Can someone please explain social security to me?

[Fenixgoon]

What benefits are gained from SS? As in, what kind of things will SS pay for? Being 22, I haven't the slightest clue, and I don't expect SS to pay me any meaningful amount of money when I retire.

Social security uses funds from current workers to pay off current retirees who are owed money. In principle it sounds basically like a pyramid scheme. Use money from current investors (current working force) to pay off previous ones (retirees). Everything is nice until you can't find anymore investors (tax revenue not sufficient). Then you're screwed.

First, how does this sound like a good idea? Obviously back in the 1930's it seemed like a good idea at the time, enough for people to pass it... but for a system that we know is going to go completely bankrupt in the near future, why don't we bother changing it or scrapping it entirely altogether? Yes, I know the elderly have the highest voting rate of any demographic, and that's (partially) why it's still here.

The reason I ask is because I'm deeply concerned about the financial health of our country - congressmen are always looking to add to bills and programs, never take away. How long until we realize that the only real way to become fiscally responsible is to cut the fat and trim down programs across the entire government. Individuals get out of debt only by reducing spending. They don't just magically make significantly more amounts of money that let them easily pay off said debt. We can't just tax our way out of deficit because that completely kills any motivation/momentum for economic growth.

</end rant>

 

[StageLeft]

You're mostly right. it won't go bankrupt, though, because taxes will keep going up. SS sure was a sweet ass deal for those who got in on the ground floor.

 

[dammitgibs]

It's a pyramid scheme.

 

[fskimospy]

Originally posted by: Fenixgoon
What benefits are gained from SS? As in, what kind of things will SS pay for? Being 22, I haven't the slightest clue, and I don't expect SS to pay me any meaningful amount of money when I retire.

Social security uses funds from current workers to pay off current retirees who are owed money. In principle it sounds basically like a pyramid scheme. Use money from current investors (current working force) to pay off previous ones (retirees). Everything is nice until you can't find anymore investors (tax revenue not sufficient). Then you're screwed.

First, how does this sound like a good idea? Obviously back in the 1930's it seemed like a good idea at the time, enough for people to pass it... but for a system that we know is going to go completely bankrupt in the near future, why don't we bother changing it or scrapping it entirely altogether? Yes, I know the elderly have the highest voting rate of any demographic, and that's (partially) why it's still here.

The reason I ask is because I'm deeply concerned about the financial health of our country - congressmen are always looking to add to bills and programs, never take away. How long until we realize that the only real way to become fiscally responsible is to cut the fat and trim down programs across the entire government. Individuals get out of debt only by reducing spending. They don't just magically make significantly more amounts of money that let them easily pay off said debt. We can't just tax our way out of deficit because that completely kills any motivation/momentum for economic growth.

</end rant>

Actually a lot of that isn't true. The primary problem with Social Security is that life expectancies have increased pretty substantially since it was enacted. Eventually we will probably index it to life expectancy in some way and bring it back in to line.

As far as the only way to get out of debt being the reduction of spending, that's simply false. The 1990's are a perfect example of this, the government's spending grew each year, but revenues grew faster. That's how we ended up with that surplus. We most certainly could tax our way out of the deficit as well, as economic modeling on tax returns vs. economic growth show that we could have considerably higher tax rates and continue economic growth, absolutely not killing the 'motivation' for it. Again, as a historical example tax rates in the 1950's were much higher than they are today, yet we experienced wonderful growth.

 

[Hayabusa Rider]

Let me set up the scenario for you. You have an aging population, many of which lost their retirements because Ron R effectively encouraged the corporate raiders to clear out their retirement pensions. There wasn't enough time for most of them to regain all that was lost. So we have all those people with no financial resource. What they have is SS.

So what do you do with those people?

 

[dammitgibs]

The primary problem with Social Security is that life expectancies have increased pretty substantially since it was enacted.

My understanding is the primary problem is that instead of investing the money I pay into the system and then taking it back out when I'm old, the government decided to spend the money that was in the program already, then relied on younger tax payers to pay for the current costs of seniors.

 

[BigDH01]

Originally posted by: Fenixgoon
Social security uses funds from current workers to pay off current retirees who are owed money. In principle it sounds basically like a pyramid scheme. Use money from current investors (current working force) to pay off previous ones (retirees). Everything is nice until you can't find anymore investors (tax revenue not sufficient). Then you're screwed.

Hyperbole. Social Security is a PAYGO system, not a pyramid scheme. You can view the differences as well as an in-depth conversation here.

First, how does this sound like a good idea? Obviously back in the 1930's it seemed like a good idea at the time, enough for people to pass it... but for a system that we know is going to go completely bankrupt in the near future, why don't we bother changing it or scrapping it entirely altogether? Yes, I know the elderly have the highest voting rate of any demographic, and that's (partially) why it's still here.

SS-like systems are not new ideas.

In advocating the case of the persons thus dispossessed, it is a right, and not a charity . . . [Government must] create a national fund, out of which there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property. And also, the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age.

-Thomas Paine in Agrarian Justice

He also mentions a system similar to this in the Rights of Man, Part II. There are likely others before him.

Also, please describe to me how SS is going bankrupt in the near future. The trust fund may run out, but in a PAYGO system people would still be paid, it would just be less. Even then, the trust fund won't run out until 2037. It could easily be solved now with a slight decrease in benefits or a slight increase in payroll taxes.

The reason I ask is because I'm deeply concerned about the financial health of our country - congressmen are always looking to add to bills and programs, never take away. How long until we realize that the only real way to become fiscally responsible is to cut the fat and trim down programs across the entire government. Individuals get out of debt only by reducing spending. They don't just magically make significantly more amounts of money that let them easily pay off said debt. We can't just tax our way out of deficit because that completely kills any motivation/momentum for economic growth.

</end rant>

Yes, fat should be cut. One of the best ways to do this in my opinion is to remove corporate lobbyists from DC by whatever means necessary.

We can't just tax our way out of deficit because that completely kills any motivation/momentum for economic growth.

Hyperbole. This only occurs if you're on the wrong side of the Laffer Curve.

 

[sactoking]

Originally posted by: Fenixgoon
First, how does this sound like a good idea? Obviously back in the 1930's it seemed like a good idea at the time, enough for people to pass it...

It wasn't a good idea then either. It was a bad idea, and the people who concocted it knew it, that's why Congress exempted itself from the program and gave themselves "real" retirement income.

Hell, the states knew it was bogus too and used the "You can't tax states" argument to bail as quickly as possible.

 

[rudder]

Originally posted by: Fenixgoon
First, how does this sound like a good idea? Obviously back in the 1930's it seemed like a good idea at the time, enough for people to pass it... but for a system that we know is going to go completely bankrupt in the near future, why don't we bother changing it or scrapping it entirely altogether? Yes, I know the elderly have the highest voting rate of any demographic, and that's (partially) why it's still here.

The ones who came up with it in the 30's never stopped to think that the average lifespan would increase so dramatically. So now you have a whole lot of people living longer and taking more benefits than they put into the system.

If you are 22, start investing then you do not have to worry about living off of social security although it will pain you to see the government take more and more out of your paycheck.

 

[Craig234]

Originally posted by: Fenixgoon
What benefits are gained from SS?

Guaranteeing an income stream for some basic expenses for elders. Before SS, the elder poverty rate in the US had long been 90% - it was the norm for the old to be in poverty.

Now that's reversed, gradually going from 90% to 10% in the decades after it passed.

As in, what kind of things will SS pay for? Being 22, I haven't the slightest clue, and I don't expect SS to pay me any meaningful amount of money when I retire.

It's not much, but see above. You appear to have bought into the right-wing FUD about how you won't get it. Their motive is not to honestly warn you.

It's to attack SS because it works so well and Democrats get the credit that it hurts them politically and they want to get rid of it and damage it if they can't get rid of it.

Social security uses funds from current workers to pay off current retirees who are owed money. In principle it sounds basically like a pyramid scheme.

You don't understand what a pyramid scheme is. There's a reason it's called 'pyramid' and it's unsustainable, unlike SS which has been in place 75 years. The main bump in the road with SS is the increasing number of recipients coming up, and some re-balancing is needed for that.

One part of the bump in the road is the way that it was planned for with a surtax (good) but the trust fund has been raided and spent every year creating a big debt (bad).

Use money from current investors (current working force) to pay off previous ones (retirees). Everything is nice until you can't find anymore investors (tax revenue not sufficient). Then you're screwed.

Did people stop having children? No, there are new payers. But the speed bump I mentioned is an issue - not one that needs to kill SS.

First, how does this sound like a good idea? Obviously back in the 1930's it seemed like a good idea at the time, enough for people to pass it...

Back then, elderly people needed money for eating and such. Not like now.

but for a system that we know is going to go completely bankrupt in the near future,

Ah, you had another glass of the right-wing FUD kool-aid.

why don't we bother changing it or scrapping it entirely altogether?

Change yes, scrap and return to elder poverty, no.

Yes, I know the elderly have the highest voting rate of any demographic, and that's (partially) why it's still here.

Fallacious as it is, I think you are stating the argument the GOP is going to be pushing for years and decades - creating a generation war, young versus old.

They don't have anything else, really - dergulation that helps the top 0.01% doesn't help young people much, allowing the corporatocracy to destroy the environment, getting in bed with the fundamentalist religious right, the undertones of racism and anti-gay policies, not much which is why young people are more democratic voting - but they can push the 'old people are stealing your money' argument, however hypocritical given how much they've stolen from young people to pay for the debt they used for 'prosperity'.

The reason I ask is because I'm deeply concerned about the financial health of our country

You should be. But if you're a smoker who coughs when you go jogging, you don't want to react by saying you need to stop jogging.

Blame the right things, not the ones fed to you by the corrupt propagandists.

For some good info, keep tabs on sites like salon.com and www.commondreams.org.

- congressmen are always looking to add to bills and programs, never take away.

Not literaly true but a lot of truth to it.

How long until we realize that the only real way to become fiscally responsible is to cut the fat and trim down programs across the entire government.

It's not just trimming, it's trimming the corrupt spending, and keepng if not increasing the spending that is good for the country. But we should reduce our debt.

Individuals get out of debt only by reducing spending. They don't just magically make significantly more amounts of money that let them easily pay off said debt. We can't just tax our way out of deficit because that completely kills any motivation/momentum for economic growth.

The issue is a lot more complex than that right-wing talking point 101. Of course there are tradeoffs - the underlying issue is the political power concentration/corruption which allows the most wealthy to distort the priorities to their own insterests against most of the nation, to the point we're seeing radically redistribution and concentration of wealth for 25 years.

Go look at a chart over the last 25 years of how 80%, how 99%, of Americans have done, versus the top 0.1% - who have increased their *share* of income sixfold in this period.

 

[WhipperSnapper]

Originally posted by: sactokingIt wasn't a good idea then either. It was a bad idea, and the people who concocted it knew it, that's why Congress exempted itself from the program and gave themselves "real" retirement income.

Hell, the states knew it was bogus too and used the "You can't tax states" argument to bail as quickly as possible.

What do you recommend in its place and why would it be better?

 

[ElFenix]

Originally posted by: eskimospy
Again, as a historical example tax rates in the 1950's were much higher than they are today, yet we experienced wonderful growth.

the marginal rates may have been much higher but i will guarantee you that there were far more loopholes making effective rates probably not much higher at all, if they were higher (might not have been).

not to mention the 50s had the benefit of the US being the only industrial economy that didn't have its factories destroyed in WWII. i think that effect far outweighs whatever benefit the particular tax scheme may have had in comparison to what we've got now.



anyway, SS takes from the least wealthy and gives to the most wealthy, when sorted by age group. it's reverse robinhood.

 

[sactoking]

Originally posted by: WhipperSnapper
What do you recommend in its place and why would it be better?

That depends, what do you want to accomplish? That's one of the problems with SSI: Americans can't agree on what it is supposed to be or do.

 

[BarrySotero]

Originally posted by: Fenixgoon
What benefits are gained from SS? As in, what kind of things will SS pay for? Being 22, I haven't the slightest clue, and I don't expect SS to pay me any meaningful amount of money when I retire.
</end rant>

You are wise not to expect much from SS. The US is about to choke on aging baby boomers like a python trying to swallow a pig - while the capitalist economy is being harpooned by President Ahab - I mean Captain Obama - I mean president Obama. Right now I would advise concern that the Constitution still be around when your 65. The way things are going (down the potty) the Constitution might be euthanized before SS dies.

 

[heyheybooboo]

Originally posted by: dammitgibs

The primary problem with Social Security is that life expectancies have increased pretty substantially since it was enacted.

My understanding is the primary problem is that instead of investing the money I pay into the system and then taking it back out when I'm old, the government decided to spend the money that was in the program already, then relied on younger tax payers to pay for the current costs of seniors.

IOUs to Social Security are currently $2.5 trillion. By 2018 SS will be owed $3.8 trillion. I've been arguing for a 'hands-off' policy for 20 years.

And more frightening: By 2018 the government will have borrowed nearly $6.4 trillion from all trust funds (including the SS number above).

We get through this recession and it will be time for a Lockbox.

 

[heyheybooboo]

Originally posted by: BarrySotero

Originally posted by: Fenixgoon
What benefits are gained from SS? As in, what kind of things will SS pay for? Being 22, I haven't the slightest clue, and I don't expect SS to pay me any meaningful amount of money when I retire.
</end rant>

You are wise not to expect much from SS. The US is about to choke on aging baby boomers like a python trying to swallow a pig - while the capitalist economy is being harpooned by President Ahab - I mean Captain Obama - I mean president Obama. Right now I would advise concern that the Constitution still be around when your 65. The way things are going (down the potty) the Constitution might be euthanized before SS dies.

As typical, that would be incorrect.

But don't let that get in the way of your Fear Card.

 

[JS80]

We work to pay current retirees and when we are 65 there aren't enough 22 year olds to pay us so we basically get fucked. It's effectively an extra 7% tax on workers that will never see the benefit.

 

[heyheybooboo]

Originally posted by: JS80
We work to pay current retirees and when we are 65 there aren't enough 22 year olds to pay us so we basically get fucked. It's effectively an extra 7% tax on workers that will never see the benefit.

You are not very good at actuarial stuff, are you?

Social Security is an easy fix. Good to see you play the Fear Card, too.

 

[JS80]

Originally posted by: heyheybooboo

Originally posted by: JS80
We work to pay current retirees and when we are 65 there aren't enough 22 year olds to pay us so we basically get fucked. It's effectively an extra 7% tax on workers that will never see the benefit.

You are not very good at actuarial stuff, are you?

Social Security is an easy fix. Good to see you play the Fear Card, too.

I'm in finance I am fully aware of the math involved. The problem is that it's not an easy fix because it's a political issue. Good luck trying to reduce the benefits to adjust for the actuarial miscalculations. It's political suicide and will never happen until the trust runs out of money. And in the meantime the people paying in now will get fucked in the future, and the people receiving benefits now are enjoying inflated pay outs.

 

[Fern]

Originally posted by: Fenixgoon
What benefits are gained from SS? As in, what kind of things will SS pay for? Being 22, I haven't the slightest clue, and I don't expect SS to pay me any meaningful amount of money when I retire.

Social Security is a combination of several different things.

The 1st, and most widely known, is retirement income. This part is essentially a retirement plan, howver does have an element of 'welfare' to it. I say that because top earners who pay more into SS don't get an equal dollar-for-dollar benefit, some 'extra' goes to lower income/earner types so they can stay (or try to stay) above the poverty level.

There's also a disability part. If yoy are disabled before reaching SS retirement age you get SSI payments. So, this part is disability insurance.

There's also a part that will pay money to your minor dependants if you are disabled or die prematurely. Another insurance portion.

There's also a death benefit to help pay for burial expenses. Again, more insurance.

(I'm leaving out Medicare and Medicaid)

Originally posted by: Fenixgoon
Social security uses funds from current workers to pay off current retirees who are owed money. In principle it sounds basically like a pyramid scheme. Use money from current investors (current working force) to pay off previous ones (retirees). Everything is nice until you can't find anymore investors (tax revenue not sufficient). Then you're screwed.

There is some truth in that.

The system even started off that way - current retirees paid with funds from current wokers. When initially put in place there was obviously no, or very little, money from the first retirees. They were paid with OPM (other peoples' money)

Originally posted by: Fenixgoon
First, how does this sound like a good idea? Obviously back in the 1930's it seemed like a good idea at the time, enough for people to pass it... but for a system that we know is going to go completely bankrupt in the near future, why don't we bother changing it or scrapping it entirely altogether? Yes, I know the elderly have the highest voting rate of any demographic, and that's (partially) why it's still here.

Well, the government couldn't very well start collecting SS tax and then not pay current retirees. For one thing you'd really be burdening the workers who would presumably be supporting their retired parents and also have to pay into SS at the same time. Just not politically feasible.


Fern

 

[LunarRay]

Originally posted by: heyheybooboo

Originally posted by: dammitgibs

The primary problem with Social Security is that life expectancies have increased pretty substantially since it was enacted.

My understanding is the primary problem is that instead of investing the money I pay into the system and then taking it back out when I'm old, the government decided to spend the money that was in the program already, then relied on younger tax payers to pay for the current costs of seniors.

IOUs to Social Security are currently $2.5 trillion. By 2018 SS will be owed $3.8 trillion. I've been arguing for a 'hands-off' policy for 20 years.

And more frightening: By 2018 the government will have borrowed nearly $6.4 trillion from all trust funds (including the SS number above).

We get through this recession and it will be time for a Lockbox.

What Securities do you propose will exist in this lockbox... the current trust fund for SS hold government securities that earn interest like any other government security... I'm sure they are locked away maybe in a box..
I'm not sure I've ever followed the 'Lockbox' logic... There can be dollars in it... pieces of paper with Washington's head on them or government securities with something on it... not sure what.. What would a lockbox do other than have given Gore something to talk about.

 

[Hacp]

SS is basically there to support the old people. While it has some merit, it is very wasteful. The old grandmpas and grandmas should live with their children before asking for government handouts. We could drastically reduce SS taxes if we enforced this rule.

 

[cubby1223]

Social Security is a Ponzi scheme on steroids. As long as there are continue to be enough workers paying into the system, it works. If a time comes there are not enough paying in to cover those receiving, we'll be in a lot of pain.

 

[ChunkiMunki]

maybe they should tax incomes above $106,000, instead of stopping at that limit, to shore up the trust fund.

 

[Craig234]

Originally posted by: ChunkiMunki
maybe they should tax incomes above $106,000, instead of stopping at that limit, to shore up the trust fund.

Sounds like a fine idea to me.