961 million in 1950, $11.2 billion in 1960, $31.9 billion in 1970, $120.5 billion in 1980, and $247.8 billion in 1990. All figures are in nominal dollars, not adjusted for inflation. In 2009, nearly 51 million Americans received $650 billion in Social Security benefits. So from the benefits progression we can easily see where payouts are headed.

What is social security? The term describes a program that uses public funds to provide a degree of economic security for the public. The specific social security discussed here is the United States government program established in 1935 that provides old age, disability, and survivors insurance, as well as supplemental security income, an income for elderly or disabled people. But nobody has a right to pass on Social Security benefits to heirs, as is done routinely with private annuities, pensions, and life insurance.

Explaining the “Third Rail” In Politics

Politicians call Social Security the “third rail of American politics.” What does that mean? There are two concepts going on here:

  • Many trains that are powered by electricity, such as subways and other rapid transit railway systems, are attached to a third rail that runs alongside the tracks. The third rail provides electricity, which powers the train. But for a person, touching the third rail means instant electrocution, or death by electrical shock.
  • In politics, a “third rail” issue is one that is so politically charged and controversial that any politician who dares to touch it risks destroying his/her career.

Former U.S. House Speaker Thomas “Tip” O’Neill first called Social Security the “third rail of American politics,” and O’Neill did as much as anyone to make Social Security a deadly political issue. Social Security had become a difficult political issue long before the early 1980s. When Barry Goldwater lost the presidential race in 1964, observers believed the loss was due in part to voter perception that Goldwater wanted to dismantle Social Security.

Here are quotes from both President George W. Bush (R) and Senator Dianne Feinstein (D): “Social security – they used to call it the third rail of American politics,” President Bush told a news conference last year, “because when you talked about it, you got singed, at the minimum.” Senator Dianne Feinstein, Democrat of California, agreed about the reason so many politicians dreaded dealing with the dangerous subject of Social Security: “This is, kind of, the third rail. No one wants to touch it.”

As mentioned above, in 1964 Barry Goldwater lost the presidency to Lyndon Johnson in part because of the perception that Goldwater was hostile to Social Security. In 1980 Ronald Reagan had campaigned for the presidency on a pledge to preserve Social Security. Administration officials, faced with the prospect of ballooning budget deficits and runaway Social Security costs, mandated almost immediate cuts in benefits to people taking early retirement. A low-income worker retiring at age 62 in 1982 would see his monthly benefits cut instantly from $248 to $164. Tip O’Neill seized the opportunity to blast the administration. After months of defeats, O’Neill finally had an issue he could rally Democrats around. At a news conference he declared: “For the first time since 1935 people would suffer because they trusted in the Social Security system.” The system was eventually overhauled successfully by the Reagan administration in December 1981.

It wasn’t until the early 1980s that Social Security became known as the third rail of American politics. It was House Speaker Tip O’Neill who coined the phrase and O’Neill who, more than anyone, made Social Security murderous to touch.

Reforms?

Here is what Ron Paul (R-TX), who offered his now famous budget proposal, said about Social Security. He proposed to end it as we know it, and let people opt out of the system. He also said that Social Security is unconstitutional. And here are Ron Paul’s personal reasons for opposing Social Security. Further, he states, “Even the most modest proposals to trim Social Security or Medicare spending will be met with howls of indignation and threats of voter revolt. Legislators who propose any kind of means testing or increased retirement ages can expect angry visits from senior citizens and lobbyists ready to fund a candidate back home who supports the status quo. 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.”

John Boehner (R-OH) invited Obama to join him on the third rail of politics. Boehner’s offering Obama to stand on the third rail of American politics with him, is one we can see Obama refusing.

And here is Boehner proposing to raise the retirement age (the age at which Social Security benefits can be drawn) to 70, to link Cost Of Living Allowance (COLA) to the Consumer Price Index CPI) rather than wage inflation, and to “means test” benefits. (The CPI, BTW, is the “official” government of inflation)

This article about John Boehner saying that he’s determined to offer a budget this spring that curbs Social Security and Medicare, despite the political risks.   [emphasis mine]   

Finally, someone in Congress with guts, someone who puts the country before his political career.

Congressional Freshmen: First-term GOP Rep. Allen West, a tea party favorite, told a town hall gathering in Coral Springs, if Social Security, Medicare and Medicaid “are left on autopilot, if we don’t institute some type of reform, they’ll subsume our entire GDP” by 2040 or 2050. In Greenville, S.C., a different Republican freshman with tea party ties, Rep. Trey Gowdy, also suggested during last week’s congressional break a paring back of social programs. Gowdy described a recent school classroom where most children indicated they think it’s the government’s job to provide health care, Social Security and education. “We’ve got to do something about the sense of entitlement,” Gowdy said. Gowdy’s office later said he thinks Social Security “is a key aspect of a broad effort to fundamentally reform our entitlement system, but any solution must honor our commitment to current retirees.”

Forced Reforms?

Despite President Obama’s promises to lower the deficit and rein in spending, there was an omission from his 2012 budget that many say would go a long way toward easing the nation’s financial woes: Social Security reform. The White House and top congressional Democrats argue that Social Security isn’t contributing to the nation’s deficit. Others say that’s nonsense and accuse Democrats of using fuzzy math to justify their claim. Senate Majority Whip Richard J. Durbin, Illinois Democrat, and Senator Charles E. Schumer, New York Democrat, appeared separately on Sunday morning news programs to say Social Security doesn’t add “one penny” to the deficit.

Did the American Association of Retired Persons (AARP) abandon its opposition to cutting Social Security benefits? The question surfaced June 17, 2011, when the Wall Street Journal published an article suggesting the AARP’s board had approved an effort to ride the increasingly dominant view in Washington: Social Security must be overhauled to remain solvent beyond 2036 – especially considering that the retired population is expected to grow dramatically and the number of workers contributing to the program will shrink. Does that mean the AARP is open to cutting Social Security benefits, if it’s in the nation’s interest? Not necessarily. The organization wants to be a player in the conversation about Social Security’s future – especially if the program can be extricated from the escalating deficit debate. The apparent shift reflects an internal civil war, an acknowledgment that the long-held opposition to Social Security reform is unsustainable.

Where Are We?

So where does all of the above leave us? It’s not as if Franklin D. Roosevelt set out to create a Ponzi scheme. But people who know the scheme is mathematically unsustainable are drafting plans that, horrors!, try to give some control over the situation back to individuals. Like so many government programs, Social Security started off with great intentions, but morphed into something else. Some people refute the Ponzi scheme comparison largely on the grounds that unlike a traditional Ponzi scheme, Social Security is completely disclosed, was never sold to as a way to make anyone rich, and that it has good intentions rooted in compassion for the poor.

Old age is NOT a surprise. If people do not plan for it, they should not look to others (in the form of taxes or discounts or Social Security) for help. People who depend upon Social Security for retirement will receive exactly what they deserve – not much or nothing. The current system WILL go broke. Then all the dependers on the current system will look to us, the savers, for a bail out (in the form of more taxes). This brings us to personal responsibility. Everyone should save for retirement, not depend on Social Security.

But that’s just my opinion.

This entry was posted in Economy, Politics. Bookmark the permalink. Thursday, July 7th, 2011 at 12:36 pm
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26 Responses to Social Security – the Third Rail of Politics [Reader Post]

  1. Ivan says: 1

    Exellent post, Warren.

    And Ron Paul is correct when saying:

    “Even the most modest proposals to trim Social Security or Medicare spending will be met with howls of indignation and threats of voter revolt. Legislators who propose any kind of means testing or increased retirement ages can expect angry visits from senior citizens and lobbyists ready to fund a candidate back home who supports the status quo. 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.”

    Okay, so Americans are socialists, to the core. Let’s face it, old people vote (those over 50), young people don’t as they are too busy smoking pot or getting drunk/laid to know they are being ripped off.

    Thus, our Republican form of government is working as intended: The will of the people, albeit old people, is being accurately represented by their elected officials.

    Since the people want this socialized pension and medical assistance just cut other programs or raise the FICA tax on current workers.

    I may hate it, but it does solve the problem. Make the FICA tax 10% and that will probably run a surplus for a couple of decades. Then jack it up to 12%.

    Problem solved, problem staying solved.

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  2. johngalt says: 2

    @Ivan:

    You know that won’t work, Ivan. The liberal/progressives in Congress, from both parties, will see that as another source of money to be spent on other programs, and there won’t be a surplus.

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  3. Ivan says: 3

    @johngalt: Yes, I know it won’t work. Then you keep upping the FICA tax. Say 15% if 14% doesn’t work. If 15% doesn’t work shoot for 16%.

    Just don’t borrow. The conintued borrowing of money by the Feds and other governments allow the day of reckoning to be put off-no pain and losts of goodies for their constituents.

    If the monornic Republicans of California had allowed the Dems to raise taxes to the moon-instead of going along with all of that borrowing that they did in the 80s and 90s, the Republicans would be in control of California.

    But no. They insist on playing the other side of the same game as the Dems.

    Stupid is as stupid does.

    End all government borrowing, make the dems pay for EVERYTHING they want and it all comes to a stop.

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  4. Warren says: 4

    @Ivan: First, Ivan, I thank you for your kind words. Second, I must agree with johngalt that congress will see what you propose as another revenue source. You are correct, but … History has shown that congress (both parties) cannot keep their hands off revenues.

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  5. johngalt says: 5

    @Ivan:

    End all government borrowing, make the dems pay for EVERYTHING they want and it all comes to a stop.

    I understand your point, Ivan, and I agree with it for the most part. The only problem that I see is that the country will be destroyed economically if it is allowed to happen. So much so, in fact, that I don’t see the US recovering from it.

    Of course, if borrowing was allowed to continue, even if a true conservative President and Congress were voted in, it wouldn’t destroy the liberal/progressives in the country, and they would only regroup, ascend to the leadership of the country again, and make it much worse than it is today.

    I guess the question is just how much pain are Americans willing to subject themselves to, in order to defeat the liberal/progressive ideology. My guess is, not very much.

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  6. Ivan says: 6

    @johngalt:

    I understand your point, Ivan, and I agree with it for the most part. The only problem that I see is that the country will be destroyed economically if it is allowed to happen. So much so, in fact, that I don’t see the US recovering from it.

    And we’re are being destroyed economically if we don’t allow it to happen! Get it? In my world, one where rational Republicans are an actual opposition party, the charade comes down to quick, crashing halt. In you’re world, the debt climbs up so high that the value of the dollar is destroyed and we’re all destroyed by inflation.

    Of course, if borrowing was allowed to continue, even if a true conservative President and Congress were voted in, it wouldn’t destroy the liberal/progressives in the country, and they would only regroup, ascend to the leadership of the country again, and make it much worse than it is today.

    And we had the most conservative President in yours and my lifetime, Reagan, blow the deficits and not fix the SSI problem (another band-aid solution). We’re not going to get a conservative government, John: Reagan couldn’t be elected in this day and age and he wasn’t a fiscal conservative by any stretch of hte immagination. He raised taxes both in D.C. and as Governor of California.

    I guess the question is just how much pain are Americans willing to subject themselves to, in order to defeat the liberal/progressive ideology. My guess is, not very much.

    As long as they can borrow they don’t have to subject themselves to ANY pain. Thus, to solve the problem of big government all the Republicans have to do is say,”No raising the debt ceiling” (fat chance, I know).

    I can dream, can’t i?

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  7. Greg says: 7

    The whole damn problem resulted from fiat currency. Monopoly money. If the U.S. had continued to use hard currency, backed with gold and silver, things never would have gotten out of hand.

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  8. retire05 says: 8

    Ivan, you want to hike the tax up to 10%. What do you think it currently is? When you already pay 6.4% and your employer pays you 6.4% less so that they can match the funds, the tax is already 12.8% plus a 1.45% overall income tax applied. So now we are to pay 10%, plus the employer match of 10% for a program that is so faulty it is doomed to fail? Well, golly gee, let’s just jack it up to 12%, for a total payroll tax of 24%.

    And why should seniors, who have been promised a return on their money for 40 years, now have to accept another broken promise by extending the age requirement? As it is now, if you are an average wage earner, you will have to live to the age of almost 73 just to break even.

    I rarely agree with Ron Paul (my former Congressman) on anything lately, but why not allow people to opt-out if they want to. Why not let those retiring take a one-time payment which would consist of their original payments plus the standard rate of interest over the years, just as you would be allowed to do with a saving account?

    You want to pay for Social Security? Cut the other welfare benefits. Why am I responsible to contribute tax money to a woman who has no education, three kids and doesn’t know who the baby-daddies are? Why is it her right to have as many kids as she wants, but then it is my responsibility to pay for them? Why do some states let welfare recipients buy things like furniture, clothing, et al, on their welfare cards? Why can someone get cash off their food stamp card? While I may have some moral value to help those less fortunate than I am, I should not be required to help anyone at the point of a Roman sword.

    The truth of the matter is that the Social Security Act was passed by a desparate Democrat majority Congress who understood that FDR was probably facing a loss in 1936, as were most of the Dem Congresscritters. Americans had been going through a depression that seemed to have no end. FDR, and the Democrats, wanted to make a big campaign splash acting like they were really doing something important. It was all about votes, nothing less, nothing more.

    What Social Security has proven is that the wrong headed ideas foisted on American by Democrats have ramifications that go on for generations. Social Security needs to end. We need to keep our promises (actually, the Democrats promises) to those seniors who are now retired or facing retirement. If you are under 50, pay them back all the money they have paid in and tell them they need to learn to be responsible for their own retirement.

    And you need to make a note of the failure of Social Security and understand that it is the picture of things to come with Obamacare.

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  9. Nan G says: 9

    @Greg:
    Greg.
    Maybe you and your buddy, Ron Paul, can fire up your time machine.
    Just go back and prevent the US from getting off the Gold Standard.
    That’s the solution.

    Means testing makes more sense to me.
    Why should people with over a million dollars in the bank (not all of it in the bank) get social security?
    Why should Juan and Jose and Melvin be paying in for hubby and me to supplement our monthly income?
    BUT, should our situation change (illness, debilitation) we should have the right to begin taking our social security once again.
    I wouldn’t even notice it if mine were gone tomorrow.

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  10. retire05 says: 10

    @Nan G:

    “Why should people with over a million dollars in the bank (not all of it in the bank) get Social Security?”

    Duh! Because they paid that money into the system? It is their money. Otherwise, let’s just tax the socks off those that have achieved some level of success and let the bureaucrats in Washington redistribute that money in a way that will garner them the most votes at the ballot box.

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  11. mathman says: 11

    What will it take?
    One of the DuPonts, many years ago, running for President, said that Americans do nothing until things get really BAD. Think of our entrance into WWI. Or think of our response to AIDS. Then we move big time.
    Examples abound. I think many of you will have your own examples.
    #1: the dollar ceases to be the World Reserve Currency.
    #2: some other Nation demands specie payment for our imports (not paper money).
    #3: a major shooting war erupts and we are in the middle.
    The Ponzi Scheme has got to be brought to an end. I just do not know what the tipping point will be.
    At the moment it is just a wealth transfer mechanism, from those with incomes to those without incomes.
    Especially when illegals, minors with deceased parents, and others receive benefits.
    I guess Einstein was right. We need 2% to make a LOT of noise.

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  12. Ivan says: 12

    @Nan G:

    Means testing makes more sense to me.
    Why should people with over a million dollars in the bank (not all of it in the bank) get social security?
    Why should Juan and Jose and Melvin be paying in for hubby and me to supplement our monthly income?

    Means testing doesn’t solve the problem, Nan. There are comparatively few “millionaires” to the number of non-rich who are on the system it’s laughable.

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  13. Ivan says: 13

    @retire05:

    Ivan, you want to hike the tax up to 10%. What do you think it currently is? When you already pay 6.4% and your employer pays you 6.4% less so that they can match the funds, the tax is already 12.8% plus a 1.45% overall income tax applied. So now we are to pay 10%, plus the employer match of 10% for a program that is so faulty it is doomed to fail? Well, golly gee, let’s just jack it up to 12%, for a total payroll tax of 24%.

    1. I’m self-employeed, I pay both sides.

    2. I meant 10% on each side. Problem solved (for now).

    3. Consumer spending grinds to a halt since much of the disposible income is now going to pay for socialistic programs! Isn’t it great? Watch them starve as they lose their employment! SOcialism, ain’t it a bitch!

    4. I gaurantee it, young workers will start paying attention to politics, for a change and rise up and strangle the phuckers at AARP!!!

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  14. Greg says: 14

    The truth about the deficit and Social Security: Social Security actually has nothing to do with it.

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  15. dscott says: 15

    You covered most of the important nuances going here, except a couple of really important issues that have a huge impact on SS. Before this recession began in 2007 (I say actually 2008 by the GDP #s), SS was projected to run out of that $2.5 trillion credit by 2042, now after the continued sluggish economy, it is 2037, that’s 5 full years earlier. Before this recession, the cash flow was not supposed to go negative until 2017, surprise we have had negative cash flow since last year 2010, a full 7 years earlier than projected. Why? The loss of jobs to the tune of almost 7 million that were contributing a combined total of 12.4% off the gross wages. When you lose a substantial basis of your solvency, the cash flow, don’t expect to be unaffected. This job loss is a double barrel hit, not only did SS suffer a reduction of cash flow from it’s so called dedicated tax, the Treasury itself in general revenue income tax collections lost a substantial portion too that was in theory supposed to pay back the borrowings (special interest bonds). Even when the SS cash flow dried up, the federal government was counting on maintaining general revenue cash flow to pay for the other stuff plus SS.

    Mark Rubio framed the revenue agrument properly: http://hotair.com/archives/2011/07/07/rubio-lets-stop-talking-about-new-taxes-and-start-talking-about-new-taxpayers/ We need the government to stop discouraging job creation by all the means Obama has continued to create.

    Most pension plans, the well run ones, which coindentially are not the government sponsored ones, don’t have COLAs. This means the pension plan can more acurately project its expenses against the required income and capital gains to remain actuarily sound. There is no such requirement upon SS. As a result of the COLAs you have a compounding of expenses year over year, not just one time charges. Even at 2 or 3% per year, with billions of dollars in payouts, this adds up tremendously. The Trustees just complain every year that they are going to run short with zero authority to properly invest the receipts, balance the funds investments for optimal return or do the required management functions of liquidating the non performing assets. Nor do they have the authority to increase or change in anyway the revenue stream much less the benefits to keep the pension fund acturarily sound. In short, SS was designed to fail because Congress refused to set any kind of plan to succeed. The COLAs need to be ended until such time as the system is solvent, i.e. actuarily sound.

    The other important issue here is survivor benefits, while people understand there are no funds to pass on to beneficiaries like insurance and annuities, there are however, survivor benefits to minors of people who die before age 65. E.g. If a father of 2 children dies at say age 30, the kids being presumably 8 and 10 years old are both entitled to monthly support payments until age 18 and then get payments IF they go to trade school, community college or university until they graduate. Right there is a substantial cash flow demand upon the system that is supposed to be only for retirees. The problem here is traditional life insurance is what is supposed to cover this situation, this is the individual’s responsibility to provide for their family in the case of their untimely demise. This part of the program needs to be ended as heartless as that may be characterized. It is not the collective responsibility of society to cover the refusal of parents to provide for their children. A $200k term life insurance plan costs about $500/year, that’s what about $42/month. You mean to say a parent(s) can’t sacrifice a portion of their beer and/or cigarette expenses to provide for their kids???? Give me a break, who’s the heartless creep here? And the senior citizens and the rest of us who paid into the system are expected to receive a reduced check for this? Are we supposed to retire later in life for this? As it is men die earlier than women, by age 75 or something like that (women age 80)? So men are supposed to take a reduced payment on top of less of them too at 67 or 70? Why? Because no one wants to confront the mess they made?

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  16. Retire05, I agree with your comment, and plus to that,
    the GOVERNMENT DID the spending, so they should be squeezee to begin with and show by exemple,
    they should cut so many expanse and lawers and agencys they have hired by the extravagant spending, they should cut on their persnal friend hand out, they should cut on their MIDDLE EAST EXPANSES IN WARS AND SUPPORT TO THEIR BROTHER HOOD, THEY SHOULD CUT ON EXPANSES IN THE WHITE HOUSE ITSELF, CUT ON LIMOUSINES ON THEIR LAVISH PARTY S ENTERTAINING IS VERY EXPANSIVE AND A FRIVOLITY, AT THE EXPANSES OF THE TAXPAYERS, THEY SHOULD LIVE IN THE TIME OF RIGIDITY JUST LIKE THE PEOPLE DO, AND REMEMBER THEY ARE THE SERVANTS OF THE PEOPLE NOT THEIR DICTATOR,
    NOW HOW MUCH MONEY DID THEY SAVED WITH DOING WHAT I MENTIONNED? LET’S COUNT CAREFULLY AND TELL THE PEOPLE OF AMERICA HOW MUCH WILL IT SAVE , STARTING RIGHT NOW,

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  17. Smorgasbord says: 17

    For years I have said we need to replace the SS system with a mandatory percentage of a paycheck going into a person’s personal retirement account.  Clark Howard said that if a 15 year old would invest $2,000 per year in a Wroth IRA for seven years, and leave it there without investing any more money, at age 65 they would have $1,000,000 in their account.  Think about how much each of us would have in our account after paying into it our entire working lives!!!

    Let’s not forget all of the new programs the politicians came up with to give our SS money to others so the politicians would get more votes, and all of the illegals getting our SS money.

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  18. Gregory_Dittman says: 18

    There were three major changes to Social Security which hurt it.

    The first one was the age in which people can get Social Security. The original age was near the age of death for the average person. This money went to a minority of people.

    The second problem was that an inflation index was put into the system. Originally there was no cost of living increase.

    The third problem is that it was seen as a retirement package by both the people and the government. This originally was not the case. It was used to help people that could no longer work yet still had to pay the bills. Only a minority of those now that get Social Security actually fit the profile of those it was created to help intent.

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  19. Greg says: 19

    I imagine corporate America has probably benefited enormously from Social Security. A high level of frivolous consumption has kept the wheels of the economy rapidly turning, and generated enormous profits. In recent years it hasn’t even been enough for blue collar and middle class America to simply spend what it earned; people were encouraged to spend even more, relying on easy consumer credit and artificially lowered interest rates to keep up the pace. If consumers hadn’t thought that they’d have Social Security as a foundation for their retirement later on, there probably would have been a lot less consuming and a lot more saving.

    Consider how the system actually discourages the traditional savings habits that our past retirement security was built on: First, you’ve got the pathetically low interest rates banks are now paying, even on very high-balance accounts; and second–as if that weren’t bad enough–you’ve got tax law that treats whatever meager interest you do get as ordinary income, from the first dollar of interest you earn. The only relief the average person has from that is a tax-deferred account, which essentially makes the government owner of some unknown portion of your savings account–that portion to be determined by the unknown tax rate at some later date. You might do better–provided you put your savings at risk in a highly volatile market.

    I call the whole game rigged, top-to-bottom and side-to-side. And not in favor of the little guy. Now he’s in danger of getting the shaft again, and in many cases he’s too far along to make adjustments. All to protect the fortunes of those who have most benefited.

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  20. Ivan says: 20

    @Greg:

    I call the whole game rigged, top-to-bottom and side-to-side. And not in favor of the little guy. Now he’s in danger of getting the shaft again, and in many cases he’s too far along to make adjustments. All to protect the fortunes of those who have most benefited.

    Spot-on. The entire economy is scam, a poni-scheme and we need to stop it now.

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  21. johngalt says: 21

    @Ivan:

    I believe that you misunderstand me, Ivan. I am actually agreeing with you. Whether it’s the lib/progs of the Democratic party in charge(a faster death), or the lib/progs of the GOP in charge(a slower death), it doesn’t really matter, as death of our country, at least as we know it, will come.

    I think that you thought I was arguing against you on this. Not the case.

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  22. johngalt, I hope BOEMER continue to take their stand on the DEBT CEILING
    ALSO BECAUSE OF THE MILLIONS IF NOT SAYING THE BILLIONS
    OBAMA’S GOVERNMENT, have already promissed to their friends in advancing their take over
    of the MIDDLE EAST COUNTRYS, so to make them a giant power to be able to exterminate the ISRAEL WITH A MASSIVE COUP OF FORCE, AND NEXT TO THE UNITED STATES HELP BY THE UN ORGANISATION.
    NOW THEY WILL NOT FEEL SO SURE TO RECEIVE THOSE PROMISSED MONEYS,
    and it will put a screw in their wheel, watch the NEWS NOW, we will see a slow down of their activity,
    coming as they become unsecure .

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  23. Ditto says: 23

    The word that is missing in all these entitlement arguments is “weening.” Americans who are dependent on these programs were slowly made addicted to them. Just like the first time smoker was sold on on cigarettes by advertising and conditioned into their dependance. In the case of entitlements, Democrats want you to ignore the signs of addiction, pretend that everything is fine, and keep on feeding the addiction until we reach the terminal stage. “Cold Turkey” in this situation will only end up in angry addicts. They must instead calmly be educated to the ugly truth, and made to understand that the current situation is untenable. But that there is are reasonable and sensible ways to forestall an abrupt terminal end, (which the far-left wishes them to ignore,) by weening America’s entitlement addictions down to a survivable, manageable level.

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  24. Smorgasbord says: 24

    @Ditto: #23

    If the politicians would have left Social Security in a separate intertrestrest baring account it would still have billions of dollars in it. If they would have also left it for retirees only and not found other ways to spread the SS wealth, it would still be financially OK.

    Todays politicians can’t stand to see a money account grow and not be able to find a way to spend it. That’s all politics is now: How to find more money to spend, not how to cut spending.

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  25. Ditto says: 25

    @Smorgasbord

    Agreed, but now we have to deal with it. After earlier compromises with the Democrats and Obama, I have no confidence in Boehner’s ability to stand fast and firm with Conservative reforms. That is why the Tea Party movement is so important, and why it needs to be encouraged. We need to take note, that all politicians and media people who denounce or try to discredit the Tea Parties, are marking themselves as part of the problem, and we can rest assured that they will not lead us to where we need to go, to restore this nation and put the government(s) in their proper place. It is these “elite” who put us in this position, and we need to network and do all we can to further peaceful campaigns against them. It must not be a movement that even hints at violence, as that only aids them in thwarting us. Until then we must give them hell when they deserve it, and support those who are on our side and defend them against elite detractors, who want to. We also must fight well-scare tactics with common sense and reason, and educate those who are being frightened, that they are being played as fools by professional political con-artists that know just how to push their buttons.

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  26. Smorgasbord says: 26

    @Ditto: #25

    Every Tea Party protest I have been to was very polite, no name calling, no cuss words, and we left the place cleaner than when we got there, but the propaganda media doesn’t mention these things.  Every liberal protest is the exact opposite.  They left 100 tons of trash on the mall after Obama’s inauguration.  We left it spotless each time we left it.  I was at this one and was proud to see how clean we left it.

    http://hubpages.com/hub/Compare-Garbage-After-Tea-Party-vs-Obama-Inauguration

    The propaganda media said that there were only a few thousand of us, but it has been verified by different organizations that there were 1-2,000,000 of us there, and NO trash.

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