Fiscal Cliff - Payroll taxes not extended (creditor, buy, companies)

[Mircea]

Originally Posted by Tampaite

If you want to put more money into middle class - why was the 4% tax increased to 6% on the first $110K you make?

It was always 6.2%. It's rather shocking that someone would be paying a tax and be totally clueless about the purpose of the tax.

Originally Posted by Tampaite

What better stimulus does the economy need if everyone making less than 110K gets an additional 2K in their pocket?

The only thing it stimulated was government debt. It did nothing.

Originally Posted by Hamish Forbes

A good place to start would be to increase the employer's contribution in order to recapture some of the money that they have stripped from so many American workers by doing away with defined-benefit pensions.

Your employer provides you with pension and healthcare, most of them provide day, and now what, you want your employer to provide your transportation and housing, too?

The defined-benefit pension plans were Ponzi-schemes that were destined to fail, which is why they were abandoned ---- even the unions could see that.

Originally Posted by Hamish Forbes

For a reality check, look at income distribution trends over the last 50 years,....

Not relevant.

Originally Posted by Hamish Forbes

One aspect of this has been the decimation of defined-benefit pension plans and the secure retirements of millions of American workers in order to keep profits continually growing.

That is the whole point, is it not? If you want someone to baby-sit you, then hire your own baby-sitter.

Originally Posted by Hamish Forbes

In order to counter this to some extent, most developed countries have a national pension plan. We could have the same in the United States, funded by employer contributions to SS that compensate for the expropriated defined-benefit pension money.

That would defeat the whole point of Social Security, which is insurance to hedge against any employer-based benefit plans and your own personal savings.

Originally Posted by Hamish Forbes

Where on earth do you get this idea? Unless right-wing bonkos kill SS for political and ideological reasons, it will certainly, beyond any shadow of a doubt, be around when you retire.

You might want to work on your math skills.

Originally Posted by Hamish Forbes

If reason prevails, you will not have to settle for 75%. The solvency of Social Security is one of our least challenging National problems - it can be fixed very easily (again if reason, rather than right-wing extremism, prevails).

No, it cannot. Again, you need to work on your math skills.

Originally Posted by Hamish Forbes

NO, NO, NO! Inflation is taken into account with the 75% number. Wouldn't it be worth your trouble to find this out yourself before jumping to a conclusion that SS is doomed? To get even the most rudimentary knowledge regarding the subject?

Are you aware that this is the Economics Forum?

Bull-**** talkers belong over on the P&OC Forum.

Sorry, inflation is not "taken into account with the 75% number."

You're out of your league here.

For someone screaming about "rudimentary knowledge," you need to start practicing what you preach.

Not amused...

Mircea

Originally Posted by TWD39

What good does increasing SS do though when the government robs from it?

The government doesn't "rob" from it.

By law, by the original 1935 law, all excess monies are to be converted in to special treasury securities. At the time Social Security went into effect, those were the Second Liberty Bonds.

Your employer withholds FICA taxes from your paycheck, that money is deposited in an interest bearing escrow account, the money is transferred quarter to the Social Security Administration, who then uses it to pay out benefits for the quarter. Any monies left over -- by law -- are required to be transferred to the US Treasury Department who then puts the cash into the General Fund and issues a special treasury note in that amount.

Sorry to rain all over your parade, but whether the OASI Trust Fund has $2.6 TRILLION in cold hard cash, $2.6 TRILLION in gold, $2.6 TRILLION in silver, $2.6 TRILLION in Euros or $2.6 TRILLION in chocolate candy bars doesn't alter the fact that the OASI Trust Fund will be exhausted within 12 years.

Raining...

Mircea

Originally Posted by duster1979

By 2037 Social Security will only be able to pay out 75% of scheduled benefits. Sure, that's a lot better than nothing; but why should I have to settle for 75%?

Nope. You are way, way, way behind.

I was saying 2028 when Social Security was saying 2041.

When I saw how badly your economy really is, I redid the numbers and it showed 2023-2025. A year later, Social Security said 2027 under High Cost and 2031 under Intermediate.

My numbers show 2023-2024 as of now.

When Social Security was showing 2037, benefits would be cut by 24%.

In the 2012 SSA report, benefits will be cut in 2027 by 25%, but in reality that will be 28%-32% (sorry, can't narrow it down more than that right now). But like I said, the OASI Trust Fund will be exhausted by 2023-2024 at which time your benefits will be automatically 28%-32% across the board.

Originally Posted by duster1979

Which as far as I know doesn't account for inflation...

You are correct and don't let any blithering idiots tell you otherwise. The numbers you are given are in current year dollars, meaning that if you got your handy-dandy Social Security printout in 2011, then the your monthly retirement benefits are stated in 2011 Dollars, and if you got it in 2012, then it is in 2012 Dollars.

Originally Posted by duster1979

The info came from moveon.org and didn't really state what it was based on.

What? Why don't you just go to MyLoveableNAZI.com?

Originally Posted by duster1979

If she had been allowed to invest the earnings that she paid into FICA all the years she worked into an investment vehicle earning only average returns, she would have had close to $500K in the bank when she finally quit working;....

But you don't know that for a fact.

I always find it amusing that people say, "If [someone] had been allowed to invest what they paid into Social Security......" and yet these Einstein Wall Street Whiz Financial Genius Wizards end up retiring with nothing.

Either you know how to invest, or you do not, and whether you do or do not pay FICA taxes makes no freaking difference.

Originally Posted by duster1979

Social Security was introduced to provide something for those who lost everything during the depression. It was never meant to be permanent, but unfortunately it became a sacred political football and a crutch for those who choose not to plan for the future.

That is not true at all.

In 1935 at the time Social Security was enacted, 30 States had some form of social-security pension retirement plan.

The error FDR made was nationalizing those plans.

Historically...

Mircea

Originally Posted by HappyTexan

Big business is behind the anti-SS bandwagon here telling people to cut it and get rid of it and convincing them that it's outdated and won't be there for them.

You can privatize Social Security.

You don't need government involvement, except for safeguards.

Each State should set a minimum requirement based on the cost-of-living in that State, and then everyone is required to pay into the plan of their choice. The only thing that needs to be done is periodically review and adjust the minimum requirement to account for changes in the cost-of-living.

If you did that, then you wouldn't have the stupid thing where one person gets $1,200/month but due to the cost-of-living that $1,200 has a buying power of $1,800, while some other poor sap gets $1,200 and due to the cost-of-living it has all the buying power of $650.

The only role of the federal government would be granting the same protections that exist now --- for example your Social Security benefits cannot be assigned, meaning a creditor cannot take them, you can't lose your Social Security benefits in a divorce, or in a civil law suit, and so on.

And then because it represents future payments to the individual, you cannot allow them to borrow against it either, or use it as collateral (especially since that would defeat the whole purpose of having income insurance).

Wait until April.

Fidelity handles like 60%-65% of all 401(k) accounts that are through employers as part of a benefit plan. They publish an annual report, with some interesting commentary. For example, in 2012, the average 401(k) account was a measly $60,000. And then based on the number of account holders who borrowed against their 401(k) plans, they estimated that 21% of all 401(k) account holders have borrowed against their plans.

The point is that it would seem many people will be using Social Security to supplement their retirement plans.....or maybe I have that backwards....a lot of people will be using their retirement plans to supplement Social Security.

Anyway, the sooner you privatize it, the better off you'll be in the long run.

Eliminate the cap an raise the FICA tax rate and you'll be able to get all the Boomers through, but you'll cause mild harm to your economy in doing so. Raise FICA to the 10%-12% range (20%-24% for both employer and employees together) and you can get all of the Tweeners through and a good chunk of Generation X, but then you'll have moderate to severe economic damage. You could probably get all of Generation X through, but it won't be pretty.

Generation Y, forget it. They need to be transitioned to a private insurance plan.....yes, insurance, not 401(k) or any other bizarre investment scheme. Just plain old ordinary insurance.

What I'm looking at now, is determining what each 1% in FICA payroll taxes will cost you in terms of job losses.

When you look at the high tax States in Europe, you can't help but notice their employment to population ratios are very low, at least lower than the US. They generally range from 41% to 55%.

I noted that the three oil States -- The UK, the Netherlands and Norway have higher employment to population ratios -- UK 57% and the Netherlands and Norway 61% and 63% effectively, buy those countries also have higher numbers of government employees as a percentage of the population as well.

These schemes all revolve around the number of workers per beneficiary, wage levels and tax rates. You end up in a vicious cycle where raising the tax rate results in job losses which reduces the number of workers per beneficiary, which then necessitates higher tax rates, which cause more job losses reducing the number of workers per beneficiary, requiring raising taxes even higher to make up for lost or reduced revenues. If you want the good news, it eventually bottoms out, but that's of little consolation to those who don't have jobs.

Anyway, whatever you do, do not under any circumstances allow them to push Social Security off into some 401(k) or other investment type scheme.

You need two sources of retirement income, your personal savings and your employer-based package, and then you need insurance -- Social Security -- as an hedge against both of those to give you at total of three -- or at least one if the first two fail.

If everyone gets pushed into some kind of 401(k) or investment scheme, I can tell you exactly what will happen --- employers will lobby Congress to dump their plans and you'll end up with with only two sources of retirement income, your personal savings and your new government investment scheme without any insurance plan to back it up in the event one or both don't pan out.

Not on the band-wagon...

Mircea

[Hamish Forbes]

Originally Posted by Mircea

It was always . . .

Mircea

ad infinitem, ad nauseam

[Hamish Forbes]

Originally Posted by gwynedd1

What you love is deflecting.

Responding to one of your posts is like trying to deflect a soggy, 500-pound marshmallow. What you have posted in this thread is so unfocused (for example, the parts about Plato, foot rubs, hyper-inflation, etc.) and so verbose that it's hard to understand your basic point. We might even agree, for all I can tell.

It seems to me that if one strips away your rhetorical swashbuckling, the gist of your thought (a 2% tax on labor is a drag on the economy) is fairly ordinary, even banal. Your predictions for the near future, to the extent that you have made any, are equally ordinary, again even banal. Basically, conventional wisdom.

[duster1979]

Originally Posted by shaker281

"Allowed to" and actually investing prudently are two completely different things.

I wasn't trying to imply that she would have prudently invested the money if she had it to invest, simply refuting a previous poster's claim that Social Security somehow represents a "store of value."

If she had no savings after 65 years of life, why assume she would have saved anything?

When I calculated the numbers several years ago it was in the context of federally mandated investing as opposed to contributions to FICA. So her actual history of savings isn't really relevant. There are reasons she retired without much in the way of savings that I won't bother going in to.

Or that she could have turned her meager FICA contributions into $500K without the benefit of employer contributions too?

In a followup post I stated that the $500K figure represented contributions from both parents. They both made pretty good money for most of their careers, and contributed for many years when interest rates were very good even on guaranteed investments. If anything it's a conservative number.

As was pointed out, that $500K would not generate anything close to what she will receive in SS benefits over an average retirement. Not even close!

What do you consider an "average retirement?" I found one study that showed the average retirement age to be 60-62 for women and 62-64 for men. The average life expectancy for a 62-year-old is 22.31 years. To draw $500,000 over that period of time you would have to draw $22,411 a year. Do you really think a lot of people get that much social security? Especially someone signing up that early.

Originally Posted by Mircea

It was always 6.2%. It's rather shocking that someone would be paying a tax and be totally clueless about the purpose of the tax.

I think the point you're making is that the rate was 6.2% before the "holiday" went into effect a couple of years ago, but because some won't get that I want to point out that the rate has increased several times over the years and that 6.2% has been the number since 1990.

What? Why don't you just go to MyLoveableNAZI.com?

I intentionally used moveon.org's numbers because I was able to make my point even using the overly optimistic figures of the most government-loving organization I could find.

But you don't know that for a fact.

I always find it amusing that people say, "If [someone] had been allowed to invest what they paid into Social Security......" and yet these Einstein Wall Street Whiz Financial Genius Wizards end up retiring with nothing.

Either you know how to invest, or you do not, and whether you do or do not pay FICA taxes makes no freaking difference.

I can't remember if I used average interest rates over the period of aver T-Bill returns. Either way, the illustration wasn't based on having any particular level of investment savvy, just the discipline to put the money away. And because it was done in the context of privatization of social security discipline really wouldn't be an issue.

If I wanted to act like they had some special investment ESP guiding them to invest in companies like IBM and AT&T way back when, the figure would be much higher.

That is not true at all.

In 1935 at the time Social Security was enacted, 30 States had some form of social-security pension retirement plan.

The error FDR made was nationalizing those plans.

Historically...

Mircea

I also couldn't find anything to back that up. I may have been thinking of a different social program, or possibly a state or states that had enacted temporary social security measures that were made irrelevant with the federal act.

At any rate, I concede my error and agree that nationalizing social security (and many other social programs) was a mistake, as most of them become an inefficient, unmanageable nightmare at that level in a country of over 300 million people.

[HappyTexan]

For those saying that if they invested it themselves they would do better, look no further than 401K plans.
Those were set up exactly as you propose and they have failed.

We've even gone so far as lax the rules so that people can still get at that money as a "loan".

FICA today needs to be shored up because tomorrow's seniors won't have any retirement income by the looks of things. The older boomers are the last breed to live "beneath" their means and save while everyone else jumped on the DEBT WAGON (a/k/a credit).

That's reality folks, like it or not. FICA is your retirement annuity so you better fight to keep it and get it funded even if your just entering the workforce tomorrow.

[TuborgP]

Originally Posted by shaker281

So, you concede that the payroll tax holiday was indeed beneficial to the economy? Great, many do not!

Rather than continue to diminish a tax that is beneficial to all Americans. Let us see SS reform, i.e. a need based qualifier. Do the wealthiest 10% really need that monthly check? Should the cap be at just over 100K or higher? Raise the age so that the program reflects new demographic/actuarial norms.

Even better yet, let us cut some fat from the defense budget. The money flows to farmers and grocers, not defense contractors. Always amazes me that people are happy to fund million dollar cruise missiles while watching the elderly starve. Maybe we could find a balance between the two?

The official motto of the Libertarians and Tea Party members should probably be, "Let them eat cake!"

Or perhaps let them bake their own cake and not eat from others. Or perhaps let them bring a little more flower to the table also.

[gwynedd1]

Originally Posted by Hamish Forbes

Responding to one of your posts is like trying to deflect a soggy, 500-pound marshmallow. What you have posted in this thread is so unfocused (for example, the parts about Plato, foot rubs, hyper-inflation, etc.) and so verbose that it's hard to understand your basic point. We might even agree, for all I can tell.

It seems to me that if one strips away your rhetorical swashbuckling, the gist of your thought (a 2% tax on labor is a drag on the economy) is fairly ordinary, even banal. Your predictions for the near future, to the extent that you have made any, are equally ordinary, again even banal. Basically, conventional wisdom.

Then you would have to explain why we have completely opposite positions like me wanting to end FICA(falling under Modern Money Theory( under employment) and classical economic theory identifying FICA "investing in treasuries" as a direct tax on labor) while you think bringing it back to 6% is swell.

deflection(n + 1)

I asked a simple favor. Be specific.


WHICH CLASSICAL ECONOMIST IN PARTICULAR DO YOU FIND FLAWED?

WHAT THEORY IN PARTICULAR WAS IT?

Answer or stop babbling and deflecting.

[gwynedd1]

Originally Posted by Hamish Forbes

HappyTexan, I think that you are exactly right. We ned to be increasing SS, not de-funding or "reforming" it. A good place to start would be to increase the employer's contribution in order to recapture some of the money that they have stripped from so many American workers by doing away with defined-benefit pensions.

There is no employer contribution. Employers higher labor based upon positive marginal profits. Any expense, which includes their FICA contribution, is computed. Employers don't care what you make. All they care about is what you cost.

Junk economics.

[Hamish Forbes]

Originally Posted by gwynedd1

Then you would have to explain why we have completely opposite positions like me wanting to end FICA(falling under Modern Money Theory( under employment) and classical economic theory identifying FICA "investing in treasuries" as a direct tax on labor) while you think bringing it back to 6% is swell.

deflection(n + 1)

I asked a simple favor. Be specific.


WHICH CLASSICAL ECONOMIST IN PARTICULAR DO YOU FIND FLAWED?

WHAT THEORY IN PARTICULAR WAS IT?

Answer or stop babbling and deflecting.

Adam Smith is flawed. His work assumes that people behave as rational decision makers who maximize their own welfare. This is incorrect, as we know from more recent work in behavioral psychology as well as through common sense and observation.

This error is general throughout classical economics. That's why classical economics is so much more like philosophy or theology than science. Most real scientists find the discipline of economics to be primitive and unreliable. The simplest models don't work, because they are deduced from incorrect assumptions, and then held to dogmatically. Contrary evidence means nothing, because the models are not, and never were, evidence-based. There is no attempt to experiment or observe and then use the outcomes to refute yesterday's dogma.

This is why you and others so schooled are so incapable of meaningful analysis. Classical economic theory is essentially useless in understanding today's economy. As a result, we have evaluations like "Economists exist to make weather forecasters look good," and "An economist is someone with a Phi Beta Kappa key on one end of his watch chain and nothing on the other end (Harry Truman)." For some reason, the following assessment also comes to mind: "an economist is someone who is good with numbers but doesn't have enough personality to be an accountant."

[Hamish Forbes]

Originally Posted by gwynedd1

There is no employer contribution. Employers higher labor based upon positive marginal profits. Any expense, which includes their FICA contribution, is computed. Employers don't care what you make. All they care about is what you cost.

Junk economics.

One question: what does it mean to "higher" an employee?