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« McCain Contradicts Himself On Torture | Main | State Stimulus Plan Disbanded »

March 26, 2008

Comments

Chris Blask

It isn't? Everything I have seen about the finances and demographics makes the whole thing look problematic.

Don't know if privitization is the right path, but it seems to me that: a McCain administration might talk about it but do nothing; a Clinton administration might do the Far Left thing and make it worse; and an Obama administration may not execute better ideas (or just might - he's pretty pragmatic...) but would provide a better overall economic environment to encourage for more GDP and growth (and its easier to be bad with your money when you have lots).

-chris

John Morgan

Social Security is fine until around 2030. Even then all we need do is eliminate the cap (currently at $90,000) so those $20 million/year CEO's pay FICA on all their income. That will fund SS without any drastic steps or without dismantling the program which is their real agenda. Republicans don't want to reform Social Security they want to eliminate it.

Kirk Wentzel

I understand the point here John but for some of us whose investments have weathered the storm fairly well, I might very well have been better with my SS money invested. Although, to be fair, not everyone has the understanding of the markets and how they work. To a great many people the stock market, investments and commercial paper are a giant question mark.

I would worry that these people would be taken advantage of by unscrupulous "investment advisors".

A savyy investor with an eye to steady conservative investments though could easily do better then the return the Treasury gets on the public money (that doesn't really exist).

The main problem is there is no solution for what happens to the person who invests poorly and ends up without the safety net...that's where the idea falls apart.

But the idea of investing wisely and getting a better return is not neccessarily a bad idea. It just hasn't been well thought through.


Kirk Wentzel

Oh and Tyler, yes you can interpret my comment as kinda sorta maybe agreeing with the germ of the idea had by a Republican....don't stop breathing or anything. I know it's shocking and all. Mark the calendar if you must.

Even I understand that, at times, a scant possibility exists that a Republican will have the core of a good idea.

After all even a blind hits the barn once in a while.

:) *wink*

John Morgan

Social Security was never designed nor intended to be an investment vehicle. It is a pay as you go program providing social insurance. If you want a retirement investment option you already have one, they are called IRA's. These are tax deferred programs allowing you to deduct your contributions and invest for your retirement. We have no need for additional such vehicles.

What if your investments had been with Bear Stearns and the company went belly up? Kiss it all good-bye.

Kirk Wentzel

I'm invest a bit more carefully than in one stock.

But, John, I don't have enough dollars out of my paycheck to invest in my IRA. I'm allowed to dump $4,000 a year into my Roth...true.

But I don't have $4,000 after paying my bills to invest. Prices go up and real earnings have dropped year over year. I work in the Real Estate industry...pay increases have been put on hold so where am I getting this mythical money to stick in my IRA?

I can afford to put away a whopping about $10.00 a week right now.

And I've consistantly gotten 8 to 10% returns on my IRA since I started it year ago. I don't invest foolishly. Now that said, I would bet that I'm probably the exception rather than the rule.

My point is that IRA's are great but only if you have the extra money to put in them...otherwise their useless.

Pay as you go falls apart when Medicare is going broke in 2019 and Social Security goes broke in 2041, right when I'm due to retire...I should have confidence in this system why????

John Morgan

"I should have confidence in this system why????"

Because it's already been there for millions of Americans so far and will be for millions more as long as we don't allow the Republicans to end it. It isn't difficult to tweak it to be solvent.

One of the misnomers perpetrated by the right is that when it began there were 16 workers/beneficiary and now there's one. That's a false argument for numerous reasons. First, the amount contributed by one worker now equals those 16 due to increased wages, increased tax rates, increased caps and much higher productivity. Do we think a 1935 worker was as productive as an 2008 worker? Of course not.

Kirk Wentzel

Yes but with the baby boomer's retiring less workers are very likely to be supporting more retirees and what workers there will be will be earning lower dollars and therefore paying less in SS and Medicare tax then th hih dollar workers that are retiring.

There are some serious challenges in terms of inflow versus outflow.

The most common tweaks are to cut benefits or raise taxes, neither of which is going to be very popular.

I already have to wait an extra 5 years to retire, if i'm going to get less when I do then that seems to me to be even more reason for me to be managing my own money.

Oh and like any good investment Social secusiry should include the the caveat "Past performance should not be used and an indicator of future performance." Bears Sterns was there for how many years, now it's not. Just because SS has been there doesn't automatically mean it will continue to be. THAT's a false argument design to artificially reassure. I'm a bit too money savvy to believe that without question.

I love it when we disagree. :)

Tyler must have fainted...


John Morgan

Here's the simple fix Kirk. Workers now only pay FICA tax on their first $90,000 of income. Anyone making more than that pays no taxes on the remainder of their income. All we need do is raise this cap or eliminate it entirely. A CEO is getting off very cheaply the way it is and can have 10-20 million of income exempt from FICA.

Kirk Wentzel

Works for me except that the limit was $97,500 in 2007 and is $102,000 in 2008 and you do remember that companies have to match that payment dollar for dollar.

The FICA tax rate is 6.2% from the employee and from the employer...so 12.4% is the true tax rate.

So as you raise the amount paid by employers, what gets taken away or how much to prices go up to cover that additional cost?

That's not an argument against your idea but working as an accountant it is a realistic concern for business especially smaller and medium size companies that are privately held. Sure big corporations like Exxon can deal with that change, although they'll be the first to bitch about it.

Many small and medium companies have 1 or 2 owners that take a large salary but then they worked for years to make their business a success as so why shouldn't they get their monetary reward. They took the risks, after all.

Like I said, I'm all for your idea but there will be some impact on small and medium companies.

The effect however is what I said in a previous comment...you are effectively raising the taxes your just doing without raising the tax rate.

And then if you happen to earn too much after you retire then your social security becomes taxable so you pay tax AGAIN on money that you already paid in AS TAX...in essence and excise tax.

The system could use a good looking at.


tyler

sorry...i am replying late on this thread...i just awoke from being unconscious...i guess i must have hit my head on the desk...

maybe its the brain damage talking, but the last thing i remember was Kirk almost agreeing with me about allowing some sort of Social Security privitization...

lemme re-read that.....THUNK....

tyler

Kirk, I know you are not a religious person...but i think its time to go outside and see if the 4 horsemen are riding...the apocalypse may be upon us...

We may agree (partially) on something? I gotta check the 3 rivers...see if any of them turned into blood.

LOL

have a great day :)

there is hope!

Truth

John,

You're up to your eyeballs in self-delusion. Yes, removing the payroll tax cap will go a decent way towards solving the problem, or shoving it down the road, but even that can't do the job. The baby boomer bubble makes Social Security fundamentally actuarially unsound. The balance of unfunded liabilities overhang is that huge.

There are only four solutions. 1) Huge tax increases, of which the cap lifting is one option, but again not enough. 2) Benefit reductions. 3) Means testing benefits. 4) Finding a way to get better internal rate of return than federal securities.

Privatization (partial) is our best hope. But there CANNOT be the opportunity to make ridiculous investments. The best vehicle is broad-based index funds, unmanaged, so that the commission rake-off is minimal if not zero.

John Morgan

I think you're assuming that raising the cap automatically means also raising it for the employer contribution. That doesn't need to happen. For corporations paying their CEO's $20 million annual salaries however, I hardly see where paying their portion of this tax on those compensations imposes a level of severity. We reading, almost daily, about CEO's who drove their businesses into the ground then stepped out with their golden parachutes.

It's tough trying to feel sorry for such mismanagers and those who enable their incompetence.

If anyone really wishes to learn about Social Security and how it works I urge to read "The Battle for Social Security" by Nancy Altman. She has unmatched knowledge and experience about these issues that would educate you better on them. Buy it here:
http://search.barnesandnoble.com/The-Battle-for-Social-Security/Nancy-J-Altman/e/9780471771722/?itm=1

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