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Either raise taxes or lower benefits

Beach Fanatic
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Walton Sun April 10 2010
www.waltonsun.com
---------------------------------------------------------------------------

Americans just can?t handle the truth when it comes to Social Security

It is refreshing, unusual, and always a surprise when a politician speaks the truth ? especially if it concerns something unpopular.

Republican frontrunner and Tea Party heartthrob Marco Rubio must have figured his double-digit lead over Gov. Charlie Crist allowed him to boldly go when no man had gone. When pressed by Chris Wallace of Fox News regarding changes in Social Security cost-ofliving adjustments, Rubio responded, ?I think all of that has to be on the table, including the way we index increases in cost of living. All of these issues have to be on the table. They have to be options that I would be open to.?

Conservative pols like Rubio usually parrot private savings accounts as a cure for Social Security?s woes. Privatization is a red herring that the investment industry (the geniuses that gave us credit default swaps and derivatives) dreamed up during the Bush administration. For all but the highest-earning 20 percent of Americans, Social Security is the largest source of income for retirees. Turning that over to the scoundrels that led us to the worst economic decline since the Great Depression is lunacy.

Americans have been deceiving themselves about the fiscal reality of Social Security. It is time to face the facts and make some painful decisions. While Social Security is a fantastic program, it is facing a serious but not insurmountable funding dilemma. We have four options: A. Raise taxes. B. Reduce benefits. C. A combination of the two. D. Learn to turn lead into gold.

In ?Choosing the Nation?s Fiscal Future? (free pdf at www.nap.edu  ), prepared by the National Research Council and the National Academy of Public Administrators, the authors spell out succinctly how fiscal balance for Social Security over the next 80 years can be achieved. Just to let you know, they don?t put a lot of stock in option D.

If raising Social Security taxes is off the board, then benefits have to be reduced. Elementary, my dear Watson. Democratic candidate Kendrick Meek?s supporters are likely salivating over Rubio?s remarks, but then they must believe 2+2=5 if they think solvency can be reached without taxes going up or benefits coming down. Raising Social Security taxes to achieve sustainability should be avoided at all costs. Social Security taxes are extremely regressive because they fall disproportionately on lower- to middle-income wage earners. Plus raising them would impose additional costs to businesses struggling to get through the worst fiscal crisis in more than 80 years.

?Choosing the Nation?s Fiscal Future? shows us a three-pronged approach that will work sans tax hikes. First, for future retirees (post 2010), the rate at which salary increases raises Social Security benefits would be scaled back.

This feature would be limited to the top 70 percent of wage-earners so workers with lower lifetime earnings would not be pinched severely. Second, for current retirees, cost-of-living adjustments would be based on a price index that grows more slowly than the CPI. Finally, the full retirement age would be raised to 67 by 2012 with gradual increases to 68 and four months by 2050. The appeal of this proposal is that everyone chips in a bit ? current and future beneficiaries.

Social Security has been demagogued to death by politicians more interested in getting elected than what is best for our nation. Any attempt to rein in costs is demonized as destroying Social Security. OK, you?re right and I?m wrong; then let?s raise taxes. Seriously, if you are a Tea Party supporter and are taxed enough already, then raising taxes on the grandkids is just a smidgen inconsistent.

?Choosing the Nation?s Fiscal Future? was a joint effort of concerned Americans ? liberal and conservative, with many serving in the Reagan, Clinton, Bush 1 and 2, and Obama administrations ? who are concerned about the financial stability of our nation. They are not paying lip service to the problem or rounding up the usual talking points.

When you hear a politician blather about ferreting out Social Security waste and abuse as some magical method to painlessly solve the problem, they are more interested in getting elected than doing what is right for the nation.

We can raise taxes or lower benefits. That?s the truth.

Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@Livingston   Financial.net  .

BUZ LIVINGSTON
Just Plain Talk

Replies

19
30ashopper avatar
SoWal Insider
#2
Kudos to Rubio for speaking the truth!
30A Skunkape avatar
Skunky
#3
Couldn't we just open more casinos?
Beach Fanatic
#4
Couldn't we just open more casinos?

yeah, maybe we could anchor them off the oil rigs!
Beach Fanatic
#5
The best way is a combined approach. 1. Remove the maximum on FICA taxes so that everyone contributes at the same percentage of income, 2. Tie benefit increases to the inflation rate, 3. Allow those under 40 to opt out of some percentage, say 50%. That will not fix the program but is a start.
30ashopper avatar
SoWal Insider
#6
The best way is a combined approach. 1. Remove the maximum on FICA taxes so that everyone contributes at the same percentage of income, 2. Tie benefit increases to the inflation rate, 3. Allow those under 40 to opt out of some percentage, say 50%. That will not fix the program but is a start.


You want to make the social security tax more progressive? :blink: The system is supposed to pay out what you put in, plus a little interest. The problem with the system currently is that people are taking out far more than they put in because they live longer. Raising the retirement age gradually and indexing it with life expectancy seems like the best approach IMHO.

I like the other two ideas. I would love to see SS become a form of private retirement investment similar to a 401K. The government could regulate what types of securities people choose and the fees investment firms can charge. To account for income discrepancies government could provide lower income groups with matching contributions. Some very small percentage would still go into funding the disability insurance portion of the system.

The beauty of a system like that is that excess income will no longer land in the general account where it can spent by Washington on pet projects.
Beach Fanatic
#7
You want to make the social security tax more progressive? :blink: The system is supposed to pay out what you put in, plus a little interest. The problem with the system currently is that people are taking out far more than they put in because they live longer. Raising the retirement age gradually and indexing it with life expectancy seems like the best approach IMHO.

I like the other two ideas. I would love to see SS become a form of private retirement investment similar to a 401K. The government could regulate what types of securities people choose and the fees investment firms can charge. To account for income discrepancies government could provide lower income groups with matching contributions. Some very small percentage would still go into funding the disability insurance portion of the system.

The beauty of a system like that is that excess income will no longer land in the general account where it can spent by Washington on pet projects.

If SS is to be saved at all more income is needed in the future. We must abandon the fantasy that SS is a retirement program based on some accepted actuarial table. It is a government transfer payment, nothing more. To get additional income realistically you cannot raise rates on the low end workers so the high end must be increased. A flat 8.5% on all income is probably the only means of raising income that has a chance to pass politically.
Bob avatar
SoWal Insider
#8
Walton Sun April 10 2010
www.waltonsun.com
---------------------------------------------------------------------------

Americans just can?t handle the truth when it comes to Social Security

It is refreshing, unusual, and always a surprise when a politician speaks the truth ? especially if it concerns something unpopular.

Republican frontrunner and Tea Party heartthrob Marco Rubio must have figured his double-digit lead over Gov. Charlie Crist allowed him to boldly go when no man had gone. When pressed by Chris Wallace of Fox News regarding changes in Social Security cost-ofliving adjustments, Rubio responded, ?I think all of that has to be on the table, including the way we index increases in cost of living. All of these issues have to be on the table. They have to be options that I would be open to.?

Conservative pols like Rubio usually parrot private savings accounts as a cure for Social Security?s woes. Privatization is a red herring that the investment industry (the geniuses that gave us credit default swaps and derivatives) dreamed up during the Bush administration. For all but the highest-earning 20 percent of Americans, Social Security is the largest source of income for retirees. Turning that over to the scoundrels that led us to the worst economic decline since the Great Depression is lunacy.

Americans have been deceiving themselves about the fiscal reality of Social Security. It is time to face the facts and make some painful decisions. While Social Security is a fantastic program, it is facing a serious but not insurmountable funding dilemma. We have four options: A. Raise taxes. B. Reduce benefits. C. A combination of the two. D. Learn to turn lead into gold.

In ?Choosing the Nation?s Fiscal Future? (free pdf at www.nap.edu  ), prepared by the National Research Council and the National Academy of Public Administrators, the authors spell out succinctly how fiscal balance for Social Security over the next 80 years can be achieved. Just to let you know, they don?t put a lot of stock in option D.

If raising Social Security taxes is off the board, then benefits have to be reduced. Elementary, my dear Watson. Democratic candidate Kendrick Meek?s supporters are likely salivating over Rubio?s remarks, but then they must believe 2+2=5 if they think solvency can be reached without taxes going up or benefits coming down. Raising Social Security taxes to achieve sustainability should be avoided at all costs. Social Security taxes are extremely regressive because they fall disproportionately on lower- to middle-income wage earners. Plus raising them would impose additional costs to businesses struggling to get through the worst fiscal crisis in more than 80 years.

?Choosing the Nation?s Fiscal Future? shows us a three-pronged approach that will work sans tax hikes. First, for future retirees (post 2010), the rate at which salary increases raises Social Security benefits would be scaled back.

This feature would be limited to the top 70 percent of wage-earners so workers with lower lifetime earnings would not be pinched severely. Second, for current retirees, cost-of-living adjustments would be based on a price index that grows more slowly than the CPI. Finally, the full retirement age would be raised to 67 by 2012 with gradual increases to 68 and four months by 2050. The appeal of this proposal is that everyone chips in a bit ? current and future beneficiaries.

Social Security has been demagogued to death by politicians more interested in getting elected than what is best for our nation. Any attempt to rein in costs is demonized as destroying Social Security. OK, you?re right and I?m wrong; then let?s raise taxes. Seriously, if you are a Tea Party supporter and are taxed enough already, then raising taxes on the grandkids is just a smidgen inconsistent.

?Choosing the Nation?s Fiscal Future? was a joint effort of concerned Americans ? liberal and conservative, with many serving in the Reagan, Clinton, Bush 1 and 2, and Obama administrations ? who are concerned about the financial stability of our nation. They are not paying lip service to the problem or rounding up the usual talking points.

When you hear a politician blather about ferreting out Social Security waste and abuse as some magical method to painlessly solve the problem, they are more interested in getting elected than doing what is right for the nation.

We can raise taxes or lower benefits. That?s the truth.

Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@Livingston   Financial.net  .

BUZ LIVINGSTON
Just Plain Talk

or we can get investment in this country, return to our manufacturing base, stop fighting senseless wars, and a reinvigorated economy will provide the tax revenue needed for expenditures....consider a different truth!
Beach Fanatic
#9
or we can get investment in this country, return to our manufacturing base, stop fighting senseless wars, and a reinvigorated economy will provide the tax revenue needed for expenditures....consider a different truth!


That sure sounds like a Reagan remedy for what our problems are.:biggrin:
Bob avatar
SoWal Insider
#10
That sure sounds like a Reagan remedy for what our problems are.:biggrin:
perhaps, but the same constituency that has offshored good jobs now wants to eviscerate pensions/ retirement entitlements. it's rather transparent, and not in keeping with having a vibrant middle class. we are descending into a serflike nation dominated by service industry servitude. this course can be changed.
Beach FanaticAuthor
#11
perhaps, but the same constituency that has offshored good jobs now wants to eviscerate pensions/ retirement entitlements. it's rather transparent, and not in keeping with having a vibrant middle class. we are descending into a serflike nation dominated by service industry servitude. this course can be changed.

My suggestion is to A. Reread my column B. Read the commision's report (www.nap.edu).

If you will note I firmly believe Social Security is a great program...it's underfunded.

Members of the commission include the Urban League. Please, please, please show me where the Urban League wants to eviscerate retirement entitlements.

The growth of entitlements is unsustainable. The neat thing is that the commission offers a no tax increase approach to SS woes, a no benefit cut to SS woes and two alternatives that split the difference.

You are correct the course can be changed but only by making some difficult decisions.
Beach Lover
#12
Hi Buz. Important topic, without a doubt. I think that based upon life expectancy increases, perhaps raising the age a bit would be helpful. I wonder what the impact would be if each of us had to wait another year, or two, or somewhere in between. My SS retirement age is 67, and I could probably manage to wait until 68, or 69.
We effectively lowered some people's payments when portions of SS became taxable in 83. The effect is the same, but it's more palatable to tax it than to cut it.
What makes our ideas difficult is that current politicians have to ask us to make sacrifices now in order to avoid difficulty (catastrophe) in later years. If they can avoid the problem until they are out of office, then they can leave the next guy holding the bag. See you soon. I have been in NOLA for a few weeks.
Bob avatar
SoWal Insider
#13
My suggestion is to A. Reread my column B. Read the commision's report (www.nap.edu).

If you will note I firmly believe Social Security is a great program...it's underfunded.

Members of the commission include the Urban League. Please, please, please show me where the Urban League wants to eviscerate retirement entitlements.

The growth of entitlements is unsustainable. The neat thing is that the commission offers a no tax increase approach to SS woes, a no benefit cut to SS woes and two alternatives that split the difference.

You are correct the course can be changed but only by making some difficult decisions.
as i stated, the correct course of action is not to eviscerate entitlements/ pensions in an economic downturn. look at the attack currently underway in the state capital on teacher's wages/pensions. it comes from the right. rubio/mccollum will continue the attack. the numbers on social security can be righted via means testing/minor alterations to retirement dates, not cuts/taxes. a vibrant economy and low unemployment will provide the necessary funding. that's the correct, non-reactionary macro view. i am not referring to the urban league.
Bob avatar
SoWal Insider
#14
About 37 percent of 18- to 29-year-olds are unemployed or out of the workforce, the highest share among this age group in three decades, according to a new Pew Research Center study......this is what will drive the problem or solve it. these are third world unemployment figures created by the policies of the last 20-25 years.
Beach FanaticAuthor
#15
Meatloaf said two outta three ain't bad.

as i stated, the correct course of action is not to eviscerate entitlements/ pensions in an economic downturn. look at the attack currently underway in the state capital on teacher's wages/pensions. it comes from the right. rubio/mccollum will continue the attack. the numbers on social security can be righted via means testing/minor alterations to retirement dates, not cuts/taxes. a vibrant economy and low unemployment will provide the necessary funding. that's the correct, non-reactionary macro view. i am not referring to the urban league.

Part of the solution I referenced includes minor alterations to the retirement dates. The problem with raising the retirement age higher than 68 is that a lot of blue collar jobs can not be done when you are that old. Heck, I couldn't work blue collar and I'm 54.

Also the committee's solutions referenced a type of means testing, more a surgical means test, I guess.

Like Meatloaf said two outta three ain't bad.

The only other item is how inflation is factored and I disagree that using an inflation index that is only slightly lower than the CPI is "eviscerating" anything.

Again, if you take the time to delve into the report you will find these folks ain't right wing extremists.

SS is a strong program it just needs some tweaks.
Beach Lover
#16
I am on board with sacrificing somewhere, but means testing is hard for me to accept. I'll just go with one example of a friend of mine (and spouse) who has always made more money than I have, and has blown through a substantial inheritance as well. He even laughed at my last car, which was 10 years old at the time, and called it a heap. My car and my wife's car are 11 years old. He has been bankrupt, and is pretty close again.

We are the same age, so we will be applying for SS at the same time. Perhaps they will look at my little savings, and determine that I do not qualify for the same benefits as my friend, or that mine should be taxed more heavily. I doubt that they will be able to audit one's financial restraint over the past 40 years to determine whether or not one should be eligible. This strikes me as unfair, and it rewards bad behavior.

Conversely, there are poor people who were lucky to survive, much less accumulate a retirement account. Separating them from spendthirifts is difficult to do.
Bob avatar
SoWal Insider
#17
Part of the solution I referenced includes minor alterations to the retirement dates. The problem with raising the retirement age higher than 68 is that a lot of blue collar jobs can not be done when you are that old. Heck, I couldn't work blue collar and I'm 54.

Also the committee's solutions referenced a type of means testing, more a surgical means test, I guess.

Like Meatloaf said two outta three ain't bad.

The only other item is how inflation is factored and I disagree that using an inflation index that is only slightly lower than the CPI is "eviscerating" anything.

Again, if you take the time to delve into the report you will find these folks ain't right wing extremists.

SS is a strong program it just needs some tweaks.
i too, am 54, and believe the program, going forward, should only target those who need it. radical change is not necessary when many incremental tweaks are available. i will say this about our country's current philosophy. it's a quote by abraham flexner. "probably, no nation is rich enough to pay for both war and civilization. we must make our choice. we cannot have both." i will take his quote one step further. neither is possible when the youth of this country cannot find meaningful, stable employment. how bright a future do you see for our country when it's leaders cater to the mi complex and wall street as it's middle class withers on the vine???
Matt J avatar
SWGB
#18
At what point is Social Security treated as a safety net? At what point will people admit that they don't need it or that perhaps you should have to qualify economically to receive it?

My grand father worked his entire life and paid into Social Security for at least 95% of his working life. I say 95% as he lived through the depression and was in the military when SS was enacted. His brother on the other hand spent his entire life avoiding work or if he did he worked under the table to avoid paying SS. Of course when my great uncle retired he immediately applied for and received SS. My grand father wouldn't speak to him ever again, but felt that denying an old man the ability to survive was wrong. He also never applied for SS himself and felt that offset the difference. He felt that while he did pay into it he was lucky enough to have two career's that provided him with the ability to be comfortable in retirement and didn't have to have the money "paid back to him". He explained that I would never understand unless I lived through something like the Great Depression. I still haven't had to live through one of those, but I'm coming much closer to understanding what he was saying.
Beach FanaticAuthor
#19
I am on board with sacrificing somewhere, but means testing is hard for me to accept. .

To paraphrase Bill Clinton it depends on your definition of means testing.

I strongly disagree with the idea that if you have over "X" amount of income you don't qualify for SS.

However the committee recommends incorporating into the formala of how SS benefits is computed a type of means testing. To wit, for the top 70% of earners their benefit would be reduced, not eliminated.

This way the folks on the bottom aren't hammered.

SS is a form of social insurance and it's worked pretty darn well.


More at www.nap.edu
Beach Lover
#20
I had not checked this forum in a few months. Usually it degrades into sniping pretty quickly, and I don't learn much. So far, so good on this thread. Buz, I had been an advocate of raising the age, but had never given thought to some of the more physically demanding careers. Every time I see construction workers in the freezing weather, or our 98 degree, 95 percent humidity days, I think about how tough that would be, especially at 60. Good point. Taxing SS for some, as we do now, is effectively means testing. It appears that we are going to have to do more of it.
To really make an impact, we will probably have to eliminate or greatly reduce the benefit for those who are moderately wealthy. I would love to get a check, but in some ways I feel that I have already benefitted greatly from SS. My mom and stepdad receive it, and if they did not, they would run out of money quickly, and this would impact my ability to save for retirement. If I inherit anything, which is not a priority for me, it would be due to their having received social security, thus allowing them to preserve some assets. Anyway, my hope is that if SS is eliminated for me, I can be thankful for the life and opportunity that I have had.

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