The Economists Who Missed the Housing Bubble Are Coming After Your Social Security
Word has it that President Obama intends to appoint a task force the week after next which will be charged with "reforming" Social Security. According to inside gossip, the task force will be led entirely by economists who were not able to see the $8 trillion housing bubble, the collapse of which is giving the country its sharpest downturn since the Great Depression.
This effort is bizarre for several reasons. First, the economy is sinking rapidly. While President Obama's stimulus package is a good first step towards counteracting the decline, there is probably not a single economist in the country who believes that is adequate to the task. President Obama would be advised to focus his attention on getting the economy back in order instead of attacking the country's most important social program.
The second reason why this task force is strange is that Social Security doesn't need reforming. According to the Congressional Budget Office, it can pay all scheduled benefits for the next 40 years with no changes whatsoever.
The third reason that this effort is pernicious is that this talk of reform is occurring with the baby boomers just as the cusp of retirement. Due to the reckless policies of the Rubin-Greenspan-Bush clique, this cohort has just seen their housing equity wiped out with the collapse of the housing bubble. Tens of millions of baby boomers who might have felt reasonably secure three years ago are now approaching retirement with little or no equity in their homes.
Similarly, if they had been fortunate enough to accumulate any substantial amount of savings in a 401(k) account, they just saw much of this wealth vanish with the plunge in the stock market. The median late baby boomer household (ages 45-54) has a net worth of just over $80 including the equity in their home. This means that if they took all of their savings, they would have less than half of their home (assuming a median price $175,000) paid off, and nothing else.
The median household among older baby boomers would be doing a bit better. With a net worth of $143,000, this household could have most of their home paid off, but nothing else. And of course, half of the population has wealth less than the median, so they would be less well-prepared for retirement.
In short, the vast majority of baby boomers will be approaching retirement with little other than their Social Security and Medicare to support them. And now President Obama is apparently prepared to appoint a commission that will attack these only remaining pillars of support.
It is especially infuriating that this task force is likely to headed up by economists who somehow could not see an $8 trillion housing bubble. The incompetence of such economists has inflicted enormous pain on billions of people around the world. However, unlike people who fail in other professions, economists who mess up on the job just get promoted so that they can do even more harm.
My guess is that this task force will not be very popular except at the Washington Post and on Wall Street.
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Here is something to think about. The Federal government's pensions are fully funded, they say. Where did they get the money? It came from part of what they owe Social Security.
Dean Baker has stood up for Social Security for years. We are lucky that he is on the side of those who want to protect Social Security. He is probably right about the Social Security Commission. Kent Conrad and some republicans have been pushing for this 'fix' for a long time.
Social Security hasn't been raided. FDR set it up to where extra money in Social Security could only be loaned to the government in the form of non marketable treasury bonds. Social Security buys treasury bonds with the extra money. Non marketable made them safer because the government doesn't default of their debt. The government has to pay those back when they are cashed in as they are needed, the same as they have to pay investors and savers who cash in their treasury bonds.
We started paying in extra to Social Security in 1983 because we were told that there would be more retirees and less workers. That money has grown to2.7 trillion. The retirement age started to be gradually lifted to 67 to take care of the fact people were living 5 years longer.
The retirement age is set about right now. Those who can and want or need to retire at 62 can at reduced benefits. Those who want to work until they are 70 can and can draw extra benefits for doing so.
People need to retire so the younger families can have their jobs.
Social Security is NOT an insurance program. It's a benefits program that I paid into for forty nine years on the word of our government that when I retired my money would be returned with interest. Now that I've retired and Bush has flushed the world's economy, my 401K is down by almost 50% and Obama's talking about revamping it. What he needs to remember is that we old farts paid into it, we vote and we have all day to stir up more flak than he would believe. They don't call it the "Political Third Rail" for nothing!
FDR referred to Social Security as an insurance. We pay into FICA from every paycheck for Social Security and Medicare. FICA stands for the Federal Insurance Contribution Act. Most people who retire will have paid into it for 45 years.
While campaigning Obama said he would not cut benefits and would not raise the retirement age. He said if we needed more money for it, then he would raise the cap on the amount of money we pay Social Security contributions on. I believe he will keep his word.
Obama has loaded his cabinet with those who want to 'fix' Social Security. We need to watch them closely and remind Obama that he sets the agenda. Republican leaders fought Social Security when it was being started.
Those who are paying in now are not being taken advantage of because most of the boomers are still working and paying in too. When we pay into Social Security we are paying for the right to retire with a benefit, and to be covered if we become disabled. Social Security even pays a benefit to our children if we die before they are 19. The longer we work and the more we pay in, the more we will draw when we retire.
If those who work for a living didn't have Social Security, most would have to work until they die while paying for the lush and early retirements of the federal and state government, the military and many other groups of people.
Social Security is an insurance program not an entitlement program. Tweek the numbers and you can fix it. (Depending on how much the Bush administration raided it.) Gore was right about a "Lock Box". But of course, Republicans are only good for ridicule and destroying stuff. Let's just see what these guys come up with.
Hey folks,
Have you not witnessed with your own eyes? This President cares. Do you really think he would take your SS and not put something better in place? This is the man who out of the goodness of his heart has done many deeds. What was his testimony. "We are our brother's keepers". Did you not see him help the lady that said; "please help in tears"? This President will go down in the history books as better than a Lincoln. Keep your hopes up and don't believe the lies you are hearing. He has been working so hard since he hit office and it has only been days. Besides a President can never be what you expect if his people aren't behind him. Why don't you ask him what he is planning instead of believeing a news article. I hate the news anymore. CNN and Fox are so oriented toward the Republican point of view. Those folks don't know what side is up. They spend their time complaining and procrastinating. Do your research guys!
"according to inside gossip..." I usually stop reading right there. But your guessing and overspeculation so intrigued me. "And now President Obama is apparently prepared to appoint a commission that will attack these only remaining pillars of support." Yeah, that sounds just like something Obama would do. Steal social security from little old ladies. Did you pull any important body parts with that amazing stretch? I would be as ticked off as anyone if they did screw around with social security. But you seem to be so woefully lacking in any factsor evidence at this point, that I'll save my worrying for all the other crud that is really happening out there. Why don't you let this story cook a little longer before you go pulling the fire alarm.
Social Security would be solvent into oblivion had the money put into it been invested at compound interest instead of being stolen to feed Government spending. Now they want to cut benefits raise retirment age and raise taxes to fund it.
I say they should start a well designed lottery with lots of small prizes so people win once in awhile so they keep playing to fund it. If people knew that this was supporting S.S. and would save taxes cuts and reduced benefits they would play. This lets people support this willingly with a chance to win and not by stealing more of the peoples money in the form of taxes.
There is not an economist alive today that has any reasonable suggestions on how to fix our problems. They did miss all the bad that has happened but worse thought what caused it was the right way to go. They now say fixing the crooked banks and markets will solve our problems.
A lottery? I think that puts you in with the economists who do not have any reasonable suggestions.
Mr. President, what are you doing?
I hope people realize that all these entitlement programs are connected and are connected to the overall economic situation.
The less people work / make the less money is collected for Social security. So as the unemployment increases the # people paying SS/Medicare tax decreases which affects the long term sustainability of those programs. Secondly, the overall debt the US government accrues will affect how much $ can be set aside for entitlements. If the US Government was debt free, I'd agree, there would be 0 problem. But at a certain point in time the % of GDP devoted to the national debt + the % devoted to entitlements becomes untenable. Something will have to change and the earlier you modify these programs the less radical the change will need to be. None of this takes into account Universal Health Care which would certainly add trillions in promises.
I suspect that if these rumors are true, it more for examining the age at which someone becomes eligible. Raising the retirement age to say 70 is probably a more realistic way going forward. Social security wasn't designed to support people for 15-20 years. In 1933 most men didn't live to be 65 ( I belive 63 was the avg life expectancy for men, 68 for women). The entire system is dated and needs to be modernized to take into account modern life expectancies.
We are only living 3 years longer now than they did when Social Security started. Google the History of Social Security and you will see that is true.
Google 'world life expectancy' and you will see that the US life expectancy is 78 years. In 1983, Greenspan gradually started moving the full retirement age to 67 to make up for those extra years. Everyone who pays into Social Security has paid extra so when the Boomers retire they won't be a burden on the younger generations. That is where the surplus has came from.
Social Security is the only government program that isn't in the red. Boomers are considered to be those who were born 1946-1964. Add 78 years to 1964 and you will get the year 2042. There is plenty of money to take care of the boomers. We have done well.
The money won't have to be paid back all at once, but just as the boomers need it over the 25 years when there will be a short fall. Dedicating the taxes charged on 401k withdrawals will probably cover most to the money the Boomers will need.
It is especially infuriating that this task force is likely to headed up by economists who somehow could not see an $8 trillion housing bubble. The incompetence of such economists has inflicted enormous pain on billions of people around the world. However, unlike people who fail in other professions, economists who mess up on the job just get promoted so that they can do even more harm.
That would include Huffpo Obamabot's favorite, Gnome Krugman.
Here's what the task force should do.
Day one. SS is fine, keep it off budget.
Day two, task force disbands.
The Republicans have stated that Social Security and Medicare need to be fixed and proposed sending the money to Wall Street. They point to the unfounded liabilities and increasing medical costs. I say we should compromise. We fix Social Security by simply broadening the tax base to include unearned income. That is rents, dividends, interest, capital gains and royalties. An exemption could be granted for the first $10,000 to $20,000 to protect small investors and savers. There would be no cap. Another item would be to exempt earned income between $100,000 and $250,000 and remove the cap above $250,000. That way those billions in Wall Street bonuses would actually do the country some good rather than just buying more polo ponies for their estates.
I retired a couple of years ago after 43 year as a tax preparer.
Your solution sounds like an accountant's nightmare, and would probably not solve any problems. At the present time, employees pay into FICA up to a cap but there is no cap for Medicare Tax paid into Social Security. A very simple solution would be to leave the cap that employers pay, but remove it from the employees share. It should be only on earned income.
There should also be a cap on the annual earning used to compute benefits. Any person with wages of $150,000. (as an example) should be able to save funds to supplement his social security benefits and pension to live comfortably in retirement.
Remember, too, that self-employed persons pay into Social Security 2 times as much as employed persons.
I posted this a hour ago, I don't know why it was rejected.
I was a tax preparer for 43 years before retireing a couple of years ago
Your solution is an accountant's nightmare, and the IRS would have to triple it's agents to audit tax returns.
FICA tax and Medicare tax should be levied only on earned income, and bonuses, employee awards and similar payments should be included as earned income when it is related to the employee's job. At present , I believe, there is no cap on the amount of Medicare tax collected, there is a cap on wages or earned income liable for FICA tax.
I think one thing to consider is to remove the cap on the employee's earned income liable for FICA, but keep the cap on the employer's share.
Runaway health costs need to be addressed in separate health care legislation. Reducing drug costs will have a desirable effect on Social Security and Medicare benefits.
The problem with these funds is that they represent a pile of money that politicians want to dig into whenever there is a "sufficient" emergency. I'm retired on Social Security and my PERS pension. My union newsletter recently informed us that Governor Schwarzenegger now wants the DPA to handle pension funds. Given California's budget shortfall I can only guess why. If the governor were to be successful there would be no reason to guess who would be getting IOU's.
Leave my SS and medicare alone!
"the Pentagon admits that it lost 2.1 trillion in '99 and then another 1.1 trillion that they couldn't track in 2000, so we're talking trillions of dollars in transactions that the Department of Defense can't track. The GAO Government Accountability Office just came out, every year they make a statement, that the reason the Federal Budget can't balance its books is because the Department of Defense is not auditable. And so I asked ChrisTina Jonas, who is the Comptroller of the Pentagon how, what steps they were taking. And they said that, you know, they were trying to get their computers to talk to each other. And I asked her how much money had they spent on getting the computers to talk to each other. Guess how much money the Pentagon has spent. Twenty billion, with a 'b', dollars. Just to get the computers to talk to each other. Now I don't know about you, but I can think of several smaller computer organizations, experts who would get together for a fraction of that..."
http://www.thomhartmann.com/index.php?option=com_content&task=view&id=382&Itemid=119
Investigate spending by the Pentagon and the billions of dollars "lost/unaccounted for" in Iraq.
Yes!
And to fund it?
Give the Republicans the "flat tax" they have always wanted:
Remove the SS income cap!
Maybe step 1 should be to put us all in the same SS pot. Take all the government pensions (state, federal, local) and put them in SS. Ever wonder about the fact that ALL the people managing SS are in a completely different retirement system?
Yes I do. They're all nicely covered 'til the day they die, aren't they?
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