Bacon's Rebellion

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Boomergeddon Watch: Social Security

—

by

James A. Bacon
in ,

Your new retirement plan: eating dog food

by James A. Bacon

File this under the “Long, Slow Demise of America’s Democratic Welfare State”…

The Social Security and Medicare Boards of Trustees have published their 2012 annual report on the financial condition of Social Security and Medicare, and the news just keeps getting worse. The combination of a slowing economy and a payroll tax holiday have combined to put Social Security on its flimsiest footing since the 1983 reforms. State the trustees:

The Social Security outlook has worsened significantly relative to last year’s report. The actuarial deficit in its combined trust funds is now 2.67 percent of taxable payroll, the highest recorded since the last major Social Security financing reforms roughly three decades ago. The single-year deterioration in the 2012 report is the largest recorded since the 1994 report. While the projected depletion date (2033) for the combined trust funds is not the earliest recorded since the 1983 reforms, we are nevertheless now closer to the point of projected depletion than we have been since enactment of those reforms.

The Disability Insurance trust fund, one of the two components of Social Security, will run out in 2016. That’s only four years away. Unless Congress acts, 10.6 million Americans receiving disability payments will see a significant reduction in benefits.

Of course, Congress being the craven institution that it is, will follow the path of least resistance. Rather than raise taxes or cut benefits, in all likelihood it will merge the assets of the Disability Insurance (DI) and the Old-Age and Survivors Insurance (OASI) funds, allowing the combined program to stumble forward to 2033, when the whole thing will collapse. Just a reminder: That’s only 21 years from now.

Of all the social safety net programs we have in America, Social Security is the largest, hence most important, and it is the easiest to fix because Dooms Day is still two decades away and the changes can be phased in gradually. If we reformed Social Security now — nudging the retirement age higher, gently reducing Cost of Living allowances, tweaking the payroll tax, or some combination thereof — the pain would be far more tolerable than if we waited another 10 or 15 years to act.

So, what have we accomplished in the past two years? Have we bolstered  Social Security in any way? No, Congress passed two years’ of payroll tax holidays, depriving Social Security of $215 billion in revenue. Two steps backwards, zero steps forward.

Here’s how badly the picture has deteriorated in the past two years:


You can blame whomever you want — the Democrats, the Republicans, political polarization, Americans’ entitlement mentality, whatever. The hard facts remain. It’s still the third rail of American politics and no one has the guts to do what needs to be done. Boomergeddon looms. The United States is only a few years behind Europe in the financial collapse of the welfare state. We’re all heading for a Big Fat Greek Drubbing.

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  1. larryg Avatar
    larryg

    yeh yeh yeh.. it’s making the appropriate right-wing “time to put SS out of it’s misery” rounds.

    We cut 2% off of FICA for two years… right? Isn’t this the result?
    not shocking… but to be expected.

    Again – for those who are predisposed toward hyperbole and blind to facts and realities.

    Social Security AND DI AND Medicare Part A are UNIQUE in the US Budget in that they, by law, CANNOT PAY OUT more than they take in.

    In other words, they are prevented by law from running a deficit.

    and the only way to change this is to change the law.

    Lucky we would be if we had …say DOD set up this way or Medicare Part B ,eh?

    Of ALL the deficit issues in our budget and debt SS is the least threat.

    SS does not EVER go bankrupt. The WORST that can happen to SS is that scheduled benefits, on average, will reduce to 75% if nothing is done in the next 2 decades.

    Isn’t that exactly what the GOP is proposing for Medicare Part B? to automatically freeze what can be paid out?

    so SS does that automatically , by law without any intervention.

    what can be done? Plenty. take a look:
    http://www.ssa.gov/oact/solvency/provisions/index.html

    that’s a hell of a lot more “options” than we have with Medicare Part B, MedicAid and DOD.

    Like I said.. this is a tempest in a teapot and what it really shows is just how misplaced and desperate the doom sayers are that they’d prioritize SS as a major threat while ignoring the REAL and much more immediate threats to the budget.

    here’s how the lie works:

    Will entitlement programs and debt consume U.S. budget in 2025?

    ” Tables in the report contain projections showing that by 2025, payments for Social Security, Medicaid, Medicare and debt interest will exceed all federal revenues going into the budget. That’s a shade different from Wolf’s statement that there won’t be any money at all to pay for additional programs since, beyond using tax revenues, the U.S. also has been known to borrow money to finance its budget.”

    http://tinyurl.com/839dnld

    but here’s the flaw. SS is funded by FICA not general revenues.

    when we lump SS into the same category as Medicare Part B and MedicAid and DOD – we are comparing apples and oranges

    SS comes from FICA and is prevented by law from exceeding FICA revenues.

    The other three come from General Revenues and have no such law restricting their revenue amounts so all 3 rise almost automatically in the current budget process.

    SS is entirely fixable. The primary fix is to reform the program to it’s original mission which was the period of time between retirement and life expectancy.

    Another reform – make the payroll tax like Medicare and do not cap it at $106k.

    social security is the least of our problems but it is emblematic of the gloom and doom types..

  2. larryg Avatar
    larryg

    Your comment is awaiting moderation.

    I absolutely hate it when the comment goes to moderation because of
    provided web links.. it’s totally asinine ( but built into wordpress)

    yeh yeh yeh.. it’s making the appropriate right-wing “time to put SS out of it’s misery” rounds.

    We cut 2% off of FICA for two years… right? Isn’t this the result?
    not shocking… but to be expected.

    Again – for those who are predisposed toward hyperbole and blind to facts and realities.

    Social Security AND DI AND Medicare Part A are UNIQUE in the US Budget in that they, by law, CANNOT PAY OUT more than they take in.

    In other words, they are prevented by law from running a deficit.

    and the only way to change this is to change the law.

    Lucky we would be if we had …say DOD set up this way or Medicare Part B ,eh?

    Of ALL the deficit issues in our budget and debt SS is the least threat.

    SS does not EVER go bankrupt. The WORST that can happen to SS is that scheduled benefits, on average, will reduce to 75% if nothing is done in the next 2 decades.

    Isn’t that exactly what the GOP is proposing for Medicare Part B? to automatically freeze what can be paid out?

    so SS does that automatically , by law without any intervention.

    what can be done? Plenty. take a look:
    www[dot]ssa.gov/oact/solvency/provisions/index.html

    that’s a hell of a lot more “options” than we have with Medicare Part B, MedicAid and DOD.

    Like I said.. this is a tempest in a teapot and what it really shows is just how misplaced and desperate the doom sayers are that they’d prioritize SS as a major threat while ignoring the REAL and much more immediate threats to the budget.

    here’s how the lie works:

    Will entitlement programs and debt consume U.S. budget in 2025?

    ” Tables in the report contain projections showing that by 2025, payments for Social Security, Medicaid, Medicare and debt interest will exceed all federal revenues going into the budget. That’s a shade different from Wolf’s statement that there won’t be any money at all to pay for additional programs since, beyond using tax revenues, the U.S. also has been known to borrow money to finance its budget.”

    [dot]tinyurl.com/839dnld

    but here’s the flaw. SS is funded by FICA not general revenues.

    when we lump SS into the same category as Medicare Part B and MedicAid and DOD – we are comparing apples and oranges

    SS comes from FICA and is prevented by law from exceeding FICA revenues.

    The other three come from General Revenues and have no such law restricting their revenue amounts so all 3 rise almost automatically in the current budget process.

    SS is entirely fixable. The primary fix is to reform the program to it’s original mission which was the period of time between retirement and life expectancy.

    Another reform – make the payroll tax like Medicare and do not cap it at $106k.

    social security is the least of our problems but it is emblematic of the gloom and doom types..

  3. DJRippert Avatar
    DJRippert

    Social security is emblematic because it is easy to understand. I am paying into SS today at a higher rate than many of the retirees. However, when I turn 74 the benefits will drop by 25%.

    Worse yet, imagine the poor woman who is 47 years old. She will turn 67 on the year that the trust fund runs out. Therefore, she will have paid the highest FICA rates ever and will lose 25% of the benefits from the day she retires. So, she has to live more frugally and put aside more money to make up for the government’s perpetual incompetence. Oh yeah, my wife is 47, did I mention that?

    LarryG likes to play the “but our government does even stupider things” card. He tries to downplay the fiasco in Social Security by citing even dumber things done by our government. He’s right to an extent. There are worse fiascos. It’s like being stabbed in the leg by one guy while you are being mugged by another. The stabbing is the more immediate problem. Yet the mugging is pretty frustrating too.

    Bacon’s point is dead on. The Congress could absolutely do something right now to put Social Security on the right path. They should pass a law that automatically leves benefits to the amount in the trust fund and the actuarily computed amount of money to be paid in the future. In other words, they should cut benefits by, let’s say, 15% immediately. That way, people paying in today would get the same benefits as those who are retired today. The only way that benefits could be increased would be for there to be a new actuarial calculation which shows improvement or the tax rate increased.

    However, the Clown Show on Capitol Hill won’t do that. They won’t take the heat at election time of telling the greedy grays that the benefits are being leveled for everybody – current and future. No, the greedy grays would then vote against the politicians. So, they’ll just let the problem fester until the benefits drop like a stone by 25% one sunny day 21 years hence.

    Our national political class is a bunch of self-serving cowards. They will perpetuate any problem to any extent so long as they get re-elected.

  4. larryg Avatar
    larryg

    the trust fund is not SS. It’s merely a financial conduit that receives FICA revenues and distributes it.

    As long as FICA is collected, people will receive benefits.

    when you confuse the trust fund with FICA – you show you really do not understand.

    but you and Bacon simply do not understand the bigger picture anyhow.

    What you both say is inevitable for Medicare Part B and MedicAid (and I AGREE with) is that at some point benefits must be cut, co-pays increased and/or taxes increased to pay and if none of that is done – the default is that recipients will receive less/reduced benefits. But we have to pass a law for this to happen.

    this very same thing will AUTOMATICALLY Happen with SS. Benefits will, by law, automatically reduce if no changes are made to the program.

    So we have all of this gloom & doom folderol about a program that already has a built-in limit that prevents deficits while we ignore the programs that do not have such built-in deficit-prevention safeguards.

    Now..at this point.. the anti-social-security blatherbutts will SWITCH the argument to say just how UNFAIR it is to reduce SS benefits – while of course they totally ignore that’s EXACTLY what they ARE calling for – for Medicare Part B and MedicAid.

    what’s “unfair” is to not understand the difference between Social Security and how it operates and Medicare Part B (C&D) and MedicAid and how they operate.

    Medicare Part B – for 100 piddling dollars a month provides people who own 2, 3 houses, 3-4 cars, and a half million in assets guaranteed health care benefits with a 20% deductible (that can be bought down with similarly subsidized Medicare Part C “gap” plans).

    this is the program that the Baconites should be focused on like a laser.

    this is the program that is going to kill the country fiscally if we don’t recognize what a scam it is in terms of user pays.

    Anyone who has large amounts of assets and income should certainly pay 400, 500, 600 dollars a month for health care.

    this is a no brainer – yet we spend our time on Social Security.

    On a scale of one to 10 – with 10 being crisis – Medicare Part B is a 10 and social security is a 3.

  5. DJRippert Avatar
    DJRippert

    Only one person on this thread doesn’t get it LarryG and that’s you.

    My wife will have paid into FICA at a much higher rate than people your age paid in. Part of that payment was to fill the trust fund. SS has not been “pay as you go” for almost 30 years (regardless of your ability to understand this). Despite paying into SS at the highest rates ever paid by anybody and despite funding the trust fund, my wife will only get 75% of the benefits being paid to today’s retirees.

    Why did my wife pay in extra money to fund a trust fund that she will never get back?

    You can get all mealy mouthed and argue about the technical definitions but you will never avoid the following facts:

    1. Social Security is not pay as you go. It has not been pay as you go since the decision was made to build the trust fund.

    2. Once the trust fund was devised it should have been used to repay those who paid into the trust fund. This did not happen.

    3. People like my wife have paid a subsidy beyond “pay as you go” to build the trust fund so that people your age can deplete it.

    4. The scam known as the trust fund was a Ponzi Scheme of the highest order. It robbed an entire generation of people so that today’s greedy grays could line their pockets with money they did not contribute and would not have received had the system been run as “pay as you go”.

    5. Social security proves that our government and our politicians are corrupt liars who will readily steal from anybody in order to get votes.

    Yes, social security will “automatically correct” virtually the day my wife retires. It will automatically correct because there will be no more money in the trust fund to disburse and the scam system will revert to “pay as you go”.

    Why did my wife contribute into a trust fund her entire working career only to get nothing from that trust fund back? Answer: So that today’s politicians can buy votes from today’s greedy grays by giving them money they did not contribute and should not have gotten in a “pay as you go” system.

  6. larryg Avatar
    larryg

    did I mention that you and I pay not one red cent into Medicare B?

    nope. In fact Medicare Part B is totally voluntary. You don’t have to buy it.

    but there are some catches. You cannot be denied it but you have to be at least 65 to be eligible to buy it.

    it IS means-tested but the threshold for assets and income is very, very generous. You have to get to 70K worth of income as a single retiree because the means-testing affects you.

    Did I say it was way too generous?

    A health care program that no one pays a penny into over their work careers and at retirement provides most of them with guaranteed health care at the same rate for everyone regardless of health status – for $100 a month. (20% deductible).

    and we fret over Social Security?

    MedicAid is even worse because it’s for the indigent …who don’t have near the income/assets that those on Medicare have.

  7. larryg Avatar
    larryg

    re: the “trust fund”.

    here’s the truth. there are more than 200 “trust funds” in the govt.

    there are separate trust funds for Social Security, Disability Insurance, Medicare PartA, Medicare Part B, C, D… the govt retirement pensions.. the military retirements pensions… the gas tax… etc.

    DJ is basically ignorant about what a Fed Govt trust fund is and what it is used for.

    It is TRUE that FICA was bumped up to put aside some additional money to provide a small bubble to deal with reforms that would become necessary because of baby boomer demographic changes but that bubble is small compared to the FICA revenues flow.

    the trust fund itself is about 2.1 trillion while FICA collects – AND distributes almost a trillion dollars a year. Money in. Money out.

    If FICA went away – the trust fund would last about two years before it ran out. It was never intended as a funding source at all.

    FICA/SS is like a LOT of insurance which IS INDEED – pay as you go.

    every year most private insurance collects premiums and from those premiums – pays out claims… it’s pay as you go – and so is FICA/SS – it works exactly the same way as your auto and homeowner insurance.

    It surprises me that DJ has swallowed the propaganda and has not done his own due diligence in understand the facts.

    DJ – do some reading to educate yourself :

    www[dot]gao.gov/new.items/d01199sp.pdf

    you’re embarrassing yourself.

  8. larryg Avatar
    larryg

    re: ” My wife will have paid into FICA at a much higher rate than people your age paid in”

    DJ – I challenge you on this comment also.

    here’s the facts: www[dot]ssa.gov/oact/ProgData/taxRates.html

    for social security – your FICA has increased at most .5%. Not chump change but not the “outrage” you portray either.

    Then you say this:

    ” Yes, social security will “automatically correct” virtually the day my wife retires. It will automatically correct because there will be no more money in the trust fund to disburse and the scam system will revert to “pay as you go”.”

    Your wife WILL receive SUBSTANTIAL social security benefits – as opposed to what you say – “nothing”.

    That’s just plain incorrect and the fact that you reference the trust fund rather than FICA/SS betrays a serious lack of understanding of the facts.

    “Why did my wife contribute into a trust fund her entire working career only to get nothing from that trust fund back?”

    again.. your wife will LIKELY receive – initially most of what she was scheduled to receive and again – FICA will continue to provide about a trillion a year in revenues – which they will pay out. when a fund takes in money and then pays it out – it’s by definition “pay as you go”. Virtually all insurance works this way. Social Security IS insurance. the formal name of the program is Old-Age, Survivors, and Disability Insurance (OASDI).

    you KNOW it IS insurance – BECAUSE – you get benefits until you die but if you die early… even before you retire – you don’t get a penny back – just like your home and auto insurance.

    and if you live longer than normal, you very likely will receive more than you paid into the program. there is no individual fund. It was never intended to be a fund.

    the REAL question is DJ – when your wife retires – is she going to sign up for that subsidized Medicare Part B which she has not paid a penny into?

    or will you take care of your own health care costs when you retire?

    1. DJRippert Avatar
      DJRippert

      “re: ” My wife will have paid into FICA at a much higher rate than people your age paid in”

      DJ – I challenge you on this comment also.

      here’s the facts: www[dot]ssa.gov/oact/ProgData/taxRates.html

      for social security – your FICA has increased at most .5%. Not chump change but not the “outrage” you portray either.”

      Man, your arguments are dim witted.

      “your FICA has increased at most .5%”.

      Go back and look at your own non-linking link. I started my full time career in 1981. OADSI was 5.35% in 1981. It is 6.2% now. That’s 0.85% which, you will find, is more than “at most .5%”. Additionally, my employer has also contributed. So, the total has fone up 1.7%.

      More importantly, your response totally and completely misses the point (as usual).

      My point was very clearly stated:

      “My wife will have paid into FICA at a much higher rate than people your age paid in”

      Your brilliant counter-point is to (incorrectly) calculate how much my FICA payments have risen.

      Instead, you should have compared how much you paid with how much my wife paid.

      Let’s try again with your non-linking link.

      Let’s say you are 75 years old. You started working at age 22. You took early retirement at 62. Here are your FICA rates:

      2.5%
      3.0%
      3.125%
      3.625%
      3.85%
      3.9%
      3.8%
      4.2%
      4.6%
      4.85%
      4.95%
      5.05%
      5.08%
      5.35%
      5.4%
      5.7%
      6.06%
      6.2%

      My wife started working in 1986. Here are the rates she has paid:

      5.07%
      6.06%
      6.2%

      Now, LarryG – let’s try again. Who paid the higher rates and how much higher were they?

      Sputtering guys like you live a live a long time. Let’s say you live to be 95.

      You not only paid lower rates but you only contributed to the surplus from 1983 to 1999 – 16 years. However, my wife will have contributed to the surplus from 1986 until it stopped being a surplus in 2010 or so. That’s 24 years of funding your surplus.

      You will draw down the surplus from 2011 until 2032 – for 21 years.

      My wife will not be able to retire until she is 70 since she has to replace the money stolen from her to fund your surplus by working a long time. She’ll retire in 2032.

      Guess what, LarryG? All the surplus money will be gone! She’ll only get 75% of your benefits although:

      1. She paid vastly higher rates.
      2. She paid in to fund the surplus longer than you did.
      3. She worked longer than you did.

      Anybody who paid extra taxes (beyond “pay as you go”) during the surplus building years should get their pro-rata share of that surplus.

      But, of course, they won’t. Because the despicable greedy grays are determined to drain that surplus into their own pockets before the people who paid the high rates and the many years of excess taxes get a chance at the benefits.

      Early Baby Boomers. America’s Worst Generation.

  9. Richard Avatar
    Richard

    How to Fix Social Security, Medicare, and the Debt.
    1. Entitlements (SS, Medicare). Grandfather and sunset them. Anyone not yet 55 gets a reduced (or no) benefit.
    2. Require retirement contributions – 20% of pay that goes into a retirement account invested by the government and accessible only by the individual on retirement or death. No Social Security except the grandfathered amounts.
    3. Eliminate all deductions from the tax base. Tax all income, sales, and loans. Repatriate all US capital held overseas. Reset the tax rate every year based on actual expenditures for the previous year (or years).
    4. Provide preventive health care benefits (as determined by the government) to everyone without cost. Provide additional benefits with a maximum lifetime value (ex. $500,000).
    5. Open up immigration to everyone who is not a criminal who can show that he/she can get a job, or who is willing to pay a fee (say $500,000) to become a legal resident. Eliminate minimum wage laws.
    6. Make everyone pay their taxes.

    1. DJRippert Avatar
      DJRippert

      Richard:

      I like your plan. Just don’t make me put my retirement into an account invested by the government. I’ll invest my own money. If I screw up I am willing to die like a dog on the street. My choice. I’ll take my chances investing my own money my way vs letting the geniuses on Capitol Hill make the investment decisions.

  10. larryg Avatar
    larryg

    re: ” Grandfather and sunset them” where will you get the money to pay for the people currently receiving benefits?

    what you are advocating is INCREASING payroll so that existing retirees still get their benefits and additional payroll is collected for a govt-directed retirement account.

    right?

    how will the govt “invest” that money? will they, instead, use it to pay for other govt costs instead of selling more treasury notes?

    won’t that fund end up the same way as the SS trust fund did – the money taken to pay for other govt costs and replaced with IOUs?

    this only “fixes” SS. The REAL threat to the budget is Medicare and MedicAid – many times larger than the SS ‘shortfall’. What is the plan for Medicare and MedicAid?

    good luck on 3. I actually agree that we should get rid of the mortgage deduction for more than the principle residence and I would cap how much is deductible to what the average median value is and if someone buys a bigger home – the finances charges are on their dime, not tax-payers.

    we should tax employer-provided health insurance and let people buy their own insurance on the open market. That,in turn, WOULD FORCE the dunderheads in Congress to come up with a bi-partisan health care law.

    I don’t think “providing health care” is going to work unless we figure out how to get health care costs under control. Right now health care costs adversely affect all of the government’s entitlement programs for health care including Medicare and MedicAid.

    of all the threats we have to the deficit/debt, Social Security is a gnat on a dog’s butt and attracts much more focus than it deserves – at the expense of losing focus on the real threats to our budget – primarily health care.

  11. DJRippert Avatar
    DJRippert

    LarryG might not be able to follow a simple argument but I can. Let me address his pseudo-points:

    1. Medicare Part B – not relevant to this discussion of Social Security.
    2. MedicAid – see prior point.
    3. There are lots of government trust funds – also irrelevant to the discussion of Social Security’s trust fund.
    4. My ignorance about trust funds – typical LarryG blather – no facts.

    So far, I have covered 2/3 of LarryG’s last two comments without hitting a single relevant point. Par for the course.

    5. FICA was “bumped up” to “provide a small bubble” … : The “small bubble” was $2.5 Trillion. That’s about $8,000 for every man, woman and child in the United States. My wife and I have 5 kids. Our share of that “small bubble” is $56,000.

    6. The “small bubble” was necessary because of baby boomer demographic changes: If it were really a small bubble then it wouldn’t have made an impact on the demographics of a huge group of people like the Baby Boomers. As usual, LarryG wants his cake and and to eat it too – either it’s a “small bubble” or it’s necessary reform to compensate for the baby boomer demographic changes. In fact, it’s an astronomical amount of money.

    7. FICA takes in and pays out $1T per year. So, the trust fund is 2.5 years worth of FICA payments. Presumably, LarryG wants us to think that makes the $2.5T a paltry amount. Life expectancy in the US is just over 78 years. If you retire at 67 then you have 11 years to live on SS before you die. 2.5 years of that time is approximately 25% of the time you will be retired. $2.5T is a paltry amount only in the eyes of those who are trying to explain how they are stealing that money from those of us who paid for it.

    8. If FICA went away the trust fund would last two years. What Larry’s arguments lack in logic they make up for in redundancy.

    9. FICA/SS is like a lot of insurance which is indeed pay as you go: Social security is not like any conventional insurance. What am I being insured against? Failing to die? Beyond that, Social Security is not pay as you go. Pay as you go systems do not build up $2.5T surpluses.

    10. FICA/SS works exactly the same way as my homeowner or auto insurance, it is pay as you go: SS works nothing like my homeowners or auto insurance. My homeowners and auto insurance cover me for a fixed period of time while I pay the premiums. I do not pay today and end up insured decades from today. That would be pretty stupid of the insurance company since the company would have to either put aside my money now to insure me in the future or guarantee that they have enough paying customers to cover me decades from now. I would never buy such “future” insurance for my car or my house since I’d have no reliable way of ensuring that the insurance company would have adequate funds to actually cover me in decades to come. You starting to see the point, LarryG? As for FICA/SS being “pay as you go” – it isn’t. Once again, pay as you go systems do not build up $2.5T surpluses.

    11. I have swallowed propaganda and failed to do due diligence. In an effort to perform some due diligence on LarryG’s arguments I called my insurance agent and asked if I could pay my car and home insurance premiums today for the coverage I’ll need in 2028. Turns out I can’t.

    12. LarryG then inserts a link that doesn’t link before telling me that I am embarrassing myself.

    Final tally:

    3 irrelevant points about non-SS subjects
    3 attempts to claim $2.5T is chump change
    2 failed attempts to declare a program with a multi-trillion surplus “pay as you go”
    2 insults regarding my ability to put forth cogent arguments
    1 utterly absurd attempt to make SS equal to car and homeowners insurance

    Oh, I almost forgot …

    Larry’s link : www[dot]gao.gov/new.items/d01199sp.pdf

    I especially like the “[dot]”

  12. larryg Avatar
    larryg

    DJ.. I provided you with an excellent FAQ on trust funds guy.

    and you are totally wrong about Medicare Part B and MedicAid in terms of proportionality of the size of the problem. Mr. Bacon can tell you that.

    ” That’s about $8,000 for every man, woman and child in the United States. My wife and I have 5 kids. Our share of that “small bubble” is $56,000.”

    is that what came out of your household income? totally disingenuous.

    re: “small bubble” … when you look at 2.5 trillion over 30 years, you’re comparing it to more than 25 trillion in FICA revenues. the 2.5 trillion was not added in one year – it was gradually built up over many years of which involved about .5% of the FICA SS rate – that I also provided links to.

    ” $2.5T is a paltry amount only in the eyes of those who are trying to explain how they are stealing that money from those of us who paid for it.”

    I never said it was paltry at all. My entire argument was to demonstrate that your stated view that the trust fund was THE fund that financed SS was totally wrong – ignorant – feigned or otherwise.

    I was pointing out that FICA is what funds the trust fund – and any overage ends up in the Trust Fund and that process is the very same process that happens in all the other govt trust funds. They all hold receipts coming in and they all pay out from the relevant fund. If DJ had taken the time to actually read the Trust Fund FAQ – he would have seen where they say: “In the federal budget the meaning of the term “trust” differs
    significantly from its private sector usage.” and they go on to explain how trust funds actually are designed to work in the Federal context.

    “if I could pay my car and home insurance premiums today for the coverage I’ll need in 2028. Turns out I can’t.”

    do you know WHY DJ? As a businessman you should. Do you KNOW what costs will be in 2028? But you COULD buy an annuity JUST LIKE Social Security that would be good in 2028 as long as you kept paying premiums into it. That’s done with actuarial. It’s the same with life insurance.

    I’m not going to try to explain how actuarials work… except to say it’s a legitimate approach to both public and private funds and insurance.

    re: the “dot”. DJ are you THICK! if you provide a LINK in BR, it shunts the comment off to moderation purgatory where Jim has been known to not see it for some time so I substitute the DOT … just change the [dot] to a “.” without the quotes and you’ll get the reference – and please do read them.

    re: pay as you go with a “surplus”.

    DJ are you THICK! Virtually all private insurance does this – to allow a safety buffer between what they think they’re going to have to pay out and what actually happens.

    I STILL SAY THIS – You DO NOT have the FACTs with regard to SS and you continue to spout propaganda and misinformation that you are hearing but have never taken the time to actually check it out.

    I urge you to do this guy. There is a mountain of pure BS propaganda out there about social security.

    The truth is as I told you before. If you REALLY want to WORRY about threats to the budget – SS is a gnat on a dogs butt compared to Medicare Part B and MedicAid.

    You say these are irrelevant and I ask you why you would focus on SS when it has a very minor role in the budget and the deficit at this point and even in 2020, and 2030..SS will automatically reduce and not become a threat to the budget and certainly no where near the size and enormity of Medicare and MedicAid.

    are you concerned about the budget, deficit and debt ?

    or are you concerned about the PHILOSOPHY that underlies SS – no matter what the impacts to the budget are?

  13. DJRippert Avatar
    DJRippert

    LarryG – You are one of the greedy grays. You concoct absurd arguments where Social Security is a magical “pay as you go” program with a $2.5T surplus. You try to confuse the basic facts to cover up your generation’s theft of $2.5T from those who funded that surplus.

    My wife paid vastly higher FICA tax rates than you greedy grays.
    My wife paid into the surplus longer than you greedy grays.
    My wife will have to work longer than you greedy grays to get benefits.
    You greedy grays will drain the entire surplus before my wife sees a cent of it.

    Yet, my wife will only receive 75% of the benefits you greedy grays are stuffing into your pockets right now.

    Yeah, LarryG – it’s a great program.

  14. DJRippert Avatar
    DJRippert

    LarryG … notice how my fingers never leave my hands:

    http://www.ssa.gov/oact/ProgData/taxRates.html

  15. DJRippert Avatar
    DJRippert

    Here’s the next comment, LarryG …

    pretty fast moderation, huh?

  16. DJRippert Avatar
    DJRippert

    re: the “dot”. DJ are you THICK! if you provide a LINK in BR, it shunts the comment off to moderation purgatory where Jim has been known to not see it for some time so I substitute the DOT … just change the [dot] to a “.” without the quotes and you’ll get the reference – and please do read them.

    Wow! I posted a link that linked and didn’t have to wait for moderation.

    I am THICK, huh?

  17. DJRippert Avatar
    DJRippert

    Uh oh, another comment with a link …

    http://www.ssa.gov/oact/ProgData/taxRates.html

    But no moderation delay ….

    How is this happening LarryG?

    Please tell me because I am so THICK that I need a genius like you to explain comment moderation to me.

  18. DJRippert Avatar
    DJRippert

    Maybe WordPress just doesn’t like you, LarryG.

  19. DJRippert Avatar
    DJRippert

    OH, the humanity!!!

    http://www.ssa.gov/oact/ProgData/taxRates.html

  20. larryg Avatar
    larryg

    maybe DJ. maybe… sometimes I seem to be able to put in a link and other times not… perhaps when I’m adding multiple links?

    but yes..you are STILL THICK… no question about it.

    🙂

    1. DJRippert Avatar
      DJRippert

      Oh, you figured it out!

      It depends on how many links are in the comment.

      You don’t have to use “[dot]” when there’s only one link.

      How many months did this take you?

      As an aside, I believe that the number of links necessary to require moderation is a function of how Ole Jim B set up the software.

  21. DJRippert Avatar
    DJRippert

    I’ll give you a hint, LarryG – I asked my 15 year old son to figure out why my comments with links were posting without moderation.

    It took him 45 seconds to find the answer. Of course, he’s real THICK – just like his Dad.

    Ready, set, go!

  22. larryg Avatar
    larryg

    DJ – why don’t you tell me what SHARE of the 2.1 trillion bubble your wife actually owns now that you know what years the rates changed?

    and DJ, please tell me again why she does not get it back. My understanding is that the 2.1 trillion is what takes us to 2030 or so…. if we consider it “gone”, then I’d agree with you but in that case, SS reduces benefits much sooner.

    you can find that info here: http://www.ssa.gov/oact/TRSUM/index.html

    under ” KEY DATES FOR THE TRUST FUNDS”

    but why are you so focused on this in the first place as ultimately what will fund SS is FICA once the trust funds are drawn down.

    the only purpose of the surplus was to buy time to gradually phase in reforms – NEVER to take over the job of actually funding SS long term.

    you misunderstood this from the get go and you apparently cannot let go of it.

  23. larryg Avatar
    larryg

    ” I’ll give you a hint, LarryG – I asked my 15 year old son to figure out why my comments with links were posting without moderation.”

    so YOU were ALSO …IGNORANT about the reason why?

    tsk tsk

    many blogs go to comment moderation when links are inserted. It’s in the default configuration of the blog and is apparently not easily undone judging from the number that continue to have it.

    but seriously you had to ask your 15 year old? I thought you were a tech guy?

    🙂

  24. larryg Avatar
    larryg

    DJ – when you see [.] in a link in a blog – it’s usually a device to get the link in and past the software moderation nazi.

    so you actually LEARNED something from your SON! COOL!

    so I’m gonna try an experiment here with TWO LINKS:

    http://www.ssa.gov/oact/TRSUM/index.html

    http://www.ssa.gov/oact/TRSUM/index.html

  25. larryg Avatar
    larryg

    yup… two links will get you referred to the moderation nazi. Looks like JIm loosened the controls but only a bit…

    Your comment is awaiting moderation. (what I got when I put 2 links in)

    DJ – when you see [.] in a link in a blog – it’s usually a device to get the link in and past the software moderation nazi.

    so you actually LEARNED something from your SON! COOL!

    so I’m gonna try an experiment here with TWO LINKS:

    link 1

    link 2

  26. James A. Bacon Avatar
    James A. Bacon

    At the risk of getting flamed in the debate between Don and Larry, I’ll have to admit that I didn’t know that comments with links had to be confirmed by the moderator. WordPress was not forthcoming with that information. But congratulations to the both of you — and Don’s son — for figuring it out!

  27. larryg Avatar
    larryg

    now tell DJ he’s doesn’t have a clue about the relative danger of SS vs Medicare/MedicAid on the budget!

    🙂

    actually I owe DJ an apology….. I try to not be personal in my comments and I’ve obviously failed miserably on that aspect ..on this thread ..sometimes DJ gets my dander up…

    My apologies.

    1. DJRippert Avatar
      DJRippert

      Actually, the guys at the software company I run got quite a kick out of your description of me as THICK on the question of how comments are moderated in WordPress. I am sure I will be routinely described as THICK by the wags in the company as we collectively debate what future features and functions of our database products should be considered the most important.

      As an aside, the national Republicans are missing a big opportunity with regard to Social Security and the youth vote. The young people who dominate the “next generation” software industry where I work are predominately liberal or libertarian. But they become staunch Republicans when Social Security comes up. They (like me) overwhelmingly see the program as a rip off of their generation perpetuated largely by Democrats.

      It should be noted that I generally don’t discuss politics at work with our employees. However, the many technology conventions that I attend give me the chance to “hold forth” with young people from many companies at the ever – present bars and clubs that dominate the night time activities at these conferences. While the young people are generally too polite and socially aware to overtly declare me the “oldest guy in the building” I am often “the oldest guy in the building”. As such, I am perceived as a spokesman for the Baby Boomers. Most of my comments in that capacity are something on the order of, “Yeah, we really $%##*& up and left you guys with a mess.”.

  28. larryg Avatar
    larryg

    but I also want to ask DJ HOW he thinks the Va pension system itself “works”.

    do you think the money going into the system has an effect on what is being paid out?

    do you think the Va pension system is a Ponzi Scheme because it depends on people paying into it in order to keep parity with what is being paid out?

    why did employees of Virginia have to pay more into the system?

    do you consider that to mean the government “lied” to them on their pension?

    I ask these questions even though a pension fund is not what SS is but both of them are affected by things like demographics. Pension funds are additionally effected by the stock market and the question is – what exactly did Va “promise” their employees with respect to how much they paid into the pension system and how much they’d get out of it.

    Since the stock market did not perform as hoped.. do you think the taxpayers of Va should pay higher taxes to make up the shortfall or do you believe the employees should?

    My point here is to show that govt cannot predict the future whether it’s social security or pensions but that does not make either of them ponzi schemes or “monstrous lies” despite the non-stop right wing echo chamber remonstrations.

  29. DJRippert Avatar
    DJRippert

    LarryG:

    Doesn’t it bother you that you can’t stick to the topic at hand – which is Social Security? Why does every conversation have to shift to something else?

    Re: Virginia’s retirement system – there are some parallels to Social Security. One parallel is that Virginia’s defined benefits pension system is underfunded, practically bankrupt and in need of massive reform. To that extent, it bears considerable likeness to Social Security.

    However, there is one big difference – Bob McDonnell has seen the problems with a “pay as you go / defined benefits / no personal accountability” system and is trying to address the worst failures of such a system – namely, the “no personal accountability” aspects of the system. He has tried to increase the amount “paid in” by beneficiaries, changed the COLA calculation and (most importantly) started to implement a “hybrid” defined contribution / defined benefits system.

    All across America the “pay as you go / defined benefits / no personal accountability” retirement systems are failing and near bankruptcy. That’s because the structure of such systems is hopelessly flawed. Private enterprise replaced defined benefits with defined contribution system years ago. As usual, government is very slow to act on the huge financial problems caused by the these retirement systems.

    In my mind, McDonnell took the best approach to the issue (other than failing to fund VRS which was a shocking dereliction of duty). His changes:

    1. Reduced pension benefits for employees with less than five years experience.

    2. New COLA calculations.

    3. Higher personal “pay in” and a pay raise to help fund these individual “pay ins”.

    4. Introducing a “hybrid 401(k)” plan.

    These same changes (and more) should be implemented immediately for Social Security – especially the hybrid 401(k) style plan.

    Here is a reasonably good summary of the VRS issue:

    http://wtvr.com/2012/03/23/lawmakers-revamp-states-retirement-system/

    Several things to note:

    1. The clown from Chesterfield acting like he has “crunched the numbers” and discovered a problem. These pension plans have been a problem for over a decade.

    2. The Clown Show’s answer – create a problem by under-funding the pension plan for over a decade and then passing a big financial burden down to the localities to solve the problem they created.

    3. The urban league’s “Jim Bacon – inspired” response: Try to kill the action by demanding delays in order to study the matter further.

    I would not call Social Security (overall) a Ponzi Scheme or monstrous lie (although there are aspects of the program such as the trust fund scheme which deserve special venom). I would call SS and VRS well intended programs that were built on shaky foundations that no longer work. One important distinction: Since the state of Virginia cannot print money and will not incur endless debt, the state must address the problem. The federal government seems to have no intention whatsoever in addressing the obvious problems in Social Security.

  30. larryg Avatar
    larryg

    thanks for the link DJ…

    re: defined benefit vs defined contribution.

    the Fed also did this many years ago.

    the state “under-funded” VRS – yes – but the costs to keep it solvent kept going up and were not bounded with a predictable number and that led to nasty surprises at budget time. Same thing was happening to the Feds and businesses so they got out of that business.

    My question is though – just as with SS – does that mean the govt “lied” and the programs were purposeful deceptions?

    I ask you this because you DO characterize the way that SS is intended to operate with automatic reductions of benefits as “unfair”.

    what is SS actually DID have a REAL unfunded liability where the fund WAS short because of more and more retirees and stock market performance impacts.

    I make the comparison that SS … actually WAS DESIGNED to NOT HAVE the unfunded pension problems that states like Va have – on purpose.

    You say that SS no longer can do what it was designed to do originally.

    I do not agree. I think with relatively minor changes in FICA taxes, FICA income cap, age eligibility, means testing, etc, it can continue to function as the basic 3rd leg of the retirement stool as it is for many, many, existing employee retirement plans – including the Fed govt.

    I think this can be done without requiring any money from general funds.

    I do not consider these changes to be any more “unfair” than what Va is doing to the VRS pension fund nor was it “unfair” when the Feds went from a defined benefit retirement to a defined contribution (that INcLUDED SS).

    it is what it is. The current JIHAD to do away with SS is just plain idiotic – and mostly a creature of organization like Heritage and CATO who have purposely and methodically basically lied about the basic facts.

    For instance, how can you claim that SS has an unfunded liability when, in fact, the program, by law, can never go into deficit?

    How come so many people believe Heritage when they say when the trust fund is “exhausted” that it means social security is “bankrupt” and no longer able to pay beneficiaries when the worst that will occur is SOME reductions that even in a worst case scenario will not exceed 25%?

    that’s a far cry from “bankrupt” but they purposely use it as a technical term to imply an “out of money because the trust fund is exhausted” – scenario.

    and you DJ – you REPEAT these untruths HERE… and that’s why I jumped you. ( Bacon treads closer to the line but still plays the same game at times).

    but the really BIG question is WHY you focus on SS when it’s the very least of our problems with the budget?

    It’s not only a fairly fixable problem .. it has almost no effect on the budget.

    As in the words of that insufferable propagandizing blow bag O’Reilly, WISE UP – DJ!

  31. larryg Avatar
    larryg

    ” I am sure I will be routinely described as THICK by the wags in the company as we collectively debate what future features and functions of our database products should be considered the most important.:

    perhaps. Trying to figure out the obvious importance and relevance of products like Instagram and Pineterest is spinning me around.

    :As an aside, the national Republicans are missing a big opportunity with regard to Social Security and the youth vote. The young people who dominate the “next generation” software industry where I work are predominately liberal or libertarian. But they become staunch Republicans when Social Security comes up. They (like me) overwhelmingly see the program as a rip off of their generation perpetuated largely by Democrats.:

    the GOP has no solutions other than “you are on your own”. SS is not a rip off.. it’s a exceptionally successful program that has reduced elderly poverty substantially. Many retired have SS as their sole income … some …not because they did not prepare but because their companies walked away from their pension obligations and promises.

    Every other G20 country in the world including places like Singapore and New Zealand have similar programs. What the GOP has done very successfully is sold a bogus bill of goods to folks like you and your employees who clearly do not understand what SS REALLY is and is not.

    “It should be noted that I generally don’t discuss politics at work with our employees. However, the many technology conventions that I attend give me the chance to “hold forth” with young people from many companies at the ever – present bars and clubs that dominate the night time activities at these conferences. While the young people are generally too polite and socially aware to overtly declare me the “oldest guy in the building” I am often “the oldest guy in the building”. As such, I am perceived as a spokesman for the Baby Boomers. Most of my comments in that capacity are something on the order of, “Yeah, we really $%##*& up and left you guys with a mess.”. ”

    maybe true but I’ve yet to hear anything other than “let them die” “solutions” from the right and libertarians.

    basically, they advocate that we return to a 3rd world type government environment.

    they forget how we got to be the most economically powerful country – in the world.

  32. accurate Avatar
    accurate

    I was told, long, long ago, by multiple sources to – 1) Not count on SS being my ‘retirement’ fund and 2) Don’t count on SS to be there at all. Between a late in life divorce and being downsized three times in the last two decades, my retirement accounts are not worth a plugged nickel (compared to what it costs to live). I’ve upped my life insurance so my wife will do fairly well when I pass, I’ve come to gripes (ages ago) that I will probably work until the day I die (and in many ways that suits me just fine). I’m lucky in that my work does NOT have a mandatory retirement age AND they have wide double doors at the entrance so any walker or wheelchair can fit easily (plus ADA ramps). No, as usual, government has bungled SS like they basically mess up pretty much everything they touch. I don’t count on SS being there when I’m old, if it is, great, if it isn’t, I’ll figure it out, or die in the park – don’t much care.

  33. Richard Avatar
    Richard

    Larry – 1. My comment was somewhat tongue in cheek regarding SS. It would be the conservative solution to a lot of things. It would have winners and losers – the losers being those who depend on Social Security for any sort of income in their old age, their children, and those who don’t need it for survival but for comfort. The other thing it would do for Social Security would be to allow quantification of the government’s liability – once the old baby boomer’s die, it’s gone, and so the arc of the liability will temporarily increase as the boomers come in, but then will decrease and eventually go away (along with the baby boomers).

    2. An important part of the solution is to allow increased immigration and eliminate minimum wages. We’re already competing with the world in manufacturing but we have a tremendous disadvantage in that we have to pay our workers more. Let those who are working in Mexico or China or wherever come here and do their jobs here. With lower wages the costs of all personal services should come down, including the wages of health care workers (who will provide services to those who don’t have Social Security or health care).

    3. The health care part puts the emphasis where it should be – preventive care. It would encourage more healthy behaviours and efficient use of services (because of the $500,000 lifetime limit). it would allow better quantification of the liability.

    4. Another part of the solution (forgot to include it earlier) – legalize, regulate and tax recreational drugs.

  34. larryg Avatar
    larryg

    ” 1) Not count on SS being my ‘retirement’ fund and 2) Don’t count on SS to be there at all”

    if you believe it you are lazy and more willing to believe propaganda than actually get the facts, Accurate.

    Like DJ (and his employees), you’ve bought the propaganda.

    As long as there is a FICA Tax there WILL BE social security and unless the law is changed, it will NEVER rely on the general fund to fund it (other than paying back the Trust fund surplus).

    why is amazing to me is just how many people do not understand the “Trust Fund” and it’s side role to the FICA tax revenues and believe when Heritage and CATO say SS will go “bankrupt” .. they don’t realize that they are using a technical term to describe what happens to companies that go broke because their expenses exceed their income.

    In SS, case – the law explicitly says that SS will not exceed expenses.

    it will automatically reduce to whatever levels the FICA payroll tax is providing in revenues (unless the law is changed and/or SS is reformed).

    them’s the facts. but the average person only knows what FAUX news keeps saying…

    I was HOPING that Mr. Bacon would, at some point, post a thread that actually deals with the facts and get away from parroting the Heritage/CATO blather.

    by the way Accurate – are those government-mandated ADA ramps?

  35. larryg Avatar
    larryg

    “Larry – 1. My comment was somewhat tongue in cheek regarding SS. It would be the conservative solution to a lot of things. It would have winners and losers – the losers being those who depend on Social Security for any sort of income in their old age, their children, and those who don’t need it for survival but for comfort.”

    as long as we ALL AGREE that those that do not save for their retirement WILL die in the streets and we’ll tax not a penny to save them.. then I buy the Conservative approach. Otherwise.. it’s a bad case of talking the talk but not walking the walk. I do not think the American people have the stomach for the baseline Conservative approach but the Conservatives are dropping two shoes and the 2nd one is still not dropped. If they fessed up to their real philosophy – the American people would soundly reject it, so we play games instead.

    “The other thing it would do for Social Security would be to allow quantification of the government’s liability – once the old baby boomer’s die, it’s gone, and so the arc of the liability will temporarily increase as the boomers come in, but then will decrease and eventually go away (along with the baby boomers).”

    I see the govt’s “liability” for SS as fairly simple. They’ll collect FICA taxes and pay it out within budget. There is no more a “promise” for specific benefits anymore with SS than there is with defined contribution or defined benefit pensions. there are no real guarantees. the govt cannot guarantee demographics or stock market performance.

    “2. An important part of the solution is to allow increased immigration and eliminate minimum wages. We’re already competing with the world in manufacturing but we have a tremendous disadvantage in that we have to pay our workers more. Let those who are working in Mexico or China or wherever come here and do their jobs here. With lower wages the costs of all personal services should come down, including the wages of health care workers (who will provide services to those who don’t have Social Security or health care).”

    I ignored this not because it’s not a substantive issue but because it enormously complicates the SS argument. It’s like mixing two volatile components.

    “3. The health care part puts the emphasis where it should be – preventive care. It would encourage more healthy behaviours and efficient use of services (because of the $500,000 lifetime limit). it would allow better quantification of the liability.”

    Naw… our health care puts emphasis on providers making profits. As long as we are willing to pay them for every procedure and test they want, we’re screwed. When they put their foot down on this in other G20 countries, they call it “rationing”. In this country, it’s just fine – as long as you have insurance.

    “4. Another part of the solution (forgot to include it earlier) – legalize, regulate and tax recreational drugs.”

    I totally agree. You take a young and dumb guy… and screw him for life by putting him in prison with hardened criminals for a stupid youthful act and then after we do that do him.. we, of course, pay him entitlements since he can no longer get a job and be a taxpayer.

  36. larryg Avatar
    larryg

    Ouch!

    did you say this seriously: ” With lower wages the costs of all personal services should come down, including the wages of health care workers (who will provide services to those who don’t have Social Security or health care).”

    so… we’re going to have a pool of retired people who have no money and depend on govt assistance and the govt is using low paid labor to do it and when that low paid labor retires it will have no money for retirement and the govt will usher in a new generation of low paid labor to care for elders on the cheap?

    Richard.. does that sound like a 3rd world country where the society is basically divided into rich and poor?

    geeze guy.

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