Tuesday, August 18, 2015

Social Security ... Myths and Truths ... There is No Trust Fund ... It's a 'Pay-Go' System

Our politics is pathetic. And the level of discourse is repulsive. It's fairy tale stuff.

The conversation surrounding the long term viability of Social Security is a good example of what I mean, recognizing that it's only one of many these days in our partisan fantasy land of electioneering.

But first, let's invoke this note of caution: Let's maintain our sense of humor, my fellow Americans and taxpayers, 'Depublicans' and 'Remocrats' alike. And that especially goes for any remaining Independents out there, assuming there still are some critical thinkers among us willing to face the facts and then go from there.

So keep smiling.

Now let's look briefly at the Social Security viability issue and the impact on future generations of taxpayers and beneficiaries.

Social Security isn't going broke. That's the good news.

In fact, the 'system' can't go broke, because Social Security has no money of its own. That's the bad news.

Fewer workers are supporting greater numbers of retirees. That's the unfair news.

We're robbing future generations by not facing facts today. That the really immoral news.

Republicans Against Retirement is a hatchet job by liberal pundit and political commentator Paul Krugman of the New York Times:

"Something strange is happening in the Republican primary — something strange, that is, besides the Trump phenomenon. For some reason, just about all the leading candidates other than The Donald have taken a deeply unpopular position, a known political loser, on a major domestic policy issue.

And it’s interesting to ask why.

The issue in question is the future of Social Security, which turned 80 last week. The retirement program is, of course, both extremely popular and a long-term target of conservatives, who want to kill it precisely because its popularity helps legitimize government action in general....

For the record, these proposals would be really bad public policy — a harsh blow to Americans in the bottom half of the income distribution, who depend on Social Security, often have jobs that involve manual labor, and have not, in fact, seen a big rise in life expectancy. Meanwhile, the decline of private pensions has left working Americans more reliant on Social Security than ever.

And no, Social Security does not face a financial crisis; its long-term funding shortfall could easily be closed with modest increases in revenue. . . .

Still, nobody should be surprised at the spectacle of politicians enthusiastically endorsing destructive policies. What’s puzzling about the renewed Republican assault on Social Security is that it looks like bad politics as well as bad policy. Americans love Social Security, so why aren’t the candidates at least pretending to share that sentiment?

The answer, I’d suggest, is that it’s all about the big money. . . .

And while most Americans love Social Security, the wealthy don’t. . . .
Whatever the rhetoric, the GOP is on track to nominate someone who has won over the big money by promising government by the 1 percent, for the 1 percent."
My Take
Social Security doesn't have any money. There is no trust fund. There is no lock box.
Social Security is what government promises to pay retirees. Social Security is not a funded benefit plan.
The benefits are whatever Congress determines them to be, and the 'contributions' are taxes levied on both employers and employees. The relationship of what's 'contributed' to what's paid in benefits is, if not coincidence, at least not important. The benefits are paid by today's taxpayers.
Government has fewer people contributing to Social Security these days as a result of the retiring Baby Boomers leaving the workforce. On the other hand, more people are receiving benefits as the Baby Boomers retire.
And those entering the workforce are fewer in number than those exiting the workforce.
Those are the critical acts.
Summing Up
Social Security is a 'pay-go' system. Current workers pay the benefits received by retired workers.
Paying greater numbers of retired workers with 'contributions' from fewer current workers will require current workers to pay vastly more than the current retirees paid while working.
In simple terms, we are sticking it to future generations by not dealing in a straightforward manner with the Social Security time bomb.
And that has nothing to do with politics.
That's my take.
Thanks. Bob.

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