[natedogg]

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You are right on many key points, your post has two fairly large errors in it.

1. Benefit calculations do not take into account the amount of tax you paid.

This is not quite right. If you're talking about the basic pension at retirement, the benefit is a formula based on covered earnings and the contributions are also a formula based on current earnings. This means that the benefits are linked to contributions.

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Not quite.

Your qualified earnings are the basis for your benefit, but the tax you paid on them is not. This means that your tax could go up or down and your benefit would remain unchanged, or vice versa, your benefit could be modified while your tax remains the same. This is one of the KEY aspects of the scam. It is a subtle and effective way to fool us all into believing there is a connection between the amount of Social Security Tax collected and the amount of benefits paid. There isn't.

Let's say you make 46k
They tax you 7k and call it Social Security tax.
The 7k goes into a pot with everything else they collect.
When you retire, they go back and calculate your benefit based on the fact that you earned 46k, NOT that you paid 7k.
The 7k is forgotten.

Don't forget that I'm not arguing that Social Security isn't a defined benefit program. I'm saying it's not a mandatory retirement savings program and it doesn't even come close to being one, but many people think of it as such. This defined benefit program serves as a smokescreen to justify an onerous and tenuously-connected extra tax on the working poor.

Put it this way: you could eliminate Social Security taxes and raise tariffs to the tune of 800 Billion and year and use THAT to fund SS, nothing has changed. (damage caused by tariffs notwithstanding). You could shuffle around all the ways that congress gets revenue and it wouldn't change anything to do with the Social Security administration.

Does that make sense now? It is a subtle trick but it's central to the scam.

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I think what you mean to say is that the benefit is not intended or calculated to be be equivalent in value to the contributions you put it, i.e. it is not a defined contribution pension scheme. But everyone knows this, and it doesn't (by itself) invalidate the scheme. It makes it a defined benefit scheme with subsidies between members, which occur all over the place in the private market.


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Again, there are no subsidies between members because there's no black box treatment of the funds nor is there any calculation that relies on the funds that are collected as "Social Security" tax.


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2. "Hey, canada has a trust fund. don't tell me we can't do it." response; Canada's trust fund is miniscule compared to ours, and they invest it in a foreign market (ours).

Well, if the money were not taken from taxpayers it would have to go somewhere else. Whether it is consumed or invested, that money would need to flow into the global market somehow, so I also don't buy this argument that "the market isn't big enough to handle it".

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Sorry if I wasn't clear. I'm not saying the market isn't big enough to handle the 2 trillion in capital. I'm saying the reasons why it's a bad idea for the US Government to manage a $2T trust fund don't apply as strongly to Canada, the biggest one being that Canada can safely invest in foreign markets and avoid the moral hazard that is presented by the government managing such a large fund and playing favorites with the allocation to rent-seekers. This is all moot and only applies if there was some actual connection between Social Security tax revenues and outlays.

natedogg