ACA kills again

[MajGenl.Meade]

I pay over 50% of what I earn in taxes ,user fees etc

Including "etc", I think it likely that everyone pays over 50% of what they earn on something or other. If income is $13K, there's no way on this green earth that anyone pays over 50% in taxes and other government mandates. At that level, a person is likely receiving considerable benefits from governmental programs that more than outweigh deductions - or is refusing on principal to accept such assistance.

Full disclosure: my daughter earns considerably less than $13K per year so I'm quite familiar with the economics of low income.

What are user fees? I'm not familiar with that concept - except perhaps for a road toll or something similar.

[Bicycle Bill]

"User fees" is a term used to refer to any payment made to a governmental agency outside of taxes.  Vehicle registration, for example, is a user fee.  The fee charged to permit your vehicle to enter a state or federal park is a user fee (the fee paid to use the campground is a user fee also).  The money you pay to get a building permit, or a restaurant license, or even a fishing or hunting license are all forms of user fees.  The money my bicycle club had to pay for a 'parade permit' in order to be able to hold a group bicycle ride (even though we were not closing the roads to the public nor were we requesting any special police escort or traffic control) is a user fee.  Charging someone to get a library card or a state-issued ID card is a user fee.  Billing someone for "cost recovery" when the fire department is called out is a user fee.

So, many governmental entities will reduce taxes — taxes that at one time would have supported the parks or the roads or the fire department — but then create or raise the fees to fund these things.  This way the politicians can truthfully claim that they reduced taxes, although the end user doesn't see any difference in the long run.

-"BB"-

[MajGenl.Meade]

Thanks BB

[rubato]

the main thing I was referring to is the raiding of the trust fund for general purposes ... "

I'm always amazed that purportedly intelligent people make this claim.

There was a long interval when SS took in more than it paid out each year. Now the next question is what do you do with the surplus? 1. Put it in a bank savings account and earn nearly nothing on it. This is the phantasmigorical "lock box" approach. 2. Invest it in equities which might happily do well or unhappily tank right when you need the cash. 3. Loan it to the rest of the federal government (the safest borrower in America since they can print money and accept it in payment for debts public and private.

#3 does not only looks like the only smart thing to do, it is the only smart thing to do.

Do you really want the federal government directly and heavily involved in equity markets? The prospect was so frightening to Greenspan that he advised Bush the stupider to flip the surplus Clinton left him with to a deficit to make sure it would not happen.


All else is whinging.


The SS system ran a surplus for a long time and that surplus is what will continue to ensure payments for a long time to come. Only Republicans are stupid and evil enough to want SS to fail; but that is what they have done since it was instituted.



yrs,
rubato

[Lord Jim]

Sanders Misleads on Social Security

Sen. Bernie Sanders repeats a Democratic talking point in saying that Social Security hasn’t contributed “one penny” — or “one nickel” — to the deficit. In fact, it contributed $73 billion to the deficit in 2014.

Sanders, an independent who’s running for the Democratic nomination for president, has made this claim several times, recently saying in a video he sent out on Twitter on Oct. 6 that “Social Security does not add one nickel to the deficit.” On Sept. 25, he tweeted that the program “had not contributed one penny to the deficit.” And he, like other Democrats, has been making the claim for several years.

Sanders is talking about what’s called the “on-budget” deficit, while Social Security is considered an “off-budget” program. But in terms of actual federal revenue and outlays, and borrowing, Social Security is contributing to yearly deficits and has been since 2010. Sanders himself has considered Social Security to be a part of the overall budget: On his Senate website, he includes raising the income cap on Social Security taxes as one way to “reduce the deficit.”

“Social Security adds to the unified deficit, which is the deficit we almost all discuss all the time,” Marc Goldwein, senior vice president and senior policy director at the bipartisan Committee for a Responsible Federal Budget, told us in an email interview. “It does so because we spend a lot more on Social Security benefits than we raise in payroll tax and other related revenue.”

Goldwein told us that Sanders’ statement contains a kernel of truth in that Social Security technically can’t run a debt. “That means that any [yearly] deficits it’s running now can only legally be paid because it was running surpluses in the past,” he says. But the government spent the surplus on other things. It owes Social Security the money, which is held in the form of Treasury securities. In order to pay it, the government must cut spending in other areas, raise taxes or borrow from the public.

Because current payroll taxes don’t produce enough revenue to pay Social Security benefits, the program is contributing to the yearly deficits.


We wrote about this claim in 2011, when other Democrats made the not-one-penny claim. As we said then, Social Security for years brought in more revenue through payroll taxes than it paid out in benefits, lessening the federal deficit and allowing Congress to spend more money in other areas. But that changed in 2010, when benefits paid outpaced revenues generated.

That year, the nonpartisan Congressional Budget Office said Social Security had a $37 billion primary deficit and projected a $30 billion deficit in 2014. The deficit actually was $73 billion in 2014, says CBO, which now estimates that the yearly deficit will rise to $177 billion in 2020 and $361 billion in 2025. (The “primary deficit” is the total budget deficit excluding interest payments.) CBO expects outlays to continue to rise, compared with the size of the economy, as baby boomers retire and retirees live longer, but tax revenues “will remain at an almost constant share of the economy.”

http://www.factcheck.org/2015/10/sander ... -security/

[Big RR]

It owes Social Security the money, which is held in the form of Treasury securities. In order to pay it, the government must cut spending in other areas, raise taxes or borrow from the public.

Please---If I borrow money from a bank and use/waste if for/on other things and then lack the capacity to pay it back (so that I have to borrow additional money), that is hardly the bank's fault, anymore than the inability of the government to pay back the debt to social security is anything but the fault of the government and its spending programs/tax policies, not the social security program.

[rubato]

Sanders Misleads on Social Security

Sen. Bernie Sanders repeats a Democratic talking point in saying that Social Security hasn’t contributed “one penny” — or “one nickel” — to the deficit. In fact, it contributed $73 billion to the deficit in 2014.

Sanders, an independent who’s running for the Democratic nomination for president, has made this claim several times, recently saying in a video he sent out on Twitter on Oct. 6 that “Social Security does not add one nickel to the deficit.” On Sept. 25, he tweeted that the program “had not contributed one penny to the deficit.” And he, like other Democrats, has been making the claim for several years.

Sanders is talking about what’s called the “on-budget” deficit, while Social Security is considered an “off-budget” program. But in terms of actual federal revenue and outlays, and borrowing, Social Security is contributing to yearly deficits and has been since 2010. Sanders himself has considered Social Security to be a part of the overall budget: On his Senate website, he includes raising the income cap on Social Security taxes as one way to “reduce the deficit.”
.[/b]

Because current payroll taxes don’t produce enough revenue to pay Social Security benefits, the program is contributing to the yearly deficits.

http://www.factcheck.org/2015/10/sander ... -security/

False. Social security ran a large surplus for a long time and is using that surplus now to make up the difference between current payments and current reciepts. During that time the federal government borrowed the surplus and used the money to pay for programs. It was counted as part of the federal deficit at that time.

The money borrowed by the Fed is an asset of SS which it can use to pay bills without being in deficit.


SS will not contribute to the deficit until the surplus is paid back in ca 2038 (I haven't seen a recent estimate).



yrs,
rubato

[Long Run]

the main thing I was referring to is the raiding of the trust fund for general purposes ... "

I'm always amazed that purportedly intelligent people make this claim.

There was a long interval when SS took in more than it paid out each year. Now the next question is what do you do with the surplus? 1. Put it in a bank savings account and earn nearly nothing on it. This is the phantasmigorical "lock box" approach. 2. Invest it in equities which might happily do well or unhappily tank right when you need the cash. 3. Loan it to the rest of the federal government (the safest borrower in America since they can print money and accept it in payment for debts public and private.

#3 does not only looks like the only smart thing to do, it is the only smart thing to do.

You mean, it would be stupid to have invested the surplus in long term assets to fund long term liabilities -- like every corporation in America is required to do and every state government does to fund its pension obligations? And like everyone of us has done for our own retirements?

There is no dispute that if Social Security had been designed intelligently, contributions would have gone into actual trust funds (like private and public pensions) to be prudently invested by professionals (in a mix of stocks, bonds, real estate and other assets) to fund the benefits promised with the payment of FICA taxes. If you look at the typical lifetime of a retirement plan, the vast majority of the benefits are paid not from contributions, but from the investment earnings on the contributions. Social Security is an anomaly as a retirement plan, and provides a puny benefit relative to the cost of the program.

[Big RR]

Well I'll agree that social security is very different from other retirement plans, but then it is also a pretty safe plan as all funds have been invested in US government securities, as a good portion of many other retirement plans are. And in any event, that money is or (should be there) for use now. I echo the statement previously made that I, too, would not like the federal government mucking around in the equity markets, and the conservative investments into government securities makes sense since social security is a last resort retirement plan which many need to rely on in order to avoid becoming public charges in heir retirement. One need only look how well state and many private defined benefit retirement plans have done recently to see how a guarantee of payment for life is quick becoming a thing of the past.

Should it have been in a lock box? I think it was--the SSA holds those bids and can redeem them for payment of benefits. the biggest problem I see with the system is that some in the federal government are now claiming the social security is taking too much current money when the real problem is that they issued it (perhaps) too many bonds. And so some seek to reduce benefits or change the program, conveniently forgetting how they used the money SSA gave them to fund many expenses in the past, hence my charge of raiding the funds. It's as if someone bought government bonds their entire life, and then were somehow accused of doing something wrong because they expected to be able to redeem them now when they need them.

[rubato]

the main thing I was referring to is the raiding of the trust fund for general purposes ... "

I'm always amazed that purportedly intelligent people make this claim.

There was a long interval when SS took in more than it paid out each year. Now the next question is what do you do with the surplus? 1. Put it in a bank savings account and earn nearly nothing on it. This is the phantasmigorical "lock box" approach. 2. Invest it in equities which might happily do well or unhappily tank right when you need the cash. 3. Loan it to the rest of the federal government (the safest borrower in America since they can print money and accept it in payment for debts public and private.

#3 does not only looks like the only smart thing to do, it is the only smart thing to do.

You mean, it would be stupid to have invested the surplus in long term assets to fund long term liabilities -- like every corporation in America is required to do and every state government does to fund its pension obligations? And like everyone of us has done for our own retirements?

There is no dispute that if Social Security had been designed intelligently, contributions would have gone into actual trust funds (like private and public pensions) to be prudently invested by professionals (in a mix of stocks, bonds, real estate and other assets) to fund the benefits promised with the payment of FICA taxes. If you look at the typical lifetime of a retirement plan, the vast majority of the benefits are paid not from contributions, but from the investment earnings on the contributions. Social Security is an anomaly as a retirement plan, and provides a puny benefit relative to the cost of the program.

The long term asset they invested in was the safest asset they possibly could; federal debt. If you look around US federal debt is so attractive that many countries, like Japan and China, use US federal debt as the blue chip investment when they have a surplus. But the idea that the federal government should be heavily invested in other kinds of investments is assinine. Even Greenspan (not as smart nor as courageous as Volcker) understood that there were horrific complications if the US federal government was significantly involved in private markets.

yrs,
rubato

[kmccune]

Thanks BB, Maj ,you want to see my 1099 UC AND W2 FORMS? AND I do not receive assistance ,my wife has a good job and that keeps me going,plus no vehicle payment and I do not waste money on things like morning coffee and biscuits at McDonalds ,currently I am living by myself and the fast dwindling mortage payments (ARM ) electricity and landline take the most of it,I could really use the percentage the govt siphons off right now .And I do not have the satellite pay to watch commercial TV service ,early to bed ,early to rise ,saves a pile of money .
When I tell somebody something ,there is little embellishment to it ,sure I dont go out carousing on Saturday nights and blow money on frivolous things , but a person can live pretty cheaply if you dont spend much on luxuries and smoking and drinking .

[Long Run]

Well I'll agree that social security is very different from other retirement plans,.

Not really. It operates on a similar principle, retirement benefits are based on the worker's salary level over a certain time period.

a pretty safe plan as all funds have been invested in US government securities, as a good portion of many other retirement plans are.

Most professionally invested retirement funds usually invest about 20% of the their portfolio in government bonds (and another 20-30% in corporate bonds), so is that a "good" portion?

the conservative investments into government securities makes sense since social security is a last resort retirement plan which many need to rely on in order to avoid becoming public charges in heir retirement.

If you think about this statement, it makes no sense. If the funding of Social Security is less than it would otherwise be, then how safe is the plan? How much safer would the promise of those retirement benefits be if instead of having $2.8 Trillion in reserves there were $5-7 Trillion in reserves? If every other retirement plan in the world invests in a range of investment classes (diversifies) because the science of investment says this will provide the best absolute return and the best risk-adjusted return, including protection against inflation risks, then it makes no sense to put Social Security at risk by not prudently investing its funds. That is, this is nothing more than telling an investor that they should put their money in a safe deposit box because investing is risky.

One need only look how well state and many private defined benefit retirement plans have done recently to see how a guarantee of payment for life is quick becoming a thing of the past.

The only reason state and private defined benefit plan are anywhere near as solvent and paying the benefit levels they pay is exactly because they have prudently invested their funds over the years. If they invested like Social Security, it wouldn't be a problem, it would be an unmitigated disaster. You can pick out any one year, or one month, and say "see I was right, the stock market goes down!" (but, even then, most plans in this year's down market year had positive returns because of strong performance in other sectors). But this is just silliness; no reasonable person makes long term investment choices based on just one year, especially one good year or one bad year. The problem with the defined benefit retirement plans that are in trouble is simple -- their benefit levels were too high relative to their contributions and reasonable expectation of retirement returns (many assumed returns of 8% or more, when a realistic return would be 6-7%, as opposed to the 1-2% from SSA).

For an interesting look at a conservative DB plan design, check out the variable annuity which is based on a 4% return, allowing very little down-size risk, and plenty of upside benefit potential if that target is exceeded: http://www.milliman.com/insight/eb/Vari ... olatility/

[Big RR]

For an interesting look at a conservative DB plan design

Variable annuities are not defined benefit plans--even the article draws the distinction and the link notes that variable annuities shift the risk to the recipients. In a defined benefit plan one receives a pension amount for life based on their salary while working and number of years worked (and a few other factors). Social security is like a defined benefit plan, but also includes an escalator so that the amount will rise as the cost of living rises, something DB plans do not do. Indeed, there are fewer and fewer defined benefit plans in the private sector, and even states are seeking to avoid them as many are unbelievably underfunded; hell, in NJ Chris Christie settled with the unions getting significant concessions in exchange for a contract that mandated additional state payments to sure up the system, and has since refused to make those payments.