An Answer To The Impending Bankruptcy Of Social Security: An Immigration Brain Gain
from the huddled-masses dept
As the baby boomers start to retire en masse, one of the fears is that the US will struggle to continue to fund Social Security. Though originally projected to become cash flow negative by 2016, it looks like Social Security will reach that mark this year, hastened by the early retirement taken by many boomers as a result of the global recession. Robert Reich, former Secretary of Labor under President Clinton, proposes a potential solution to the impending crisis: immigration. The way Reich puts it, the nation's workers all put into the system to support the retirees -- but the increasing number of retirees is outpacing the growth of the American workforce:Forty years ago there were five workers for every retiree. Now there are three. Within a couple of decades, there will be only two workers per retiree. There's no way just two workers will be able or willing to pay enough payroll taxes to keep benefits flowing to every retiree.So, to correct this demographic imbalance, Reich proposes that the US opens itself up for more immigration:
Get it? One logical way to deal with the crisis of funding Social Security and Medicare is to have more workers per retiree, and the simplest way to do that is to allow more immigrants into the United States.Easier said than done, perhaps. Faced with a global recession and high unemployment levels, it will be easy to find critics who will vehemently argue that there are not enough jobs here for American workers. Reich refutes this with a simple claim that "once the American economy recovers, there will be." He may be right, but he could have done a more convincing job. Reich misses an opportunity to explain that bringing a fresh wave of skilled, smart immigrants into this country actually creates more jobs. Jobs are a not a zero-sum game -- studies have shown that an increase of H-1B visas resulted in an increase in jobs. And as we've pointed out before, there are also suggestions like the startup visa that attempts to attract immigrants who would create jobs.
Immigration policy will almost certainly need to be included as a part of any solution to the impending Social Security shortfall. Without addressing immigration at all, the options are much more limited -- focusing mainly on cutbacks or higher taxes. An option that could help grow the economy should not be left off the table.
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Filed Under: immigration, robert reich, social security
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Re:
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Think of the housing boom that would create.
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Learn to fear the boom.
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A different approach
Much of this discussion has focused on increasing the workforce to offset the increasing retirees. That seems like a plan destined to failure since eventually we'll need even more workers to cover the benefits for the retirements of the newly expanded workforce.
How about changing Social Security to be an 'insurance' program instead? We all pay in as we currently do and only those who qualify (less than $X,000 per year retirement income) end up getting payments out of it. Life Insurance companies seem to manage payment rates to payout rates pretty well. Can't we do the same thing for Soc. Security?
It would seem to vastly reduce the number of payouts while keeping the inputs much the same. Isn't that the only way to truly fix the system?
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I fully support allowing more immigration, but we need to be intellectually honest about this. The simple fact is that Congress has little incentive to run a balanced budget. Even if a huge influx of workers suddenly balanced the system out, Congress would simply spend the system back into red ink again.
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1. If it happens en mass as is happening now, the short term pay out is speed up.
2. If the workers has worked longer they would have be contributing into the system longer and would be requesting benefits at a time when we might have had "fixed" the system.
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Ponzi Scheme anyone?
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Re: Ponzi Scheme anyone?
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Re: Ponzi Scheme anyone?
Yes, but I think this is worse than that. It's mortgaging the future. An influx of immigration in order to solve Medicare and Social Security is stupid....because what happens when all of those IMMIGRANTS FUCKING RETIRE!!!??? You haven't solved the problem, you've just staved it off a while for an even bigger problem in the future!
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Re: Re: Ponzi Scheme anyone?
Obama 'saves' social security and solves the immigration problem in one fell swoop. All hail Obama.
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Re: Re: Ponzi Scheme anyone?
Allowing immigrants to come here and pay into those systems with the understanding that they would get NO payments later [or while they are here] would resolve the issues mentioned so far.
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Re: Ponzi Scheme anyone?
I am an engineer, but if engineers are aplenty in 2020 whereas America badly needs mechanics that can build windmills/solar panels with a view to harnessing environmentally friendly energy and lots of it, then it should absolutely be bringing in mechanics and stopping the import of engineers. That's pragmatic and as long as the immigration scheme is objective, quite fair.
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Willingness is what counts
Rather the question is how many they would be willing to support - and that depends on a whole lot of other things.
Over the last 60 years the bulk of the retired population has consisted of those who fought in one or other (occasionally both ) world wars.
The younger generation has always been quite generous with these people - out of a sense of gratitude (note - this may stronger here in the UK than it is in the US).
However over the last 15 years this group has been slowly declining as a proportion of the retired population - so they are now a small minority.
The relatively mean attitude shown by the baby boomer generation towards their own children (at least in terms of the public funding of education etc) doesn't augur well for their ability to attract a reasonable income from their successors.
The immigration idea is a red herring. All it can possibly do is to postpone the problem. One cannot have a rising population forever.
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Re: Willingness is what counts
I agree, the numbers I have seen say that there are 3 billion to many people. The planet can only sustain 2-3 billion people before we start doing irreparable harm. Thats looking at historical trends of temperature, toxins, sustainable food production, and 20 other indicators.
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Re: Willingness is what counts
Supporting a retiree that lives WITH YOU is different than supporting a retiree via inefficient taxes so that they can live by themselves.
Not only do you go from mostly just extra grocery costs to suddenly house/cable/water/electricity/transportation costs, but you have to add in the overhead of the distribution of those taxes.
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The first thought that comes to mind...
The last time that we had such a large active H1-B visa program was during the tech boom, when the growth of new jobs outpaced tech company's ability to fill them with non-immigrants.
In the current situation, with the migration to "off-shoring" after the bust, there is already a glut of skilled tech workers here in America, which has even increased as those in the education system, slightly before and during the bust, are also now on the market as well.
I am not against immigration in general, and I highly support a fairly open startup Visa program, but I think the H1-B program needs to be careful to focus on filling any holes [medical?] vs being used in area where there is a glut of workers here already.
Is it even "legal" to limit what industries can hire via the current H1-B program?
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Re: The first thought that comes to mind...
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Re: Re: The first thought that comes to mind...
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Re: The first thought that comes to mind...
How effectively it's enforced, and how effectively it can possibly be enforced, is another matter.
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Yeap cause there is plenty of jobs for everyone..../s
How about immigration reform. How many illegals are collecting welfare that we the people pay for. They say that illegals do the job that nobody wants to do. That may have been true but it isn't any more.
If you want more people working lets put the people that belong in america to work.
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That's false. The argument is that they're taking jobs. The issue is that they're not paying into Social Security, and neither are their employers. Which is why hiring them is so lucrative for cheap labor.
Take that benefit away by making those people pay into the system with no payment benefit later, and the immigration issues will take care of themselves since our jobs will be less attractive to foreigners.
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That's Alot of Flippin' !
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all part of the grand plan
hehe haha hoho
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Elephant in the room
You work and pay into a “pool”, just like all insurance companies, and if life was unkind to you, you get a pittance from the government to stay alive, not take vacations to Mexico. I know people who are paying their country club memberships with their SS. Their argument, “they paid a lot in over many years, so they should get their money back.” Not how it is suppose to work, government workers have bastardized the system.
Robert “Big Government Rocks” Riche wants to perpetuate a system that is the hydra destroying this country. We need to fix the system before we add more people who will demand their entitlement as well. Without any meaningful reform to SS, Medicare or Medicaid, the problem remains, government will keep peeing in the “pool” to dilute it and then tell you its just fine, have a swim.
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Now DH, isn't that what a politician is supposed to do? Put off the problem until they are no longer running for office? Isn't that what BO did with healthcare, the nasty parts not taking place until 2014?
Jobs American's won't do? What is that? I have been unemployed for about 8 months (things seem to have picked up in the past 3 weeks) and to generate a bit of money (and keep from going insane) I have worked for a landscaping company off and on laying down mulch. Was kind of funny to see our crew (2 white guys and a Guatamalan who was very nice) putting down mulch, lots of mulch. The house I was working on wasn't all that much nicer than mine. The neighbors must have been thinking "times must be touch when white guys are doing that job."
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However they never planned for the new corporate culture of figuring out how to do more with fewer people. Which is rather amusing.
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Grow it.
Tax it.
Manufacture items from it.
More money coming in.
Less money wasted on lost cause fighting it.
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"Studies"
Check out a few of these instead:
"Debunking the Myth of a Desperate Software Labor Shortage" by Dr. Norman Matloff
"Captive Workers A Disturbing Trend in Immigration Policy" by Mark Krikorian
"The H-1B Visa Debate in Historical Perspective: The Evolution of U.S. Policy Toward Foreign-Born Workers" By Margaret L. Usdansky and Thomas J. Espenshade
Dr. Eric Weinstein - "How and Why Government, Universities, and Industry Create Domestic Labor Shortages of Scientists and High-Tech Workers" By Eric Weinstein
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Double Standards
No wonder the world hates them.
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Immigration - it's simple really
The more *skilled* immigrants we get, the more money the USA will receive.
The more skilled workers a country as a whole has, the better off it is relative to other countries.
In the *long run*, whomever boasts the largest skilled labor force wins.
You don't even have to understand much of economics. It's more like thermodynamics. Skilled workers are akin to energy. If you put energy into the system, it has to go somewhere and you can tap in to the energy/money flow *IF* they work in your country.
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Common Sence
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Endgame for Social Security
So, the endgame coming for Social Security has only two options that I can see. Benefits will be metered out on a "needs-testing" basis, meaning this will become another welfare program paid only to people with no other means of support or the program will be put back on it's original basis with benefits starting around the age of 75 to 78, the general life expectancy.
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Creates more jobs?
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Legal discrimination
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The Real Numbers
But, why are my deposits - monies paid by me and my employer - paying for the debts of everyone before me? Using basic return rates - I calculate that even on a low-end - my SS money should net a return of more than $1 million over my lifetime - even at a paltry 6% return. Why is it that the government returns negative equity on my money? And we continue to trust them with money, why?
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Bad math
2. Best case: Most immigrants are merely ordinary workers with skill sets already found in abundance among (unemployed and underemployed) American workers.
3. Worst case: we get a bunch of frauds and scamsters like this one: http://licenselaws.com/what-do-we-do-about-this-h1b-criminal-racket
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Seventy-five years ago, the United States joined the rest of the developed world in making a commitment to provide a financially sound social security system that would take at least some of the worry out of the financial consequences of growing old. In developing the legislation, President Roosevelt stressed the importance of developing a “self-sustaining” system under which funds would be separate from general government financing. He emphatically insisted that the system “should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation.” Six years later, in 1941, President Roosevelt made the following statement:
“We put those payroll contributions in so as to give the contributors a legal, moral, and political right to collect their pension…with those taxes in there. No damned politician can ever scrap my Social Security Program.”
Over the past 75 years, many “damned” politicians have tried to scrap the Social Security system without success. But today with so many “damned” politicians gunning for Social Security, its future is probably less certain than ever before. The biggest threat to Social Security today is the bipartisan fiscal commission that will issue its report and recommendations in December. You can be certain that the conservatives on the commission will push hard for cuts in Social Security benefits.
It is time for those who support Social Security to stand up and be counted. Unless we wage a vigorous campaign against those who would destroy Social Security, we will allow a program, that has been successful and popular for three quarters of a century, to be dramatically altered. The only serious problem facing Social Security in the short term is the fact that the federal government has embezzled every dollar of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs.
If the government had not looted the surplus Social Security revenue, or if the government repays the embezzled money. Social Security would be totally solvent until at least 2037. With a single action, Social Security could be made solvent for decades beyond 2037. That single action would be to remove the earnings cap so that every American worker would pay Social Security taxes on all of his or her income, just like everyone else, who currently earns less than $106,800, already pays.
THAT’S IT! The only actions required to enable Social Security to pay full benefits for many decades to come are:
1) The government must repay the $2.5 trillion that it has embezzled from the trust fund.
2) The cap on earnings subject to the Social Security payroll tax must be removed.
The Social Security program, which is based on sound principles, has operated successfully for 75 years. If the above two actions were taken, it could operate successfully for another 75 years and beyond. This doesn’t mean that actuarial adjustments, such as gradually raising the retirement age to correspond with the increased life expectancy, should not be given serious consideration. But there is no need to fundamentally change the principles upon which the program was initially built.
Conservative don’t hate Social Security because it does not work or is not sustainable in the long run. They hate it because it does work and can be successful indefinitely. The hate it primarily because it is a government operated program and they hate all such programs.
I have been researching and writing about Social Security for more than a decade and I am the author of four books on the subject. I don’t claim to know more about Social Security financing than anyone else. There are several good scholars who see the problems of Social Security as I do. However, I do consider myself more knowledgeable than most of Social Security’s harshest critics. I urge every reader who cares about the future of Social Security to visit my website at www.thebiglie.net to learn more. Those of us who want to protect and save Social Security, as we now know it, should be working together, because those who want to destroy it are well organized.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
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Solution that creates jobs
works for me im under that
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The Many are confused again
Economist Dean Baker finds this sort of shallowness all too common:
http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=03&year=2010&base _name=the_nyt_features_of_the_views
The NYT Features the Views of the Mysterious "Many" Who Don't Understand Social Security's Finances
"Of course people who are familiar with the finances of the system don't believe such things. The Congressional Budget Office projects that the program can pay all scheduled benefits through the year 2044 with no changes whatsoever. Even after this date it could still pay more than 75 percent of projected benefits long into the future (a level far higher than current benefits) even if no changes were ever made. "
Baker is a supporter of more open immigration, especially in cases where the US is forced to bear higher costs due to protectionist laws (e.g. Physicians).
The are plenty of good reasons to reform immigration; there is no reason to fabricate false ones.
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For the liberal economics professor.
The government stealing from it only hastened the process, but all it was, and all it ever was (and can be) is a generation wealth transfer.
The only way to pay it off is with further debt or inflation, which has worked nowhere.
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social security
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Immigrant != Work Permit
This actually happens a lot, especially when the visa holder is from a more wealthy country and has less to worry about in terms of living conditions back in the "old country". This is *especially* relevant under some of the non-immigrant visas, like TNs, where you're not even allowed start the permanent resident process.
So it's not a ponzi scheme... there are a lot of foreign workers just injecting money into the SS system (because they have to) for no return on their investment.
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Brain gain and brain maintain!
That said, brain maintain does not get what it deserves. Old people aren't just a drain on the system, unless we let them be. We have increasing numbers of creative, skilled, experienced Baby Boomers retiring to golf courses in low-tax areas. These people have ideas and the desire to implement them, but they don't have the societal support and expectation to do so.
I'd love to see a project that plays off of the soc sec scare in order to team up on the brain gain & maintain idea, perhaps starting some kind of reciprocal mentorship program. This kind of pro-active problem solving is what we need, but so often we just get FEAR. More active contribution to the world is always desired. We just need to stop being so focused on what it costs in order realize its superior benefits.
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Social security tax %'s through the years
Citation
"Social Security Facts." By Stephen F. Cardone and James D. Agresti. Just Facts, January 9, 2009. http://justfacts.com/socialsecurity.asp
(This page contains comprehensive and scholarly details about the topic of Social Security. For a more concise list of essential facts, click here. For an even shorter list of basic facts, click here.)
Finding what you want
» Type "Ctrl F" to search this page
» The footnotes contain detailed source documentation. Click the footnote numbers [1, 2, 3…] to access this content and click the browser "Back" button to return to the same place in the main text.
» Quick Click to:
• Overview
• Taxes
• Benefits
• Financial Stability
• Public Perceptions
• Accountability
• Impact on National Debt
• Personal Ownership
• Privacy
Introductory Notes
Whenever the word "projections" is used, this refers to projections done by the United States Social Security Administration. The process of making projections is not an exact science and actual outcomes often differ from the projected ones. The Social Security Administration produces high, low, and intermediate projections. Only the intermediate numbers are cited here.[1]
A major source of information for this section is the 2008 Social Security Trustees Report. This report was published in March of 2008 and contains data from 2007. Unless otherwise stated, all dollar figures are indexed for inflation, wage growth, and other economic parameters to produce numbers that are consistent in terms of the years 2007/2008.
Figures from specific years are used based on availability, and not to produce a desired result.
Overview
* In 1935, Congress passed and Democratic President Franklin D. Roosevelt signed into law the "Social Security Act." This law created "a system of Federal old-age benefits" for workers and their families. In 1956, the law was amended to also provide disability benefits.[2] [3]
* Pictured below is Franklin Delano Roosevelt signing the Social Security Act of 1935.[4]
* Social Security is composed of two separate entities: The "Old Age and Survivors Insurance" program and the "Disability Insurance" program. Each program has separate finances handled through two separate trust funds. For the purpose of simplicity, the figures shown below reflect the combination of both programs unless otherwise stated.[5]
* The "Supplemental Security Income" program provides benefits for aged, blind, and disabled people without regard to prior workforce participation. It is administered by the Social Security Administration, but it is not funded by Social Security taxes. This program is not covered in this list of facts.[6]
* In 2007, Social Security had a total income of $784.9 billion and expenditures of $594.5 billion.[7] [8]
* As of June 30, 2007, there were over 49 million people receiving monthly benefits, or approximately 16% of the U.S. population.[9] [10]
Taxes
* Social Security taxes and Medicare taxes comprise what is referred to as "FICA taxes." The acronym FICA stands for the "Federal Insurance Contributions Act." (Medicare is a program that provides medical benefits for elderly people.)[11]
* FICA tax rates for people who are self-employed:
Social Security Tax 12.4%
Medicare Tax [12] 2.9%
FICA Tax (total) 15.3%
[13]
* FICA tax rates for people who are employees:
Social Security Tax Medicare Tax FICA Tax (total)
Employee tax 6.2% 1.45% 7.65%
Employer tax 6.2% 1.45% 7.65%
Total 12.4% 2.9% 15.3%
[14]
* The FICA tax amounts that appear on paychecks generally do not account for the taxes that employers pay.[15]
* Social Security taxes are subject to a wage threshold. Any income earned above the threshold is not taxed. In 2008, the threshold was $102,000.[16] [17]
└ Tax Threshold Increases
* The Social Security Act of 1935 set the wage threshold at $3,000. Income earned above this amount was not subject to Social Security taxes. This threshold was a fixed amount that was not indexed for inflation.[18]
* Between 1950 and 1971, various Congresses and Presidents passed at least six laws to increase the threshold.[19]
* In 1972, the Congress and Republican President Nixon passed a law to automatically index the threshold based upon the national average wage.[20]
* In 1977, the Congress and President Carter passed a law that increased the threshold in 1979, 1980, and 1981 at higher rates than the growth in the national average wage.[21] [22]
* Since 1982, threshold increases have been based upon growth in the national average wage.[23] [24]
* In 1951, the wage threshold was 129% of the national average wage.[25]
* In 2007, the wage threshold was 241% of the national average wage.[26]
└ Tax Rate Increases
* The Social Security Act of 1935 set the initial tax rate at 2% and specified increases that would bring the rate to 6% by 1949.[27]
* In 1939 and during the 1940s, Congresses and President Roosevelt postponed the tax rate increases scheduled in the original Social Security Act. The tax rate of 6% was delayed until 1960.[28] [29]
* Since 1950, various Congresses and Presidents have passed at least nine laws to increase Social Security tax rates above the 6% level specified in the original Social Security Act.[30]
* Tax rate history:
Year Social Security Tax Rate
1950 3%
1960 6%
1970 8.4%
1980 10.2%
1990 12.4%
2000 12.4%
2008 12.4%
[31]
* For workers with average incomes, the government collects the equivalent of 6 weeks worth of their salary in Social Security taxes every year.[32]
└ Government Promise
* At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following with regard to Social Security taxes:
And finally, beginning in 1949, 12 years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.[33]
After adjusting for inflation, the result of this calculation equates to a maximum tax collection of $1,630 per person.[34] In 2007, the maximum tax collection per person was $12,090, or more than seven times this amount.[35]
* In 2007, Social Security taxes accounted for about 25% of all federal tax collections.[36]
* During the 2008 presidential race, Barack Obama's campaign stated that he is considering increasing Social Security taxes on those making above $250,000/year by 2% to 4%.[37]
* During the 2008 presidential race, John McCain pledged not to increase Social Security taxes.[38] [39]
Benefits
NOTE: The following projections are based upon what the current law specifies. This does not mean that there will be enough money in the Social Security program to pay for these benefits. Information concerning the financial stability of the Social Security program is contained in the next section.
└ Old Age Benefits
* In general, to qualify for old age benefits, a person must work for ten years, earning at least $4,000 a year (in 2007).[40]
* Old age benefits are calculated in a way that takes into account the Social Security taxes paid by the worker.[41] The Social Security Administration has an Online Calculator that allows individuals to input birth date, expected retirement age, yearly income, and provides an estimate of monthly retirement benefits. The result can be delivered in either today's dollars or in future (inflated) dollars.[42]
* People who have lower incomes receive a higher ratio of benefits to taxes.[43] The graph below compares the annual old-age benefit to the average annual taxes paid over 46 years of work:
[44]
* Old age benefits are generally increased each December based upon a cost of living adjustment. The benefit increase for 2006 was 3.3%, for 2007 2.3%, and for 2008 5.8%. [45]
* The age at which a worker receives full Social Security old age benefits is referred to as the "full retirement age." A person's full retirement age can be between 65 and 67 years old, depending upon their year of birth. For those born after 1959, full retirement age is 67 (More details in footnote.)[46]
* Workers have the option to start receiving Social Security benefits at the age of 62, but the benefits are reduced. (More details in footnote.) [47] Workers also have the option to start receiving benefits later than their full retirement age, and the benefits are increased. (More details in footnote.)[48]
* Family members of workers who are receiving old age benefits may also be eligible for benefits, even if they have not worked. (More details in footnote.)[49]
* When Social Security first began, beneficiaries could take their benefits as a lump sum.[50] The earliest reported applicant for a lump sum Social Security benefit is Ernest Ackerman of Cleveland, OH. Mr. Ackerman retired one day after the program began and paid $0.05 in Social Security taxes. He received a lump sum payment of $0.17 or a 240% return on the nickel he paid.[51]
└ Retirement Income
* The statement issued by the Social Security Administration to all participants states the following:
Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.[52]
* As of 2007, Social Security benefits comprise 50% or more of the income for 63% of elderly beneficiaries. It makes up 90% or more of the income for 32% of elderly beneficiaries.[53]
* In 2007, the average annual U.S. savings rate was $158.23 per person. This is 0.5% of disposable personal income.[54]
* As of 2008, Social Security is paying an average of $12,948/year to individual retired workers receiving old age benefits. The poverty level for an individual is $10,400.[55] [56]
* As of 2008, Social Security is paying an average of $21,132/year to couples receiving old age benefits. The poverty level for a couple is $14,000.[57] [58]
└ Taxes on Social Security Benefits
* At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following with regard to old age benefits:
You will get them regardless of the amount of property or income you may have.[59]
* Currently, elderly individuals with incomes of more than $25,000/year and couples with incomes of more than $32,000/year must pay taxes on up to 50% of their old-age benefits.[60] Half of an individual's or couple's old-age benefits are counted as income when determining if they meet these $25,000 and $32,000 thresholds.[61]
* Elderly individuals with incomes of more than $34,000/year and couples with incomes of more than $44,000/year must pay taxes on up to 85% of their old age benefits. Half of an individual's or couple's old-age benefits are counted as income when determining if they meet these $34,000 and $44,000 thresholds.[62]
* The thresholds at which people are required to pay taxes on their old-age benefits are not automatically indexed for inflation or wage growth.[63]
└ Disability Benefits
* In general, to qualify for disability benefits, there are two criteria that must be satisfied:
1. A "recent work" test based on your age at the time you became disabled; and
2. A "duration of work" test to show that you worked long enough under Social Security.
(More details in footnote.)[64]
* In general, recipients begin to receive disability benefits after they have been disabled for five full months.[65]
* Disability benefits are calculated based upon a formula that takes into account the average Social Security taxes paid by the worker.[66]
* Disability benefits are generally increased once a year based upon the increased cost of living. The benefit increase for 2007 was 2.3%.[67]
* Family members of workers who are receiving old age benefits may also be eligible for benefits, even if they have not worked. (More details in footnote.)[68]
* Distribution of benefits in 2007:
Category Amount
(billions)
Percent of Total Social
Security Benefits
Retired workers and their families $389 67%
Survivors of deceased workers $97 16%
Disabled workers and their families $99 17%
[69]
* The Social Security administration is required by law to send statements to workers once a year outlining their projected benefits. You should receive it about 3 months before your birthday. If you do not receive it, call 1-800-772-1213 or go to http://www.ssa.gov/.[70]
Financial Stability
* The Social Security program has an independent budget that is separate from the rest of the federal government.[71]
* Since 1982, Social Security has had surpluses ranging from $89 million to $190 billion per year.[72] By law, these surpluses must be loaned to the federal government, which is obligated to pay the money back with interest.[73] [74] [75] This is referred to as the "Social Security Trust Fund" and at the close of 2007 it had a balance of $2.2 trillion.[76]
* Social Security is projected to continue having annual surpluses until 2017 [77] [78] at which point the federal government will owe $3.5 trillion to the Social Security program, or $10,400 for every man, woman and child living in the U.S. at the time.[79] [80]
* In 2017, the Social Security program is projected to start having annual deficits that will be covered by collecting on the money it has loaned to the federal government. By 2041, it is projected that all of this money will be paid back and the trust fund will be exhausted.[81]
NOTE: The above fact does not mean that the federal government will have enough money to pay back the Social Security program. Information concerning the ability of the federal government to do so is contained in the section: Impact on National Debt
* After 2041, Social Security is projected to have deficits every year into the foreseeable future.[82] To cover these shortfalls, it is projected that payroll taxes would need to be increased by 28% starting in 2041, rising to a 34% increase by 2082.[83] This shortfall could also be covered by reducing benefits by 21% starting in 2041, falling to a 24% reduction by 2082.[84]
* There are several other ways to quantify Social Security's projected deficits. One is to calculate how much money must be immediately added to the trust fund so that the principle and interest would cover the shortfalls through 2082. This is referred to as the "75-year unfunded obligation" and currently amounts to $4.3 trillion ($4,300,000,000,000).[85] [86] [87] This is equivalent to 5.5 times the total income for Social Security in 2007,[88] or an additional $26,000 from every person who paid Social Security taxes in 2007.[89]
* Another way to quantify the projected deficits is to calculate the total debt the program will accumulate if money is borrowed to cover the shortfalls of the next 75 years. This debt (including interest) would amount to $36 trillion ($36,000,000,000,000) or an additional $153,000 (in 2008 dollars) for every person expected to be paying Social Security taxes in 2082.[90] [91]
* According to the 2008 Social Security Trustees' report, relying too heavily on a 75-year projection "can lead to incorrect perceptions and policies that fail to address financial sustainability for the more distant future." To address this shortcoming, it is calculated how much money must be placed in the Social Security Trust Fund right now in order to finance projected deficits for the infinite horizon. This amounts to $13.6 trillion,[92] [93] or an additional $83,345 for every person currently paying Social Security taxes.[94] [95]
└ Characterizing the Shortfall
* Back in 2004, it was calculated that $3.7 trillion (2004 dollars) had to be added to the trust fund at that time to cover projected deficits for the ensuing 75 years. It was also calculated that $10.4 trillion (2004 dollars) had to be added to the trust fund to cover projected deficits for the infinite horizon.[96]
* In January 2005, a New York Times house editorial entitled "The Social Security Fear Factor," criticized President Bush for citing the $10.4 trillion infinite horizon figure and asserting that this amount "threatens the retirement system – and the economy itself." The editorial then referred to the 75-year figure of $3.7 trillion as "a manageable sliver of the economy." [97]
* This figure of $3.7 trillion, which needed to be added to the trust fund and begin earning interest in 2004, is roughly equivalent to the combined market capitalization of all thirty companies comprising the Dow Jones Industrial Average (in September 2008), or an additional $23,680 from every person who paid Social Security taxes in 2004.[98] [99] [100] [101] [102]
└ Reliability of Projections
* In 2001, Social Security projected the Trust Fund balance to reach $2.54 trillion by the end of 2007. It actually reached $2.24 trillion, or 13% lower than projected.[103] [104]
* In 2001, the Social Security Administration projected a cumulative debt of $37 trillion (2008 dollars) by 2075.[105] [106] In 2008, the Social Security Administration projected a cumulative debt of $25 trillion (2008 dollars) by 2075, or 33% lower than the 2001 projection.[107] [108] [109]
* In 2001, the Social Security Administration projected that payroll taxes would need to be increased by about 37% to cover the projected deficit in 2041.[110] In 2008, the Social Security Administration projected that payroll taxes would need to be increased by about 28% to cover the projected deficit in 2041.[111]
* In 2001, the Social Security Administration projected that payroll taxes would need to be increased by about 49% to cover the annual expected deficit in 2075.[112] In 2008, the Social Security Administration projected that payroll taxes would need to be increased by about 32% to cover the projected deficit in 2075.[113]
└ Summary
* Projected financial status of the Social Security program:
Time Period Financial Status
1984- 2016 The Social Security program brings in more money than it spends. The surplus money is loaned to the federal government.
2017-2041 The Social Security program spends more money than it brings in. The federal government pays back the money that the Social Security program has loaned to it with interest. The trust fund ends this period with a balance of zero.
2041-2082 The Social Security program runs annual deficits that accumulate to $36 trillion, which could be covered by (a) adding $4.3 trillion to the trust fund today, or (b) increasing payroll taxes 28% starting in 2041, rising to a 34% increase by 2082, or (c) reducing benefits by 21% starting in 2041, falling to a 24% reduction by 2082.
2083 and beyond The Social Security Program runs annual deficits that could be covered by adding $9.3 trillion to the trust fund today.[114]
└ Causes and Effects
* One of the causes for the projected deficits is that the number of workers paying taxes compared to the number of people receiving benefits has fallen and is projected to fall further.
Year Ratio of people paying taxes
to people receiving benefits
1945 41.9 / 1
1950 16.5 / 1
1960 5.1 / 1
1970 3.7 / 1
1980 3.2 / 1
1990 3.4 / 1
2000 3.4 / 1
2007 3.3 / 1
2030 2.2 / 1
2070 2.1 / 1
[115]
* Factors that have contributed to the falling ratio of people paying taxes compared to people receiving benefits:
1) Increase in life expectancy without a comparable increase in the retirement age.
2) The higher birth rate of the baby boom generation compared to the birth rates of succeeding generations.
3) The increasing number of people receiving disability benefits.
1) Increase in life expectancy without a comparable increase in the retirement age:
- From the inception of the Social Security program through 2002, the retirement age was not changed. A law passed in 1983 requires that it be increased from 65 to 67 (in stages) by the year 2027.[116] [117]
- When Social Security began paying benefits in 1940, the average 65-year-old male had a life expectancy of 11.9 more years. As of 2004, the average 65-year-old male has a life expectancy of 16.7 more years. This is a 40% increase.[118] [119]
- When Social Security began paying benefits in 1940, the average 65-year-old female had a life expectancy of 13.4 more years. As of 2004, the average 65-year-old female has a life expectancy of 19.5 more years. This is a 45% increase.[120] [121]
- Benefits and taxes are automatically indexed on an annual basis to compensate for inflation and wage growth. The retirement age is not indexed to compensate for increased life expectancy.[122]
2) The higher birth rate of the baby boom generation compared to other generations:
- The baby boom generation was born between the late 1940's and early 1960's. In 1960, the average birth rate per woman was 3.6.[123] [124]
- By 1975, the average birth rate had fallen to 1.77. As of 2004, it is at 2.05.[125]
- Around 2010, the baby boom generation will begin to retire. Between 2010 and 2030, it is projected that the number of people eligible for old age benefits will increase by about 66%. During the same time period, the number of people paying Social Security taxes will increase by about 10.2%.[126] [127]
3) The increasing number of people receiving disability benefits:
Year Population in U.S. Number of People Receiving
Disability Benefits
1960 190,172,000 687,000
2000 288,284,000 6,667,000
2005 302,863,000 8,309,000
[128] [129]
- Between 1960 and 2005, the U.S. population grew by 59%. During the same period, the number of people receiving disability benefits increased by 1,109%.[130] [131]
Public Perceptions
Perception:
I am entitled to my Social Security benefits. It's my money. I've saved it.[132]
* Social Security Administration publication number 05-10024 states:
The money you pay in taxes is not held in a personal account for you to use when you get benefits. Your taxes are being used right now to pay people who now are getting benefits. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.[133]
* All taxes that have been paid into the Social Security system since its inception have been spent to pay benefits, fund the administrative overhead of the program, or loaned to the federal government.[134] [135] [136]
* In its 2000 budget, the Clinton administration stated that the Social Security Trust Funds
do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.[137]
* As of 2007, for every person receiving benefits, there are 3.3 people paying payroll taxes.[138] This ratio is projected to continue decreasing until beyond 2070:
[139]
Perception:
If politicians didn't take money out of the Social Security program, it would be fine now.
* No money has been taken from the Social Security program.[140] Social Security surpluses are loaned to the federal government.[141] [142] This is a requirement that was established in the original Social Security Act.[143] The federal government is required by law to pay back this money to the Social Security program with interest, and it has never failed to do so.[144] [145] [146]
* The assets of the Social Security program include all of the money that it has loaned to the federal government.[147] [148] [149] Even when this money is repaid with interest, the program is projected to be unable to pay full benefits starting in 2041. An additional $4,300,000,000,000 would need to be injected into the program today to finance the projected deficits over the next 75 years.[150] [151]
* If extra money had not been added into the Social Security program by increasing the tax rate above the levels specified in the original Social Security Act, it would have been unable to pay full benefits since about 1980.[152]
Accountability
* In 2007, the administrative cost of the Social Security program was $5.5 billion. This is equal to 0.9% of the benefit payments that Social Security made that year, or enough to pay monthly Social Security retirement benefits to 424,776 individual retired workers for one year.[153] [154]
[155]
* In 1999, the Social Security Administration paid approximately $17 million dollars in benefits to an estimated 2,091 people who were deceased.[156]
* From January 2004 through April 2007, there were 44,000 instances where the Social Security Administration erroneously listed an individual as dead. After the Social Security Administration completes a face-to-face interview with the beneficiary or recipient, they process what they refer to as a "resurrection transaction" to remove the individual from the "death master file" and reinstate benefit payments.[157]
Impact on National Debt
NOTE: For a compelling news story on this topic, visit our Exclusive News Service article: The Impact of Social Security on the National Debt
└ Trust Fund Assets Consist of Federal Debt
* The Social Security program has an independent budget that is separate from the rest of the federal government.[158]
* When the Social Security program collects more in taxes than it spends, it generates surplus money. By law, the only thing that the Social Security program can do with surplus money is to loan it to the U.S. government.[159] [160]
* The money that the federal government owes to the Social Security program is held in the form of special issue bonds from the United States Treasury.[161]
* Bonds that represent the debt are located in a file cabinet at the Bureau of Public Debt in Parkersburg, West Virginia. Below is a photo of President George W. Bush inspecting the documents along with Susan Chapman of the Office of Public Debt Accounting.[162] [163]
* When the Social Security program loans money to the U.S. government, the government is obligated by law to pay this money back to the Social Security program with interest. This money becomes a part of the national debt.[164] [165] [166]
* The U.S. government divides the national debt into two categories:
1) Money that it owes to federal entities such as the Social Security program and federal employee retirement funds.
2) Money that it owes to non-federal entities such as individuals who have purchased U.S. Savings Bonds.[167] [168]
* The federal law that governs the repayment of the national debt draws no distinction between the debt owed to federal versus non-federal entities. Both must be repaid with interest. As of August 2008, the average interest rate that the U.S. government pays on debt outstanding was 4.36%.[169] [170]
* As of June 30, 2008, the national debt looks like this:
Money owed to federal entities 4.2 trillion
Money owed to non-federal entities 5.3 trillion
National debt (total) 9.5 trillion
[171]
└ The Lock Box & Raiding the Trust Fund
* When the Social Security program loans money to the U.S. government, the government can use this money to pay off debt that it owes to non-federal entities. This leaves the national debt unchanged because the U.S. government needs to pay back this money to the Social Security program. Some politicians have referred to this action as, "Putting Social Security into a lockbox." [172]
* When the Social Security program loans money to the U.S. government, the government can use this money to spend on government programs. This increases the national debt because the U.S. government has spent the money that it has borrowed from the Social Security program. Some politicians have referred to this action as, "Raiding the Social Security Trust Fund." [173]
* When the U.S. government takes either of the above actions, the finances of the Social Security program are not affected. In both cases, the law requires the government to pay the money back to the Social Security program with interest.[174] [175]
* The impact of one action compared to the other is whether the national debt remains unchanged or increases. The national debt is not paid for with Social Security taxes. It is paid for with income taxes, corporate taxes, sales taxes, and excise taxes.[176] [177] [178] [179]
* In 1999, Republican Congressman Wally Herger sponsored a "lockbox" bill in the House of Representatives. This law would have restricted Congress from using money borrowed from the Social Security program to spend on other government programs. It passed the House by a vote of 416 to 12.[180]
* Senate rules allow for a "filibuster," in which certain votes can be blocked unless 60 of the Senate's 100 members agree to let it take place.[181] [182] In the Senate, Republicans attempted to bring this bill up for a vote and it was blocked by a filibuster conducted by Democrats.[183]
└ Debt to be Paid
* As of June, 2008, the U.S. government owes $2.36 trillion to the Social Security program. This comes to $7,800 for every man, woman, and child living in the United States.[184] [185]
* At the start of 2017, the U.S. government is projected to owe $3.5 trillion (2008 dollars) to the Social Security program. This comes to $10,400 for every man, woman and child who is expected to be living in the United States at that time.[186] [187] [188]
[189] [190]
└ Politics
* In February of 2001, while addressing Congress, Republican President George W. Bush stated:
Many of you have talked about the need to pay down our national debt. I listened, and I agree. We owe it to our children and grandchildren to act now, and I hope you will join me to pay down $2 trillion in debt during the next 10 years. At the end of those 10 years, we will have paid down all the debt that is available to retire. That is more debt, repaid more quickly than has ever been repaid by any nation at any time in history.[191]
* The debt that President Bush referred to in this statement excludes the debt that is owed to federal entities such as Social Security.[192]
* The following information was not included in Bush's speech to Congress. It was found on page 201 of his budget proposal:
- The reduction in the debt owed to non-federal entities is offset by an increase in debt owed to federal entities such as Social Security.[193]
- Under Bush's budget proposal, the national debt was to increase by 1.5 trillion dollars over the subsequent ten years.[194]
Personal Ownership
* At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following with regard to Social Security benefits:
The checks will come to you as a right.[195]
* Three years later, Congress and President Franklin D. Roosevelt eliminated a lump-sum benefit payment for the survivors of workers who died before age 65.[196]
* The original Social Security Act of 1935 states:
The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.[197]
* In 1960, the Supreme Court ruled that entitlement to Social Security benefits is not a contractual right.[198]
* The Social Security Administration's web site states:
There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense.… Congress clearly had no such limitation in mind when crafting the law. ... Benefits which are granted at one time can be withdrawn.…[199]
* Under current law, the money that people pay in Social Security taxes is not saved for them and is not their property.[200]
* For a worker who is 34 years old in 2008 and plans to retire at 67 in 2041, their retirement benefits will be derived solely from year 2041 taxpayers. Under current law, tax revenue in 2041 is projected to be sufficient to pay 78% of Social Security benefits.[201]
* Proposals have been made to change a portion of Social Security from a benefit program to a savings program. These savings would be the personal property of each person who chose to participate. In turn, their Social Security old-age benefits would be reduced to correspond with the amount of taxes they paid into the program.[202]
* In general, such proposals include a transition cost to move from the current system to a system that includes personal accounts.[203] [204]
* Under the current system, a 22-year-old person who works for the next 45 years earning $50,000/ year will contribute $279,000 to the Social Security program. When he or she turns 67 years old in 2053, all of the money they have contributed will be spent. Any old age benefits they receive would be derived from taxpayer revenue at that time.[205] [206]
* If this same person put 16% of their Social Security taxes into a personal account and it earned 7% above the rate of inflation, he or she will have saved $263,991 (2008 dollars) when they turn 67 years old in 2053.[207]
* From 1871 to 2002, (including the Great Depression), the stock market (S&P 500) has averaged more than 8% above the rate of inflation.[208]
└ Politics
* During the 109th Congress (2005-2006), eight Social Security reform bills were introduced that would have established individual accounts to supplement or replace traditional Social Security benefits. No action was taken on any of these bills.[209] [210]
* Of these eight bills, seven were sponsored by Republicans and one was co-sponsored by one Democrat and one Republican.[211] [212]
* During the 110th Congress (2007-2008), at least four Social Security reform measures were introduced that included the establishment of individual accounts. All were introduced by Republicans.[213] [214] [215]
* As of September 2008, the four bills had been referred to committee, but had not received additional action.[216] [217] [218] [219]
* The Republican Party supports giving workers the option to place a portion of their Social Security taxes into a personal account. The Democratic Party does not.[220] [221]
* Barack Obama opposes giving workers the option to place a portion of their Social Security taxes into a personal account.[222] [223]
* John McCain supports giving workers the option to place a portion of their Social Security taxes into a personal account.[224]
└ Heritability
* As of 2004, 30-year-old black men have an average life expectancy of 5.3 years beyond their full retirement age of 67. (White males – 10.3 years, Black females – 11.1 years, White females – 14.8 years).[225] [226]
* In general, for people who are single and have no children under the age of 19, their benefits stop when they pass on.[227]
* Personal ownership allows people to pass their Social Security savings to their heirs upon death.[228]
└ Media
* In February of 2001, the New York Times published an article written by Robert Pear. The headline read:
Study Says Disabled Would Lose Benefits Under New Social Security Plan.
The article stated:
The new study, by the General Accounting Office, an investigative arm of Congress, concludes that "even under the best of circumstances, Social Security reform proposals would reduce benefits" for people with disabilities.[229]
* This study compared the disability benefits produced by several personal ownership proposals to the disability benefits specified by current law. To pay the disability benefits specified by current law, the Social Security tax rate needed to be increased over time by 49%.[230]
* This information appeared on page 44 of the congressional study and nowhere in the New York Times article.
* When the study compared the personal ownership proposals to the current Social Security system using the same tax rate for both plans, in the majority of cases, the personal ownership systems produced higher disability benefits than the current Social Security system.[231]
* This information appeared on page 36 of the congressional study and nowhere in the New York Times article.
└ Chile
* In 1981, the South American nation of Chile instituted a social security personal ownership program.[232]
* Prior to this reform, Chile had a government-run social security program.[233]
* When reform occurred, membership in the personal ownership system was made mandatory for all workers beginning their careers and optional for workers who were members of the government-run social security program.[234]
* As of 2007, 98% of all workers contributing to social security were in the personal ownership system.[235] [236] [237]
* Membership in the personal ownership program is voluntary for the self-employed.[238]
* Chile's personal ownership system has the following attributes:
- The contribution rate is 10% of income. Workers also pay 0.64% for survivors and disability insurance and approximately 3.4% in administrative fees for an average total of 14.04%. The tax rate for the government-run program ranged between 15.75% and 24.91%.[239] [240] [241]
- Each participating worker has an individual account into which their contributions are deposited. [242]
- Workers are given a choice of five government approved investment funds.[243] [244]
- Workers select between numerous investment fund administrators.[245] [246]
- Full retirement age is 65 for men and 60 for women, but it is possible to retire
before this age if your personal retirement account meets certain conditions.[247]
- Assets may be passed on to surviving beneficiaries. If there are not any surviving beneficiaries, the balance in the individual account becomes a part of the deceased member's estate.[248]
- There is a provision to supply a minimum pension level for workers who have not saved enough.[249]
- At retirement, people have three options:
1) Programmed withdrawal: Retirees receive monthly payments made from their personal account based on the amount of money accumulated, the life expectancy of the individual and other factors. Retirees pay about 1.2% commission.[250] [251]
2) Life annuity: Workers enter into a contract with a life insurance company of their choosing, whereby the insurer takes control of the personal account assets and in return provides a constant monthly income to the retiree and survivorship benefits to their beneficiaries.
3) Temporary income with deferred life annuity (a hybrid of options 1 & 2): Workers enter into a contract with a life insurance company that allows them to keep their assets in their personal account for a predetermined period after they retire (and receive a monthly payment), but later begin to receive a life annuity through the insurance company. Retirees pay about 1.2% commission.[252] [253] [254]
* The average annual yield on these personal ownership accounts from 1981 to 2002 was 10.7% above the rate of inflation. The costs for administering the accounts averaged 3.4%, leaving a total annual yield of 7.3% above the rate of inflation.[255] [256]
* The costs of paying pensions under the government system plus the costs of transitioning to the personal ownership system averaged 3.25% of yearly Chilean gross domestic product from 1981 to 1999.[257]
* The government system paid benefits by taxing people who were currently working and had an accumulated deficit equal to more than 100% of GDP.[258] [259]
* The personal ownership system is self-funded and has no deficit. Three times per year workers receive a statement that informs them how much money they have saved.[260] [261] [262]
[263]
Privacy
* Beginning in 1946, Social Security cards had the following sentence imprinted on them:
FOR SOCIAL SECURITY PURPOSES -- NOT FOR IDENTIFICATION.[264]
* Since 1961, various Congresses and Presidents have enacted laws requiring the use of Social Security numbers for identity-related functions.[265]
* Starting in 1972, the sentence reading "For Social Security Purposes -- Not For Identification" was removed from all newly issued Social Security cards.[266]
* In 1994, Democratic Congressman Dick Gephardt sponsored a law that passed Congress with 67% of Democrats and 70% of Republicans voting for it. Democratic President Bill Clinton signed it into law. This legislation contains a section entitled:
TAXPAYER IDENTIFICATION NUMBERS REQUIRED AT BIRTH.[267]
This law requires that parents submit Social Security numbers for their children with their tax return in order to obtain a tax exemption for their children.[268]
* The web site of the U.S. Social Security Administration states:
The Social Security number was originally devised to keep an accurate record of each individual's earnings, and to subsequently monitor benefits paid under the Social Security program. However, use of the number as a general identifier has grown to the point where it is the most commonly used and convenient identifier for all types of record-keeping systems in the United States.
It goes on to state that "specific laws require a person to provide his/her number for certain purposes" and provides 15 examples of such including:
- Internal Revenue Service for tax returns
- Employers for wage and tax reporting purposes
- Banks for monetary transactions
- States to administer any tax, general public assistance, motor vehicle or drivers license law within its jurisdiction
- States for Medicaid
- U.S. Treasury for U.S. Savings Bonds
It is also states:
If a business or other enterprise asks you for your number, you can refuse to give it. However, that may mean doing without the purchase or service for which your number was requested.[269]
Sources
[1] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 6:
Future income and expenditures of the OASI [Old-Age & Survivors Insurance] and DI [Disability Insurance] Trust Funds will depend on many factors, including the size and characteristics of the population receiving benefits, the level of monthly benefit amounts, the size of the workforce, and the level of workers' earnings. These factors will depend in turn on future birth rates, death rates, immigration, marriage and divorce rates, retirement-age patterns, disability incidence and termination rates, employment rates, productivity gains, wage increases, inflation, and many other demographic, economic, and program-specific factors.
{Also see table II.C1 on page 6.}
Page 72:
Because projections of these factors and their interrelationships are inherently uncertain, a range of estimates is shown in this report on the basis of three sets of assumptions, designated as intermediate (alternative II), low cost (alternative I), and high cost (alternative III). The intermediate set represents the Board's best estimate of the future course of the population and the economy. In terms of the net effect on the status of the [Social Security] program, the low cost is the most optimistic, and the high cost is the most pessimistic. The low and high cost sets of assumptions reflect significant potential changes in the interrelationship among factors, as well as changes in the values for individual factors. The probability is very low that all the assumptions and interactions would differ in the same direction from those expected. Outcomes with overall cost as low as (or lower than) the low cost scenario or as high as (or higher than) the high cost scenario also have a very low probability.
[2] Web page: "Legislative History: Social Security Act of 1935." United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html
[3] Report: "Major Decisions in the House and Senate on Social Security." By Geoffrey Kollmann and Carmen Solomon-Fears. Domestic Social Policy Division, Social Security Administration, March 26, 2001. http://www.ssa.gov/history/reports/crsleghist3.html
H.R. 7225, the Social Security Amendments of 1956, was signed by President Eisenhower on August 1, 1956. The amendments provided benefits, after a 6-month waiting period, for permanently and totally disabled workers aged 50 to 64 who were fully insured and had at least 5 years of coverage in the 10-year period before becoming disabled; to a dependent child 18 and older of a deceased or retired insured worker if the child became disabled before age 18; to women workers and wives at the age of 62, instead of 65, with actuarially reduced benefits; reduced from 65 to 62 the age at which benefits were payable to widows or parents, with no reduction; extended coverage to lawyers, dentists, veterinarians, optometrists, and all other self-employed professionals except doctors99 increased the tax rate by 0.25% on employer and employee each (0.375% for self-employed people) to finance disability benefits (thereby raising the aggregate tax rate ultimately to 4.25%); and created a separate disability insurance (DI) trust fund. The Social Security program now consisted of old-age, survivors, and disability insurance [Social Security].
[4] Web page: "History: Signing the Social Security Act of 1935." United States Social Security Administration. Accessed November 17, 2008 at http://www.ssa.gov/history/fdrsign.html
President Roosevelt signing Social Security Act of 1935 in the Cabinet Room of the White House. Also shown, left to right:
Rep. Robert Doughton (D-NC); Sen. Robert Wagner (D-NY); Rep. John Dingell, Sr. (D-MI); Unknown man in bowtie; Secretary of Labor, Frances Perkins; Senator Pat Harrison (D-MS); Congressman David L. Lewis (D-MD). Library of Congress photo, LC-US262-123278.
[5] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 131: "The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. All the financial operations of the OASI and DI programs are handled through these respective funds."
[6] Report: "Charting the Future of Social Security's Disability Programs: The Need for Fundamental Change." Social Security Advisory Board, January 2001. http://www.ssab.gov/Publications/Disability/disabilitywhitepap.pdf
{According to this document, the Social Security Advisory Board is "an independent, bipartisan Board created by the Congress and appointed by the President and the Congress to advise the President, the Congress, and the Commissioner of Social Security on matters related to the Social Security and Supplemental Security Income programs."}
Page ii: "SUPPLEMENTAL SECURITY INCOME (SSI) is a means-tested income assistance program for aged, blind, and disabled individuals (regardless of prior workforce participation) and is funded from general revenues of the Treasury."
[7] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 4: "Table II.B.1: Summary of 2007 Trust Fund Financial Operations."
Page 4: "In 2007, net contributions accounted for 84 percent [$656.1 billion] of total trust fund income [$784.9 billion]. Net contributions consist of taxes paid by employees, employers and the self-employed on earnings covered by Social Security."
[8] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 4: "Table II.B.1: Summary of 2007 Trust Fund Financial Operations.
Page 5: "More than 98 percent of expenditures from the combined [Social Security] Trust Funds in 2007 went to pay retirement, survivor, and disability benefits totaling $584.9 billion."
[9] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Pages 50-51:
Table IV.B2.—Covered Workers1 and Beneficiaries, Calendar Years 1945-2085 …
1 Workers who are paid at some time during the year for employment on which OASDI taxes are due.
[10] Web page: "Population, Population change and estimated components of population change: April 1, 2000 to July 1, 2007." United States Census Bureau. Accessed October 31,2008 at http://www.census.gov/popest/datasets.html
{See CSV file under the heading "Population, Population change and estimated components of population change: April 1, 2000 to July 1, 2007 (NST-EST2007-alldata)." Cell O2 in the spreadsheet is the 2007 population estimate. The U.S. Census Bureau estimates the U.S. population to be 301,621,157 for 2007. The last census (2000) found the population to be 281,421,906. The 2000 census can be found at http://www.census.gov/prod/2002pubs/c2kprof00-us.pdf}
[11] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 172: "The combined OASDI [Social Security] and HI [Hospital Insurance] contribution rate for employees and their employers is often referred to as the FICA tax, because it is authorized by the Federal Insurance Contributions Act."
[12] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 207: "Medicare consists of two separate but coordinated programs—Hospital Insurance (HI, Part A) and Supplementary Medical Insurance (SMI)."
NOTE: Hospital Insurance is financed via payroll tax. Supplemental Medical Insurance is not funded via payroll tax. Page 172: "Estimates for the Supplementary Medical Insurance (SMI) program are not included in this appendix because adequate financing is guaranteed in the law, and because the SMI program is not financed through a payroll tax."
[13] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Pages 132-133: "Table VI.A1.— Contribution and Benefit Base and Contribution Rates."
[14] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Pages 132-133: "Table VI.A1.—Contribution and Benefit Base and Contribution Rates."
[15] Examined several different paychecks.
[16] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 4: "Net contributions consist of taxes paid by employees, employers and the self-employed on earnings covered by Social Security. These taxes were paid on covered earnings up to a specified maximum annual amount, which was $97,500 in 2007 and is increased each year automatically (to $102,000 in 2008) as the average wage increases."
[17] Web page: "History of SSA-related Legislation: 103rd Congress." United States Social Security Administration. Accessed October 31,2008 at http://www.socialsecurity.gov/legislation/history/103.htm
"PL 103-66 The Omnibus Budget Reconciliation Act of 1993 (enacted 8/10/93). Section 13207 repeals the limitation on the amount of earnings subject to the HI [Hospital Insurance] tax beginning in 1994."
[18] Web page: "Legislative History: Social Security Act of 1935." United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html
SEC. 811. When used in this title- (a) The term wages means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash; except that such term shall not include that part of the remuneration which, after remuneration equal to $3,000 has been paid to an individual by an employer with respect to employment during any calendar year, is paid to such individual by such employer with respect to employment during such calendar year.
[19] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf
{The phrase "at least six laws" was used because six laws were found in this 30 page document that raised the threshold during this time period. However, other documents indicated law changes that were not found here. To be on the safe side, the lowest possible number in conjunction with the term "at least" was used.}
[20] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf
Page CRS-11:
The 1972 amendments introduced the concept of automatic adjustments or "indexing" to the Social Security system. They provided that, effective in 1975, benefit increases would be tied directly, or indexed, to rises in the cost of living. Under this new procedure, benefits would be increased automatically each January (through a cost-of-living adjustment, or COLA) when inflation as measured by the Consumer Price Index (CPI) rose 3% or more from the approximate time of the last benefit increase. In addition, effective in 1975, the earnings base and the exempt amount under the earnings test would be adjusted automatically to keep pace with changes in wage levels.
[21] Report: "Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996." By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf
Page CRS-14: "Increased the earnings base, on an ad hoc basis, to $22,900 in 1979, $25,900 in 1980, and $29,700 in 1981. After 1981, the base would be adjusted automatically to keep up with average wages as under the prior law."
[22] "The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf
Page 102-103:
{See
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Way to kill a discussion.
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I have been researching and writing about Social Security for more than a decade, and I have published four books on the subject. The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs. Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways. First, benefits for current retirees are paid from the Social Security revenue. Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue.
Most workers think that at least some of the FICA taxes deducted from their paychecks will be saved and used to pay future Social Security benefits. But it doesn’t work that way. Not a single dime of payroll tax revenue has ever been saved and earmarked for the payment of future benefits. To put it bluntly, the government has “borrowed,” “embezzled,” or “stolen” every penny of the $2.5 trillion of surplus revenue that was supposed to be saved and invested. I consider this to be the greatest fraud ever perpetrated on the American people by their government. I have been trying to expose this awful truth for more than a decade, and some courageous people were trying to expose it even before I stumbled onto the scam in 1999.
On October 13, 1989, Senator Ernest Hollings of South Carolina issued the following warning in a speech on the Senate floor.
“…the most reprehensible fraud in this great jambalaya of frauds is the systematic and total ransacking of the Social Security trust fund ..in the next century…the American people will wake up to the reality that those IOUs in the trust fund vault are a 21st century version of Confederate bank notes.”
On January 21, 2005, David Walker, the Comptroller General of the GAO, tried to make it clear to everyone that the trust fund contained no real assets. He said:
“There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down.”
If anyone has any remaining doubts about whether or not the trust fund contains real assets, those doubts should be removed by the following statement from the 2009 Social Security Trustees Report:
“Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”
I urge everyone who cares about the future of Social Security to please visit my website at www.thebiglie.net to learn more about Social Security and my efforts to expose the scam. Excerpts from my latest book, “THE BIG LIE: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” are posted on the site. Please feel free to download them.
Allen W. Smith, Ph.D.
Professor of Economics Emeritus
Eastern Illinois University
Website: www.thebiglie.net
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
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The baby boomers have paid more into Social Security than any other generation. The 1983 Social Security Amendments required the baby boomers to pay for the benefits of the generation that preceded them, which was customary. However, it also required the boomers to pay enough additional Social Security taxes to prepay most of the cost of their own benefits, which was not customary. The $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, was mostly paid by the boomers, but the revenue was used mostly to replace the lost revenue from the unaffordable Reagan income tax cuts that went mostly to the wealthiest Americans. Now, conservatives want to cut Social Security benefits to the baby boomers, who have already prepaid most of the cost of their own benefits.
When I first stumbled onto this information, more than a decade ago, I was outraged, and I wanted to tell the whole world, so they would be outraged too. But nobody wanted to listen. The whole idea of imposing the very regressive payroll tax on working Americans, and then using the revenue from that tax to help fund large income tax cuts to the very wealth is absolutely repulsive, at least to me. Is it repulsive to you?.
Allen W. Smith, Ph.D.
Email: ironwoodas@aol.com
Phone: 1-800-840-6812
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"One logical way to deal with the crisis of funding Social Security and Medicare is to have more workers per retiree"
The other is not to fund it at all.
1) Institute a VAT
2) Institute a flat tax
3) Eliminate welfare programs and end pensions
4) Institute a "Nothing in, nothing out" tax policy where the gov't will not issue back more money than it has taken in per individual. The net result is that no one gets paid from taxes, they will just owe none.
5) Tax corporations based on their net income, not profits. Far too many are abusing tax law by taking losses in the US and moving profitable businesses overseas to low-tax havens.
6) Take away the power of the Fed to control the supply of money. The longest period of prosperity in history in the US was during an extended deflation of the US dollar. The value of goods produced exceeded the amount of money created, making each dollar more valuable and coupled with the gold standard, rewarded those who saved their money.
If these things happen, the country will be on the right track
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Socialist Insecurity Abomination bankrupt since 1937
"One of those who brushed these objections aside was professor Paul Samuelson...: 'The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in...'" --- Thomas Sowell 2004 _Applied Economics_ pp158-159
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when to delare bankruptcy
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Your article too good, very useful for me,Who are all looking for part time and home based jobs, Visit the website: https://greatlance.com/.
In this website you can Find a freelancer as well as you can find number of projects for home based working.
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Baby Boomers paid- so Show Me the Money-IOU's
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