The "raiding" of the Social Security Trust. What you don't know, and why you're probably an idiot.

[EdwardBaiamonte]

The Urban Institute disagrees. They provide research on SS. A retiree 2015 who put his contributions aside in a bank account earning 2% real which is close to 5% would have about $300,000.

how is that possible given that $40k x 12.4% x 46 years = $228k without any interest at all!!

interesting that Urban Institute is left wing commie probably like you and wants the govt rip-off to look good!!

 

[JoeTheEconomist]

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

5% of $2500 is $125.
The maximum taxable income in 1969 was $7800.
The OASDI tax rate in 1969 was 8.4%.
$655.20 max cost per employee.

Today is pretty much the max and it is 10.6%.

12.4%.

And folks like me and my partners pay the ENTIRE %12.4 ourselves.

Yup. And they want to remove the cap.
Not realizing that would boost your benefit and still not balance the books.

It will help because the replacement rate on the contribution is almost zero. I have a piece at Independent Voter Network hammering the idea of raising the cap. It is a bad idea.

It will help because the replacement rate on the contribution is almost zero.

Please explain further.

The benefits formula uses average indexed monthly earnings. To simplify it we are looking at the last $1000 of earnings for someone who is at the cap.

First you need to determine month averages, so you will divide the $1,000 by 12 or roughly 83. That is averaged against 35 years so it adds 1/35th to the month average. At the cap your AIME is weighted in the 3rd bend point. So the average only gets 15% weighting. 1000/12*1/35*.15 = nearly 0.36 cents extra per month. Multiply by 12 and it is about $4.28 per year.

If the worker has worked for more than 35 years, adding the new year means removing a smaller contribution year. 4.28 per year is a maximum in benefits. It goes down from there.

 

[JoeTheEconomist]

The Urban Institute disagrees. They provide research on SS. A retiree 2015 who put his contributions aside in a bank account earning 2% real which is close to 5% would have about $300,000.

how is that possible given that $40k x 12.4% x 46 years = $228k without any interest at all!!

The Urban Institute uses the right figures. In the 1970s, people didn't earn 40K. The average worker earned something around 15K, much of which was above the cap. The tax rate wasn't 12.4%. It was probably 8% or so.

 

[EdwardBaiamonte]

If the government spent less (including debt service) than it takes in, the result would be deflation, depression and disaster.

.

100% stupid and liberal. If the govt spends less the private sector can sent more. The money supply stays the same and you have neither deflation nor inflation.

Econ 101

 

[EdwardBaiamonte]

The Urban Institute uses the right figures. .

yes why would a commie think tank use the wrong figures!

 

[EdwardBaiamonte]

In the 1970s, people didn't earn 40K. .

its just an average. For half their working life they earned more and for half they earned less. Get it????

 

[EdwardBaiamonte]

[

Ignorance of economics is the backbone of the conservative movement..

if so why so afraid to provide your best example now that you've learned that deficits don't cause inflation!! What does your fear teach us??

 

[SwimExpert]

very true, an average American could retire with an estate of $1.4 million rather than the dog food money they get from SS, assuming they live long enough to collect any of it.

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Who said anything about 1969, other than you?

Hmmm 1969 + 46 = 2015. My point is that his example is inaccurate and absurd. You are dealing with someone who is making 5 times median income at the start of his career, and by the end is making minimum wage.

So $40,000 a year is minimum wage?

I think you should really sit this out. You can't seem to find the difference between your ass and a hole in the ground.

 

[Toddsterpatriot]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

If the government spent less (including debt service) than it takes in, the result would be deflation, depression and disaster.

Both inflation and the national debt can play a positive role in the economy if prudently used.

The government balance sheet is NOT comparable to family finances. Were it so, university economics departments would shrivel to half their size. Families don't print money. Families don't have investors from around the world trying to lend them money.

Ignorance of economics is the backbone of the conservative movement. GWB was correct: it's voodoo economics.

Ignorance of economics is the backbone of the conservative movement.

It's funny when a liberal says this.

 

[SwimExpert]

If the government spent less (including debt service) than it takes in, the result would be deflation, depression and disaster.

GWB was correct: it's voodoo economics.

He never said that.

 

[JoeTheEconomist]

In the 1970s, people didn't earn 40K. .

its just an average. For half their working life they earned more and for half they earned less. Get it????

I get what you are trying to say. I am only surprised that you can't get that it is a meaningless sequence of numbers. I showed you that you have the wrong rates and the wrong wages. It is as though you have never heard of the wage cap. Your numbers are worthless, get it???

 

[flacaltenn]

No.. It was silly statement. Raising the floors to lower the ceiling? I like my ceilings as the designer saw them in the first place. Don't even understand it,. EVERYONE should be involved as a TAXPAYER. Having damn near half of workers now EXCUSED from income tax (or on EITC) is prescription for disaster. And that's not gonna raise the floor or lower the ceiling.

For the purposes of THIS discussion ---- the SS solutions that I've heard sound good but are actually cruel and sadistic. Raising the age of retirement means you're in favor of making that rickety roofer climb ladders in the hot sun for another 4 or 6 years. It means that 2 working spouses probably need to keep working to avoid draining their private retirement funds.. And raising the exemption levels on payroll tax -- means that some folks will be paying 4 to 10 times more than others for the same benefit. SS is supposed to be a UNIVERSAL insurance program and FDR would be screaming bloody murder about these proposals.

So -- if that's done. And SS is OFFICIALLY changed from UNIVERSAL retirement to a grinchy WELFARE retirement program --- What do you think the chances are the public would EVER trust you leftists/socialists with UNIVERSAL healthcare or UNIVERSAL anything in the future??

Because you seem to think that reading the mind of FDR is a useful guide to understanding contemporary government policies, you might enjoy looking up the original federal income tax law to see the threshold income level at which tax liability began to be incurred. Compare that income amount to the prevailing median family income at the time and see just which sections of the population were subject to income tax.

If that assignment is too difficult for you, let me know and I'll give you the answers. Good luck.

I'll do that ----- just as soon as you look up the original participation schedule for SS and see where the caps and the contributions were when THAT program was started.

And I doubt that we have EVER EXEMPTED over 45% of working Americans from paying ANY income tax. Especially not during the War years.

I see you have dodged the issue. Not surprised. You are on the right track about the war years, that is when the income tax was extended downward to the middle class.

Nobody likes paying taxes Those who leap from dislike to foaming rage have deficient understanding of the nature of the American community. It's so Ron Paul.

Not that it's on topic here (but I will skillfully make it that way ) -- why shouldn't the middle class pay for the Fed Govt in some small way? There are MILLIONS more of them than the 1%.

We ask even the WORKING POOR to pay into SS.. Why aren't we exempting them? Is it because that would screw the notion of SS being a UNIVERSAL program? With equal contributions and benefits for everybody?

Why isn't funding the CDC or NSF or NPR a UNIVERSAL benefit for everyone?

From the perspective of the individual taxpayer, the statistic that really counts is the total tax burden. It is comparing that total tax burden as a percentage of income that the regressive nature of our tax system becomes shockingly apparent.

One of the biggest difference between the rich and the middle class is that most middle class income is earned as salary or fees while the truly wealthy derive their income from capital gains and its many loop holes such as the carried interest definition.

Another class difference is that the lower classes spend all their income just to survive while the upper-middle manages to save and invest a bit, primarily for retirement. The rich, even with their garage elevators and million-dollar yachts spend only a small part of their income, most of it is reinvested, compounding wealth. Sales taxes as a percent of income are steeply regressive.

The federal tax code is many thousands of pages long. In bound volumes it takes up a bookshelf. Most of that endless text consists of definitions and exceptions to the basic code. If you have enough income to be able to hire a tax expert to manage your taxes in coordination with the financial advisors who manage your income, those thousands of pages of tax code serve as the means whereby your paid advisors earn their fees by sheltering your income from taxation.

The bottom line: poor people pay a larger fraction of their income in taxes than rich people. Some of us don't think that is fair.

Not exactly on topic -- but there are no poor people paying income tax. These comparisons include the 6% FICA tax --- and that's because it's SUPPOSED be a Universal Insurance premium. We can do the rest on another thread. I'm not in favor of excluding them from that until everyone agrees it's being converted into a welfare program. Hope you're comfortable with forcing poor people to work their menial jobs for another 4 or 6 years before they see their first $ of SS..

 

[flacaltenn]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

Well if they SPENT IT and didn't put a debt on the books -- how could they use the surplus to "make an investment" in the T.F?

Answer -- they never did. They left it to ANOTHER set of taxpayers to prop up SS deficits. So you got the first SS surplus dollar squandered --- and NOW the taxpayers have to fork over ANOTHER NEW DOLLAR to pay benefits while the SS fund is in deficit.. QUICK --- pull up that fancy calculator on your workstation and calculate the "return on investment" for THAT... ,,,, from the perspective of the working taxpayer..

 

[Toddsterpatriot]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

Well if they SPENT IT and didn't put a debt on the books -- how could they use the surplus to "make an investment" in the T.F?

Answer -- they never did. They left it to ANOTHER set of taxpayers to prop up SS deficits. So you got the first SS surplus dollar squandered --- and NOW the taxpayers have to fork over ANOTHER NEW DOLLAR to pay benefits while the SS fund is in deficit.. QUICK --- pull up that fancy calculator on your workstation and calculate the "return on investment" for THAT...

Well if they SPENT IT and didn't put a debt on the books

If they borrowed SS funds, that is a debt on the books.
Intragovernmental holdings. The difference between the debt and the debt held by the public.

 

[flacaltenn]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

Well if they SPENT IT and didn't put a debt on the books -- how could they use the surplus to "make an investment" in the T.F?

Answer -- they never did. They left it to ANOTHER set of taxpayers to prop up SS deficits. So you got the first SS surplus dollar squandered --- and NOW the taxpayers have to fork over ANOTHER NEW DOLLAR to pay benefits while the SS fund is in deficit.. QUICK --- pull up that fancy calculator on your workstation and calculate the "return on investment" for THAT...

Well if they SPENT IT and didn't put a debt on the books

If they borrowed SS funds, that is a debt on the books.
Intragovernmental holdings. The difference between the debt and the debt held by the public.

EXACTLY -- the debt doesn't go onto the taxpayers until the SSA tries to cash those IOUs. THEN it's held by the public. So essentially what's in that big ole file cabinet that holds the SS T.Fund is a BUNCH OF DEBT.

With interest of course. Can't fool the Toddster -- can ya????

You ever see the "SS Trust Fund"?? GWBush went to visit it for a photo-op.. It's hysterical...

There it is. All those valuable $Trills of "negotiable securities" guarded by a combo lock that could be taken down in about 20 seconds. And Bush has checked every entry and assured you that it's really all there.

 

[kaz]

I get paid the same amount, my kids pay the same amount regardless. What does the government owing me have to do with anything? In no scenario do I get more or less money based on the existence of the bogus fund. The existence of this fantasy fund effects who?

You will get paid an amount based upon your contributions to the fund. That's what the government owes you for your SS contributions, and that's EXACTLY how a defined contribution pension plan or annuity works.

Whether or not you will get the amount promised - and I don't think you will - is another story. But the economics of how SS works is no different than any other pooled capital of retirement savings.

Actually, other "pooled capital of retirement savings" typically involves actual money, not IOUs the pool wrote to itself. And the amount I get paid is irrelevant to the discussion because there is no connection between the amount I will be paid and whether or not those IOUs government wrote to itself are a "trust fund" or not..

What is relevant to the discussion is that the amount we get paid has nothing to do with whether SS has a "trust fund" or not, and there is no connection between what our children will pay and whether SS has a trust fund or not.

There is no cashflow connection to anyone regarding whether the government's IOUs to itself are considered a trust fun or not.

All other financial securities as assets affect cashflow to someone somewhere somehow. Social Security's phantom "trust fund" doesn't.

Seriously, with what you do for a living, and I do believe you even if we banter sometimes, how can you possibly consider something that EX-ANTE has no effect on cashflow, positive or negative, ever, to anyone, an economic asset? How is that possible?

The trust fund does not write IOUs to itself. The government writes an IOU to the trust then the trust owes you. You keep repeating that mistake.

The "real cash flows" are your FICA taxes and the SS payments you will receive in later life.

What is the difference between that and you investing in government bonds for your retirement?

Seriously, you don't understand the difference between me loaning money to someone else, and me loaning money to myself. You actually mean that? Seriously?

And as a finance guy, you actually, truly didn't grasp my point that whether or not there is a trust changes zero cash flows ex-ante to anyone, ANYONE, EX-ANTE

you want to look someone in the eye who knows that that means and say you don't get it? I withdraw my statement that I believe you. You are full of shit. And I mean that in the most disrespectful sort of way. In a way that most who say that to you don't. I know what I am talking about. that you don't grasp that your arguement changes zero cashflows is pathetic. If you do what you say, you should be shit canned on the spot.

Cash flows is wall street, Holmes. You don't know that? You aren't Wall Street, you are a janitor, you are a canard:

Toro: There doesn't have to be any money for something to be an asset, WTF are you talking about? Yeah, there does

You're not loaning money to yourself. You keep repeating that mistake.

Tell me the difference between the two are

1. You give the government taxes and you are credited with future SS payments

2. You give the government money for a bond which you are credited for future interest and principle payments.

Tell me what the difference is?

You know nothing about finance if you actually can stand behind that a "trust fund" which effects cash flows to no one positively or negatively ex-ante is a financial asset

Assets are valued on risk adjusted expected cashflows, Holmes. Bonds, stocks, all of them. An "asset" which has zero effect on cashflows in or out of the imperial federal government therefore has a value of zero

Read a book on asset valuation and get back to me

 

[NYcarbineer]

You will get paid an amount based upon your contributions to the fund. That's what the government owes you for your SS contributions, and that's EXACTLY how a defined contribution pension plan or annuity works.

Whether or not you will get the amount promised - and I don't think you will - is another story. But the economics of how SS works is no different than any other pooled capital of retirement savings.

Actually, other "pooled capital of retirement savings" typically involves actual money, not IOUs the pool wrote to itself. And the amount I get paid is irrelevant to the discussion because there is no connection between the amount I will be paid and whether or not those IOUs government wrote to itself are a "trust fund" or not..

What is relevant to the discussion is that the amount we get paid has nothing to do with whether SS has a "trust fund" or not, and there is no connection between what our children will pay and whether SS has a trust fund or not.

There is no cashflow connection to anyone regarding whether the government's IOUs to itself are considered a trust fun or not.

All other financial securities as assets affect cashflow to someone somewhere somehow. Social Security's phantom "trust fund" doesn't.

Seriously, with what you do for a living, and I do believe you even if we banter sometimes, how can you possibly consider something that EX-ANTE has no effect on cashflow, positive or negative, ever, to anyone, an economic asset? How is that possible?

The trust fund does not write IOUs to itself. The government writes an IOU to the trust then the trust owes you. You keep repeating that mistake.

The "real cash flows" are your FICA taxes and the SS payments you will receive in later life.

What is the difference between that and you investing in government bonds for your retirement?

Seriously, you don't understand the difference between me loaning money to someone else, and me loaning money to myself. You actually mean that? Seriously?

And as a finance guy, you actually, truly didn't grasp my point that whether or not there is a trust changes zero cash flows ex-ante to anyone, ANYONE, EX-ANTE

you want to look someone in the eye who knows that that means and say you don't get it? I withdraw my statement that I believe you. You are full of shit. And I mean that in the most disrespectful sort of way. In a way that most who say that to you don't. I know what I am talking about. that you don't grasp that your arguement changes zero cashflows is pathetic. If you do what you say, you should be shit canned on the spot.

Cash flows is wall street, Holmes. You don't know that? You aren't Wall Street, you are a janitor, you are a canard:

Toro: There doesn't have to be any money for something to be an asset, WTF are you talking about? Yeah, there does

You're not loaning money to yourself. You keep repeating that mistake.

Tell me the difference between the two are

1. You give the government taxes and you are credited with future SS payments

2. You give the government money for a bond which you are credited for future interest and principle payments.

Tell me what the difference is?

You know nothing about finance if you actually can stand behind that a "trust fund" which effects cash flows to no one positively or negatively ex-ante is a financial asset

Assets are valued on risk adjusted expected cashflows, Holmes. Bonds, stocks, all of them. An "asset" which has zero effect on cashflows in or out of the imperial federal government therefore has a value of zero

Read a book on asset valuation and get back to me

Ranch or Blue Cheese?

 

[NYcarbineer]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

Well if they SPENT IT and didn't put a debt on the books -- how could they use the surplus to "make an investment" in the T.F?

Answer -- they never did. They left it to ANOTHER set of taxpayers to prop up SS deficits. So you got the first SS surplus dollar squandered --- and NOW the taxpayers have to fork over ANOTHER NEW DOLLAR to pay benefits while the SS fund is in deficit.. QUICK --- pull up that fancy calculator on your workstation and calculate the "return on investment" for THAT... ,,,, from the perspective of the working taxpayer..

The SS fund is not in deficit. SS is in surplus.

 

[NYcarbineer]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

Well if they SPENT IT and didn't put a debt on the books -- how could they use the surplus to "make an investment" in the T.F?

Answer -- they never did. They left it to ANOTHER set of taxpayers to prop up SS deficits. So you got the first SS surplus dollar squandered --- and NOW the taxpayers have to fork over ANOTHER NEW DOLLAR to pay benefits while the SS fund is in deficit.. QUICK --- pull up that fancy calculator on your workstation and calculate the "return on investment" for THAT... ,,,, from the perspective of the working taxpayer..

What the general fund 'squanders' the payroll tax revenue on is of no concern to SS. The government still has to pay it back, and pay interest on it. It was LOANED to the general fund, not given.

Do you understand the concept of a LOAN?

 

[Toro]

You will get paid an amount based upon your contributions to the fund. That's what the government owes you for your SS contributions, and that's EXACTLY how a defined contribution pension plan or annuity works.

Whether or not you will get the amount promised - and I don't think you will - is another story. But the economics of how SS works is no different than any other pooled capital of retirement savings.

Actually, other "pooled capital of retirement savings" typically involves actual money, not IOUs the pool wrote to itself. And the amount I get paid is irrelevant to the discussion because there is no connection between the amount I will be paid and whether or not those IOUs government wrote to itself are a "trust fund" or not..

What is relevant to the discussion is that the amount we get paid has nothing to do with whether SS has a "trust fund" or not, and there is no connection between what our children will pay and whether SS has a trust fund or not.

There is no cashflow connection to anyone regarding whether the government's IOUs to itself are considered a trust fun or not.

All other financial securities as assets affect cashflow to someone somewhere somehow. Social Security's phantom "trust fund" doesn't.

Seriously, with what you do for a living, and I do believe you even if we banter sometimes, how can you possibly consider something that EX-ANTE has no effect on cashflow, positive or negative, ever, to anyone, an economic asset? How is that possible?

The trust fund does not write IOUs to itself. The government writes an IOU to the trust then the trust owes you. You keep repeating that mistake.

The "real cash flows" are your FICA taxes and the SS payments you will receive in later life.

What is the difference between that and you investing in government bonds for your retirement?

Seriously, you don't understand the difference between me loaning money to someone else, and me loaning money to myself. You actually mean that? Seriously?

And as a finance guy, you actually, truly didn't grasp my point that whether or not there is a trust changes zero cash flows ex-ante to anyone, ANYONE, EX-ANTE

you want to look someone in the eye who knows that that means and say you don't get it? I withdraw my statement that I believe you. You are full of shit. And I mean that in the most disrespectful sort of way. In a way that most who say that to you don't. I know what I am talking about. that you don't grasp that your arguement changes zero cashflows is pathetic. If you do what you say, you should be shit canned on the spot.

Cash flows is wall street, Holmes. You don't know that? You aren't Wall Street, you are a janitor, you are a canard:

Toro: There doesn't have to be any money for something to be an asset, WTF are you talking about? Yeah, there does

You're not loaning money to yourself. You keep repeating that mistake.

Tell me the difference between the two are

1. You give the government taxes and you are credited with future SS payments

2. You give the government money for a bond which you are credited for future interest and principle payments.

Tell me what the difference is?

You know nothing about finance if you actually can stand behind that a "trust fund" which effects cash flows to no one positively or negatively ex-ante is a financial asset

Assets are valued on risk adjusted expected cashflows, Holmes. Bonds, stocks, all of them. An "asset" which has zero effect on cashflows in or out of the imperial federal government therefore has a value of zero

Read a book on asset valuation and get back to me

I have. Which is why your future social security payments are an asset.

A financial asset is the value of future cash flows discounted back to the present. What is the value of your future social security payments? That's your asset. Do you understand that, "Holmes?" That's the asset that is held in trust for you at the Treasury. Then, all estimated future payments made to SS participants are pooled together in the trust, and those are the assets of the trust. These are liabilities of the government.

Now why don't you answer the question? Did you not understand it? Did you not read your book on valuation? I'll repeat it for you.

Tell me the difference between the two

1. You give the government taxes and you are credited with future SS payments

2. You give the government money for a bond which you are credited for future interest and principle payments.

What is the difference?