Understanding the Social Security scam

[andyfox]

Like just about everything President Bush has spoken of as a "big" priority, he has accomplished nothing. This goes for Iraq, ilegal immigration, social security reform, and energy policy.

You and I are on opposite ends of the political spectrum, but we agree that:

1) the tax is onerous on those who can least afford it, a regressive tax.

2) the "trust fund" has simply been used to pay for other things, to the tune of $1,700,000,000,000 over the period from Reagan to Clinton.

3) cognitive dissonance and double-speak are the lingua francas of American politics.

4) the whole thing is a giant smokescreen to enable the government to justify onerous taxes on the poor and middle class and then fund massive giveaways to the rich.

[mosdef]

You and I also have varying degrees of overlap and conflict in political philosophies and also both agree that social security is a disaster. The question is: how to fix it?

Wind it up? We could buy annuities for pensioners from private insurers and distribute the remainder to non-pensioners.

Individual accounts? It would clearly eliminate ALL of the intergenerational wealth transfer issues that are associated with a defined benefit plan. The issue is that there would be risk associated with the investment returns, and the pool of assets would strain the market. General market production would skyrocket though.

Privatization? All the obligations could be given to the market to sort out via annities and investment accounts.

Anything else?

[andyfox]

I don't know what makes sense. Any minor modification, much less the major ones you speak of, will surely have a hard time, AARP is one of the more powerful lobbbies.

[adios]

[ QUOTE ]
1) the tax is onerous on those who can least afford it, a regressive tax.

[/ QUOTE ]

Don't they receive payments from the government when they reach retirement age given they meet all the other requirements?

One major objection (among many) I have with SS is that if you're earning an income your benefit payments are reduced. If you socked the money paid to SS into an IRA it wouldn't matter if you had earned income or not.

[andyfox]

Meanwhile, they have to pay the taxes while they're trying to support their family, send their kids to college, etc. Bill Gates pays the same amount as I do, and I pay the same amount as someone making a tenth of my income.

[mosdef]

[ QUOTE ]
Meanwhile, they have to pay the taxes while they're trying to support their family, send their kids to college, etc. Bill Gates pays the same amount as I do, and I pay the same amount as someone making a tenth of my income.

[/ QUOTE ]

But they all get the same thing out, so it's not intriniscally "unfair".

I guess this question must be answered: do you expect the SS system to redistribute wealth or to defer wealth? In my mind, the primary purpose of pension plans is to defer wealth.

[adios]

[ QUOTE ]
[ QUOTE ]
Meanwhile, they have to pay the taxes while they're trying to support their family, send their kids to college, etc. Bill Gates pays the same amount as I do, and I pay the same amount as someone making a tenth of my income.

[/ QUOTE ]

But they all get the same thing out, so it's not intriniscally "unfair".

I guess this question must be answered: do you expect the SS system to redistribute wealth or to defer wealth? In my mind, the primary purpose of pension plans is to defer wealth.

[/ QUOTE ]

It's defered consumption but otherwise you're correct. Also the EIC is available to many lower income earners which certainly offset their SS contributions. Finally SS does redistribute income:

SS Income Redistribution


If I Bill Gates contributes as much to SS as I do, he should get the same distribution as I do. Don't understand why he should get less. BTW I think this is exactly what will happen in the future, the laws will change and there will be many people who contribute but won't get a dime out of it.