Understanding the Social Security scam - Page 4

adios · #31 11-27-2007, 11:12 PM

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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.

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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.

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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.

Copernicus · #32 11-28-2007, 12:56 AM

I will respond to any questions about my responses from the truly interested. I won't bother to rebut any of natedogg's responses because he plays this game periodically and its a waste of time.

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In order to understand the Social Security scam you must ask yourself "What is the program supposed to do?" Or in the case of defenders, what is it you believe Social Security accomplishes?

Two of the most common answers are:

1. provide destitute seniors something to live on
2. act as a mandatory retirement savings program for all

 1 is the function of SSI which is administered by the SSA but is not part of Social Security. 2 is a misstatement in that it isnt a "savings program" it is a pay as you go retirement system that happends to be running a small surplus, but close enough to one of the main purposes, which is to provide a basic retirement benefit. 

Muddying the waters is a standard and brilliant government tactic when it comes to protecting massive programs and Social Security has been no exception. utter nonsense, SS is a totally transparent system that isnt at all muddied. The inability of some to understand it isnt a "government tactic".
 It comprises several different programs at this point so it's hard to pin down a strict purpose. It provides several different benefits, but I wouldnt characterize them as different programs, and its not at all hard to pin down their purposes, which are the same as the purposes of private defined benefit retirement programs: to provide retirement benefits to the employee, to provide family and survivor retirement benefits, to provide disability benefits, and to provide death benefits. Real tough to pinpoint.

Let's assume that you believe the main purpose of Social Security should be to give destitute seniors something to live on, i.e. welfare for the elderly. lets skip this because it isnt a purpose and no one who understands it claims it is.

So let's try framing Social Security as a mandatory retirement savings program instead. This is where the scam really gets exposed. I cant wait. 

The first thing you should know is that Social Security taxes do not fund Social Security checks. yes, they do. This is hard to believe, I know, because we've all been told differently, but it's true. Revenues from Social Security tax are not in any way earmarked, saved, held aside, locked away, or anything else. yes, they are. the fact that they are invested doesnt change their nature any more than you putting your personal retirement savings in a bank or custodial account. 

The Supreme Court case Fleming v. Nestor (http://www.ssa.gov/history/nestor.html) established that the taxes you pay for Social Security are just another tax and the revenues are not distinct from the general fund. A gross misinterpreation of Nestor, a contract case, which in part says
"THE TAX PROCEEDS ARE PAID INTO THE TREASURY "AS INTERNAL
REVENUE COLLECTIONS," I.R.C., SEC. 3501, AND EACH YEAR AN AMOUNT EQUAL
TO THE PROCEEDS IS APPROPRIATED TO A TRUST FUND, FROM WHICH BENEFITS
AND THE EXPENSES OF THE PROGRAM ARE PAID. Doesnt sound much like a claim that revenues are indistinct from general revenues. Furthermore, this case established that the government has no binding obligation to pay you one dime of a Social Security benefit. So what? The government changes the provisions of social programs all the time, and reserving the right to do so is s.o.p. The fact that SS has been changed so rarely is ample evidence that it is working as intended and that political pressures to change it meet strong resistence. Of course, they promulgate a false sense of entitlement by referring to the debt as an "obligation", but it is not an obligation. semantics. The fact that so many fear that benefits will not be available to them in the future makes it clear that people understand the extent and nature of the "obligation" 

But wait, they are tracking the revenues and outlays and the trust fund aren't they? There *must* be something tying my Social Security taxes to the actual outlays, right? It's all internal accounting shenanigans. Your Social Security Taxes might as well be labelled "The Silly Tax" and the revenues would be as closely tied to SS. It's all part of the charade to keep us complacent about the 15.3% payroll tax. The bottom line is that the govt revenues go into a big pot, and they cut Social Security checks out of that pot, and they make some notes about it for internal accounting purposes. The so-called excess revenues that should be in the trust fund (more on the trust fund below) are just a spurious categorization of general funds. No, they arent, and you can spew this garbage 1000 times, it doesnt change what happens. Taxes are collected, proceeds are invested, investments are cashed in, benefits are paid. And ZOMG, they actually account for the transactions, what a scam. 

What this means is that there is no legal or regulatory connection, none whatsoever, between what you pay into Social Security and what you get out of it. [em]Benefit calculations do not take into account the amount of tax you paid.[/em] This should be indication enough that it's not a retirement savings plan. Its not anything of the sort. Tell me the tax paid and the year it was paid and I can tell you the benefit. As pointed out in a later post, youre just playing rhetorical games to try and prove an inaccurate claim. Your Social Security taxes are just another tax. Your benefit is entirely up to the whim of a future congress. They are not bound. already responded to 

You may think this makes it hardly sound like a retirement program and more like a general benefit or giveaway, while providing cover for an unconnected burdensome tax. And you'd be right. Anybody who thinks that doesnt know how to think for themselves or has an agenda to push that blinds them to the facts 

So much for being a retirement program but it get worse, because there's a "trust fund" myth foisted on the public. The myth serves to perpetuate the notion that it is a retirement savings program. Simply using the word "trust fund" implies as much. It gives people the impression that there is a huge asset ready for disbursement to all the people who paid into it. It implies that your money has been earmarked and kept safe. But that is entirely false.
To the contrary it is entirely true. When you buy a CD from an FDIC insured bank and get a piece of paper, is your investment "safe"? The don't get any safer. SS trust fund assets are invested in special issue Treasuries that gurantee principal...they are even safer than Treasuries available to the public. If the government defaults on all of its obligations we and the rest of the world have a lot bigger problem than paying SS benefits. 
Instead of real assets, there is a note from Congress that says "We promise that a future congress will continue to fund this program". That's all there is. And the note itself is only there to further the pretense that there is some kind of relationship between your Social Security taxes and the benefit coming to you. But there's no relationship. It's just internal accounting shenanigans. more meaningless inflammatory rhetoric 

And these taxes that are disingenuously labelled as Social Security tax are levied disproportionately on the poor. Benefits are paid even more disproportionately to the "poor", the system results in a small wealth transfer toward the lower paid A single mother living on $10,750 a year pays $1500 in Social Security tax, with no way out of it. It's taken right off the top before she can even start making deductions. And since I've already shown this tax for the lie that it is, any reasonable person can see this is outrageous. since youve shown no such thing, the only outrage should be at your lies 

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. the mind boggles 

Social Security is often mis-characterized as a pyramid scheme by detractors, but this could only be accurate if there was an actual pile of money resulting from the scheme that will go to the early contributors. There is no such asset. At least you admit its mischaracterized, but you dont know what its mischaracterized as...a Ponzi scheme, not a pyramid scheme. It is neither. 

So, to summarize:

1. It fails miserably when we frame it as a welfare program. It is in fact nearly the opposite of a welfare program, transferring money from the working poor to the wealthiest class of people.

2. If we frame it as a retirement savings program we see that there's no savings happening by any definition of the word.

3. The "trust fund" is a lie, and in fact is a convoluted pretense designed to reinforce a mistaken belief about the relationship between your Social Security taxes and Social Security benefits.

 A cliff notes of your strawmen and inaccuracies. How quaint 

So, what is GOOD about Social Security?

A good number of retirees in penury are able to feed and clothe themselves because of Social Security checks. But this minor good can be achieved in a more effective way, although it wouldn't provide a nice smokescreen for taxing the hell out of the working class. ORLY, Im sure there are dozens of politicians and policy makers who would love to know your ideas. Defending the Social Security status quo requires cognitive dissonance and double speak. The Social Security apologists rely on various fallacious spins.

Here are a some typical apologist positions:

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. Sorry I dont have the key to the vault where the securities are held. They will be liquidated the same way every other Treasury obligation is liquidated. When someone applies for a loan their SS payments are taken into account just like any other retirement plan. sounds like an asset to me 

1.b An extension of the argument above is that if they didn't have a tax surplus to spend, they would just borrow the money, as if spending levels are something that happen in a vacuum. I'll let you work through that prevarication on your own. Because theres nothing to work through, and you cant support that there is. Spending is spending, if a bill is passed the money will be spent and it will be funded, either by cash flow from taxes or from selling bonds. If there were no SS to buy some of them, someone else would. If you think anyone in the legistlature passes a bill thining "cool, SS is going to buy the bonds to pay for this, so I can vote for it you are simply out of your mind. 

2. Without Social Security, there is a moral hazard created for those who would be foolish and not prepare for their retirement. Any "moral hazard" that exists if you know what a moral hazard is) results from SS's existence and reliance on it, not the opposite.
Response: This is a common defense, providing core retirement benefits doesnt need a "defense", regardless of your misunderstanding of moral hazards. but it is a red herring, since Social Security does not save their money anyway, and there are plenty of other ways to address this moral hazard. Again, lets hear them, oh wise one. 

3. The number of recipients who need that money for basic necessities is greater than you think.
response: this implies a false dilemma. no, its a strawman on your part. To the extent that anybody thinks about the issue, there is plenty of information about retirement savings and income levels DUCY? I'll let the apologists hang themseves on this one if they want to try pursuing it. define what there is to pursue. that some people dont know how many people rely on SS? How does that knowledge impact them? 

5. Saving for retirement together as a group creates a safety net,whereas individual retirement savings can be wiped out due to bad luck. A nice bundling of strawman and false dichotomy. It isnt a "savings plan" as noted before, and if it were, since its invested in risk free assets group versus individual risk in investing is meaningless. 
Response: If it was a retirement savings program the apologist might have a point here. But this answer assumes the antecedent because there is no real savings going on. You got something right!!! Im in awe of your analysis. Even so, the individual bad luck problem is easily solved with private annuities. But what if the annuity company goes bankrupt? That's what insurance is for. Hell you could make annuity companies buy a government backed insurance plan similar to FDIC if it makes you feel better, but this group safety net argument is just a red herring. There are plenty of ways to solve it without ripping off the poor. since it isnt a savings plan and it doesnt rip off anyone, much less the poor, youve wasted a lot of time solving an non-existent problem 

6. "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). non sequiter 

which brings me to

7. We just need to lock up the trust fund with real assets and it will be fine.

response: I have explained before why it wouldn't even be possible to have a trust fund even if we wanted to but I'll recap:

1. Holding onto the cash simply ensures a negative return due to inflation. Its not a savings plan for the nth time, and Short term surplus is invested, so you have no point here. 

2. Investing it in the market ensures government control of industry and creates a huge moral hazard for our decisionmakers, as the investment choices of the trust fund would be the biggest prize available to lobbyists and industry. Furthermore the investment directors have little incentive to do their job well. For an excellent example of what happens when you put government bureaucrats in charge of investing your retirement fund, check out the history of the CalPers fund. Expand on this, since CalPers is an extremely well run fund with excellent investment management and results. It might make an interesting discussion for another thread, but it isnt in anyway analagous to Social Security, since it isnt limited to risk free investments. It is much closer to a private retirement plan than it is to SS. Whether or not Calpers SHOULD invest in risky assets is a different issue, due to intergenerational transfer of that risk. 

3. Investing it elsewhere (such as in foreign treasuries like Canada does) is not politically feasible, nor is it a safe investment since the US is the safest place for capital (yeah yeah I know it's looking shaky right now). ORLY? Abu Dhabi apparently feels differently. Even if those objections were overcome, there is no objection to overcome we return to the same moral hazard as #2, that wasnt a moral hazard but in this case we have foreign governments vying for the trust fund prize instead of domestic rent-seekers. but they cant strawman Hardly an improvement. And the investment decisions would be politically motivated instead of taking into account what is the best investment, which defeats the purpose.

Bottom line, Social Security is a scam from any angle, and in every case where the perceived goal of Social Security is used as a defense, there is a better way to achieve that goal. botoom line, you're full of merde, like you have been in your many prior rants 

natedogg

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natedogg · #33 11-28-2007, 05:20 AM

Mostly insults, which I expected. But there was one section I'd like to address.

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The Supreme Court case Fleming v. Nestor (http://www.ssa.gov/history/nestor.html) established that the taxes you pay for Social Security are just another tax and the revenues are not distinct from the general fund. A gross misinterpreation of Nestor, a contract case, which in part says
"THE TAX PROCEEDS ARE PAID INTO THE TREASURY "AS INTERNAL
REVENUE COLLECTIONS," I.R.C., SEC. 3501, AND EACH YEAR AN AMOUNT EQUAL
TO THE PROCEEDS IS APPROPRIATED TO A TRUST FUND, FROM WHICH BENEFITS
AND THE EXPENSES OF THE PROGRAM ARE PAID. Doesnt sound much like a claim that revenues are indistinct from general revenues.

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Thank for your followup quote, it supports my position nicely.

Note how the section states that once congress collects the pile of money (which are all "IRS collections"), it then "appropriates an amount equal to the proceeds". The proceeds themselves are not handled separately.

In fact, Copernicus, you have reiterated *exactly* what I was saying. The monies are collected, and then there's a bunch of internal accounting procedures which are unrelated to the sources of the monies collected, just as I described. The money from Social Security Taxes DO NOT go into the Trust Fund. They go into the general fund and later the Congress earmarks some of that money to fund the SSA. This is a subtle, yet crucial difference. It is the crux of the scam in fact.

Imagine there were no payroll tax, but some other taxes were higher and the IRS revenues still totalled what they do today. What would congress "appropriate" to the SSA? They'd be in the same scenario they are now, with one big general fund and an SSA budget. Would they over appropriate and then borrow back the rest, as they do now?

They wouldn't do that, because there would be no need to maintain the pretense that the SSA is funded by Social Security Tax. Congress would simply appropriate what it costs to fund SSA that year and be done with it.

The tax is misleadingly labelled as Social Security Tax when in fact it's just a generic wage tax and the revenues are general IRS collections just like income tax. Once it is all collected and thrown into the pot together, the congress makes some internal accounting tallies that further the pretense of a relationship between the two.

Returning to Fleming v. Nestor, we see this is true. Nestor found out the hard way that you have no claim to your benefit even though you paid the tax. So much for that. He literally paid into it all his life and got nothing out. Why? Because the benefit is just a giveaway, not a payout from something you paid into like a typical defined benefit.
And the tax is something separate even though it is disingenuously labeled "Social Security Tax".

Lastly, I'd urge you to do what I said at the beginning of my post. The most important thing to do before even beginning to analyze the Social Security program is to clarify exactly what it is you think this program ought to accomplish. What is the purpose(s)?

You dismissed my discussion that many people think of it as a welfare program for the elderly but you yourself have admitted the program acts as a way to perform some redistribution to the less wealthy recipients. Why do we modify the benefit to favor the less wealthy? Is it because the program is supposed to subsidize poor retirees? (aka welfare).

There is no denying that Social Security in some way acts as a welfare subsidy to a certain class.

Once you realize/decide that the program intends to/ should subsidize poor retirees (or whatever else you think it should do), we can begin to address how and why this could be better accomplished in a different way.

natedogg

bocablkr · #34 11-28-2007, 10:19 AM

Cop, very good rebuttal sir.

XXXNoahXXX · #35 11-28-2007, 10:48 AM

nate, great thread. haven't read the case, but how does this

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They go into the general fund and later the Congress earmarks some of that money to fund the SSA.

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fit with the quote from the Nestor case

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AN AMOUNT EQUAL
TO THE PROCEEDS IS APPROPRIATED TO A TRUST FUND

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Doesn't that explicitly state that it goes to the general fund, but then an equal amount, not a piece, is put into the SS fund?

Moseley · #36 11-28-2007, 11:13 AM

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Doesn't that explicitly state that it goes to the general fund, but then an equal amount, not a piece, is put into the SS fund?

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Congress is required to keep an accounting of the monies collected as "ssi tax" and keep a record of the surplus, and the interest the surplus collects when it is given to the general fund to help pay the deficit.

That is why we have a 3 trillion dollar ssi "surplus" which is a total of all surplus monies collected and the interest on same, since it was given to the general fund.

The problem is that there is no way to pay back the 3 trillion dollars without raising taxes.

When congress reports they have a 500 billion deficit this year, they account for that deficit this way (figures are made up for purpose of example)

Payroll taxes 400b
Corp taxes 400b
ssi taxes 600b
total 1.4 trillion

total outlays (including ssi benefits which was 300b, 1/2 of what was taken in) 1.9 trillion

We therefore have a 500 billion deficit. But we really have a 800 billion deficit, because congress took the 300 billion surplus from ssi taxes to use for the general fund.

But that is not what congress reports as the deficit. They report it to be 500 billion.

They then issue IOUs to the ssi fund, which accrues interest. They also issue more IOUs each quarter to pay for the interest on the 3 trillion they already owe.

That is how Clinton supposedly balanced the budget one year. The deficit was less than the ssi surplus that year

natedogg · #37 11-28-2007, 12:44 PM

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Cop, very good rebuttal sir.

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bocablkr, can you tell me why we have a social security program?

natedogg

Copernicus · #38 11-28-2007, 12:46 PM

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Doesn't that explicitly state that it goes to the general fund, but then an equal amount, not a piece, is put into the SS fund?

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Congress is required to keep an accounting of the monies collected as "ssi tax" and keep a record of the surplus, and the interest the surplus collects when it is given to the general fund to help pay the deficit. Nothing is "given" to the general fund. Treasuries are SOLD to SSA. The proceeds from the sale pay the deficit like any other borrowing pays the deficit. 

That is why we have a 3 trillion dollar ssi "surplus" which is a total of all surplus monies collected and the interest on same, since it was given to the general fund. The reason there is a surplus (I havent looked at the number for a while, 3 trillion sounds high) is because taxes + interest > benefit payments + expenses. Its that simple. 

The problem is that there is no way to pay back the 3 trillion dollars without raising taxes. Of course there is. The same way you balance any budget, cut spending (not SS spending, on budget spending) 

When congress reports they have a 500 billion deficit this year, they account for that deficit this way (figures are made up for purpose of example)

Payroll taxes 400b
Corp taxes 400b
ssi taxes 600b
total 1.4 trillion

total outlays (including ssi benefits which was 300b, 1/2 of what was taken in) 1.9 trillion

We therefore have a 500 billion deficit. But we really have a 800 billion deficit, because congress took the 300 billion surplus from ssi taxes to use for the general fund. Use real numbers and then call out anyone who accounts for it this way, because they are lying. Social Security is an off budget item, and official budget deficits are reported without any consideration of Social Security. If a politician wants to lie about it, thats the politicians fault, not SS's 

But that is not what congress reports as the deficit. They report it to be 500 billion. wrong 

They then issue IOUs to the ssi fund, which accrues interest. They also issue more IOUs each quarter to pay for the interest on the 3 trillion they already owe. Yup, thats what a Treasury bond/bill, CD, corporate bond etc. is, an IOU. so what? 

That is how Clinton supposedly balanced the budget one year. The deficit was less than the ssi surplus that year Speaking of liars. This wouldnt surprise me, but I doubt he lied that blatantly. Link? 

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mosdef · #39 11-28-2007, 01:00 PM

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The reason there is a surplus (I havent looked at the number for a while, 3 trillion sounds high) is because taxes + interest > benefit payments + expenses. Its that simple.

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Do you know the details of how the surplus is calculated? Is it the present value of all expected contributions plus the trust fund's current balance less the present value of all expected benefits and expenses? Does it take into account current Americans only or is it an open group projection with future births taken into account.

Moseley · #40 11-28-2007, 01:13 PM

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The reason there is a surplus (I havent looked at the number for a while, 3 trillion sounds high) is because taxes + interest > benefit payments + expenses. Its that simple.

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Do you know the details of how the surplus is calculated? Is it the present value of all expected contributions plus the trust fund's current balance less the present value of all expected benefits and expenses? Does it take into account current Americans only or is it an open group projection with future births taken into account.

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The surplus is those contributions made in the past, that were not distributed as ssi benefits, and "loaned" to the general fund, plus the interest those surpluses have earned.

When I was doing research on ssi, berkley college had a website, which is now down, that showed all these calculations, and showed that by 2017 (I believe) ssi taxes would not be greater than than the ssi benefits that would need to be paid out.

Therefore, congress is going to have to start paying back the 3 trillion each year, to make up the difference.

That's a big difference between being able to tap a surplus of 300b to feed the deficit and now (in 2017) come up with 100b (or whatever it may be) to pay back.

Based on berkley's calculation, the 3 trillion surplus will be used up by 2038 I believe.

In any event, congress has no way to pay back the money, without cutting the general budget or raising taxes.

If you ck one of my earlier posts in this thread, you will find the link that verifies the surplus is in excess of 3 trillion.