Sunday, October 21, 2007

How Can Social Security be Going Bankrupt???














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“There were originally 16 workers paying into social security to every one retiree.”

Well, yeah, that was true when privatizing 1% of the fund (which most economists argue WOULD’VE improved social security’s solvency) was floated a few years ago.

In short, nothing has changed.

“By 2030 there will be more retirees than workers paying into the program.”

That was true back in 2005 as well, so again, NOTHING has changed.

The Democrats back then, argued that “Social Security didn’t need fixing.”

They DID NOT argue, “Social security needs fixing, but privatization isn’t the right fix.”

So why, a scant thirty months after AARP led the Democrats led the Democrats in the chant of “Social security doesn’t need fixing,” is the same chorus now chanting, “Social security needs fixing NOW!”

Well, because the first Baby-boomer (Kathleen Casey-Kirschling) is ready to sign up for her social security benefits – the first of what is anticipated to be the largest wave of beneficiaries in history. According to the MSM, she’s the “raindrop that’s going to become a tsunami,” one, that many warn, could swamp the program.

Let me agree, first off, that it’s now too late for privatization to save social security. While there’s also no doubt that it WOULD HAVE, that’s water under the bridge. It would still HELP improve the system, but it's doubtful that it would SAVE social security from the coming armegeddon that will be brought on by a far too low retirement age and benefits that are too high to sustain.

The primary problem with today’s social security is that it hasn’t remained true to its original blueprint, that of, as FDR called it, “one leg of a three—legged tool for retirement.”

So if privatization isn’t the answer now, we are left with three choices;

1) DECREASE, or at least FREEZE benefits

2) RAISE the retirement/benefits age

3) Raise Taxes

The first two are very viable options, even basic requirements, the third must be seen as out of the question.

When social security began, life expectancy for American males was about 63 years and social security benefits kicked in at 62 for reduced benefits and 65 for full benefits. Today Americans are living longer and healthier and there’s no question that both the retirement age and the age levels for receiving social security benefits should be raised.

Today’s life expectancy in the U.S. is 77.6 years, by the original blueprint for social security, reduced benefits should kick in at around age 76.5 and full benefits at almost 80 years of age.

In a world where people are living longer and healthier it makes perfect sense to raise the retirement age and keep those folks working and living longer, more productive lives. THAT would be good for ALL of us!

We should also very seriously consider reducing, or at least FREEZING benefits. Those over 65 in America are one of the wealthiest generations ever to live on the face of the earth. Consider that the generation prior to the baby-boomers saved only $30,000 toward retirement, while the boomers have put away, on average, some $140,000! They’ve also benefitted from a stock market that improved from appx. DOW 3,000 in the 1980s to near 14,000 today and they’ve benefitted from a real estate surge that has seen the price of the average boomer’s home now going for $600,000!

So, why not at least FREEZE benefits, as we raise the retirement age?

The one thing we shouldn’t do, MUSTN’T do is raise taxes!

It would be obscene for struggling young people, most of them just starting out in life to be burdened with higher taxes to, in effect, subsidize the already well-heeled lifestyles of a generation that is already far wealthier than they.

We should raise the retirement age, raise the age limits for receiving social security benefits and reduce those benefits to make that program once again solvent.

6 comments:

Rachel said...

Maybe that's what happens when the Dems realize that they are in charge and possibly will be in charge en toto in 2009. They won't be able to blame the Reps so they are finally coming up with some ideas - mind you they belonged to others, but still...

JMK said...

Well Rachel, the only saving grace (at least for Conservatives, like myself), right now, is that we currently have a deeply divided Democratic party - the Left of Center elites versus the "New Democrats" (mostly "Blue Dog" Conservatives), now comprising over 20% of the Dems in Congress. And if the Dems are going to make any more inroads, it will almost have to be with more Conservative Dems in places down South and out West.

The Liberal elites (the Pelosi's, Reid's, Kennedy's etc.) are going to fight hard for massive tax increases to fund things like Universal healthcare and maintain social security at its current unworkable numbers....should any part of that agenda occur, the financial markets will react and we'll probably see the kind of recession we haven't seen since "Jimma Carter's" ill-fated tenure - "THE worst American economy since the Great Depression."

The fact of the matter is, that if the elites in BOTH Parties (the "Moderate Republicans are also "elites") really cared about things like "tax fairness," they'd seriously address the inately unfair tax system we now labor under.

The reailty is that people ARE paid what their jobs/skills are worth in the market. I have no trouble understanding or even explaining why a school teacher, cop or firefighter is currently worth some 8 to 12 times LESS than a stock or bond trader. However, I can't understand why a Senator or Congressman isn't worth even LESS!

The latter folks (stock & bond traders) often work actual eighteen hour days, under tremendous stress and their continuing education is arduous, complex and forever ongoing. In short, they are worth every penny of their mid-six figure and up incomes. THEY are the true "engine of our economy."

So it stands to reason that when tax rate cuts are passed, those who earn the most and PAY the most in taxes, also get the most in relief.

There's NOTHING unfair in any of that.

What IS unfair is that millions of Americans engaged in the "underground" (off-the-books) economy don't pay taxes at all, and neither do the TRULY WEALTHY, folks like the Kennedy's Rockefeller's, the Heinz-Kerry's, etc. Those people DO NOT rely upon INCOME for their WEALTH.

The ONLY tax system that would tax ALL Americans and have the TRULY WEALTHY really pay "more of their share" would be some sort of consumption-based tax, like the Fair Tax (http://www.fairtax.org/site/PageServer), but the real "special interests," those who don't rely upon income for wealth stand steadfastly against that.

I mean, do you think that it's a coincidence that John Edwards (who talks a great "champion of the poor" game) has benefitted from the extremely low tax rates that Hedge Fund managers have long gotten (they pay the modest 15% Cap gains rate on thier holdings), or that his Fund invested over 60% of its assetts in Fortress Financial, a bank that foreclosed on many of the Katrina victims that Edwards claimed the Bush administration had "forgotten."

If ONLY John Edwards had forgotten those victims, perhaps they wouldn't have been victimized a second time.

There's a long time between today and November of 2008....an enternity in political time, but if we do indeed see major Dem gains in Congress, along with a Democrat in the WH, I'd take a very bearish view of the American economy after that.

Savvy investors would almost certainly make major profits from "shorting" the American economy at that point.

Rachel said...

The reailty is that people ARE paid what their jobs/skills are worth in the market. I have no trouble understanding or even explaining why a school teacher, cop or firefighter is currently worth some 8 to 12 times LESS than a stock or bond trader. However, I can't understand why a Senator or Congressman isn't worth even LESS!

I have to disagree with ou on the "worth" of a teacher cop or firefighter. In fact, I'm kind of surprised that you would say firefighters worth was so much less than that of stock traders. The fields you mentioned are in the public interests. As a person in public education, I work beyond the 6 hours I teach. There's research, improving techniques for teaching, etc. And forgivve me if I sound patronizing, because, I know you know this. Firefighters and police have real intense, long, and potentially deadly jobs, all for the protection of the public. Stock and bond traders' seem to earn more because of the values of the stock they trade and sell. Public servants like you and I are reliant on the taxes the public is willing to pay us. But to me that does not make us less worthy of more pay.

I do agree that the Represenatives' pay should be less, considering they have massive benefits that American citizens could not get even with universal coverage.

JMK said...

I certainly understand your disagreement Rachel and I'd bet the majority of people would agree with you and disagree with myself, at least on the surface merits.

BUT, without business there would be no government at all, there'd be no way to fund a government. Sure, we'd probably have what much of the Third World does - warring war lords, each controlling small fiefdoms, hardly a "government."

But without government, commerce or business COULD and almost certainly WOULD go on.

No doubt about it, there are aspects of government that are good for business - security, uniformity of language and culture across sustainable borders, etc., but by and large government NEEDS business and industry far more than the reverse.

It is lsrgely for that reason that I am and remain a strict Jeffersonian Constitutionalist. I believe that government IS responsible for insuring domestic tranquility (police powers) and for settling Civil torts, protecting life and property, at least the latter (property) on a local level (ie fire departments), but I've always felt that we made an egregious error in setting up government funded schools.

In my view education exists to train individuals for careers in business and industry and for that reason, they probably should've been set up through and by the various industries.

Government schools have resulted in the current educational caste system where the curriculi for public schools is woefully inadequate compared to that of private schools, leaving most public school students behind the proverbial eight ball. Even within today's public schools, there is an educational caste system - one tier or track for Collegiate bound students, another for trades bound students and then the ubiquitous "Special Ed" dumping ground.

I'd doubt an industry funded educational systyem would be so wasteful with such a valuable resource.

Today, with DVDs and the internet EVERY student should be able to benefit from the lectures of the very best teachers. The old 19th century factory-styled education system is outmoded in today's world. Increasingly it has become a "jobs creation mill" for, sad to say, some of the least motivated people. That's not to say that there aren't many excellent teachers, just that many less motivated people are drawn to a profession where the teacher's unions have made it increasingly disfficult to actually educate.

As for value, my wife earns appx. $120K/year as an accountant in a Big Four Accounting firm, BUT she works 70 hours per week...somtimes more, almost never less.

When I did the math and computed her hourly wages, IF that industry were forced to give time and a half overtime for any hours over 40 hrs/week, her base pay would be appx. $57K/year.

My base pay as a NYC firefighter is appx $80K/year (+12% Specialty Pay for being a HazMat Specialist, + overtime) and I didn't need to take a four part CPA exam, pay for various licensures in various states, etc. Don't you agree that she seems underpaid, compared to even myself.

Even though my wife's financial sector job pays significantly more than my base pay, her actual base salary (considering the hours she puts in and the overtime she doesn't get) is actually far less than mine...and believe me, hers is a more pressurized, more demanding job that requires a tremendous amount of continuing education.

Yes, my Hazmat job requires extensive training and re-training (I've gone to almost ten schools all over the country and put in over 600 hours of outside training over the past three years), but a regular cop, firefighter or teacher doesn't have to do any of that.

My cousing John, who works trading stocks, works hideous hours, up real early to catch the opening of the London markets, up late to check on Japan's Nikkei. Again, he works tremendous hours, under tremendous stress albeit for a significantly above normal fiscal reward, but you probably couldn't attract or keep people in that vital position without far above average reward, as the demands are so far above average.

Moreover, I'd argue that both my wife's and my cousin's jobs in the financial private sector also serve the PUBLIC GOOD, perhaps less overtly, but even more critically than any cop, school teacher or firefighter.

Most of the firefighters and cops that I know, had originally taken these jobs as back-ups, or were, as is especially in the case of many firefighters, adrenaline junkies, etc.

I'd majored in Physiological Psychology and was studying mapping the brain and implanting electrodes in the brains of rats, when I realized that I would be miserable working indoors, in a lab or teaching facility. I took a number of jobs that I hated, partnered up in starting a deck building outfit, even repossessed cars at night to make some extra money and then took the 1982 FDNY entrance exam....I was thirty years old, with a lot of mileage and a fair amount of abuse on me by the time the physical was given in 1984.

When I got on, I started out in about the 25th busiest Engine Company (out of 212) and moved to the #8 Engine Company and finally to the busiest Engine Company in the City at the time, where I stayed, "crossing the floor" to the Ladder Company, also a very busy Unit, a few years later.

I spent nearly two decades in the South Bronx before coming to Hazmat, where I initially saw an opportunity for more education and perhaps more opportunities on the outside when the time comes.

All my life I've heard people say things like "You guys should make $200 grand a year," (back when we were making $60K/yr)...and that's a very touching sentiment, it really is.

But the reality is that we are basically a net COST for the city and for the people of New York...like the military, the police and government teachers, we provide basic services that the local government is duty bound to provide, should they provide them at all, at the lowest cost possible.

After all, millions of hardworking citizens NEVER need a police officer, or a firefighter and if they send their kids to private schools, have no need for that government service, so of course, it would stand to reason that those services need to be provided as cheaply and as streamlined/efficiently as is humanly possible.

That "net cost" aspect of government work is one of the reasons that government workers have traditionally been paid significantly less than their private sector colleagues.

That lower pay came with INCREASED job security, generally good healthcare benefits and a pension - cops and firefighters in NYC can retire after 20 years with half pay and some surrounding Municipalities have a 25 years for 2/3s pension. All of that is quite generous as compared to what is currently being offered in the private sector...and it's the private sector that is the engine of our entire economy.

I know that was long (sorry about that), but those are ust some of my thoughts on the matter.

Rachel said...

I know that was long (sorry about that), but those are ust some of my thoughts on the matter.

Hey, that's cool. At least you make sense. Someone made some smarmy comment about your writing at CN and I was tempted to retort, but why bother? I could tell he never bothered to try and understand what you were saying.

JMK said...

Well, that's why I really appreciate discussing things with the likes of you, Barry, Mal and some others.

Reasonable people can disagree on things.

In fact that's only natural. No one agrees all the time, most people no more than 70% of the time if they're really sympatico.

I don't consider those who disagree with me unreasonable, I only consider those who can't (or won't) make an actual rational argument for their position (even if they agree with me) to be unreasonable.

You have to know why you believe things, otherwise your ideas have no roots.

The CN comments section is a real mixed bag for me. It can be a source of real amusement. I mean, I'm interested in that Blue Wind guy precisely because he's never able to articulate a reason he believes what he does. It seems he's accepted a specific kind of dogma and considers anyone who disagrees with him a heretic of some sort.

I notice how he and some other extremist Liberals like to throw the term "fascist" around.

It led me to re-read a book by the poet Ezra Pound, who wrote a book called "Jefferson &/OR Mussollini," and that's led to me to look over some of Thomas Jefferson's own writings and (as Pound noted) the autobiography of Martin Van Buren (not that easy to find now-a-days)....I'll probably be slogging through those for awhile to see what, if any validity Pound's thesis had.

Pound actually made broadcasts from Italy in favor of Mussollini during WW II and was brought back to the USA (he'd been an expatriate for over two decades by then), where he was declared unfit to stand trial due to mental defect.

He was held at St Elizabeth's mental hospital until the late 1950s. After that he returned to Italy, where he died in 1973 I think.

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