So Bush's new plan is decent... but I really doubt that it's all that necessary. Kind of like his "fix" for Iraq. That, however, is beside the point.
This is what I understand about the current situation of SS (from various articles that I've read):
-Social Security is currently running at a ~$1.5 Trillion surplus
-This surplus is put into a trust fund that generates dividends from investments in U.S. federal securities.
-Other government programs can, and have been, tapping into this trust fund.
-Social Security won't stop taking in more money (from taxes) than it hands out for another 10+ years (2014-2018).
-Even when Social Security stops taking in more money from taxes than it pays out, it will still have a positive cash flow because of dividends from investments. This positive cash flow will continue for another 10 years (2024-2028).
-From that time until around 2042 (around 15 years later) Social Security can survive at the current level of taxes + dipping into the trust fund to make up the difference.
-Around the year 2042 (37 years from now), there will be the first cash shortage. The system will be able to sustain 70% of current benefits without running at a loss at the current level of taxation.
-Income is only taxed up to $87,900 a year. Any additional income after that is not taxed.
-If the taxable income ceiling was raised to tax income up to $150,000 (actually a percentage of the average national income which would currently be 150 grand), Social Security would stay solvent at its current level until around 2105.
-Social Security is a very efficient program as is, only 1% of taxes going towards overhead.
-If private/personal accounts were added, the overhead on these accounts would be something like 20%+
-The UK, Chile and Argentina are among nations that have tried privatizing their Social Security programs with lackluster results.
Here's what Bush is proposing (in a nut shell):
-He want's "Progressive Indexing" to determine cuts in benefits, mostly for middle and upper-class people with the addition of private accounts where individuals could invest 2% of their income in the stock market (kind of like a government 401K).
-Here's the cuts:
> People earning under $20,000 a year - no cuts. Benefits would be linked to income and cost of living as is currently. Not sure if this group can add private accounts.
>$20,000 to (around) $100,000: these people would see a cut in benefits as their benefits will now be determined by a mixture of the current system and inflation. This group can also add private accounts
>over $100,000: These people will have their benefits determined entirely by a new equation involving inflation. They will also be able to add private accounts.
(could somebody please provide me with some links please? I really don't have the time to research this)
It seems to me that with these private accounts, won't the richest recoup far more of their loss from the cuts than the middle-class will?
Also, I read an interesting article today that said that this system would essentially make Social Security more like a welfare program for the poor instead of a safety net for everybody. He made a good point saying "Programs for the poor end up being poor programs". This is largely due to the fact that many see the poor as "undeserving" and also because the wealthy, being in power, see nothing in the program for themselves, they won't support it. The author was afraid that, in the end, the poor (who Bush's plan is supposed to help) will be hurt by this.
Bush's plan, from what I hear will get rid of 70% of the SS shortfall, it won't even be a fix-all. The other 30% of the shortfall will have to be made up elsewhere. Where? Who knows?
It's obvious to me after seeing the Republican national convention last year that Bush wants to be like FDR. An odd thing for a conservative to want to be like a liberal icon (and father of modern America) but he does. He want's to be a hero war president like FDR and also to leave his conservative mark on Roosevelt's biggest progressive accomplish: Social Security. Why does he want this? I don't know, I guess being a spoiled little rich kid he's always gotten what he's wanted.
What's my plan? Well, I believe that most of the problem with Social Security (if you call it that) can be fixed with a little tweaking here and there. Everybody will be happy and private accounts won't be necessary:
-Raise the retirement age slightly. Perhaps link it to average life expectency so that this will be adjusted automatically in the future.
-Raise the cap on taxable SS income to $150,000 a year. There's no reason why the rich can't pay more of the burden.
-Put the trust fund in a "lock box" (like Al Gore wanted to do). This will keep the funds safe from other government programs taking from it.
-Add a temporary increase to the payroll tax. At least while the big baby-boom retirement is going on. After the baby-boomers begin to die off (I know it sounds morbid), we can lower this again.
What are your thoughts on the subject? Anybody amazed at my un-researched rant and my soap-box assertions?
This is what I understand about the current situation of SS (from various articles that I've read):
-Social Security is currently running at a ~$1.5 Trillion surplus
-This surplus is put into a trust fund that generates dividends from investments in U.S. federal securities.
-Other government programs can, and have been, tapping into this trust fund.
-Social Security won't stop taking in more money (from taxes) than it hands out for another 10+ years (2014-2018).
-Even when Social Security stops taking in more money from taxes than it pays out, it will still have a positive cash flow because of dividends from investments. This positive cash flow will continue for another 10 years (2024-2028).
-From that time until around 2042 (around 15 years later) Social Security can survive at the current level of taxes + dipping into the trust fund to make up the difference.
-Around the year 2042 (37 years from now), there will be the first cash shortage. The system will be able to sustain 70% of current benefits without running at a loss at the current level of taxation.
-Income is only taxed up to $87,900 a year. Any additional income after that is not taxed.
-If the taxable income ceiling was raised to tax income up to $150,000 (actually a percentage of the average national income which would currently be 150 grand), Social Security would stay solvent at its current level until around 2105.
-Social Security is a very efficient program as is, only 1% of taxes going towards overhead.
-If private/personal accounts were added, the overhead on these accounts would be something like 20%+
-The UK, Chile and Argentina are among nations that have tried privatizing their Social Security programs with lackluster results.
Here's what Bush is proposing (in a nut shell):
-He want's "Progressive Indexing" to determine cuts in benefits, mostly for middle and upper-class people with the addition of private accounts where individuals could invest 2% of their income in the stock market (kind of like a government 401K).
-Here's the cuts:
> People earning under $20,000 a year - no cuts. Benefits would be linked to income and cost of living as is currently. Not sure if this group can add private accounts.
>$20,000 to (around) $100,000: these people would see a cut in benefits as their benefits will now be determined by a mixture of the current system and inflation. This group can also add private accounts
>over $100,000: These people will have their benefits determined entirely by a new equation involving inflation. They will also be able to add private accounts.
(could somebody please provide me with some links please? I really don't have the time to research this)
It seems to me that with these private accounts, won't the richest recoup far more of their loss from the cuts than the middle-class will?
Also, I read an interesting article today that said that this system would essentially make Social Security more like a welfare program for the poor instead of a safety net for everybody. He made a good point saying "Programs for the poor end up being poor programs". This is largely due to the fact that many see the poor as "undeserving" and also because the wealthy, being in power, see nothing in the program for themselves, they won't support it. The author was afraid that, in the end, the poor (who Bush's plan is supposed to help) will be hurt by this.
Bush's plan, from what I hear will get rid of 70% of the SS shortfall, it won't even be a fix-all. The other 30% of the shortfall will have to be made up elsewhere. Where? Who knows?
It's obvious to me after seeing the Republican national convention last year that Bush wants to be like FDR. An odd thing for a conservative to want to be like a liberal icon (and father of modern America) but he does. He want's to be a hero war president like FDR and also to leave his conservative mark on Roosevelt's biggest progressive accomplish: Social Security. Why does he want this? I don't know, I guess being a spoiled little rich kid he's always gotten what he's wanted.
What's my plan? Well, I believe that most of the problem with Social Security (if you call it that) can be fixed with a little tweaking here and there. Everybody will be happy and private accounts won't be necessary:
-Raise the retirement age slightly. Perhaps link it to average life expectency so that this will be adjusted automatically in the future.
-Raise the cap on taxable SS income to $150,000 a year. There's no reason why the rich can't pay more of the burden.
-Put the trust fund in a "lock box" (like Al Gore wanted to do). This will keep the funds safe from other government programs taking from it.
-Add a temporary increase to the payroll tax. At least while the big baby-boom retirement is going on. After the baby-boomers begin to die off (I know it sounds morbid), we can lower this again.
What are your thoughts on the subject? Anybody amazed at my un-researched rant and my soap-box assertions?
