The Ruse of the SS COLA Scheme.

[MillCreek]

So how would you propose we get rid of SS?  Must be something with at least a snowballs chance in hell of actually being implemented. 

I would think that the only viable means of getting rid of Social Security is to replace it with another type of program.  If we agree that the primary goal of SS is to ensure that the elderly are not dying of poverty, then we would have to have another means of achieving this.  A more robust social services safety net?  But how is that going to be funded that doesn't involve extracting money from the populace at the point of a gun?

[HankB]

To get rid of SS . . . how about we start phasing out SS contributions on young people now, and make up for that by taking money currently used for unearned entitlements (i.e., welfare) and use that to bolster the SS system to cover those who've paid in?

Of course, welfare expenditures would have to be limited - say, frozen - and over time, less money would be spent on people who hadn't earned it, and more of what is now the welfare budget would be diverted to SS. Eventually, the amount spent on welfare would reach zero (that's the pre-LBJ level) and the draw required for SS would start diminishing, too.

It would take a long time - 50 years or more - but dismantling the welfare state is desirable - pre-covid, our national debt was roughly equivalent to our total welfare expenditures since the '60s, and that was unsustainable.

[230RN]

And . . . why is it that SS is running out of money which may mean a future benefit cut, but nobody talks about WELFARE running out of money?

Welfare buys votes from those willing to sell themselves into political servitude.

Woody

That irks me as much as your zip code affecting your Medicaid / Medicare benefits, and for the same reason.

I remember a time when banks had "redline" borders inside which they would not lend.  This was knocked down as being prejudicial.  So how come it's not prejudicial to have enhanced benefits for densely populated zip codes?

Not to divert the thread, but there's a lot wrong with our system of choosing public servants.

Term limitations is only a partial palliative.

(I also had trouble with "SS COLA.")

Terry, 230RN

[MillCreek]

^^^I have heard it said that the older population tends be more diligent about voting, and they really turn out in droves when Social Security is involved.  I think that is why Social Security has a reputation of being one of the third rails in American politics.  https://historynewsnetwork.org/article/10522

[MillCreek]

A timely story about the latest proposals to rescue Social Security from the Democrats.  Are there any Republican proposals out there, I wonder.

https://www.cnbc.com/2022/07/26/lawmakers-want-to-strengthen-social-security-how-benefits-may-change.html

[ConstitutionCowboy]

Here’s what I’d propose. 

Everyone 65+ keeps their bennies as is.  Must also keep paying FICA taxes in full on eligible earnings, including any increases imposed (note - very few would pay taxes anyway since it’s a payroll tax and passive income isn’t a payroll).
Everyone 55-64 keeps the bennies they’ve earned to date but no longer gets any increase based on higher earnings or years worked.  Not subject to any future FICA tax increases, but also won’t benefit from any future reduction in SS rate.
Everyone 45-54 keeps benefits as earned to date but with a cap at 50% of of the max benefit of those in the 55-64 cohort.  Max 12.4% SS tax rate, second in line to benefit from any reductions.
Everyone 44 and younger loses all rights to SS benefits.  Their earning will remain subject to FICA taxes, including any increases, until age 45 at which point it reverts to a max of 12.4%.  First in line for any reductions in SS rate.

As retired people drawing SS die off and the need for paying them goes down so do SS taxes.  The people under 45 at the time of passage get the cuts first, with cuts first reducing any intermediate increases on the youngest payers.

Within 10 years overall SS payouts should start dropping.  After 20 years the majority of those in the 65+ group will have died, and probably +-1/3 of the 55-64 cohort (now 75-84).  By this time taxes required to sustain payouts should be able to start dropping significantly.  After 30 years essentially all of the oldest cohort are gone and likely 70+% of the next cohort as well, plus probably 1/4-1/3 of the youngest cohort to be eligible for anything.  SS taxes should be able to drop a lot more, and be approaching nuisance levels by this time.  After 40 years the amount being paid out will have dropped so low that SS taxes should be gone entirely.

Sucks for young people to keep paying into a system for a couple decades they’ll never benefit from, but they’re doing that anyway.  This would just admit to reality, and at least give line of site to eventually getting some breaks before they hit retirement age.  Those currently under 25 would get the most long term benefits.  Those 25-44 will be the most screwed.  But lines would have to be drawn somewhere, and there will always be losers and winners for any change that is made.  And making millennials take it in the shorts doesn’t bother me as much as it probably should.

I Like your Idea. The problem is is that the government "needs" that money to "run the country". Getting Congress to do anything that cuts off their flow of money would be more difficult than washing a wild cat's ass in a phone booth and come out without a scratch.

Woody

[ConstitutionCowboy]

Here is a little food for thought: Why is there a surplus that the SS Admin says will last thirteen years right now?  It's because they are taking more out of every working man's wages than is needed in the immediate! That also means that there is a surplus that could be and could have been used to keep up with inflation, and left some money in the pockets of the wage earners.

So, if the system were tailored to just meet the immediate obligations, everyone would be having less taken out of their wages, or at the very least, the obligation to the recipients would be met, and Uncle Sam wouldn't be raping the system.

Yes, more is being taken from wage earners just so the Government can spend it and "cover" it with an I.O.U. .. And here is another rub: Uncle Sam is paying off the I.O.U's with money it takes in from income and other taxes, fiat money it prints, or money it borrows - sorta like it "borrows" money from SS to pay other obligations.

Social Security is just one big bookkeeping scam. The COLA scheme is one way the government doesn't have to pay it all back! The deadbeat here is not the SS recipients, it is the government!

One aspect of this SS scheme has to do with age and birthrates. There are fewer and fewer people being born to support the system right now, but the largest generation of recipients has begun to die off. In twenty or thirty or so years the last of the Baby Boomers will likely be passing on or have passed on and the "burden" on the system will have diminished.

All that said, Social Security shouldn't even exist. There is no grant of power in the Constitution for the US Government to either create or enforce such a scheme.

I'd rather see the Fair Tax system instituted. That would automatically abolish the SS System and at the same time cover everyone who relies on SS.

Woody

[kgbsquirrel]

You (and I) got robbed at gunpoint so the could give our money to other people. It sucks and was unfair.  What I am unclear about is why you think that the fact you got robbed entitles (your word) to use the force of government to rob the people behind you.

Your money is gone.  It was spent. You got jacked.  Why does that entitle you to my money?

Social engineering.

[De Selby]

https://core.ac.uk/download/pdf/161443531.pdf

Of course, if the stock market guaranteed high returns, say 9 percent, there would be an easy way of fixing the social security deficit—simply have the government switch its money into indexed stocks, for example. Walla! The social security deficit would disappear. In fact, the entire U.S. debt would disappear in a few years if we could float enough bonds at current rates and invest the money at a 9 percent return. Alas, the reason no one is advocating this is that no one really believes in a safe 9 percent return.

Part of the reason that returns on social security “contributions” seem low is not just the false arithmetic of booking the high returns from stocks while ignoring the risk. Part is because of the pay-as-you-go nature of our current social security system, where the current generation pays for the previous. However, there is no magic in going from a pay-as-you-go to a fully funded system: Someone has to pay for today’s retirees who were promised benefits. This problem, the so-called transition problem, is enormous. It means that, if we were to quickly switch, the current generation would have to pay twice, both for the current elderly and for themselves. Either the retirees will have their benefits cut or the current workers will have their contributions increased, or both. Again, there is no escaping the arithmetic. A gradual switch will only spread out this cost. Of course, if the social security system were vastly inefficient, one could claim that the switch would save so much money that everyone would be better off; but, to the contrary, as we have noted, transaction costs are likely to be larger with privatization, not smaller.

[De Selby]

…

All that said, Social Security shouldn't even exist. There is no grant of power in the Constitution for the US Government to either create or enforce such a scheme.

…

Woody

That would be the explicit power to tax and spend in Article I, Section 8 of the constitution.

[dogmush]

If I were dictator I would immediately stop the taxes, so that the people that aren't going to get SS have a chance to save, and do a ramp down for folks over 50 that is similar but a bit faster than your plan. Funding for the ramp down can come from other sources starting with the ATF's budget.

But it doesn't matter, because Congress will never end SS. They will cut payments, and move retirement age, but they won't end that 12% tax, no matter what.  So we might as well settle for being bitter about the 13 or so years stolen from me, where I have to work to support others.

[Ben]

Funny, the gov kinda did a social security prototype faze out with it's own employees when we went from CSRS to FERS. I'm in FERS, and while I have a lower pension, I also had the option to invest in the stock market via TSP versus counting on CSRS (like social security - in fact CSRS employees paid no SS taxes)) for everything.

My TSP income, when I start to take it, will be much higher than my pension. Just like my personal Vanguard, etc. accounts pay me more than I can get from social security. I can only imagine how much more retirement savings I would have if I were to have been able to invest all the money SS taxes took from me over my working career.

As others have said though, I can't see SS going anywhere other than a slightly different program with a slightly different name. That's if we're lucky. If we're not, younger generations may be heading for a euro model of much higher socialist taxes.

[ConstitutionCowboy]

That would be the explicit power to tax and spend in Article I, Section 8 of the constitution.

Yes, Article I, Section 8, Clause 1, grants Congress the power to collect taxes, etc., but is limited to all the "to's", such as to pay the debts and provide for the common defense and general welfare of the United States. That "general welfare" does not include a scheme such as social security. The Johnson's Dictionary of the English Language (1755), the only dictionary of the English Language in existence at that time, defines "welfare" as "Happiness; success; prosperity." Many think that alone gives the government the power to institute a program such as Social Security. Not so. (The best thing the US Government can do to provide for the general welfare is to stay out of the way!)

The power to pay the debts (and incur debt) is delineated in Clauses 2 through 6.

The common defense powers are directly enumerated in Clauses 10 through 16.

The general welfare includes the powers enumerated in Clauses 7 through 9.

Nowhere in the Constitution is there a power granted to create the social security system we have been saddled with. That would be a power reserved to each of the several states. Social Security has nothing to do with providing the general welfare of any or all states.

Regardless of the unconstitutionality of the US Government taking on the role of providing financial security to all retirees, it still owes the debt it incurred at "the point of a gun."

Woody

[dogmush]

So I owe you that money.

And you're willing to send men with guns to collect it.

[ConstitutionCowboy]

So I owe you that money.

And you're willing to send men with guns to collect it.

Not me. The same government that took it from me.

Woody

[cordex]

Woody: “Social Security is bad law, unconstitutional, ineffective, and an overreach of power.”
Also Woody: “You can take my Social Security from my cold dead fingers.  In fact I need more. Drain it until there is nothing left.”

[De Selby]

Funny, the gov kinda did a social security prototype faze out with it's own employees when we went from CSRS to FERS. I'm in FERS, and while I have a lower pension, I also had the option to invest in the stock market via TSP versus counting on CSRS (like social security - in fact CSRS employees paid no SS taxes)) for everything.

My TSP income, when I start to take it, will be much higher than my pension. Just like my personal Vanguard, etc. accounts pay me more than I can get from social security. I can only imagine how much more retirement savings I would have if I were to have been able to invest all the money SS taxes took from me over my working career.

As others have said though, I can't see SS going anywhere other than a slightly different program with a slightly different name. That's if we're lucky. If we're not, younger generations may be heading for a euro model of much higher socialist taxes.

It works in limited settings, but the problem is that increased return is invariably a function of increased risk. Moving everyone to private investments guarantees that some people, through no fault of their own, will have returns that are worse than even social security. What do you do with those people? The point of social security is to reduce risk for older people. It’s a false economy to compare it to risky private sector returns, because those returns are only possible in exchange for a lack of security.

[De Selby]

Yes, Article I, Section 8, Clause 1, grants Congress the power to collect taxes, etc., but is limited to all the "to's", such as to pay the debts and provide for the common defense and general welfare of the United States. That "general welfare" does not include a scheme such as social security. The Johnson's Dictionary of the English Language (1755), the only dictionary of the English Language in existence at that time, defines "welfare" as "Happiness; success; prosperity." Many think that alone gives the government the power to institute a program such as Social Security. Not so. (The best thing the US Government can do to provide for the general welfare is to stay out of the way!)

The power to pay the debts (and incur debt) is delineated in Clauses 2 through 6.

The common defense powers are directly enumerated in Clauses 10 through 16.

The general welfare includes the powers enumerated in Clauses 7 through 9.

Nowhere in the Constitution is there a power granted to create the social security system we have been saddled with. That would be a power reserved to each of the several states. Social Security has nothing to do with providing the general welfare of any or all states.

Regardless of the unconstitutionality of the US Government taking on the role of providing financial security to all retirees, it still owes the debt it incurred at "the point of a gun."

Woody

Are you seriously arguing that paying to ensure old people aren’t in poverty does not count as spending on “the general welfare”? Does anything more directly contribute to happiness and success than a cash payment?  The argument you’re making sounds like a ridiculous distortion of the English language.

What would be an example of the “general welfare” if not literally spending on welfare?

[kgbsquirrel]

Not me. The same government that took it from me.

Woody

That government can give you nothing without first taking it from someone else.  Now what?

[ConstitutionCowboy]

Are you seriously arguing that paying to ensure old people aren’t in poverty does not count as spending on “the general welfare”? Does anything more directly contribute to happiness and success than a cash payment?

Happiness and success has nothing to do with money. Prosperity is something earned, not taken from others except by criminal activity.

The argument you’re making sounds like a ridiculous distortion of the English language.

I used the definition of those words as they stood at the time the Constitution was written. The distorted definitions are what is in use today, not as what was the intent of the Founding Fathers and the people of the time.

For intent of the Founding Fathers, look to the preamble of the Constitution. It says "..., promote the general welfare, ..."

What would be an example of the “general welfare” if not literally spending on welfare?

Oh, I would say providing roads, delivering mail, guarding the borders, fighting fires, keeping the seaways open, dredging harbors, creating needful forts, coining money at a set rate to provide for honest and fair trading, and on, and on, and on.

Remember, the word "welfare" has taken on more or other meanings since the Constitution was ordained and established.

The bottom lie here is that the government is taking more money from wage earners than is needed to run the system each year and pays out less and less to the recipients each year. Who profits here? Yup. The government. Who are the bad guys here? Not the wage earners being fleeced, not those on social security being cheated - it's the government, plain and simple.

I've made my points here. I didn't have to prevaricate, assassinate character, misconstrue, demean, exaggerate, nor bully. I only hope all have gained a bit of insight into this unfair system that no one in Congress will address.

Woody

[Perd Hapley]

Are you seriously arguing that paying to ensure old people aren’t in poverty does not count as spending on “the general welfare”? Does anything more directly contribute to happiness and success than a cash payment?  The argument you’re making sounds like a ridiculous distortion of the English language.

What would be an example of the “general welfare” if not literally spending on welfare?

Payments to individuals is not "general welfare." Provisions for the general welfare are things like roads, that everyone can use, not cash payments to particular individuals.

[sumpnz]

Payments to individuals is not "general welfare." Provisions for the general welfare are things like roads, that everyone can use, not cash payments to particular individuals.

QFT.

DeSelby is falling into the trap too many people do these days.  They see “general welfare” and automatically assume it means transfer payments to the poor.  In reality, as noted previously, it means providing for the ability of the people to become self-sufficient and hopefully prosperous.  Things like maintaining the rule of law, infrastructure, effective currency, etc.

[Pb]

The "general welfare" clause of the constitution was not intended to give a new powers to the government to spend on anything that that would promote the general welfare...

The powers of the federal government are listed in the Constitution.  By spending on those listed objects, it promotes the general welfare.  It is not a blank check for the government to spend on anything.  If it was, there would have been no need for the government to list specific items that the federal government could spend on, such as postal roads, forts, etc.  All of that could have been covered by saying it is "general welfare."

James Madison was the "Father of the Constitution."  Hamilton planned to have the Federal Government subsidize manufacturing.  James Madison opposed this as violating the Constitution by misapplying the general welfare clause in the same manner that our government has been doing for many decades now, like with Social Security.  Below I have reproduced James Madison's thoughts on this issue:

I have reserved for you a copy of the Report of the Secretary of the Treasury on Manufactures for which I hoped to have found before this a private conveyance, it being rather bulky for the mail. Having not yet succeeded in hitting on an opportunity, I send you a part of it in a newspaper which broaches a new constitutional doctrine of vast consequence and demanding the serious attention of the public, I consider it myself as subverting the fundamental and characteristic principle of the Government, as contrary to the true & fair, as well as the received construction, and as bidding defiance to the sense in which the Constitution is known to have been proposed, advocated and adopted. If Congress can do whatever in their discretion can be done by money, and will promote the general welfare, the Government is no longer a limited one possessing enumerated powers, but an indefinite one subject to particular exceptions. It is to be remarked that the phrase out of which this doctrine is elaborated, is copied from the old articles of Confederation, where it was always understood as nothing more than a general caption to the specified powers, and it is a fact that it was preferred in the new instrument for that very reason as less liable than any other to misconstruction.

https://founders.archives.gov/documents/Madison/01-14-02-0174