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Social Security says system's costs will exceed income this year

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Re: Social Security says system's costs will exceed income this year

#71
post #32

There are two problems with SS, one fixable, one less so. The hard to fix problem is slowing population growth. SS depends on young workers to fund the payments to retirees. But this is really only a problem if aggregate income growth declines with population growth, and it hasn't; the aggregate income of all Americans has quadrupled since 1982, the last time this shortfall occurred. The problem is that the vast majo…

> If we had sane progressive tax policy in the US, the SS shortfall would evaporate. Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxe... . The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/...…

From your linked article:

"Why, according to the OECD, is the US system so progressive? Not because the rich face unusually high average tax rates, but because middle-income US households face unusually low tax rates--an important point which de Rugy mentions and Chait ignores.

How does the picture change if you take indirect taxation into account? That would make the US system look even more progressive, because the US doesn't rely on a flat consumption tax like most other governments.

What does the tax-rate schedule tell you about progressivity? Very little, until you factor in deductions, thresholds and opportunities for avoidance. High top rates are meaningless if nobody is paying them.

What happens to tax progressivity at the very top of the US income distribution--inside the top one percent, or 0.1 or 0.01 percent? Good question. When it comes to international comparisons, I don't know of any good answers..."

The real point of the article is that progresssivity is hard to measure. But when so much of the income growth in the country is captured by a class that doesn't pay into the SS system, the result speaks for itself.

Re: Social Security says system's costs will exceed income this year

#72
post #51
post #25

Earlier quoted context omitted.

I'm not sure why millenials have to worry about it. Social Security is not an aquifer that will be tapped out by the time we get to it. It is a pay-as-you-go system. The current crunch is coming from having a large retiring generation (the baby boomers), supported by relatively smaller working generations. Millenials will not necessarily have the same problems (unless the elect to have even fewer kids than baby boome…

> It is a pay-as-you-go system. Then who paid for the first generation of recipients?

The kids of that first generation of retirees, who were workers at the time.

Re: Social Security says system's costs will exceed income this year

#73
post #32

There are two problems with SS, one fixable, one less so. The hard to fix problem is slowing population growth. SS depends on young workers to fund the payments to retirees. But this is really only a problem if aggregate income growth declines with population growth, and it hasn't; the aggregate income of all Americans has quadrupled since 1982, the last time this shortfall occurred. The problem is that the vast majo…

> If we had sane progressive tax policy in the US, the SS shortfall would evaporate. Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxe... . The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/...…

> Our tax policy is among the most progressive in the developed world

Not as applies to Social Security, which has a dedicated funding stream independent of general revenue, consisting entirely of a flat tax on labor income below a certain level and no tax above that level which constitutes a two-timer regressive tax on labor income made even more regressive on total income because the high end of the total income distribution consists largely of people whose income comes largely from capital rather than labor income.

Re: Social Security says system's costs will exceed income this year

#74

Some comments by millenials say that they expect to receive SS benefits, but this is not a secure basis for financial planning. A person's retirement planning should be independent of any expected SS receipts and if you happen to receive SS then it's just a windfall.

I'm less than 15 years from retirement age, and I don't expect to get any Social Security.

Re: Social Security says system's costs will exceed income this year

#75
One interesting side effect of this will be on the interest rate.

Social Security has been investing the surplus, most (or all?) in Treasury bonds. As outflows exceed income, they're going to have to sell bonds. That should drive prices down, and therefore interest rates up - to what degree, I don't know.

Re: Social Security says system's costs will exceed income this year

#76
post #61

Earlier quoted context omitted.

From your link "...and turning 65 in 2010 would have paid $722,000 into Social Security and Medicare and can be expected to take out $966,000 in benefits." So basically, employees are giving the government a 45 year loan at zero interest. Even at just a 1.5% rate, the typical employee pays their own way.

That's already accounted for in the "paid-in" figure: > (Remember, the couple didn’t literally pay out $600,000; that’s the current value of what they paid out over the years, plus an additional 2 percent they may have gotten had it been invested.) Even accounting for inflation and investment, the average worker still is paid out more from Social Security than they paid in.

> Even accounting for inflation and investment, the average worker still is paid out more from Social Security than they paid in.

The source cited combines “Social Security and Medicare”, it doesn't (at least in the quoted excerpt) address SS separately. These are different programs supported by different Trust Funds funded by different taxes applicable to different income and with different dynamics driving costs.

Re: Social Security says system's costs will exceed income this year

#77

We have the resources. What we lack are necessary priorities and the resolve to fix them. The latest DoD budget is $700 billion. Russia's DoD budget is approx 10% of that. That's not a typo 10%. China might not be an ally - in the historical European sense - but given our symbiotic economic relationship it would like take quite a bit for a true military conflict to break out between the two countries. Even if our DoD…

The fundamental/fucked-up thing is that if you cut the military budget it's not that soldiers stop getting recruited it's that tank/jet/boot/GPS/mre companies start firing people. The Military Industrial complex is a huge welfare/workfare program that no one in power is willing to cut. So until we can convince essentially EVERY voter (any party: libertarian, green, D or R) that it's okay to have a real safety net then politicians who campaign against the military budget are basically lost causes.

Re: Social Security says system's costs will exceed income this year

#78
post #32

Earlier quoted context omitted.

> If we had sane progressive tax policy in the US, the SS shortfall would evaporate. Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxe... . The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/...…

From your linked article: "Why, according to the OECD, is the US system so progressive? Not because the rich face unusually high average tax rates, but because middle-income US households face unusually low tax rates--an important point which de Rugy mentions and Chait ignores. How does the picture change if you take indirect taxation into account? That would make the US system look even more progressive, because the…

No, the real point of the article is that "according to the OECD, "the US system [is] progressive." The most salient feature of the U.S. tax system is that "middle-income US households face unusually low tax rates"--i.e. the system is highly progressive.

The U.S. tax system is progressive well into the top 1% of income earners (by contrast, Germany, Sweden, and Denmark have a relatively flat tax structure after about 1.5x the median income). There is a lot of focus on tax breaks for the top 0.1%, but 90% of U.S. income is earned by people outside that group, and 80% is earned by folks outside the top 1%.

Re: Social Security says system's costs will exceed income this year

#79
post #32

Earlier quoted context omitted.

> If we had sane progressive tax policy in the US, the SS shortfall would evaporate. Our tax policy is among the most progressive in the developed world: https://www.theatlantic.com/business/archive/2012/02/us-taxe... . The real problem is that the average income earner doesn't pay enough Social Security taxes to cover what they will receive in benefits: http://www.politifact.com/truth-o-meter/article/2013/feb/01/...…

> Our tax policy is among the most progressive in the developed world Not as applies to Social Security, which has a dedicated funding stream independent of general revenue, consisting entirely of a flat tax on labor income below a certain level and no tax above that level which constitutes a two-timer regressive tax on labor income made even more regressive on total income because the high end of the total income di…

A flat tax on labor income, with a cap, is a typical model for Social Security in Europe. E.g. France, Germany, etc. Ours is more progressive because the cap is generally higher.

Re: Social Security says system's costs will exceed income this year

#80

We have the resources. What we lack are necessary priorities and the resolve to fix them. The latest DoD budget is $700 billion. Russia's DoD budget is approx 10% of that. That's not a typo 10%. China might not be an ally - in the historical European sense - but given our symbiotic economic relationship it would like take quite a bit for a true military conflict to break out between the two countries. Even if our DoD…

The fundamental/fucked-up thing is that if you cut the military budget it's not that soldiers stop getting recruited it's that tank/jet/boot/GPS/mre companies start firing people. The Military Industrial complex is a huge welfare/workfare program that no one in power is willing to cut. So until we can convince essentially EVERY voter (any party: libertarian, green, D or R) that it's okay to have a real safety net the…

A lot of military spending is building stuff to blow up. I rather pay people to build windfarms and trains.
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