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Originally Posted by Supposn
Two questions regarding privatization of social security accounts.
Social Security, (SS) retirement benefits have a dual purpose; to some extent they protect the finances of individuals (and their families), and additionally our nation's governments.
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Wrong. Another poorly researched blasphemous screed.
A nation is a homogeneous group of people. The United States is not a nation, and never has been, but it might actually evolve into one a few 1,000 years from now. Well, a rough calculation is a little over 12,000 years.
Other than having co-opted existing social security programs and administering the program, the government has nothing to do with Social Security.
Social Security is an insurance program. That is what the "I" in OASI stands for. Old Age & Survivors
Insurance.
Social Security does not "protect" the finances of individuals. It is retirement insurance for those individuals who contributed to the program, and survivors insurance for certain survivors of those who contributed.
Quote:
Originally Posted by Supposn
Prior to the establishment of federal Social Security Retirement benefits, the elderly were, (along with single parent households), among our nation's poorest of population segments. Due to Social Security benefits, SSI, and Medicare, this is much less the case today.
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Those are demonstrably false statements made recklessly.
Social security was created by a Republican governor. Prior to the Social Security Act of 1935, there were 35 States that had social security programs. The remaining 13 States (there were only 48 at the time) either had pending legislation to create a create a social security program, or, as was the case for less populous States, appointed commissions to study the issue of creating a social security program.
Governor Delano Franklin Roosevelt (FDR) of New York State appointed a commission
to study the social security programs of other States and the commission made its recommendations, legislation was crafted, and New York State had a social security program in 1929. At that time, New York was the 28th or 29th State to create a social security program.
It is understood by intelligent people that the full-retirement age of 65 years was chosen because: 1) 29 States had set the full-retirement age for their social security programs at age 65; and 2) Actuarial science based on
Life Expectancy from Age 65 (not from Birth) supported it.
States, counties, and some major cities had housing programs for the poor. States, counties and some major cities had food stamp programs for the poor. That was before the federal government seized control of them in its endless quest for more power and control, but even today, States, counties and some cities still have housing programs.
States, counties, and a small number of large cities had old-aged, retirement, or pensioner's homes for the elderly poor. States and counties also operated pensioner homes for military veterans, poor or not, which included Civil War, Spanish-American War, and WW I veterans, although by 1935 the Civil War veterans had died off.
For the elderly who were not poor but not flush with cash, villages, towns, and cities had low-cost boarding houses where the elderly got a room, and 3 meals a day, and could enjoy the company of others listening to radio shows or playing cards or board games, and then later in the 1950s could enjoy watching TV.
Starting around the late 1960s, State statutes and county/city ordinances regulated boarding homes out of existence because it was cheaper to rent an apartment than it was to rent a room in a boarding house. Thank you, government.
Quote:
Originally Posted by Supposn
[SSI, (Supplemental Security Income) is operated as a federal charity; it's not funded by FICA, (Federal Insurance Contributions Act) funds.
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Yet another demonstrably false statement.
SSI is a joint State and federal program. It is "joint" only because the SSA administers the program as a cost-saving measure to avoid redundancy.
SSI is for disabled persons or those over age 65 who qualify.
The number of work credits required to qualify for Disability Insurance is age dependent, thus someone who has 24 years could qualify even though they don't have 40 credits.
Persons on SSI are typically disabled from birth and never worked.
Persons age 65 and older can qualify if they demonstrate financial need. Generally, anyone receiving a Social Security Retirement or Social Security Disability that is less than the monthly amount for SSI is eligible for SSI.
Example: I knew a guy whose monthly Social Security Retirement is $80/month.
That's because he thought his "job" was to con women into letting him live with them and bankroll his life-style while he made lots of babies. When he did work, he had 5 different CSEAs from 5 different counties in 2 different States taking all his money for child support so he worked only until he got caught working and they started taking money from his check and then he would quit.
If the monthly SSI benefit is $914 then he gets $80 from Social Security and $834/month in SSI totaling $914/month which is the full SSI benefit.
Quote:
Originally Posted by Supposn
Currently, FICA revenue is contributing to pay for current retirees' benefits.
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Your understanding of SSA is below even that of the low-information voter.
FICA revenues pay current retiree benefits 100% of the time since Day #1.
The statute and regulations require SSA to take FICA revenues from the previous month and pay benefits to retirees in the current month. From Day #1, when there is a surplus of FICA revenues, the surplus is transferred to the General Fund and a non-marketable interest-bearing treasury security is issued in its stead.
By statute, the interest rate is the prime rate or 3%, whichever is greater.
When FICA revenues from the previous month do not generate enough to pay beneficiaries in the current month, the federal government buys back the non-marketable treasury securities.
That has generally been the case for 8-9 months out of the year for the last 15 years.
The Treasury Department uses money from the General Fund to buy back the non-marketable securities. In the event there isn't enough cash in the General Fund to buy back the non-marketable securities, the government deficit spends and at the end of the month, the deficit is packaged as marketable treasury securities, usually in form of T-bills.
For accounting purposes, there is no such thing as a "national debt." There is only the federal debt because the States and the people are not legally liable for the federal debt. The federal debt has two components: government debt and public debt.
The non-marketable securities are government debt. If there is cash in the General Fund then government debt decreases, and the federal debt decreases.
If there isn't enough cash, then government debt decreases and the public debt increases and there is no change in the total federal debt. Right? If you convert a $300 Million security note then government debt decreases by $300 Million and public debt increases by $300 Million and there is no change in the total debt.
In almost every instance, the tax-payers actually save money because the interest on the T-bills is less than the interest on the non-marketable security that was converted, because instead of servicing a non-marketable security at 11.5% now you're servicing it at 5.35%.
Quote:
Originally Posted by Supposn
How do privatization advocates suggest funding the current retirees benefits after privatization commences? It will be more than 20 years in the future before the last of today's SS beneficiaries are dead. That doesn't even consider employees that have been paying FICA taxes for as many as 40 years or more, and they have not yet retired.
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I'm actually shocked that you asked a relevant question. No one has addressed it because no one wants to hear the answer.
Quote:
Originally Posted by Supposn
Question 1:
I don't suppose anyone credible has suggested we fund it all by further increasing our federal debt, but I haven't heard or seen their solutions?
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Just eyeballing, it would cost $1.3 TRILLION in the first year and increase slightly year after year to about $39.6 TRILLION through 2045 predicated on the condition that those under 65 years are transitioned to the new program. If they are not transitioned or privatization is optional, the costs would increase after 2045 but not nearly as much. The cost annually would be reduced by 25%-75% (depending on how many opted to stay in) and decline further over an extended period of time.
That would put federal debt in 2045 at roughly $115 TRILLION and about 90% of World GDP.
That would make the Monetary Inflation rate in the US around 25%-35% annually (perhaps approaching 50% or more) plus Demand-pull Inflation and Cost-push Inflation on top of that, although my guess is Demand-pull Inflation would be negligible, probably less than 1% since no one would be demanding anything. However, Cost-push Inflation could be problematic.
If people were given the option of SSA or a privatized account, it's a given that a few Million would choose SSA so you'd have to figure out a way to raise taxes to pay them.
That probably isn't going to work.
The funding formula for SSA is basic 4th Grade Math:
FICA Revenues = # of Workers x Avg Wages x FICA Tax
We know from our 4th Grade Math that if we increase/decrease any of the factors, the product increases/decreases.
Increase wages results in a net gain of 0 because contrary to what you believe, benefits are based on income and not on FICA taxes paid.
Initially, the ratio of workers to beneficiaries was 159:1.
By 1945 that ratio was 46:1 and it has dwindled down to 2.5:1 now. The good news is from 2045 on and for the next 500 years it will be 2:1.
In the 5th Grade, we learned the principles of substitution:
FICA Revenues = 2.5/1 Workers x Avg Wages x FICA Tax
If workers are allowed to remain/opt-in then we have:
FICA Revenues = 1/1 Workers x Avg Wages x FICA Tax
The current FICA tax would not fund it and I'm too lazy to do the math to see what the FICA tax would need to fund it to maintain current benefit standards.
Quote:
Originally Posted by Supposn
Currently, SS retirees' initial year's benefits are somewhat determined by their FICA tax contributions over their working years.
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That is demonstrably false.
By statute and regulations, FICA contributions are never considered and have never -- meaning at no time ever -- been part of equation.
Benefits are determined by a formula.
That formula takes the 35 years of highest wages. If a person worked only 29 years, then they have 29 years of wages and 6 years of exactly $0 in wages which totals 35 years.
The wages are modified to account for all forms of Inflation: Natural, Monetary, Wage, Demand-pull, and Cost-push.
That $20,000 you earned in 1990 is not $20,000. To calculate your benefits, that $20,000 becomes $57,616 (as of 2023). If your wages were $0 then your modified wages are $0.
Someone whose modified wages are $100,000/year over 35 years gets paid far more than someone whose modified wages are $100,000/year but only worked 29 years.
The 35 years of wages are added then divided by 420 to get the monthly average wage.
For those whose average monthly wage is $1,115 or more, they get 90% of that plus 32% of the amount over that but less than $6,271, and for those whose average monthly wage is greater than $6,271, they get 15% of that.
For those whose average monthly wage is $1,114 or less, they get 90% of that and nothing more.
As everyone can see, the amount of FICA taxes paid is not a consideration.
Quote:
Originally Posted by Supposn
Question 2, (of lesser concern):
How do advocates perceive retirees' situations and options on and beyond retirees' dates of retirement?
Respectfully, Supposn
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That is irrelevant.
What is relevant is protection. SSA benefits cannot be assigned and they are protected from garnishment or attachment excepting where a federal agency is the creditor. State, county, and municipal governments and private creditors have no right of garnishment or attachment.
Having said that, if you get sued for a credit card or other debt and you wanna get totally friggin' stupid, then don't whine when you're at Wal-Mart and your bank card keeps getting rejected because your bank account was attached. Yeah, that's right, you know you get SSA benefits but that knowledge is not imputed and the other 6.5 Billion people on Earth do not know, and the plaintiff creditor has no legal duty to ascertain the source of your income prior to filing a law suit.
So, will privatize plans be protected in the same way?
What is the cost to tax-payers to fund the bureaucracy to administer the privatized plans?
Will the SEC have sole oversight? Other government agencies?
Are there sufficient statutes and regulations to prevent unscrupulous or predatory "financial advisors" from preying on people?
What recourse do people have if they are victimized?
Is this a federal question, meaning legal action can only be filed in federal court or will State courts have concurrent jurisdiction (as is the case for FDCPA and FCRA and others)? As a federal question, the defendant has the right to remove a case from a State court to a federal court (just a reminder.)
What damages are the victims entitled to receive? Pecuniary damages? Statutory damages? Punitive damages? Non-pecuniary damages (like emotional distress)?
Are class action law suits permitted? Those would leave victims worse off but enrich law firms.
Are employers going to be involved? Since 80% of humans are the sub-stratum below whale dung, what would prevent employers from lobbying Congress to gain control?
Employers control your health plan coverage because 80% of Americans are the sub-stratum below whale dung and let them gain control and have done exactly nothing about over the last 74 years.
So, what would keep employers from controlling your retirement plans?
Note that unions were the driving force to put health plan coverage under employer control (1949).
What would keep unions from putting retirement plans under employer control?
After the 1949
In re: Inland Steel Supreme Court decision, insurance companies finally began selling health plans and they coupled them with life insurance which allowed Americans to profit off of their own healthcare by creating wealth and passing it onto their children and grand-children.
Because that wrested control away from unions and because it was about to bury the AHA's Blue Cross and put it out of business, unions and the American Hospital Association lobbied Congress to prohibit Americans from profiting off of their own healthcare.
What would prevent unions from doing the same now? If employers are allowed to direct those monies, what would prevent an employer from investing that money by forcing employees to buy company stocks, or for non-corporations, to invest in bonds or other investment vehicles established by the employer?
If monies are given directly to employees, what would compel them to invest? Will monies not invested by taxed as regular income? Or taxed as a different type of income?
What about the people who fail? And Millions will fail.
If government does the investing, how much transparency?
If the idiot McTraders can see where government is investing, the result could be recession or recession in select economic sectors and if government keeps shifting investments into other sectors it could result in more frequent recessions.
Anyway, I'm seeing a lot of vapid emotion but no real substance to claims privatization is better.
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