Reply to “Billionaires and the U.S. debt”: Part 1 Social Security

 

This is part 1 of my kinda, sorta rebuttal on Thursdays “billionaires” column…

Initially, I want to talk about the issue of Social Security and his (at least, that’s my kinda, sorta sexist assumption that it’s a he) thought that it is nothing more than a government backed Ponzi scheme…

Then, in another column I want to address why I agree that budget cuts are needed…

I just think the cuts need to be elsewhere rather than in a lot of social programs that benefit mostly we the people as well as specifically benefits those who are most in need of financial and social assistance… the working class, the middle class, the poor and the homeless, those who are the most needy of anything that puts even a morsel of food in their bellies and allows them a moment of respite from the cold and the hardships and ravages of being alone and out in a sometimes frightening world… and not programs… especially, one part of the U.S. budget in particular…  that benefit the profit margins of a bunch of overly rich people… or… if, you would… billionaires.

Part 1…

This is how the Social Security works…

By and through our taxes.

Taxes paid by today’s workers and their employers don’t go into dedicated individual accounts (although per many studies at least 32% of Americans think they do.)

And, Social Security checks are not some sort of retirement account investment by which we the people get a return on invested capital.

It is this… the benefits eligible citizens (eligible citizens usually are retirees but not always… you can work and still collect Social Security bennies) get are funded by the taxes that are paid by today’s workers. And when today’s workers are ready to be eligible to get social security bennies… and on down the road either unto perpetuity or the damn world is blown to smithereens.

What you get in your monthly check is based on your earnings history and age at retirement, not on how much you and your employer paid in Social Security taxes… however for a fair amount of we the people the taxes paid into the fund are relatively closely tied to what was earned throughout life.

This is why, I think, some might call Social Security a Ponzi Scheme…

But, it ain’t

Let me explain…

Social Security as of this moment is flush… it has money in the bank so to speak… a lot of it, in fact.

Here is why.

When Social Security was first founded it was a pay-as-you-go system… the then current tax receipts funded current benefits.

In 1983 the system was overhauled. Why?

It was determined if it didn’t get overhauled then when the future coming of the Baby Boomer retirees finally did start collecting bennies… Social Security… they very well could and probably would bankrupt. the system.

Without going into a overly in depth analysis of the overhaul… suffice it to say one of the major consequences of that overhaul was that Congress raised the payroll taxes that provided most of Social Security’s revenue. Then… for the next 30 or so years more money came in than got paid out. And the extra money… the surplus… was invested in special non-tradeable Treasury bonds, with interest credited to the system’s two trust funds… one for old-age and survivors’ benefits, the other for disability payments.

As of July 31 2015 those two trust funds totaled $2.83 trillion in Treasuries.

Now… let’s back track a tad…

Back around 2010 Social Security cash output began to exceed its cash intake.

Recent negative cash flow sat around $74 billion, and, per the peeps who manage Social Security, that number should be around $84 billion very soon if it hasn’t yet been reached.

Still… as mentioned above… the credited interest in the two trust funds is more than enough to cover whatever is needed. But, that will only be until about 2020.  At that point, Social Security will begin dipping into the capital of the funds to continue paying benefits. Which guess what? That was the entire idea from day 1.

But, here is the rub…

Social Security’s reserves will be all used up by 2034… this doesn’t mean checks won’t still be forth coming, it just means the checks will be a lot less than what folks thought they were gonna get. After the reserves are exhausted, the system still will be receiving tax revenue, but, it will only be enough to pay about three-quarters of scheduled benefits.

Eventually… there will come a time when there may be no money to get from the well if we keep on keeping on as we be going.

Ah, but there is a solution…

Presently the lunkheads in Congress can’t do bumpkus to get anything worthwhile done that benefits we the people… for example… see the present clusterfuck revolving around health care/health care insurance… but… there are many Social Security reform options out there and some of them make some sense. And… incremental adjustments can fix the money problems and keep the Social Security program solvent without fundamentally changing its structure.

In fact, the Social Security Chief Actuary annually posts the various options, and, right now, there are at least 121 options listed. And, anyone can access these options and actually chip with their own Social Security plan by accessing “The Reformer”, an online tool from The Committee for a Responsible Federal Budget (CRFB).

But… the reality is that there are many functional and useful AND real options to ensure that Social Security remains financially sound for the next 80 years and beyond.

However… I have the fix right here and now…

(1) Restore at the Reagan standard that 90% of wages are covered by the Social Security tax. Presently, we only apply the tax to 83% of wages. If, we, at the minimum, went back to the Reagan standard, the Social Security tax would apply to close to $200,000 of wages this year instead of the present $110,100.

You are now talking about a lot of added shekels to the funds.

Hold this thought… because I’m gonna come back to it with a vengeance.

(2) Raise the actual tax.  Not a lot… say by about two percentage points.

And that tax rate? It could be a smaller hike IF…

(3) We raised people’s personal income.

More people making more money means there would be larger contributions into the fund. The effect of what an a $15 an hour minimum wage would have on life in the United States for millions would be immeasurable but the reality is it would also help insure that the Social Security fund would stay solvent.

And last…

(4) We need to make sure people have jobs.  Somehow, some way we need to create millions of jobs and make sure people are employed and contributing to the fund.

Now…

Allow me to make a few suggestions that in my opinion would make sure Social Security never goes belly up.

And, some people ain’t gonna like my suggestions…

That cap on wages or money earned? Lift it… entirely.

You make $200,000? You pay the Social Security tax on it all. You make $500,000? You pay Social Security tax on it all. You make $1 million… you pay the damn tax… you make $5 million… pay the tax… and, even if you make $40 million… you pay a damn Social Security tax on it all.

End of money shortfall.

Know why that won’t happen any time soon?

Too many politicians are in bed with too many damn people who make way too much money. Most politicians don’t give a fuck about you and me and the rest of us people who are in the working and middle classes. They do not.

Oh, sure some politicians do some good… and… some, laws get passed that make it somewhat easier for us all to get by… but…  for we the people? Overall? Naw.

Most politicians say a bunch of nice sounding stuff but they honestly don’t care. They just keep playing us for political chumps by promising a lot of stuff we want to hear and when we vote them either into office or reelect them they then go back to the same old same old padding of their bank accounts (or future back accounts) by making sure legislation gets passed that helps millionaires and billionaires make more and more profits.

It’s time billionaires started contributing more to the stability of this nation and as well as making sure the people who actually made them into billionaires are properly rewarded… after all without we the people doing all the labor nothing they had ever thought of would have come to fruition.

The time has come to pay back the debt with much overdue interest…

Next… Part 2… talking about real budgets…

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