McCain gets all disgraceful about Social Security

I don't see why you have a problem with McCain's statement, it is essentially the same argument about how they "paper over" the general budget deficit with Social Security funds. McCain's point is they are spending the money of the people paying into the system - depleting the trust fund of the money people invest for their own retirement. Today, people are putting as much into Social Security as they are legally allowed to save into their own 401K retirement account, the principal difference being they own the 401K, but only have a weak claim on the Social Security money. They do receive statements annually saying what they have invested in Social Security and what they may receive back if they survive and ever have the opportunity to retire. Spending these people's money in real time IS a disgrace! This is what "paper over the deficit" means - spenidng the people's retirement money. The system was not designed for current workers to pay for current retirees - this was required at startup as there was no existing trust fund. The system was supposed to become self-financing - people paying into their own retirement - but the politicians insist on using the money for other purposes preventing the fund from working properly. I pay into my own Social Security. Period. End of story. I have no children to support me in retirement and expect to receive my own money plus a decent return on investment back from the system when it is my turn. Yes, the loss of pensions is a serious issue which increases the stress on the social security system - but I lost a military officer's pension when the Clinton administration cut the military active duty rolls by 40%. If they now propose to remove my investment in Social Security, then expect me and hundreds of thousands of others to move to the underground economy so we may have something in the future!

It IS a disgrace because there is no assurance that there will be a sufficient number of current workers to pay for older people's retirement.
Further, the government continues to take an ever larger piece of people's paychecks to pay for a current retirement program that is unlikely to be in place when they themselves retire.

Disgrace.

It's funny, but many Americans still understand the concept of the "trust fund" as one where the money they contribute throughout their lives is the same money they withdraw at retirement, with interest. I recently had my barber tell me that his contributions must total about $2 million dollars, which he was looking forward to having access to in a few years. Not wanting to argue with the man who held a razor to my throat, I confess that I declined to set him straight.

It IS a disgrace because there is no assurance that there will be a sufficient number of current workers to pay for older people's retirement.

Evidence?

Further, the government continues to take an ever larger piece of people's paychecks to pay for a current retirement program that is unlikely to be in place when they themselves retire.

Evidence?

"To a certain degree, Social Security could be considered a cross-generational wage swap. Using this scenario, the first year of a young person’s career overlaps with the first year of an older person’s retirement. Wages typically increase over time, and theoretically this is how Social Security is able to provide a return on investment. For example, a fixed percentage on the standard wage of a carpenter will be worth more today than the same percentage on a carpenter’s wage 40 years ago. Therefore, Social Security has been able to provide inflation-protected returns on contributions to the system."

http://www.pactamerica.com/cross_generational_wage_swap.htm

KT-
Disgrace #1 is that the SS contributions are capped at $105K of salary. This is a REGRESSIVE tax on WAGES (SS not collected on Capital Gains) that is aimed squarely at having working people pay for the SS of working people. 98.6% of John and Cindy McCain's income (if we every learn the actual amount) is NOT subject to SS withholding, thank you very much.

Re: rrsafety (=QH). It IS a disgrace. It IS a good idea to encourage your Congressman/Senator to raise the salary cap to unlimited. And include Capital gains while you're at it. The SS rate could shrink from 7.5% to 2% in the stroke of a pen.

Re: assurance of current # of workers. At the time the New Deal was brought into being (ca. 1935), WW2 and the Baby Boom had not been invented. We've had 50 years to set the books straight, but neither Dem or GOP majorities have had the cajones to do much else than raise the SS rate on the first $100K you earn. Pay as you go is not a bad way to fund SS, it just needs to be adjusted to account for Baby Boom populations, life expectancy, retirement ages, etc., etc.

Justin is playing dumb here. Of course conservatives philosophically disagree with SS. Nothing gets economic conservatives' blood pressure up faster than talking about SS. They only pretend to want to "save" the program for the rubes with the microphones, who don't even believe them, and any reform is designed to make the program worse ("whither on the vine") so it will be easier to kill when they bankrupt it.

But what the heck, if dumb's the game, then I'll play. So let's just ask McCain: would he have voted for the program when it was enacted?

Simple question. Only an extremist would be so absurd as to suggest McCain meant SS was a disgrace when he said it was a disgrace. So ask him: would he have voted for SS? If a vote were held to disband the program today, would he do it?

"Or if you want to get all class-warfarey about, payroll taxes paid by working- and middle-class Americans that are intended for Social Security's coffers are instead being diverted to fund income tax cuts for the rich."

This implies that without the "papering-over", the goverment would be entotled to more income from the rich.

I am middle class, but I have always though it intellectually dishonest to say that one person was paying for another persons "tax cut". The latter person is not having that funded by the former; they are just keeping what is already theirs. It is also worth pointing out that the latter is already paying a higher prcentage of taxable income than the former in most cases.

For the sake of simple calculations, assume that 50 years ago, a young workers earned $100 per week and each week, $12.40 from each of these paychecks went towards paying the Social Security benefits for retirees of that generation.

Now fast forward to the current day, when those once young workers are now older retirees who receive Social Security benefits paid from taxation of the current generation. The younger workers now earn $500 a week, and $62 from each paycheck would go towards paying the benefits of the older person.

This cycle can continue to effectively repeat through successive generations given proper management and favorable (or at least stable) demographic factors.

Congress has already spent the entire Social Security trust fund, which as of last year, totaled $2.238 trillion. Current intermediate projections made by the U.S. Social Security Administration indicate that this trust fund should continue to increase in value to a total of $4.486 trillion by the year 2017, and we the people of this great nation would be in dereliction of our duties as citizens and taxpayers if we were to let politicians spend the second half of this trust like they have spent the first.

http://blog.pactamerica.com/2008/05/show-me-money.htm

You know, we should tell the youngsters that before there was social security, old people LIVED WITH THEIR CHILDREN AND GRANDCHILDREN. Yeah. Lived with them. And brought their yappy little dogs and their smelly food and all those damned pills and that oxygen tank, and yelled everytime the teenagers played music, and kept the remote control and kept the channel tuned to Golden Girl re-runs (okay, okay, Social Security and TV started about the same time).

That is, young people have always supported their elderly relatives. It just used to cost a whole lot more, and took up more time and space. Now, you just pay (as we all have, including that very, very large baby boom gen) 6.5% a paycheck, and your parents and grandparents and great-grandparents get a guaranteed income and not only stay out of you hair and your house, but also even send you $5 dollars in generic birthday cards every year.

I don't think it's actually young people who are so upset here. After all, the young candidate (Obama) supports Social Security. It's the old rich guy who wants to water it down. You know, the guy with the very, very, wealthy wife, not to mention a hefty Senate pension. I'm thinking if we can get all our old relatives to marry people as rich as Cindy McCain, maybe we won't need Social Security either.
Is there any sign that John McCain has the slightest notion what most Americans need?

Social Security is old and antiquated. It needs reform. The cost to the younger tax payer is no longer realistic, especially when you already know that there are not enough workers to support those who will be retiring over the next 20 years.

Why can't we have a program to fund Social Security that is not dependent on the younger tax payer, and instead fund it with money that is wasted on special "pet" projects by Congress? Why not use the drug money that is confiscated each year? Why not tighten up the belt on all of the government waste?

We can't because other competing projects like the proposed Universal Health Care would not happen if we took that approach. We wouldn't be able to keep increasing the money that school districts get keeping the already over-paid teachers and district supervisors happy. We can't because the same government officials we vote into office every 2 years also need to have their wages increased more and more all the time for doing what?

NOTHING

Rusty, how come we can't pay for anything anymore? We used to pay for schools, even textbooks. We used to have community hospitals that treated people for free. We used to have public swimming pools and old people's homes and even poor homes. We used to pay for all that. How come we can't now? Could it be because taxing all citizens proportionately to pay for such services for all means that the rich, poor guys, have to pay more than they want to?

And they can afford lobbyists and a president who will put their wishes first.

My city just announced it was closing city pools in the middle of August. Why? Because there's not enough money to pay for pools (which charge admission, btw) in the hottest time of the summer. What kids without airconditioning will do to cool off, I don't know. But rich people have airconditioning in all 5 of their houses, and that's what counts! And they NEVER have to close their pools early!

Justin, I don't understand why you feel the need to explain or interpret what John McCain meant or intended with his comments (though this seems to be part of a larger pattern of MSM behavior in trying to cover for McCain), but I agree with you on your point of the use Social Security to oover up current budget deficits.

I would also just quibble with you equating McCain with Obama in talking about new systems to "supplement" Social Security. McCain has said that he wants to privatize Social Security, not supplement it. He may deny that now, but he is on record as saying that he wants to privatize.

John McCain seems to have magical powers because no other politician regularly (daily?)has the press giving excuses for what he says.
"...I would imagine that this was more a case of McCain misspeaking or misunderstanding..."
Where's that old reporter cynicism we used to hear about? Sen. Obama said some people are "bitter" [see: Congressional and Presidential approval ratings] and we heard that comment "analyzed" for multiple news cycles and it's even still being brought up today.

This is a good post.

What I meant with the "McCain misspeaking or misunderstanding" is simply that there's not a whole lot of evidence in his past statements and actions that he's part of the gang that secretly or not-so-secretly wants to get rid of Social Security. To me that's not covering for McCain, it's just trying to differentiate him from Grover Norquist. (Speaking of somebody who might be feeling a little bitter these days.)

If the issue is that we don't have enough people to pay SS for the current elderly (the baby boom and beyond), doesn't legal immigration provide some sort of a magic bullet? Isn't this a problem of demographics?

Justin:
Doesn't it bother you since McCain now has to pander to Norquist and his crew? He didn't before and there is a big difference. Then again, Obama could doom McCain with commercials about it if he chose.

Interesting arguments. I suggest those thinking we are producing enough children to support the intergenerational ponzi-scheme concept read the recent book "The Age Curve" by Kenneth Gronbach. I can relate this to my own family - I'm the oldest of four children at 49 - and those four children my parents had have produced ONE child to date (not one each, a total of ONE) - demographics changed drastically thanks to Roe v Wade and unilateral divorce.
The theory we can simply increase marginal tax rates (extend the payroll taxes "cap") ignores behavioural impact - working people hate paying a greater than 50% marginal tax rate, which is very near the current total take for a single worker without depedendents. Most people will not exceed the cap until their very late forties or early fifties - when they also become tax "cash cows" because their dependent children also age out of being highly-prized deductions. Why do you think the government gives giving greater deductions for children? They need the future wage-slaves to support the Social Security system and they still get the very high tax rates when people are earning at their lifetime peak. Europe is in even worse shape, producing 1.3 children per woman when the replacement of existing population requires 2.1 children per woman. When Social Security was conceived, people were having lots of children and they didn't usually live into retirement. People now have very few children and live much longer and we tie the amount of social scurity payment they receive to how much they contributed when working - a necessity to avoid having the system perceived as "welfare" - a perception that would eliminate remaining political support for the system.

Justin,
I am sure McCain is usually more careful (or there simply weren't people outside of the Press as unwilling to filter his remarks as they are today), but to ignore the fact that part of the Republican strategy regarding SS has been to claim to reform it, while working to undermine it, is to be willfully dumb.

So, ask McCain if he'd vote for SS. I say this because he wants to suggest, by using the code word "reform", that he is for it, when to conservatives, that word "reform" means "gut". But to say that he philosophically agress that SS is something the government should be involved in eliminates any weasling. Either he believes SS is a legitimate role of government, or he doesn't. If he doesn't, why should we believe any "reform" is earnest?

Justin, McCain is on record as saying he wants to privatize Social Security. That's the evidence he wants to get rid of it, as much as he denies he ever said that now. Hence, the questioning of why you were so quick to jump in and attribute your own projections of what he "really" meant in his comments about the program.

Here's McCain on video, saying we should privatize Social Security, for the record, Justin:

http://talkingpointsmemo.com/archives/200055.php

Why don't we let whoever wants to opt out of SS for their remaining work years do so at a 1 percentage point penalty (which is actually around an 8% cash penalty)?

If my employer and I together are paying, say, 12.4% of my salary to social security, let me instead invest the 11.4% myself while the government takes the extra 1% scott free to do what ever the feel like doing with it.

rrsafety
Perhaps we should just have insurance pools for just cancer patients or just MS patients etc.(that would certainly be affordable) and let the healthy people have their own insurance. If the healthy then get sick well...they'll have to buy different insurance.
Likewise, why don't we let each neighborhood pay for their own school as opposed to the city or county helping out. Sure the poorer neighborhoods would either be heavily taxed or have poor schools but hey that's their fault because America has enough jobs for everybody to make over $100k a year if they just weren't so lazy. Don't know who would collect the garbage or deliver the mail or teach our kids, but hey lower taxes.

carsick,

SS isn't an insurance pool, its a retirement program. The insurance aspects of SS can be handled, well, like insurance.

rrsafety:

Good point. $1,240 a month is pretty excessive for an "insurance" policy and that number does not even include the Medicare portion!

Yep, making sure that everybody pays some of their income into a pooled account to make sure they can at least afford some basics in their eventual non income years in case they cannot afford those basics otherwise is not in any way insurance.