Nancy Altman Gets It Right About Social Security, Then Gets It Wrong
Dale Coberly: Commentary on an article by Nancy Altman that I read yesterday:
“Senator Warnock’s Re-Election Is a Victory for Social Security,” Portside, Nancy J. Altman.
Nancy Altman wrote a pretty good book about Social Security [The Battle For Social Security (2005)] which I recommend. It’s readable and tells a story better than I can. In it, she explained the difference between worker paid insurance and welfare. And she told a story about how FDR intervened personally to keep his Committe on Economic Security, who wrote the plan, from turning it into welfare (“the dole”).
Unfortunately toward the end of the book she seems to have forgotten all of this and says, essentially,
“Social Security is not broken because it is paid for by the workers themselves. We can fix it with a tax on estates.”
I tried to point out the contradiction to her. She didn’t like it.
She begins the essay cited here by getting it right:
“It is important to recognize that, as a self-funded program that has no borrowing authority and can only pay benefits if it has sufficient revenue to cover every penny of the cost, Social Security does not add even a penny to the federal debt. It is not contributing a penny to the debt whose limit must be raised to avoid a default by the United States on its obligations. Nevertheless, Republicans in Congress want to cut our earned benefits so badly, they’re willing to risk an economic catastrophe to make it happen.”
And then gets it wrong:
“Fortunately, Senator Warnock won, giving the Democrats a clear majority in the Senate. President Biden and the Democrats he leads have made it clear that they are committed to expanding Social Security, with no cuts, while requiring the wealthiest to begin to pay their fair share. And Senator Warnock himself understands how important our Social Security system is.”
Social Security does not need to be expanded at the cost of turning it into welfare. There are already welfare programs that can be expanded to meet the needs of people who for reasons of their own did not pay (enough) into Social Security. And “the wealthiest” do pay their fair share. They would argue they pay more than their fair share. They pay more into Social Security than less wealthy people, and they get less back in benefits as a percent of what they paid in.
What they get is, first a positive real return on their money, guaranteed, and including, especially , an insurance benefit so that if they are no longer “wealthy” when they retire they still collect enough to live on . Thus, just like the rest of us, the are paying for what they get: insurance. The rate of return on their insurance premium is adjusted so that higher earners get less as a percent (but more in actual dollars) than the lower earners. That “less as a percent” is what enables Social Securit to pay the “more as a percent” to the lowest earners so they still get enough to live on even though they never made enough to pay enough (save enough) to see them through retirement.
This plan works. And it works very well. It has always been at risk from the people who don’t understand it. But in the past those people have usually been a small part of “the rich” who think that Social Security is welfare, for which they are paying taxes, to suport the idle poor. It is a shame that now, after eighty years of working very well, reducing poverty, and disproving the lies told about it, Social Security should be in danger of being ruined by people who don’t understand it, but think they are “saving” it for the poor.
As it happens Social Security does face a funding shortfall. This is not “bankruptcy” or “going broke. But if Social Security is going to continue to be meaningful insurance for retirement, it will need to raise the payroll tax [this is more like an insurance premium and savings account]. This is mostly because people are going to be living longer in the future and so need to save more for their longer retirement. The extra cost will eventually amount to an extra 2% deducted from their paycheck.
But if we start right away, we can reach this amount by increasing the tax one tenth of one percent per year… about a dollar per week per year for a worker earning 50,000 dollars per year. The amount goes up year after year, but the real wage is expected to go up about ten times as fast.
This is not an amount anyone will notice . . . except for the crazies running around calling it a huge burden and pretending that the young are paying for the old. The young will not be paying for the old. The young will be paying for their own retirement when they will have become “the old.” Alot of people can’t seem to understand this, because they have been lied to by a trick of language. People put their own money into Social Security and get it back with interest when they retire or become disabled. But just like a savings account or any investment, the cash they take out is not the same cash they put in. What comes out is from the cash paid in on the same day by people who are saving (paying in advance) for their own future needs. Again, people don’t understand this and we need to explain it to them.
I think you should read Altman’s book and this article. They say some things that need saying. But I hope you can realize that “making the rich pay what is called “their fair share” is turning SS into welfare, and that is exactly not the way to save it: It is exactly what Roosevelt warned us against . . .
Only you can save it . . . for yourself and your children at a price you can afford, and which you will have to pay anyway either in real taxes (where you don’t get your money back) for welfare, or by getting lucky on the market.
Social Security is safe only if you pay for it yourself. You can’t afford not to.
“Biden vows to save Social Security and Medicare in face of shortfalls,” Angry Bear, angry bear blog.
Massive attaboy for Dale Coberly,
thanks. I should point out that what appears here as a quote from Altman’s book, is not a direct quote: it is my paraphrase of what she said.
Just to make sure it is confusing, the other two quotes (indented in boxes) are in fact real quotes.
Otherwise the editor made a few changes in what I wrote, to make it more clear. So I would understand if Ms Altman was didn’t like the way I changed what she wrote. I do hope the reader can navigate his way through all this and arrive at understanding that
Social Secuity does not add a penny to the debt.
It is not going broke.
It was designed to be worker paid.
Some high-end Democrats want to change to “making the rich pay their fair share.”
The rich already pay their fair share.. it’s what makes SS work as insurance.
Changing it will turn it into welfare as we knew it.
Then it’s enemies will destroy it.
The workers need to raise their own “tax” a tiny amont per year to keep up with the costs of living longer. The “payroll tax” is really a savings and insurance contribution to their own retirement.
Raising their own tax a tiny amount is the only way to save Social Security which has worked well for more than eighty years in spite of raising the tax a little bit from time to time over the years, but without “making the rich pay” for it.
Making the title of this essay “Warnocks election is a victory for Social Security” is almost the exact opposite of the point I was trying to make.
some of the typos in the post and in my comments here are my own.
Their fair share would be something like the share of their earnings that was subject to SS taxes back in the 50’s and 60’s. That is not the case now. The extremely wealthy have a fraction of a percent of their income subject to tax. Most working Americans pay SS tax on all their salary income.
Back in the 80’s the company I worked for made the “executive bonus” payroll the very first payroll of the year. If you were on the bonus roll and still saw FICA withheld from your first regular check, it was time to start looking for a new job. In contrast, it took everyone else most if not all the year to max out on FICA.
“The extremely wealthy have a fraction of a percent of their income subject to tax.”
The extremely wealthy don’t get most of their earnings from salary. Dividends and capital gains are not subject to social security tax.
“Their fair share would be something like the share of their earnings that was subject to SS taxes back in the 50’s and 60’s.”
To the best of my knowledge, dividends and earnings weren’t subject to SS taxes back in the 50s and 60s. The top marginal *income tax* rate was higher in the 50s and 60s, but that’s not social security taxes.
you don’t understand the purpose of Social Security. it is meant to provied the safest possible way for workers to save their own money, and insure they will have enough to live on in case they can no longer work and/or wish to retire at a reasonable age.
high earners pay into Social Security and get the same benefit..insured savings, and insured income in case savings fall short.
you would not charge “rich” people more for their goceries just because they earn more money. making “the rich” pay more for Social Security than it is worth to them would just insure that they would make Social Security disappear in a very short time.
“make the rich pay” is not even decent socialism…or bleak communism for that matter. it is simple greed and theft by those people who think they are poor because they are not rich.
like all greed it kills the goose that lays the golden eggs.
“the rich” pay the same percent of their earnings as “the poor” up to 160,000 dollars per year income. that means roughly they pay 16,000 dollars per year for their SS.
the average 50k worker pays 5,000 per year…or 2500 if you don’t count the “emloyer’s share” as “really the worker’s income” which opens up a can of mostly word play worms i don’t want to waste my time with today.
a really poor worker, say 20k/y pays 2000 per year…or “really” 1000..because there isn’t a chance in hell the boss would raise his pay if he, the boss, didn’t have to pay the”boss’s share.”
when they come to retire the rich man gets about 30k/y benefits. the average gets about 25k/y in benefits, the really poor get about 20k/y in benefits.
do the arithmetic here, if you can, and tell me who is paying “his fair share.”
i can live on 20k/y and since i paid in less than average over a lifetime (i had other things to do than work for money) i figure that’s fair…more than fair actually.
almost everyone can live on 25k per year if they have been reasonably smart about paying off their mortgage and not spending their savings on fast cars and trips to vegas. paying them more would mean that someone…them or the “rich” guy across the street…would have to pay more into SS than they want to, resulting in them killing the program. the rich guy is glad to get that extra 30k/y benefit…especailly if he has blown all his riches on fast cars and faster women. but he imagines he would have made a lot more on the market “if only” he didn’t have to pay SS…leading him to want to kill SS..not realizing he might not have been rich if he had an accident , or the stock market turned on him, or if his business became obsolete when he was 50.
my numbers here are very very approximate. they are meant to get you to start thinking about you are talking about. the rich guy does not need SS until he does. then without SS we would have pay taxes for welfare to support him. the poor…people earning less than 100 k or so think the rich guy should have to pay for their benefits, because after all it is “no fair” that the rich guy should have more money than they do.
hope you kept track of the pronouns and the sarcasm.
What is the sense of the rate gradually starting now (or at least soon) instead of waiting until the Trust Fund balance is much lower and doing a step change to 2% or whatever the increase need be at that time? The general revenue – mostly progressively raised – owes SS a ton of money. Why slow down that redemption process, which must be a result of raising rates well in advance of depleting the Trust? “Give the money back to workers” by not raising rates until the Trust Fund balance is much lower.
by raising the tax now one tenth of one percent per year or about a dollar per week per year, the raise becomes unnoticeable, rises in step with the need for funds, and causes the higher tax rates to be paid by the people who will get more in benefits because they are the people who will be living longer in the future.
it also preserves the Trust Fund so it does not have to be paid back, costing the general budget money it would rather spend somewhere else… the reason it borrowed the money in the first place. the interest on the Trust Fund undeleted keeps the ultimate tax rate about 1% lower than it would be otherwise.
what you establish by raising the tax gradually is a glide path whereby the Trust Fund falls to a “normal prudent reserve’ and then holds steady. by not raising the tax gradually you have to raise the tax all at once when the Trust Fund runs out. This would be a psychological shock (that would last about two weeks if it were not for the screamers on the other side claiming it was a huge horrilbe burden (it would be a 2% raise and almost would pass unnoticed if not for the doomsayers) but then the Trust Fund would have to be rebuilt in order to reestablish it as a normal prudent reserve.
Your idea of “saving the workers money” would actually cost them more in the end.
The funding approach for Social Security seems to assume that each generation of working people will be larger than the previous one. Since benefits are paid to the current generation of retirees by the current generation of workers. This certainly may not be true over the next few decades at least, quite possibly much longer.
no. the increasing population does result in a lower tax rate than otherwise…which is the same as a higher rate of return on the tax paid when it comes time to collect benefits. nice, but not necessary. it is pretty much the same as having a period of bull market. when we go through a time of not increasing population it would be like being in a time of less-bullish market… that is lower rate of return on investment.
even Social Security cannot escape the consequences of variations in the rate of economic growth. what it does is keep you from desperate poverty when “the market” crashes at just the worst time for you.
the one tenth of one percent per year tax increase is needed exactly because the population of workers is currently not rising fast enough to keep up with longer life expectancies. for people who prefer to think of the “national economy” the need for the tax increase is slower populationg growth. for people like me, the need for the tax increase is longer life expectancy. both ways are correct. mine is more meaningful to the individual paying the tax and collecting the benefits.
You didn’t explain the impact of smaller working populations one generation after another, going forward. It’s hard to see how a ‘one tenth of one percent per year tax increase’ is going to solve this problem. What might, somewhat, is that self-employed ‘gig workers’ always have to pay double FICA, once as employee, again as their own employer. Eventually, when everybody is a gig worker, the system will be much more secure, I guess.
wrong guess, because you don’t know anything.
i let the actuaries do the predictions. i only point out what their predictions mean in terms of individual persons. you can actualy read the Trustees Report if you want to know what the actuaries actually say. or you can read the newspapers to hear the lies about it. or you can read the letter the actuaries sent me saying that yes, my arithmetic is right. published here on AB a couple of years ago. the predictions have not changed much since then.
the working population will NOT get smaller year after year. it will get larger and larger, just not fast enough to keep up with the fact that people are iiving longer, but that will level off by 2050l. meanwhile the 2% (each) tax increase in 2035 will pay the bills…forever. or the one tenth of one percent increase will pay the bills forever if we start now. but that deal won’t last. all due to the wonders of arithmetic.
as for self employed paying double…no. the other-employed pay half. being self employed has other benefits. if you wanna be your own boss, you have to pay the boss’s share . that means an extra two dollars per week (combined). not the sort of thing to break you if you are a smart boss.
again, if this is hard to see for you, it’s because you don’t know enough and refuse to learn.
“the increasing population does result in a lower tax rate than otherwise”
Did you not mean “the decreasing population (of workers, going forward) does result in a lower (FICA) tax revenues than otherwise”?
So, they will just have to pay more & more, I guess.
another wrong guess.
yes. one tenth of one percent more per year for about twenty years, not all consecutive (that is LESS than one tenth percent per year over a longer time than 20 consecutive years…but still adding up to about 2% in total while wages will have gone up at least 20% over the same time…
the poulation of workers is not decreasing, it is growing. sorry if this is too complicated for you, you could learn it if you stopped fighting it.
Fortunately, I am a soc-sec recipient, without too many years left. My paying-in days are over, except for the excess income taxes due to my own retirement investments (with Mrs Fred.)
(“Income tax is the price we pay for civilization.”)
But I do think you are fantasizing, sorry to say.
re my fantasizing
that is often the way innumerate people regard simple mathematics.
it’s pretty pathetic. if it wasn’t so annoying, and dangerous to Social Security which people need, I’d be kinder to you.
maybe if you ask AB to repost the letter from the Deputy Chief Actuary confirming my results, you will decide that she is fantasizing also.
I do hope you are right, that you get your way, and that my kids are around to benefit from it.
Dale, how about giving us a quick lesson in the Trust Fund. Like what was its balance when the Reagan reforms went into effect, when and at what level did it peak, when will it project to be exhausted under current law and what would the balance be at that same date under your gradual increase idea. Right now I am suspicious that a gradual increase starting now as opposed to a step change when actually needed mostly protects the Treasury from the inconvenience of net redeeming a whole lot of money, but both approaches get the job done as far as funding benefits. But maybe I misunderstand this.
it would cost me some work to dig out those statics for you and they wouldn’t mean anything. give me a week or so and i might do it for you. paart of it i can do right now: predicted exhaused in 2035 or so under present law and conditions. under my proposal the TF balance in 2035 would be about what it is now…because the tax raise is fully covering the “funding shortage.” The balance as a percent of the required payout at that time would be 100%… because the same money in the TF would be balanced against higher costs. but the higher tax at that time and forever after would be matched to the increased cost. the TF at the time of the Reagan fix was
but yes, you misunderstand this. The treasury (congress) likes to borrow money and hates to pay it back. but it keeps borrowing. if they have to pay back the money the borrowed from SS, they will just borrow it from somewhere else. theoretically you got the benefit of the borrowed money (lower taxes, more defense toys). and if treasury pays back the money…you will pay the taxes to find the money to repay what you borrowed. i don’t see any problem (or advantage) to any of that, and I think it is pretty silly of you to worry about have to SAVE an extra dollar a week so you will have enough to live on when you are old…by pretending it is money you are “paying” to a government black hole. the TF at time of Reagan fix was lower than required for prudent reserve…less than 100% what that was in dollars i have no idea. you could look it up but it wouldn’t mean anything. The TF grew to about 3 times prudent reserve and peaked about ten years ago if i remember… when they started shouting about SS being cash flow negative as if that meant anything. again, the dollar amount wouldn’t mean anything…i think it was about 3 trillion. There are historical tables in the Trustees Report..you can look this all up…but again they are just meaningless numbers at this point. If you like to play with meaningless numbers.
my computer is going to hell at this point so is my personality.
“statistics” not statics. i’ll leave the rest of the typos for your amusement.
Due to demographic changes, the U.S. Social Security system will face financial challenges in the near future. Declining fertility rates and increasing life expectancies are causing the U.S. population to age. Today 12 percent of the total population is aged 65 or older, but by 2080, it will be 23 percent. At the same time, the working-age population is shrinking from 60 percent today to a projected 54 percent in 2080. Consequently, the Social Security system is experiencing a declining worker-to-beneficiary ratio, which will fall from 3.3 in 2005 to 2.1 in 2040 (the year in which the Social Security trust fund is projected to be exhausted). This presents a significant challenge to policymakers.
Coping with the Demographic Challenge: Fewer Children and Living Longer
Soc Sec Admin – Office of Policy
yes, and they have been saying this for 30 years. they do not make policy, they don’t evem recommend policy, they do state clearly that a 1 and a half percent increase in the payroll tax today would keep SS “solvent for the next 75 years. a little math shows that the same result can achieved by gradually raising the tax one tenth of one percent per year..and that by doing it that way there is no need to raise it any further for “as far as the eye can see.”
and their actuaries confirmed this.
they also state clearly that waiting until 2035 will requre a 2% tax raise all at once at that time to keep SS able to pay the benefits needed to keep SS a meaningful insurance against poverty in old age.
thank you for your kind thoughts in previous comment. but we don’t need kind thoughts. the facts are clear, we need political action. which is not helped by sowing uninformed doubts.
From your link: “Immigration also plays a role in the age structure of the population. Compared with earlier decades, net immigration has increased in recent years (Table 2). Because immigrants tend to be younger and have higher fertility rates than the general population, immigration mitigates the aging of the population.”
I have long felt that the US is a country of immigrants and ought to remain so, whatever the costs. Apparently those who brought unwilling immigrants in felt the same way, just didn’t realize it at the time.
This is how we remain the last best hope of mankind.
this is true. the actuaries have already taken account of that in the predictions my calculations are based on.
from a macro perspective the “aging of the population” would indeed be reduced and reduce the need for the tax raise that will otherwise be necessary.
but it’s not a good way to frame the problem. we need to think in terms of paying for our on retirement, not relying on some historical trend to save us from having to pay for our own groceries.
yhose immigrants might not come, might decide to have fewer children, might not get good enough jobs to pay even for their own retirement…
all this is accounted for by the actuaries, but they could be wrong, as they are the first to tell you.
raising the tax rate (the savings rate) whenever there is a reaonable probability of “short term financial inadequacy” will meet every problem, and if we raise the tax higher than it turns out we need..we can always reduce it again to “sustainable.”
but the biggest point is to get people thinking in terms of their own need to pay for their own needs. granting that for people this will turn out to not work out…that’s what welfare is for. but welfare is not a good way to meet the needs of ordinary life and highly predictable events.
Try Your Hand at Social Security Reform
The American Academy of Actuaries
Play the Academy’s Social Security Game to learn about common Social Security myths, then explore options for reform and see how changes will affect younger workers, retirees, and the program’s long-term health. …
I did, and won on my first try (thus saving social security!)
My choices? Increase full retirement age (to 69)
Subject higher wages to to FICA tax
Subject benefits to higher taxes
Evidently I do know something.
no. you are proving you do know nothing. and cannot imagine the consequences of your choices.
“people” may be expected to live longer. but not all people will, and most of those who do will be higher income people.
if you pay for your own retirement you can retire whenever you choose… subject to actuarial constraints…you need to have paid in enough to have enough to last through your own remaining life expectancy, but otherwise, since you paid for it no one has a right to tell you you can’t retire when when you want to.
living longer doesn’t mean you won’t be getting old, and sick, and crippled, and stupid, or just want to do something with the rest of your life beside make money for your boss.
meanwhile the boss probably doesn’t want you around any more either. a lot of people get laid off just before retiremet age because the boss thinks he can make more money out of someone younger.
maybe your society of actuaries is stupid or dishonest. CRFB runs a “fix social security game” which, strangely, does not allow “raise the payroll tax one tenth of one percent per year for twenty years.
please stop. you can’t imagine how painful this is for me. it’s like have to work an extra two years at a job you hate because some damn politicians decided that raising the retirement age was “the obvious solution.” those two politicians by the way were Clinton and Gingrich. fortunately a lady in a blue dress saved us that time.
raising the cap beyond the point where SS stops being a good value as insurance (plus reasonable return on savings) will just make the honest rich join the crazies in getting rid of Social Security.
subjecting benefits to taxes would always have been the normal thing to do… you pay taxes on your retirement income from non SS sources. but since people who only have SS income are very near the poverty line (to keep payroll tax as low as possible) SS income was originally not taxed. later, when they wanted to increase income to the program without raising FICA taxes, they decided to tax some of the benefits that people get who also have other non SS income at a level sufficiently above poverty that it is reasonable (fair?) to tax part of their SS income at the same rate as whatever tax bracket those people are in. it’s kind of a rube goldberg approach i don’t like much… mostly because people get hysterical thinking they are paying taxes twice on the money they paid into SS. that’s not really so. the income they get from SS is about three times as much as they paid in due to the effective interest that comes automatically from pay as you go financing.
But you, like them, wouldn’t know anything about this.
I continue to be surprised (sort of) that you get away with such ad hominem attacks.
you have no idea how much pain your ill-informed comments cause me.
I don’t think anything I say to your counts as “ad hominem” in formal logic. If I told someone else that you beat your wife, THAT would be an ad hominem.
But when I tell you it is hopeless drudgery to try to educate you, tht is not an ad hominem, it is a desperate plea for you to quit making me have to keep on explaining things to someone who won’t or can’t take the trouble to think about them.
Actually, I should probably be grateful to you for giving me the chance to try to explain this to other people, but after fifteen years I have realized that most of them are just like you. They want to have their options taken seriously, but refuse to listen when someone tries to explain why they are wrong.
It is one thing to try to explain something to a child who wants to learn (though for “why is the sky blue?” you might have to say “wait until you are older.” but it is another thing to try to eplain to an audience of convicted and jailed bank robbers that robbing banks gets them less money per hour of “work” than getting an honest job.
Increasing the retirement age (the age when benefits entitlement begins) is an obvious measure when life spans are increasing, even though it’s not necessary a desireable move as far as employers are concerned.m but causes problems for people who need to ‘retire’ early, forced out by their employers.
(Maybe employeers should only be allowed to shed employees who are being paid too much, not those who are too old. Executives excluded of course.)
Subjecting higher wages to FICA taxes has traditionally meant benefit increases, which are capped according to wage limits, thus raising expenditures. Still worth doing to raise FICA revenues.
Subjecting benefits to higher taxes? I doubt this is actually a good idea, but I indicated it as something tolerable even if undesireable. People seem to dislike having benefits taxed for some reason.
SS benefits *are* already subject to taxation above a threshold of other taxable income. This is mathematically identical to reducing the benefits for those fortunate enough to have significant income. Calling it “taxing benefits” rather than “reducing benefits” is a linguistic distinction, not a mathematical one.
In the discussions I’ve read, increasing immigration is seldom discussed as a way of addressing the demographic problem. My guess is that it’s because “immigration” evokes a picture of hordes of teh swarthy people in the minds of the White electorate. I notice you didn’t include that as one of your variables in gaming your solutions. Why?
Increasing immigration above the levels prophesied in current actuarial models should, I believe, reduce the need for reducing benefits, increasing taxes or increasing retirement age. How much? I don’t know. I don’t think Boomer levels of immigrants will be politically acceptable, but increasing immigration to be part of the solution. As you acknowledge above, immigration has historically been a boon for capitalist America (albeit a scourge for indigenous Americans and for involuntary immigration by slavery).
correction: “increasing immigration *should* be part of the solution.”
I would say that ‘taxing benefits’ at least reduces them, in effect, but since such payments go to the IRS and not the SS trust fund, they are far from identical. (Is it possible that the IRS sorts this out and passes such payments over to the SSA?)
Of course this comes about from treating such benefits as income, even though such income was previously taxed as such.
What might be next is to treat transfers from savings to checking accounts as income also. Hmmm. You didn’t hear this from me.
“Income tax is the price of civilization.”
income from taxing SS benefits goes into the SS Trust Fund.
See how much you don’t know.
when you “transfer” money from savings account to checking account
you pay income tax on the interest you earned on the savings account.
This is an awkward way of saying that Yes you pay taxes on the income you receive from interest on your own money. That is exactly what the tax on SS income does, except that most people pay no tax on their SS income because we as a formerly sensible nation realoze that would be counter productive from the point of view of reducing poverty.
See how mucch more you don’t know.
I would like to feel good about explaining this to you, but I know you will ignore it or find some other objection to raising the payroll tax a tiny amount because you hate the idea of saving an extra dollar a week to make sure you have enough when you retire.
Unfortunately for them, your children’s generation already believes they are paying for YOUR retirement and not their own, which must rank as one of the greatest triumphs of pure stupidity the world has ever seen.
Because America has always been a nation of immigrants, and that is a Good Thing, voluntary or otherwise it would seem.
Now you’re just playing word games. The distinction between taxing benefits and reducing benefits is semantic when you are the person receiving the benefits. That is true regardless of whether the money withheld from the beneficiary goes to the SS trust fund or into general revenue.
And yes, we are a nation of immigrants, but that completely misses my point. When you gamed ways to avoid SS benefit cuts, you “Increase[d] full retirement age (to 69), Subject[ed] higher wages to to FICA tax and Subject[ed] benefits to higher taxes. You did not test a policy of *increasing* the number of immigrants over and above current policy. That was my point. What happens when we allow *more* immigration to offset the decline in American citizens who are paying into SS? Why do people who profess to model various ways of stabilizing SS benefits ignore this way of getting more employees paying FICA?
At 65 most people are beginning to low down if not before. In physical labor especially. Their physical capability diminishes. Getting to work is another issue. Unless there is public transportation. Even then it can be difficult in bad weather or hot weather.
Benefits are already taxed. 50% of income over $25,000 and beyond the standard deduction. But is an income at $25,000 big bucks? $50,000 for a single person? More than $34,000 and the taxable rate is 85% pf income being taxable after standard deduction.
If everyone working pays $1 more per week, why is that a big deal?
I am not sure you said this right. If you get, say 20,000 in SS benefits, and have other income that raises your total income to say 30, 000…putting you into what normally would be the 10% bracket you would normally pay 3000 in taxes.
But because of the tax on benefits rule what happens is you would pay the normal 10% only on half of your 20,000 SS benefits. That is you would pay 10% on 10,000 dollars plus 10% on the ten thousand you earned from non SS sources. total tax is 2000. ….that is less than you would pay if SS was treated like ordinary income.
if you like to twist your brain around to come up with another way of thinking about it. You could say your Tax on non-ss income would be 1000 (10% of 10000) and no tax on any SS.. so your tax is doubled by having your SS benefits taxed. Wow! But your tax on SS income is still only 5%. and your tax on “total” income is 7%. less than a person with no SS but 30,000 in, say income from interest on ordinary savings or bonds, or profit from stock sales.
What makes this hard to understand is that most people see red when they see ANY tax…expecially on what they regard as income they have already paid taxes on. But income from SS is “profit” just like income from ordinary interest or stocks is “profit” on money they lent.. that is actually “unearned’ money if yout think of “earned” as money from work or other increase in productivity not derived from simply lending money to a producer.
As Joel points out you can talk yourself into semantic traps. That’s why it’s important to try to get the “semantics” [Lakov’s “framing”] right in the first place. Unfortunately the bad guys have about an eighty year head start on mis-framing Social Security.
it’s not only “physical” labor. The brain slows down a bit, too. Enough that bosses would rather hire someone younger.
Even worse is the creeping insanity that comes from working at a job you hate. Sitting in a cubicle doing something that is not worth anything to anybody, except by the magic of forced labor somehow turns into millions of dollars for the CEO.
Even without the torture…living longer does not mean not getting older…
if you have paid for it yourself, there is no reason or justice in someone telling you you can’t retire when you want to. You may want to someting else with the rest of your life than make money for the boss. That’s what retirement is for…or has been for for the rich forever, and just recently for even the poor, who are human beings also, though “the rich” never quite seem to realize that.
I read somewhere…can’t remember where.. of an elderly rich woman saying she couldnt imagine why the poor would WANT to retire.
And though those days are past (we think) there was another episode i read about from the last last century where an upper class woman refused to make way for a porter struggling under a load of luggage, until her companion said “respect the load, madam.” if you have an ear for such things you still hear that attitude from time to time.
to some of the rich, the poor are just beasts of burden
and some people treat their asses better than the rich treat their servants.
[for the benefit of some of us the following off topic is presented as a public service: my daughter, who has turned out to be a genius in such matters has taught me how much better it is to treat an animal with love than even the best scientific “training” methods. of course i don’t expect, or even want, bosses to go that far with workers, but just a little respect for the souls of others goes a long way. you may observe that i myself don’t have as much of that as i should.