The President gave a news conference last night and guess what no change. The president is still stuck in the something for nothing loop he can't move to reality . you get what you pay for . He is using the same flawed argument . He is assuming that all the baby boomers will live for ever . The president misses the point that a 1.89 to 2.0% increase in the FICA tax will stabilize the system till the end of this century. The president fails to see that when inflation out paces wages the SSA system looses revenue . Remember the the minimum wage bill . when the RNC blocked passage they were driving another nail into the SSA coffin. They know what they are doing . Every thing they can do to weaken Social Security.

note fig 1 The three out comes chart from the SSA Trustees report.

The 1.89 to 2.00% increase in FICA will put us on the low cost curve ( curve I ) , end of problem, If the RNC will let wages grow with inflation. The RNC is in control of the SSA Trust short fall, They can increase the short fall at will, just keep wages losing ground to inflation. This will keep SSA revenues artificially low with respect to the cost of living, on any index.

If the FICA salary cap is moved up the SSA Trust will grow that much faster ( no draw down on the trust). If the private accounts described in the Rangel fix Plus Private account addition are enacted, retirement poverty will be eliminated.

reply

From:

wmhart1

5:10 am

To:

91203

(607 of 618)

16941.607 in reply to 16941.605

The regressive payroll tax rate increase you advocate is a bad solution.

1. An increase in the regressive payroll tax of 1.92% would mean that workers would be paying about $86 billion more in taxes this year, with the dollar size of the tax increase growing with the growth in wages from year to year.

2. Collecting that much more in taxes more would mean that the federal government would get that much more in Social Security surpluses. And the federal government would give the SSTF more in special issue U.S. bonds. Using U.S. bonds to pre-fund future old age support is a fine "financial" pre-funding mechanism but a very poor economic pre-funding mechanism.

3. The economic effect of simply increasing the regressive payroll tax ultimately would probably have a negative effect on financing. Back in 1983, with the "big fix" of Social Security through increases in payroll taxation and the intent to build the SSTF, Social Security was projected to be solvent through 2063. But by the mid-1990s those projections had declined to 2029, and now they stand at 2041. In my opinion, treating Social Security solvency solely from a financial perspective, without taking account of the economic impact of tax increases is a deeply flawed analysis.

With respect to the 1983 "big fix", I believe that what happened as a result of those regressive payroll tax increases was that baby boomers had less resources for use in real economic investment and that this resulted in reduced economic growth and reduced wage growth. And in effect, this resulted in less payroll taxes being collected. Treating Social Security's problems solely as financial problems, without addressing the economics of the situation, is the real something for nothing scenario.

In fact, all of Social Security is based on something for nothing. Why? Because paying Social Security payroll taxes that get used (a) for current benefits and consumption spending by the elderly and (b) for current consumption spending (i.e., surplus SS taxes) by the federal government does nothing to advance the economic ability of the United States to actually provide old age support to the elderly of the future.

Best regards,

If you look at fig .1

"The three out comes chart" from the 2005 SSA condition report.

http://www.ssa.gov/finance/2004/Full_FY04_PAR.pdf

If one can see the low cost curve ( 1 ) it can be seen that the Trust fund balance begins to rise after a moderate inflection. This is what 1.89 to 2.00 % will do . The problem is fixed. The cost over 20 years is about 1.6 Trillion dollars as per your own dollar projections. If the Bush plan is implemented the cost over the first 20 years will be OVER 2 TIMES GREATER and the problem isNOT FIXED. See fig.2

Now which is cheaper pay for what you get or try to borrow your way out of the problem. Then cover up the mess with spin-o-nomics.

How often will you buy a set of thousand dollar wheels , with thousand dollar tires mounted on them, and believe that this is the correct fix for a broken timing belt. WWW.INTLISEC.COM

To: 91203

ps

With respect to the distinction between "finance" and "economics" please consider the following from the Congressional Budget Office:

Any strategy to prepare the United States for an aging population must deal with a key fact: the goods and services that retirees consume in the future will have to be produced at that time by the U.S. economy or imported from abroad. From that perspective, what matters is not the financial structure of the Social Security program but the capacity of the economy. Various options for reform will have different effects on the economy and on the division of resources between the elderly and other people. To the extent that those options boost the future size of the economy and increase the nation's accumulation of assets, they can lessen the burden on future workers of making payments to the elderly.

How can the federal government expand the economy? Possible ways include running budget surpluses or promoting private saving, which can provide more funds for investment in business equipment, structures, and other types of capital; changing tax and regulatory policies to make the economy more efficient or give people greater incentives to work or improve their skills; and increasing government spending on programs that are geared toward investment rather than current consumption. In addition, changing some of the rules of the Social Security program could promote economic growth. In most cases, increasing the size of the economy requires policy actions that cause people to consume less or work more. Thus, policymakers should weigh the benefits of a larger economy in the future against the costs of those policy actions today.

http://www.cbo.gov/showdoc.cfm?index=3213&sequence=5

Best regards,

REPLY

One question have you ever balanced your own budget? I am very sure that you have done this many times. It is time the RNC started to face up to the problems of this country and stop borrowing money that does not belong to them and forcing future generations to clean up the mess that they created. If the Bush administration doesn't straighten up and fly right, some future administration will be forced to default on the special obligation bonds in the SSA Trust.

With respect to the fueling of the economy, why not let the people in the economy drive spending. There is no need for government intervention just enact the private accounts described in the RANGEL Fix Plus A Private Addition . In this plan retirement savings will begin at birth with the issuance of the Social Security card. A one time grant of $3.00 is deposited in the account and begins to earn interest ASAP. This is a cost of a whopping ~$12 Million per year. This will be the ultimate budget buster and will yield over $80,000.00 at age 65 ( with no additional deposits ) @4% per quarter. If this same person works from age 20 to age 64 and contributes $3.00 per week @ 4%/quarter the account will have over $900,000.00 in it . This should ease the problems of retirement when added to the OASI benefit. --THIS CUSTOMER HAS MONEY TO SPEND -------

THIS IS WHAT WE WILL NEED MORE CUSTOMERS WITH MORE MONEY

If some where along the way this person deposited an extra $300.00 or so he/she would have a real private account . not some over complex veiled margin account . Just think of it Millions of old farts with Millions of dollars and nothing to spend it on. Do you think the economy would grow a point or two with that kind of buying power?

Instead of retiring to poverty how about retiring to a life of lesure with millions in the SSA private account addition.