Budget for no reason?

[quaddriver]

If I read that right Andrew, you would charge the very rich the 4.2% with no intention of ever paying off on the promise of what the 4.2% was collected for...

the current system might be insane, but that proposal reeks of theft...

It is in fact no different than selling CDs (cerficates of deposit) and then on maturity date stiffing the holder because he made too much money....

If I read that wrong, please advise.

[Crackpot]

I Have to agree with Quad there.

as far as military spending we really have to sic the GAO on them.

[rubato]

Per recent economic reading lifting the cap on SS taxed income would by itself 'fix' SS. It might be that merely raising it to $200,000 would be enough.

Currently SS is a redistributive system which pays out relatively less as you approach the upper limit per dollar paid in. Phasing it out completely by some income limit would make it more steeply redistributive and would alter the basic logic of the system which is: all are required to pay in and all benefit when (if) they reach retirement. We could do that but it would be very divisive politically and it is unnecessary.

One place to keep current on economics:

http://economistsview.typepad.com/

A variety of perspectives but Mark Thoma is somewhat liberal.

yrs,
rubato

[dgs49]

Not to be disagreeable, but the temporary reduction in the employee FICA tax to 4.2% is not the best place to start the discussion. The truer number is 12.4%, the combined NORMAL contribution of the employee and employer - recognizing that the entire 12.4% is paid by virtue of the employee's worth to the enterprise.

Oddly enough, I more or less agree with Andrew's screed above. DoD spending is MULTIPLES of what is needed or appropriate. Among the many reasons why we throw so much money at the military is that we must bribe them to participate in these ill-considered, pointless, unwinnable battles overseas. And unlike our conduct of previous wars, we must provide our fighters with mountains of personal protective gear and NEVER send them on missions where they are knowingly at mortal risk. "D Day" would NEVER happen today. No commander would ever mount an attack knowing that 25% of his men will be "sacrificed" in the process.

Regarding military retirement, I believe that once one reaches the "regular" rank of General (O7 & above), you are not "retired" but rather de-activated at full pay.

[Andrew D]

If I read that right Andrew, you would charge the very rich the 4.2% with no intention of ever paying off on the promise of what the 4.2% was collected for....

We could continue to honor the promise on the present terms with respect to the payments thus far made into the sytsem. But once we change the system, we would simply no longer make the promise. As I wrote, Social Security is really a welfare program -- and to the extent that it is not, it ought to be -- and we should treat it as such.

[quaddriver]

If I read that right Andrew, you would charge the very rich the 4.2% with no intention of ever paying off on the promise of what the 4.2% was collected for....

We could continue to honor the promise on the present terms with respect to the payments thus far made into the sytsem. But once we change the system, we would simply no longer make the promise. As I wrote, Social Security is really a welfare program -- and to the extent that it is not, it ought to be -- and we should treat it as such.

well if we are no longer gonna make the promise, how about no longer collect the money? you could even mandate the (historically) 6+% be dunked SOMEWHERE, at the persons choosing, but must be done. You would perform better than the govt over 30 years.

[Big RR]

Either that or just treat is as part of the budget nd not tax for it separately, adjusting the income tax upwards as need be. If there is no promise of a return, what's the justification for taxing it separately?

[quaddriver]

Either that or just treat is as part of the budget nd not tax for it separately, adjusting the income tax upwards as need be. If there is no promise of a return, what's the justification for taxing it separately?

If its not going to be used for welfare, workfare, oldage-fare then why tax it at all? If you need that '4.2%' into the coffers, then raise all the tax rates by 4.2% and be done with it.....did we just say the same thing?

[Big RR]

I'm not certain; my point as that if we want to trash social security (all participants receive benefits regardless of assets and income) as it now stands and make it a purely needs tested welfare program, then there's no need to have a separate social security tax. If needed, we should just raise the amount to pay it out of the general income tax.

[Long Run]

Why is 4.2% being used as the number? The rate was temporarily dropped for only 2011 from 6.2% for each the employer and employee to 4.2% for the employee (an odd sort of approach to ensuring the fiscal soundness of Social Security, but that is a digression).

The whole program was sold on the basis that it was an annuity/insurance program that provides a base level of retirement income (along with some disability and life insurance protection), in some rough proportion to the amount paid in. It has always been a better deal for those who put in less than those who pay the maximum. As such, the program itself is progressive, not regressive, because those who make less get more out of the program relative to what they have put in than those who pay the maximum.

You can jump the shark and say Social Security is just a welfare program that should compete with all other programs for the big pot of money (allowing some transition for accrued benefits from monies already paid in). If you are a congress-critter that would be the last thing you ever did, so that concept is a non-starter. Plus, slamming a 12.4% tax increase on upper earners at any time would be bad economic policy, but would be a really bad idea with a fragile recovery just gaining some traction.

If the proposal is to make Social Security more sustainable by upping the wage base on which taxes are paid, and reducing benefits to the really well-off, that is probably already in the cards. Most likely to happen when the rolling car is 2 inches from the cliff rather than today's 2 miles, but that is how we do things.

[Andrew D]

That would have the additional advantage of expanding the pool from which the revenue could be raised. Right now, the Social Security tax is levied only on income derived from working.

[quaddriver]

Why is 4.2% being used as the number? The rate was temporarily dropped for only 2011 from 6.2% for each the employer and employee to 4.2% for the employee (an odd sort of approach to ensuring the fiscal soundness of Social Security, but that is a digression).

The whole program was sold on the basis that it was an annuity/insurance program that provides a base level of retirement income (along with some disability and life insurance protection), in some rough proportion to the amount paid in. It has always been a better deal for those who put in less than those who pay the maximum. As such, the program itself is progressive, not regressive, because those who make less get more out of the program relative to what they have put in than those who pay the maximum.

You can jump the shark and say Social Security is just a welfare program that should compete with all other programs for the big pot of money (allowing some transition for accrued benefits from monies already paid in). If you are a congress-critter that would be the last thing you ever did, so that concept is a non-starter. Plus, slamming a 12.4% tax increase on upper earners at any time would be bad economic policy, but would be a really bad idea with a fragile recovery just gaining some traction.

If the proposal is to make Social Security more sustainable by upping the wage base on which taxes are paid, and reducing benefits to the really well-off, that is probably already in the cards. Most likely to happen when the rolling car is 2 inches from the cliff rather than today's 2 miles, but that is how we do things.

I pretty much agree with everything. I only used the 4.2% cuz andrew did. the actual number is over 6% historically and over *12*% if you are self employed. Part of the employer agreement is the boss picks up half the tab.

It has been put forth to set a max payout amount, yet collect on income at levels that will be phased out - this is ok IMO because a) there aint that many people comparatively and b) the super rich make too much to not reduce the monthly payments.

I still favor weaning off of it. Had I posssessed the 6.something % I paid in all these years, years ago, my own personal investments would have me a nice nest egg. Instead I hope I get the check my annual statement says I will, the IBM pays out on its pension at least something, that FERS pays me something, and my 401's are worth something.

[Gob]

The US Senate has passed a fresh stop-gap bill that will fund the US government for three more weeks, and avoid a shut-down while lawmakers work out a deal on the main federal budget.

The bill slashes $6bn (£3.71bn) from government spending in that period.

The US government would have run out of money on Friday had it not passed.

Legislators have been unable to agree to a long-term budget, with Democrats resisting demands from many Republicans for even deeper budget cuts.

President Barack Obama has said he will sign the bill into law, but he has implored congressional negotiators to agree to a budget to fund the government the the end of the fiscal year on 30 September.

Following that, Congress will have to approve a budget funding the next fiscal year.

http://www.bbc.co.uk/news/world-us-canada-12780474

You're just doing this to keep us laughing, aren't you? Seriously?