The Future of Social Security in Challenging Times
http://thedianerehmshow.org/shows/2011-09-12/future-social-security-challenging-times
One in seven Americans receives a Social Security benefit. More than ninety percent of all workers are in jobs covered by Social Security. But concerns are growing over the long-term viability of the program. Texas Governor and presidential front-runner Rick Perry says Social Security is "a Ponzi scheme" and "monstrous lie." the congressional debt supercommittee is expected to consider Social Security revisions. And advocates worry the payroll tax cut extension proposed by President Obama could shrink revenues. A panel joins Diane to discuss options for the future of Social Security.
Guests
Mark Miller
syndicated columnist and author of "The Hard Times Guide to Retirement Security"
Nancy Altman
co-director of Social Security Works, co-chair of the Strenghen Social Security coalition and campaign and author of "The Battle for Social Security."
Charles Blahous
a Hoover research fellow, one of two public trustees for the Social Security and Medicare Programs and author of "Social Security: The Unfinished Work."
Related Items
Program Highlights
Changes to the social security system will be on the congressional debt super committee's agenda. President Obama hopes to ignite to job market in part by extending cuts to payroll taxes that otherwise would go into the trust fund. Diane and guests looked at the history of the system, changes legislators have made to it, and how it compares to retirement plans.
Can Social Security Legitimately be Called a Ponzi Scheme?
Mark Miller said that Gov. Perry's comment was reckless and irresponsible. "The essence of Social Security is that people pay taxes and they accumulate credits, and in return, they get a pension. And that's a program that's been working for 75 years. And the essence of a Ponzi scheme, if you checked that in a dictionary, is criminal fraud," Miller said.
How Social Security Compares to Insurance and Pension Plans
"Social Security is an extremely good deal...some people talked about the need to modernize Social Security, but the concept is really thoroughly modern. The idea is that as long as workers are dependent and their families are dependent on wage income, they need insurance against the loss of those wages. They need unemployment insurance if they lose their jobs, disability insurance if they become disabled, life insurance, old-age insurance. Social Security provides the last three," said Nancy Altman.
Who Bears the Risk?
Altman:"A fundamental difference is, with individual accounts, the risk is all borne by the individual. If the stock market is down or your investments are down, you're in trouble if you have to retire. With Social Security and, generally, with defined-benefit plans, the risk is shared by everyone. With Social Security, it's shared by the entire nation. That’s what makes it work so well. "
Lifting the Income Cap
Blahous:"The more you pay into the system, the more you get out. It's not designed to be a welfare program. Basically, no matter how rich you are, no matter how poor you are, you get something back for your contributions. So if you lift the cap, then unless you sever that link between contributions and benefits, then you're gonna obligate a very large amount of additional benefit outlays to people who need them least. You're basically bringing in more revenue from rich people to pay more benefits to rich people."
Our Guests Suggest Fixes to the System
Miller:"I would do it by lifting and eliminating the cap on income subject to tax."
Blahous:"I would make progressive changes to restrain the growth of benefits, still above inflation, but restrain the growth to people on the higher income end. And I would, unlike my colleagues, raise the retirement age at least to get it back to where we were when the program first began."
Altman:"Some have talked about dedicating a tax on stocks speculation, a kind of tax that Great Britain has. Dedicate that to Social Security, you actually could raise the benefits. That's how much money is brought in. There are other kinds. Some have talked about dedicating the estate tax."
Comments
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Is this the definition of a Ponzi scheme or not?
This is from the GAO.
Social Security has always been largely a pay-as-you-go
system. This means that current workers’ taxes pay current retirees’
benefits. As a result, the relative numbers of workers and beneficiaries has
a major impact on the program’s financial condition. This ratio, however, is
changing. In the 1960s, the ratio averaged 4.2:1. Today it is 3.4:1 and it is
expected to drop to around 2:1 by 2030. The retirement of the baby boom
generation is not the only demographic challenge facing the system.
People are retiring early and living longer. A falling fertility rate is the other
principal factor underlying the growth in the elderly’s share of the
population. In the 1960s, the fertility rate was an average of 3 children per
woman. Today it is a little over 2, and by 2030 it is expected to fall to 1.95—
a rate that is below replacement. Taken together, these trends threaten the
financial solvency and sustainability of this important program
A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.
The system is destined to collapse because the earnings, if any, are less than the payments to investors. Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.
Again, thanks Monte for your openness. You appear to have access to information, so please post Senator Bernie Sander's position on social security. There appears to be some inconsistency with the position you have taken, err! posted.
Social Security has served the Congress very well. The Social Security welfare program has provided the Congress with a $2.6 trillion supplement for Congressional annual budgets for at least 30 years.
The very fact that there is a Social Security Trust Fund that contains treasury bonds--i.e., IOU's left by 30 years of Congressional raids on Social Security--is evidence of the "welfare" supplement Social Security taxes have provided for annual federal budgets.
Obviously, Social Security has not been a "pay-as-you-go" program. If that were so, there would not be a Trust Fund. The Social Security Trust Fund shows that Social Security income has exceeded Social Security pay out for many years. Social Security is not part of the federal budget. Social Security taxes pay Social Security benefits.
The current policy of reducing payroll taxes payed by employees and the recommendation that employer payroll taxes be reduced as well puts more pressure on future Social Security trust fund solvency. Yet, few if any commentators see this policy as adverse to what needs to be done to keep Social Security solvent.
Congress needs to stop using Social Security payroll taxes as a supplement to annual federal budget short-falls. Congress, obviously, need to raise taxes to cover federal budget short falls.
There is an easy fix to the so called Social Security problem. Just remove the salary/income cap on Social Security payroll taxes.
Social Security can be reformed by collecting more through FISA not subtracting more, as the Obama Admin. has suggested and which was enacted by Congress. The reduction in the percentage taken was too small to be noticed by the individual payer, yet, collectively, has done more harm to SS holdings.
Tax reform, budget reform and increasing FISA collections are important to SS survival.
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As an independent voter I'm tired of the rhetoric on both sides of the aisle. Even though Governor Perry used the term "ponzi scheme" to describe the status of Social Security, I think most voters understood what he was talking about and the frustration he feels. We know it's not something "illegal" but under it's current status and future funding it cannot fulfill it's obligations to those participating and has a "pyramid" feel to it. Let's work together and fix it instead of fighting over labels.
In my opinion, SS became too generous in the '80s; I remember the anecdotes about seniors eating pet food that should have been addressed through SSI/welfare, not blanket increases that amounted to ridiculous "windfall" returns to many recipients that were retiring from secure jobs with good pay and private pensions.
I think "means testing" is an unfortunate necessity now, but it should used to temper - not eliminate - individuals' benefits. It should also be based upon lifetime income, not current financial status, so that profligate spenders aren't rewarded at the expense of prudent savers - the latter do enough to subsidize the former already.
The trouble with Rick Perry's comment about Social Security being a "Ponzy scheme" is that many Americans believe it. I hear younger people complaining all the time that they hate paying into Social Security because they don't believe it will be there for them when they retire. They may be ready to elect someone who is ready to take on Social Security head on. The idea really scares me. I think it's a very important subject that needs to be addressed. So glad you're talking about it today.
Social Security disability retroactive payments can be tens of thousands or hundreds of thousands of dollars. maybe that should be changed to payments starting at the time of eligibility rather than retroactively to the time of original application.
Can we not sure up the Social Security by removing the Cap completely?
Can't we sure up Social Security by removing the Cap Completely?
Over time there have been two changes that increased the payout of Social Security. First, in the early 1980's the age limit for the $1 for $3 payback was reduced from age 72 to age 70.
Second, in the 1990's the $1 for $3 was eliminated.
Neither of these made sense if you're trying to protect the future of the fund.
Social Security is basically welfare. It is funded through taxes. Supposedly the money is "invested" in treasury bonds, but SS can only sell them back to the treasury, not on the market.
Interest (and principle) on the bonds when redeemed does not come from investing the money, it comes from future taxes.
SS should be changed to a true investment plan with a fall back SSI type system for those who invest poorly. With real investment and proper financial education people could retire on their investment and not need the SSI welfare portion. But that would mean that withdrawals would have to vary every year like a REAL investment plan and the only inflation protection would be WISE investment.
We need to rethink Congress' boondoggle and raise the rates employees pay.
First, leave the current tax rate and moritorium up to $250,000
Second, from $250,000 to $500,000 lower rate by 1%
Third, from $500,000 to $1,000,000 lower rate by 1%
Fourth, from $1,000,000 to $5,000,000 lower another point
Fifth, from $5,000,000 up to the person's upper limit the remainder stays the same. This applies to all sources of income, payroll, interest income, royalties, deferred income, stock options and all other accounting terms to hide income. NO loopholes or hidden income hiding, all monies that eventually go to the worker have to be taxed.
This will keep all the fat cat lawyers, bankers, hedge fund managers, rock stars and all sports people. It's ludicrous the A Rod is done with Soc Sec tax with his first two hits in Spring training. Also, lower the upper limits of payout to $5,000 a month. This is the only fair way for all American people.
First of all every person earning wages and/or salary need to be invested in the social security program - including the elected officials.
Second, remove the cap on earnings contributions.
The cap on earnings contributions is another loophole for wealthy persons to not put in their share.
The 'exempt' earners need to be included as well.
There is no reason for any worker/ earner to be exempt in a system that is supposed to be for all Americans - only some do not need to contribute? Why?
When boomers retire, many of us will begin paying taxes on the payouts from IRAs and 401(k) accounts. Has anyone taken that into their calculations?
I have been perplexed for years why they do not just raise the cap and at the same time create a reasonable limit on how much benefits can be received each year. BUT of course the Hoover guy rejects this Republicans reject this. The wealthy have absolutely no conscious.
The Hoover institute guy sits at a desk pontificating drinking bottled water there are a lot of us who have hard physical jobs He can work till he is 80 if he chooses. Some of us wiull not be able to do that. The wealth conservatives generally are awful, selfish people
Since Social Security is not part of the Federal budget, how can we make sure the 'supercommittee' does not make detrimental changes - or ANY changes. Changes to this program need to be made with much thought and consideration not related to the federal budget or trying to make up any deficit.
I have heard that Congress has 'dipped in' to these funds over the years when there seemed to be a surplus in Social Security. Can those 'loans?' be called - with interest?? Congress had no business touching the funds which workers had contributed to their future security.
My father-in-law retired at 62 and began living on S.S. and his investments. He died in 2007 and was worth $6,000,000. My mother lives on only her S.S. checks. The fluctuation of the program directly affects her decision-making process in what she spends monthly. If the republican party wants to protect the wealthy by keeping the Bush era tax cuts, then it is very unlikely a proposal to limit benefits for those who can most afford those cuts would entertained, but wouldn't it help to level the participation playing field?
It's certainly good to know that all that money is still there to cover public obligations, because Congress keeps telling us it isn't. So that means there is no problem and Congress should get off the public's back and fix the economy like maybe focusing on corporate welfare.... Unfortunately, this discussion fails to address interest on the public debt, let alone the apparent intent to disassemble New Deal policy altogether. We don't like to use the terminology, but the alternative movement is toward Fascism.....
billtmore wrote:
"The wealth conservatives generally are awful, selfish people"
Really? Really?!
Then why do studies show that wealthy people (generally conservatives) give far more to charity than liberals? Hmmmm?
http://www.realclearpolitics.com/articles/2008/03/conservatives_more_lib...
http://www.realclearpolitics.com/articles/2008/03/conservatives_more_lib...
Instead, liberal progressives keep the poor dependent on them for the crumbs the government chooses to throw them. THAT is selfish. THAT is awful.
Mountainwomon wrote:
"The cap on earnings contributions is another loophole for wealthy persons to not put in their share."
Patently false. The "rich" put in the same share as the poor and middle class - and they get the same amount out. How is that not "putting in their share"?!
Face it, Mountainwomon, you just want to "spread the wealth around".
Large corporations have reduced their employee retirement benefits for their rank & file over the last thirty years while increasing the salaries & compensation packages for their executive leadership and, in the case of the financial industry, their investment bankers. The rank & file employees jobs are unstable and when they find jobs, they receive lower compensation (for instance, they're hired as 'consultants' which means they only get paid by the hour & pay all of their own benefits). The old concept of employer/employee loyalty is gone. American workers need to think of themselves as 'temporary' workers not employees with benefits. These changes have been supported through legislation and PR by the conservative movement in this country. These changes have only benefited the wealthiest of Americans and the rest of us have been harmed by these changes. Social Security is the only STABLE retirement income for most Americans. If the conservative movement wants these changes which only benefit a very small percentage of Americans, they should support SS not attack it. Afterall, their biggest donors such as the Koch Brothers, have increased their wealth enormously through paying for tax policies which enable them to pay low taxes (the top 1% pay an average of 22% according to the CBO) and by changing the work environment where they hire workers on a temporary basis.
As a special educator for over 30 years I have seen a increasing of the SSI acceptability. If EVERYONE with an educational disability were required to go to work in order to collect their SSI check, the number of abusers to that part of the program would be reduced.
"Marvin Wagner wrote:
Again, thanks Monte for your openness. You appear to have access to information, so please post Senator Bernie Sander's position on social security. There appears to be some inconsistency with the position you have taken, err! posted."
Marvin:
When Senator Sander was on this program some month ago he stated that SS had 245 Trillion dollars. I asked this question last time and I will ask it again.
Will we have to sell our National Parks, Monuments,etc to foreign interest in order to raise cash to pay future retirees? Or will Feds take over a private company like they did with GM, let say Chevron, making it a government entity in order to use it asset for retirees?
Again, an excellent discussion! I would like to quote "Mountain Woman" and am fully inline with her comments. Especially the idea that all should contribute and receive SS. This would include our Congressmen/women and Senators. When our governing officials have the same benefits in retirement and health care as the rest of Americans there will be a balanced system that will work.
"billtmore wrote:
I have been perplexed for years why they do not just raise the cap and at the same time create a reasonable limit on how much benefits can be received each year. BUT of course the Hoover guy rejects this Republicans reject this. The wealthy have absolutely no conscious.
The Hoover institute guy sits at a desk pontificating drinking bottled water there are a lot of us who have hard physical jobs He can work till he is 80 if he chooses. Some of us wiull not be able to do that. The wealth conservatives generally are awful, selfish people"
Hello David:
No the weathly conservatives are not awful, selfish people. Do not know what it is in England but many wealthy conservatives are very big givers to the arts and charity.
"As an independent voter I'm tired of the rhetoric on both sides of the aisle."
Perry says "Ponzi scheme". After his "mandate" win, GWB wanted to privatize a chunk of Soc Sec--got his bottom sawed off for that, even before the last ~4 years of the roller-coaster stock market.
Time and again, the most worrisome phrase in Washington involves a Republican uttering the word "reform" for something that's pretty much working and is about 400th on the to-fix list,
(The next thing we'll get is a show on meaningless amounts of "voter fraud", which will involve disenfranchising millions of people who just happen to vote for Democrats. But well-informed folks know that.)
This is abetted by the media machine in which Republican crazy ideas are followed, on a slow arc, for a dozen years of being fluffed by Fox News, Rush, Drudge-and-therefore-Politico. Then all of a sudden it's something that can be brought up in polite society. And when it fails disastrously, it's disappeared, and our "liberal media" never hangs it around the neck of the GOP.
What's the genuine liberal, centrist Democratic, or even ConservaDem equivalent offense which turns off an independent voter?
"Rose Bullen wrote:
Again, an excellent discussion! I would like to quote "Mountain Woman" and am fully inline with her comments. Especially the idea that all should contribute and receive SS. This would include our Congressmen/women and Senators. When our governing officials have the same benefits in retirement and health care as the rest of Americans there will be a balanced system that will work"
Rose:
I disagree with mountain women. I would probably have more in retirement if I could be given the opportunity to put my money in private investments instead of SS.