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What is the solution to the Social Security crisis?

By jardinier ·
Already this is a critical issue in America, but will no doubt eventually become critical in other countries as modern medical techniques extend the lifespan of people.

In Australia, in the lead-up to the October 2004 election, Treasurer Peter Costello had a huge budget surplus which he suggested should be kept aside to meet future social security needs.

But Prime Minister John Howard blew the lot in order to buy his way to re-election.

However the issue is one of which the Australian Government is aware, and very concerned.

The episode of "West Wing" that was screened in Sydney this week was dedicated to the Social Security crisis.

Now I know a lot of you have strong feelings about welfare bludgers, but a restatement of those feelings is not what I am looking for.

I am looking for feasible suggestions. This may well include cracking down on welfare bludgers, but the real problem of course is with the ever increasing proportion of the population that is living longer and longer after normal retiring age.

One suggestion presented in West Wing was to extend the age for retirement, but this was dismissed as politically too unpopular.

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This is already the case in Australia

by jardinier In reply to An Idea

and has been for as long as I remember.

ALL types of pension (old age, disability, widow's etc) have asset and income tests to determine if the individual is entitled to full pension, part pension or no pension.

"Assets" include all your material possessions except the house that you own. There are different ceilings for single and married persons.

"Income" includes all income whether from part time work or investments. I think the figures have changed recently, but it used to be: for every dollar you earn more than a set amount (used to $AU 50 per week, but may have increased) Social Security subtracts 50 cents from your pension.

For the assets test (quite separate from the income test) if your assets (not including the house that you own) exceed a certain figure, your pension is reduced accordingly.

There is an example in my own family. My sister, aged 69, is receiving a full Old Age Pension. When my mother, now aged 94, passes on, my sister will inherit a considerable sum of money, which will make her no longer eligible to receive any pension payment.


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Means testing

by In reply to An Idea

No, Protius, it's called means testing, at least here in Australia.

No-one likes it, but it may be the only way to go in the future -- here and in the US.

Levannah (aka Gret)

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It's going to get rough.

by apotheon In reply to An Idea

Social Security was never sustainable. As TheChas has pointed out, the original aim of SS wasn't to provide for those who are too old to provide for themselves; it was to get older workers out of the market with government handouts. This served two very useful political purposes.

1. Seniors felt like the government was doing good things for them, so they would be likely to vote again for all relevant incumbent candidates next time around.

2. Younger people felt like the government was doing good things for them, so they would be likely to vote as the seniors did.

Of course, it was a short-term "fix" for some of the effects of the Depression at best. The Depression briefly faltered, then worsened, as a result of the economic effects of taxing the **** out of everyone still working to push others out of work and pay their way. The only way to turn around an economic depression is to increase production of wealth, but policies that increase production of wealth don't look as much like handouts to the general public, so they don't tend to garner as many votes.

Rather than increase wealth production, SS only took wealth from the hands of those who could ill afford to use it and put it in the hands of others so that they would cease producing wealth. I trust you can recognize the long-term folly of that way of thinking (in this case, long-term being anything longer than only a couple of years or so). Ultimately, what saved the US economy was the production demands of war.

In any case, the encroaching collapse of SS is simply the long-delayed inevitable coming home to roost. Welfare programs, when they're calculated out and measured and judged "good", are judged based on foreseen expenses and projected growth. Such growth projections don't take into account the effect the welfare program will have on economic growth (I haven't met a government handout yet that motivated people to produce more: they demotivate those who have to pay and remove any incentive to find work for those on the dole). They also assume a static system, where a snapshot of a given time-span is assumed to be a reliable judge of future trends. The baby boom (as a result of celebratory fun after the war) and subsequent low birth-rate amongst the baby-boomers themselves threw a huge monkey wrench into the whole "money grows on trees" theory of Social Security.

Add into that the fact that politicians, whether Left-wing or Right, plan in five-year increments (give or take: adjust for actual term lengths of various offices) to maximize electability over a four-year (or adjusted number, natch) span. As a result, SS got plundered any time there was a "surplus" (meaning "for once, we're getting more in SS taxes than we're paying out in benefits", without any concern for the fact that this would need to continue for a while just to get back out of the red). This, of course, is just evidence of what I've known all along: you can't trust government with your money. We're now looking at the inevitable collapse of the SS system, here at last.

If governmental officials really want to make things as smooth as possible, they'll go with a plan similar in principle to what George Bush is currently proposing (I loathe the guy, but nobody else in federal government is offering even mildly sane alternatives except Ron Paul, and nobody's listening to him). He's recommending allowing workers to divert part of their SS tax into an approved retirement account so that they can provide for themselves rather than simply paying into a black hole.

Personally, I don't think there's any need to bail out Social Security at all. The longer we keep it on life support, the more problems it sill cause. Government handout programs cause more economic hardship than they alleviate. For every dollar going into the hands of someone poorly-screened (and, thus, as likely to be some lazy parasites with six kids and a crack habit as they are to be a hard-working, needy individual fallen on hard times), there's something on the order of three dollars taken from the hands of those ill able to afford it.

Thus, the answer to Social Security is, to me, quite simple: Let it die. Better yet, cancel it TODAY, and start trying to figure out how to pay back the debt its current financial rat's-nest has created. If any money can be eked out of it upon cancellation, use it to retrain the bureaucrats currently working in Social Security offices nationwide to do a useful job.

We Gen-Xers aren't just going to have to deal with the lack of SS to fall back on if we are such poor planners that we decide to let government take care of us: we're going to have to keep paying money into that black hole because politicians aren't willing to take the heat from the voters for doing the right thing.

By the way, ProtiusX, if I give money voluntarily to help someone else, that's charity. If someone shows up at my door with a census form and a gun to steal my money, that's socialism. There's a distinct difference, and Social Security isn't on the good side of that.

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Well now that we have that soughed

by HAL 9000 Moderator In reply to It's going to get rough.

What about the programs by the US Federal Government that pays farmers to produce crops that go unused or are so under priced as to no longer be even remotely funny?

Maybe it's just me but wouldn't it be far more useful to stop these idiot programs and save money there?


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Yes, it would.

by apotheon In reply to Well now that we have tha ...

That's a good point, and something I've discussed with others before. Government subsidies constitute an interference with market forces, which in turn causes economic crises to arise on a regular basis. For every farmer kept in business in the US by subsidies, producing crops that are burned or letting fields lie fallow, there are probably a dozen farmers in other countries that suffer from US surpluses and a thousand US citizens that can't afford to pay their bills this month due to tax withholdings.

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the solution is...

by Jessie In reply to What is the solution to t ...

For Congress to STOP SPENDING IT!!! Congress "borrows" from social security all the time to fund their little pet projects. If they STOPPED doing that, and put BACK the money that they "borrowed"... problem SOLVED!!!!

Of course, if Bush had done what the democrats WANTED him to do with that budget surplus 4 years ago, and put it into social security, we wouldn't be having this conversation at all!

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As mentioned in my initial posting

by jardinier In reply to the solution is...

there has been a parallel in Australia.

Prime Minister Howard ("Liberal Party," equivalent to your Republican Party) blew the surplus to buy his way into re-election. That is to say, whatever the opposition ("Labor Party," equivalent to you Democrat Party) offered in the way of promises to put more money in peoples' pockets, Howard countered with a more generous offer.

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not quite so

by apotheon In reply to the solution is...

There wasn't enough money in that budget "surplus" by far to bail out Social Security. In fact, it's mathematically impossible to indefinitely maintain the Social Security program without periodically turning off payments while still collecting taxes on it. That, of course, would be fairly counterproductive, though less so than continuing to attempt to keep SS going.

Unfortunately, this means that the problem would not have been "solved" if Bush had pushed to have that money earmarked for Social Security. Keep in mind, by the way, that though Bush suffers quite a few failings as a President, it's Congress that holds the purse strings. That means that it was Congress that voted to deal with the so-called surplus as they did.

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Of course we would still be in

by jdclyde In reply to the solution is...

The Clinton recession if he had socked that money away instead of giving it back to the people that made that money, us.

The government is a non-profit organization. ANYTIME they have a "surplus", it means they OVER taxed us. Something that is illegal.

If you have more of your own money that YOU earned, then you are more likely to go out and get that SUV / Big screen TV / new X-box or whatever.

If you buy that new toy, someone else has a job SELLING that new toy. If someone has a job selling that toy, someone else has a job MAKING that new toy. All of these people are working, making a living and PAYING TAXES so the tax base goes up.

Just sitting around saying we should tax the "evil rich people" that make over $200 K to pay for OUR bills won't fix things.

The raiding of the SS fund has been going on for decades, and as apatheon pointed out it is CONGRESS that spends the money, NOT the Pres. The CONGRESS decide what bills get passed, what gets taxed, what "rights" we gain of lose. They do a lot of strutting around playing politics about it but it is a fact that when one party is in "power", the other party drags it's feet on everything because if anything good happens the other party will get the blame. What is bad for our country is good for the Democrats at this time and has been for the last four years.

Listen to Sent. Kennedy sometimes and look at what he is doing. First, is he concistant in his stance from administration to administration? Is he offering a solution or just running around saying that the other party is evil and out to fill their own pockets?

Remember, ALL Senators are millionairs, not just the Republicans. And the the Kennedy fortune came from bootlegging and shorting stocks at the start of the depression. How "in touch" is he with the common man?

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My Suggestions

by TheChas In reply to What is the solution to t ...

This has been a news and talk show subject since the President announced his desire to change the Social Security program.

My suggestions would "fix" the funding problems, but would be rejected out of hand by the politicians.

1. Go ahead and start some form of partial investment accounts. Keep in mind that limiting the accounts to "safe" investments will NOT provide the kind of investment growth that some people expect.

2. Change the limit on contributions.
Cap employer match at the first $75,000
Remove the individual cap. Or, at least raise that cap to $200,000

3. Keep the present formula for adjusting payments.

4. Change the program from paying all retirees to a needs based system.
I don't have the statistics to define a formula for capping benefit payments.
The formula should take into account all other forms of income not just wages, and the value of investments with some exclusions.

Primary residence, family owned farms, and family businesses should NOT be part of the investment assets used to determine need.

5. Set up the funding system to have a nominal 5% or 10% fund surplus. Adjust the rate annually to maintain the surplus.


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