The Party of No

[CalicoPenn]

Hmmm.

 

According to the Social Security Administration, Social Security is fully funded through 2037. Everybody Panic!!!!

 

Last year's payroll tax holiday cost about 112 billion dollars - but it didn't affect Social Security at all because under that bill, the US Treasury gave Social Security the bonds for that 112 billion dollars anyway - so the funds really came out of the general funding.

 

Wait - you don't know that Social Security is one of the US Government's largest bondholders? Govenment borrows money from Social Security by issuing bonds - and Social Security only keeps enough cash to pay for a few months worth of benefits - the rest is kept in bonds from the US Government - enough to ensure that Social Security is fully funded through 2037. Unless the US Government defaults, and it never has yet (although the Party of No certainly has brought us to the brink), the money for Social Security is there. Oddly enough, 2 years ago, Social Security was fully funded through 2035. Hmm - do I detect a pattern? Oh wait - that story doesn't sell newspapers or ad time on TV and doesn't allow politicians to fool some of the people some of the time so never mind...Everybody Panic!!!!

 

 

[BS-87]

CalicoPenn - What's the total liability of payouts for SS?

 

Answer: $62 Trillion

 

I highly doubt that SS holds $62 Trillion in bonds, making much of this currently an unfunded liability.

 

If 9% (or really closer to 12% in reality) unemployment is the "new norm", and benefits exceed total accrued contributions and interest as they do now, then how can you be intellectually honest in saying that a system like this is sustainable?

 

The SS admins have said 2037 is when it stops being solvent. That is not an inconvenience. That is catastrophic.

 

If reforms aren't made now, there will be a generation of retirees that is forced to eat dog food. By kicking the can down the road now, you're begging for austerity measures in the future.

[Beavah]

Yah, hmmmm...

 

What CalicoPenn is not mentioning is that Social Security is funded by non-negotiable, non-exchangeable, valueless bonds that are effectively just an "IOU" between one part of the government and another. And a "default" on social security IOUs is not the same thing as a default on da sovereign debt, since the government cannot demand payment from itself (or can simply discontinue Social Security).

 

What really happens is that tax revenues come in, and some of them are paid out in Social Security. As of a year or two ago, the Social Security payroll tax no longer covered the expense obligations, so we paid for social security from other general revenue sources. That may or may not have stabilized, but it points out that effectively social security was robbed back in LBJ's day, and that goin' forward it will be an ever increasing drain on the general treasury. Only the internal IOUs run out in 2037. That's the bankruptcy-on-paper date. The real bankruptcy, the burden on the general treasury that causes us to borrow from foreigners to pay for social security has started.

 

Should we panic? Well, no. Borrowin' money is very cheap right now, so we can do that for a little bit. Doin' it for a recurring expense obligation like Social Security is irresponsible and foolish, of course, and a recipe for long term decline and disaster. (As opposed to borrowing for infrastructure and research and education - things that would lead to future revenue increases and economic expansion - which is prudent).

 

Beavah

 

[scoutingagain]

And in 2037 Soc. Sec. will still be taking in sufficient revenue to pay 70-75% of it's obligations, assuming the payrol tax stays the same and current methods of calculating annual increases stay the same. This is easily fixed simply by reducing the rate of annual increase and lifting the cap on earnings the payroll tax applies to which is currently at around $106K/yr. The combination of both of these with a slight increase in the retirement age is more than enough to keep Soc. Sec. funded, assuming the Govt. doesn't default on it's debt to Soc. Sec.

 

Why a simple solution can't be done is beyond me. Democrats see the reduction of rate of increase as a cut in benefits, and the Republicans are against any kind of tax increase, except when it applies to working people making under $106K/yr.

 

Now as Beav said, going forward, Soc. Security will be a drain on government funding. Up until recently it has taken in more than it's paid out. Going forward, not only will it have to cash in it's IOUs and hope the government honors them, it will need money from the general fund to fully meet it's obligations.

 

As for the Bush Tax cuts, here's what David Stockman, Director of OMB under that big government liberal President Ronald Reagan had to say about them and the general no tax philosophy of the current Republican party.

 

"This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Partys embrace, about three decades ago, of the insidious doctrine that deficits dont matter if they result from tax cuts. "

 

"Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans fiscal religion. "

 

 

http://www.nytimes.com/2010/08/01/opinion/01stockman.html

 

 

SA

 

 

[fred8033]

What people forget is that the "payroll taxes" were essentially designed as "insurance" premiums. Social security was "Old-Age, Survivors and Disability Insurance". Payroll taxes are "FICA" which is "Federal Insurance...".

 

...

 

So what is it?

 

INSURANCE ... If you believe it's insurance, then ... If the insurance is underfunded, you raise the premium pretty much on everyone.

 

GENERAL BENEFIT ... Then everyone should get the same monthly S.S. payment whether you paid payroll taxes on $110k of income or $25k of income. But then you have other major major economic issues to address.

 

...

 

Now if you raise the taxable cap, do you also raise the limit they use to calculate benefits. Right now, when figuring SS payments, the max income in the calculation is $110k. If you raise the taxable amount, do you raise the max the benefit is calculated at?

 

...

 

The other thing is these taxes have been going up for years. I'm not sure how many people realize that. Back in 1966, I did my own company taxes. I remember parts of FICA being capped at $67K. Each year it slowly increased until I believe there is no limit now since 1994. That's a huge revenue increase! Also, there's another pending increase about to happen. Currently, it is 2.9%, individual plus company match. Starting in 2013, it is 2.9% up to $200K (single) or $250k (married). Over that, it's 3.8%.

 

The key is the effective payroll taxes have been going up for decades.

 

...

 

I just get tired of the class warfare arguements. It's just a bunch of hate mongering where the 99% blaming their bad times on the a smaller group.

 

Personally, I'd rather see medicare go away and just create a national health coverage program for all US citizens.

 

...

 

I should also admit I hate the idea of passing a bill that only extends things two months. That is an incredibly expensive way of doing things. If I remember my readings, "how long" is one of the points of difference.

 

...

 

I don't know the right answer, but I am tired of the blame game.(This message has been edited by fred8033)

[Papadaddy]

People call the Republicans "the party of NO" as if it's a bad thing. I think it preferable to the "party of yes we can", which most voters interpreted as "yes we can have it all for free". Like being a parent, sometimes you have to be the adult and say "NO" when your kids want everything they see, without considering the cost to the family.

 

Here is a quote from Wikipedia:

"Federal Insurance Contributions Act (FICA) tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicarefederal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits. The amount that one pays in payroll taxes throughout one's working career is indirectly tied to the social security benefits annuity that one receives as a retiree.[citation needed] This has led some to claim that the payroll tax is not a tax because its collection is tied to a benefit. The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security.

 

The Federal Insurance Contributions Act is currently codified at Title 26, Subtitle C, Chapter 21 of the United States Code."

 

I have recent experience with SS in that my BIL just died suddenly at age 50. He paid his "tax" for over 30 years and never collected a dime of it. His son, who just turned 18 will get $1400 a month until the age of 19 and 2 months, even though he is LD and will still be a full time high school student for at least 2 more years, then would like to go to a trade school. At that age, payments cease and all of the rest of money that my BIL paid in will be given to others, leaving his son to fend for himself, and leaving us to pay for his subsistance. I don't think that's fair. Meanwhile, I see the daughter of a friend who was a druggie and "bad girl" who, at the age of 20-something, has 5 kids, doesn't work or go to school, is getting SSI and welfare, yet brags on Facebook via her iPhone about how great her new Kindle Fire is and how many free turkeys (5) they got from various charities for Thanksgiving. I recently inquired about getting a smartphone and decided not to when I found out my monthly bill would go from $60 to over $140 a month. Why? Because I need to save that money for my retirement, and I don't really "need" a smartphone. That's what "adults" do...

 

 

[John-in-KC]

What irritates me is that for a decade, we've fought long and hard.

 

Has anyone, outside our troops in battle, sacrificed one iota to provide the wherewithal to the US Government? No.

 

Yes, there's been sacrifice in the current Depression. That's not national sacrifice.

 

Thank you, Bush and Rummy.

 

 

[Tampa Turtle]

I think it was a BIG mistake that their was not a War Tax. Everyone, beyond the families of servicemen and women needed to have skin in the game.

[Eagledad]

>>I think it was a BIG mistake that their was not a War Tax. Everyone, beyond the families of servicemen and women needed to have skin in the game.

[fred8033]

By the way "Back in 1966...". Ummm... I meant "Back in 1996". I'm old, but not that old.

[Tampa Turtle]

Probably not, the War on Terror will never end and we got SF folks all over the place now. The reality is that it costs money and we pretended like it was all free --both parties.

[Beavah]

And do you think Obama would call a stop to the tax now that we left Iraq? Once they get their hooks in our skin, the barbs only get bigger.

 

Yah, doesn't matter, eh? If our troops are at war, we have an obligation to support 'em, regardless of whether we feel that a future congress will try to keep the tax in place.

 

Of course, I note with dismay that da members of both parties have renewed the "Authorization to Use Force" this past month, with all of its odious provisions, even though we admit we've destroyed the original Al Queda and have left Iraq.

 

If we're not stopping the spending on war, then we shouldn't stop paying for it. Oh wait... we've never paid for it.

 

B

 

[Papadaddy]

The current progressive income tax, as we know it, was a "war tax" ... to fund the Civil War...the Union side, anyway. And it was supposed to be temporary.

[Tampa Turtle]

I am no tax historian (yawn) but I read that income tax was retired in 1876. In 1913 the 16th Amendment passed in order to make an Income Tax constitutional. Not that will change any minds.

[scoutingagain]

Cutting taxes is easy. Both parties have voted for tax cuts. Now they're only arguing about how long "temporary" tax cuts should be.

 

It's the cutting spending part, and cutting back on defense capabilities, entitlements and government services or raising taxes that's the hard part and neither party has been able show they can actually cut spending in any significant way. At least not enough to balance the budget with current revenues. Heck, they couldn't agree on how to cut less than 3% of the budget let alone come anywhere near enough to balance the budget.

 

SA