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  #11  
Old 11-27-2007, 11:36 AM
mosdef mosdef is offline
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Default Re: Understanding the Social Security scam

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That's not the way it works. The more you pay in to ssi, the more you get when you retire. So the football player would get more ssi at 62 paying on 150k of his income.

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So what exactly then is your problem with the contribution/benefit rate?

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We would not have a problem keeping ssi afloat, if the surplus had not been used to pay down the deficit and the ceiling on ssi taxes had increased with inflation.

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This is your problem, and it is totally separate from the issue of setting contribution and benefit rates.

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The MAJOR problem is: Congress is having to come up with a way of dealing with the fact that they will no longer have 300+ billion in ssi surpluses to pay the deficit, while at the same time, having to come up with billions every year to pay back the 3 trillion ssi surplus.

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Changing the contribution rate so that it exceeds the benefit cost is the only way to eliminate a funding shortfall.
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  #12  
Old 11-27-2007, 11:46 AM
andyfox andyfox is offline
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Default Re: Understanding the Social Security scam

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.
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  #13  
Old 11-27-2007, 11:59 AM
mosdef mosdef is offline
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Default Re: Understanding the Social Security scam

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?
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  #14  
Old 11-27-2007, 12:44 PM
natedogg natedogg is offline
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Default Re: Understanding the Social Security scam

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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
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  #15  
Old 11-27-2007, 12:51 PM
mosdef mosdef is offline
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Default Re: Understanding the Social Security scam

[ QUOTE ]
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.

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I still disagree with you on this. The fact that the 7K is not referenced directly does not mean that the benefits are not linked to contributions.

Consider for example the following 2 pension plans:

Plan A: You pay 2% of pay into the pension fund and on retirement you receive a benefit equal to 1% of your total pay over your career.

Plan B: You pay 2% of pay into the pension fund and on retirement you receive a benefit equal to 50% of your total contributions to the plan.

Based on your logic, one of these plans has benefits linked to earnings and one does not. But they are the same plan.
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  #16  
Old 11-27-2007, 01:23 PM
adios adios is offline
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Default Re: Understanding the Social Security scam

[ QUOTE ]
1. The trust fund really is an asset. Just as when you purchase a good, your networth hasn't changed. You now own the good.
response: This is patently disingenuous. The trust fund is more like an accounting of how much you spent on hookers and blow. I'd really like to have one of these apologists point me to the "assets" that the trust fund purchased and how the govt will liquidate it in order to pay my checks down the road.

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Actually part of the interest paid by the Treasury department on the national debt goes to the trust fund.

From page 99 of the following linky:

Historical Budget Data

900 Net interest:
For 2007 (in millions)

Interest on Treasury debt securities (gross) 405,866
Interest received by on-budget trust funds –71,574
Interest received by off-budget trust funds –97,722
Other interest –7,306
Other investment income –2,661
Total, Net interest 226,603
(On-budget) (324,325)
(Off-budget) (–97,722)


So it appears that there is an accounting transaction entered for the federal government re-imbursing the trust fund.
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  #17  
Old 11-27-2007, 01:34 PM
adios adios is offline
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Default Re: Understanding the Social Security scam

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

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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.
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  #18  
Old 11-27-2007, 02:41 PM
bocablkr bocablkr is offline
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Default Re: Understanding the Social Security scam

What is the scam you talk about? I don't know of anyone who has not received a social security check that they were entitled to. Your definition of scam must be different from the one I am used to.
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  #19  
Old 11-27-2007, 02:47 PM
mosdef mosdef is offline
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Default Re: Understanding the Social Security scam

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What is the scam you talk about? I don't know of anyone who has not received a social security check that they were entitled to. Your definition of scam must be different from the one I am used to.

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Is a pyramid scheme a scam before it collapses?
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  #20  
Old 11-27-2007, 03:08 PM
bocablkr bocablkr is offline
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Default Re: Understanding the Social Security scam

[ QUOTE ]
[ QUOTE ]
What is the scam you talk about? I don't know of anyone who has not received a social security check that they were entitled to. Your definition of scam must be different from the one I am used to.

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Is a pyramid scheme a scam before it collapses?

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Good question - I would say yes. I would also argue that social security is not a pyramid scheme in reality. Funding does come from the broader base to support the top layer. But, if the base shrinks they will either increase the tax, lessen the benefits, or change the age of retirement. Either way, people will still get their checks.

Many budgets and pension plans are similar to pyramids schemes. They rely on a certain amount of money coming in to pay the money going out. That doesn't make them scams.

By-the-way Capitalism is basically a pyramid scheme. Usually, Capitalism, in order to be a healthy, viable system has to sustain constant growth.
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