advertisement

GUEST COMMENTARY: Obama's tax deal will hurt Social Security

Tuesday, December 28, 2010 | 12:01 a.m. CST; updated 11:33 a.m. CST, Tuesday, December 28, 2010

We enter 2011 with a few more dollars in our paychecks. For about 98 percent of Americans, the extension of Bush tax cuts and the new payroll tax holiday will make it easier for us to afford a gallon, rather than a quart, of milk for our families each month and to fill our tanks almost as high as we did with lower gas prices last year. (We ought to be consuming less gas and driving electric cars, but I'll leave that for another commentary.)

On the other side of the Great Divide: the richest 2 percent of Americans will get vast windfalls from the deal Obama made with the GOP — ample enough to refurnish second and third homes or get those boats they've always needed.

But studies show us that they won't. They'll sock that money away for the kids' inheritance. We'll get no stimulative boost to the economy, but it sure will help some dynasties from dying. To give the rest of us some lunch money, House and Senate Republicans insisted this Christmas season on stuffing huge lumps of gold into Paris Hilton's velvet stockings. That's what happened when they extended tax cuts for the highest-income Americans and lowered the estate tax, which only gets levied on the wealthiest of the wealthy.

The rich keep getting richer. And richer. But, there is some stimulus in this deal, and it's better than no deal at all. And hey ... didn't we all get a boost from the "payroll tax holiday"? We didn't have that before. A holiday after Christmas, for a whole year. Hallelujah, auld lang syne and happy Valentine's Day.

Let's hold the confetti for a minute and take a closer look. Just because the deal was better than no deal, that doesn't mean it was a good one, even given this difficult political climate.

In addition to non-stimulative and expensive tax cuts and estate-tax favors for the wealthy, this package has another poison pill in it. In the 2009 Recovery Act, the Making Work Pay provision gave those of us making less than $95,000 annually ($190,000 for couples) a refundable tax credit. Income above that level didn't see a tax credit. It was progressive. Those most likely to use the money, stimulating the economy, received the money.

The new tax deal replaces this Making Work Pay credit with the Payroll Tax Holiday.

According to the Center on Economic Policy Research and the Tax Policy Center, a little more than half of tax-filers will indeed get a bigger paycheck because of a tax holiday than they would have under the Making Work Pay credit. However, about 42 percent of taxpayers will actually pay more taxes in 2011 than they would have if the Making Work Pay Credit had been extended.

So, the less you earn — and the more you need — the less you get under this tax deal.

Further, critics of this aspect of the tax deal worry that this Payroll Tax Holiday could become permanent. Congress has been more than squeamish in the past to reinstate taxes after temporary cuts — the incoming Congress even more so. But either way, this shift signifies political willingness to start altering the way we pay for Social Security in a way that has never been politically possible before.

As Sen. Bernie Sanders, I-Vt., cautioned in a floor debate in December leading up to the vote, "You're talking about the beginning of the end for Social Security." Couple this with a deficit-hysteric incoming Congress, and it's hard not to fear for the long-term well-being of America's imperiled middle- and low-income families.

Entering the New Year, I'm feeling less financially secure. There's not much to celebrate with Obama's tax deal, which accomplished far less than what is necessary or possible.

Karen Dolan is a fellow at the Institute for Policy Studies — a community of public scholars and organizers linking peace, justice and the environment in the U.S. and globally — based in Washington. This column was distributed through OtherWords.org, a project for the Institute of Policy Studies.


Like what you see here? Become a member.


Show Me the Errors (What's this?)

Report corrections or additions here. Leave comments below here.

You must be logged in to participate in the Show Me the Errors contest.


Comments

Michael Williams December 28, 2010 | 2:25 p.m.

""You're talking about the beginning of the end for Social Security."
________________________________

We can only hope.
Privatize the damn thing, either by turning it back to the people for them to save, or allow the people to invest in gov't-approved plans ranging from the very safe (gov't T-bills and similar things) to the moderately risky. In ALL cases, make it heritable (which is the main reason I support privatization).
______________________________________
It amazes me that my generation of flower children not only frittered their income on "crap" and "things that make me feel good", but now most of them will retire at 62 (I recently read a report that 3 or 4 are doing this, but I'm sorry I have no reference). Further, they are retiring with "nest eggs" of 5K to 100K.

Retire on <100K? You gotta be kidding! You better hope you don't live past 72, else you'll be movin' back in with the kids. It's simple math: Let's divide 100K by 10 years and you get.....10K/year to live off of, plus any interest accrued (yeah, right....5 bucks?). Now let's add your social security which, by retiring at age 62, is less than if you retired at 66....let's say $1200 per month, which is $14400/year.

Total is $24400 per year.

How does THAT compare to your current salary and bennies? Can you say, "MUCH lower standard of living?"
____________________________

How did this happen?

Well, for one thing, my generation forgot how to accumulate wealth. For a second reason, my generation forgot what an ASSET was. For a third reason, my generation forgot the word patience, which is just a common word for the $25-dollar words "delayed gratification."

Don't whine.

(Report Comment)
Michael Williams December 28, 2010 | 2:39 p.m.

The author says, "They'll sock that money away for the kids' inheritance."
___________________________

I love meaningless hyperbole like this because it shows me the author hasn't thought things through.

What does it mean "to sock that money away"? Did it go into a mattress? Is it laying in some bank in the form of wrapped C-notes?

No, it's not. The rich don't store money in mattresses because the maid or butler or pool boy might steal it. Also, money in the bank does not stay in the bank. It gets loaned out to someone and it's working someplace in the world. Or perhaps it's invested in T-bills that your kids have to pay back someday, but by gawd the money is building a bridge or road someplace. Or land...growing something.

Quite frankly, I'm happy when rich folks build a couple of houses or buy a boat.....that means some Joe Schmoe had a job someplace.

This article smacks of envy rather than solutions...except "tax them more". But authors like this NEVER say "How much more?" I don't know why.

Regarding inheritance taxes, I'd be more sympathetic if authors like this would come up with a plan to strip the Kennedy or Soros stashes upon their death. But, that will never happen because there are different definitions for "good-and-bad rich" based upon political affiliation.

(Report Comment)
Michael Williams December 28, 2010 | 2:44 p.m.

Oh, and by the way....they are no longer the Bush tax cuts.

They are the "Obama tax cuts".

You can check out his signature on the bottom of the bill. I swear to you the signature does NOT say GWB or anything close to that.

That means, he agreed.

I'm actually starting to like this guy; I can respect a politician who promises one thing but then runs headlong into a brick wall of "reality" and has to deal with "real" things rather than "ivory tower" things. This has happened a LOT over the last 2 years, and I'm proud of him.

(Report Comment)
Jimmy Bearfield December 28, 2010 | 8:57 p.m.

Karen, what about the nearly 50% of taxpayers who don't pay federal income taxes? Many of them also get a check courtesy of the remaining 50%+ who are carrying their load. The freeloaders should humble themselves before those who are carrying their load, instead of goading their apologists to whine on their behalf for an even bigger handout.

(Report Comment)
Derrick Fogle December 28, 2010 | 10:44 p.m.

For some of us, that tax holiday will *almost* offset the increases in insurance premiums. I'll only have to skip lunch once or twice a month to make up the difference. Oh boy.

I do think it's interesting that in one post, Mike says, "....by turning it back to the people for them to save..." then lambasts the author for "...by socking that money away..." all while lamenting our collective inability to plan and save for anything. You're looking a bit like a pinball there, buddy.

I still see a disconnect between the idea that the "rich" people's money always ends up being put to work somewhere that sends the money back into the economy. If that were true, the inequality index would not keep growing. The money would actually circulate, showing up as income across the board. It does not. The idea is only partially true.

Look no farther than the derivatives market to see money that circulates (actually, it doesn't even circulate, people just pretend it does), but it does so almost exclusively between the few huge pools of money that have collected it, instead of being sent back down into the lower ranks of the economy. As of 2009, the value of the derivatives market stood at over $600 Trillion dollars (yes, that's about 14 times the annual US GDP).

Those transactions don't create any jobs, real products, infrastructure, or anything else that does or could be used to create real new wealth. But, it somehow creates a profit. You think the government's got an issue of printing money out of nothing? The real estate bubble created about $10 Trillion in fake money in 8 years. The government also created about $10 Trillion in fake money in that timeframe. The derivatives market appears to have created about $400 Trillion in fake money in that timeframe.

The typical argument for derivatives markets is that they smooth out fluctuations in prices and minimize risk. How'd that work out for us in 2008?

It would be nice to think that we could get ahold of some of that $600 Trillion for real wealth-producing investments, but it's not real. It's just a mirage. I just wonder how long it will take before we (collectively) realize it's not real money. Most likely, that will happen the moment we finally try to tax it.

That's one of the first really good arguments I've heard against raising taxes on the super-wealthy. It really could trigger a massive financial collapse.

(Report Comment)
Michael Williams December 29, 2010 | 12:29 a.m.

Derrick: It's true that my use of the word "save" was incorrect in the paragraph where my REAL point was that SS should be privatized. I should have said the people should be able to keep the money and do with it what they want to...be it save, spend, invest, put in a mattress, whatever. Their choice, and their consequences (good or bad).

And I think you would agree that the "socking it away" verbiage by the author was.....well....wrong from BOTH our viewpoints. Correct? Money does NOT get socked away; it gets used in multiple ways, but it's not sitting still.

Let's not forget that many of these problems were caused by (1) folks who did not pay their mortgages, (2) the bundling of risky mortgage loans into bonds, (3) the false and "should be criminal" rating of those bonds by rating agencies, (4) the sale of these bonds all over the place (not a bad thing, except the ratings were false), (5) the purchase of insurance against default on these bonds from fly-by-night unregulated insurance agencies who had no-where-near the resources to pay off a default should one occur.

So, in my opinion, who should go to jail or at least pay a heavy price?

Well, since I'm generally an advocate of more-serious punishment of the "first cause" causer, those who did not pay the loans should not get off scot-free. The bond raters should be jailed. The insurers should be jailed if they were clearly underfunded, which is about all of them. And a whole buncha politicians over the last 25 years that have aided and abetted all this should join them.

Please don't insinuate that that 600T of derivatives is owned by the super wealthy (which I read in your missive). No.....much of it is/was owned by......us. We gave it willingly....for the same sort of high profits the super-wealthy had in mind. The very same.

As stated previously in other threads, I'll take more seriously the complaints against the super-wealthy more seriously once there is no discrimination between good-rich and bad-rich based upon political affiliation (Derrick: this statement is not meant for you, since it's rather clear you and I agree on this particular point...I think).

I see MU screwed up the game.....

(Report Comment)
Tim Dance December 29, 2010 | 2:20 a.m.

Yes, privatize SS so the financial gurus can mess with your money again and wipe your nest egg out. Multiple posts from libertarians does not make them right. Don't let them fool you. The wealthy is using these "liberty" arguments to make you think you will prosper like them. Chances are, you won't and you'll literally will be giving trillions of dollars to the likes of those who defrauded the American people. Stop listening to the useful idiots. Fight for your retirement.

(Report Comment)
John Schultz December 29, 2010 | 2:55 a.m.

That's right Tim, darn those pesky libertarians for telling people to save their own money for their own retirement instead of being dependent upon Uncle Sugar for the monthly Social Insecurity check.

One of my favorite activities is to make liberals argue math. Care to indulge me? Take a look at the numbers I laid out in this letter to the editor and let us know where you plan to get your retirement dollars from:

http://www.columbiamissourian.com/storie...

(Report Comment)
Jack Hamm December 29, 2010 | 7:34 a.m.

@ Michael

In theory I agree with you, unfortunately in reality things do not work that way; real life tends to be more complicated. You said it perfectly yourself in your first post and then seemed to go on to contradict your own observations. Most of your generation is set to retire soon and they have no savings. This is why we created Social Security in the first place and why we must keep it going. Social security is not a retirement plan or a pension and was never meant to be. SS is simply a social safety net for the senior class. Without SS how many millions from your generation would be living in poverty very soon? If you privatized it all what would we do when a market failure wipes out millions of peoples savings? What will they fall back on? SS is safe, there is little to no risk which is the whole point of the program.

Michael says: “Oh, and by the way....they are no longer the Bush tax cuts.”

Mike please join us in reality:

Republicans: “We will block EVERYTHING until the tax cuts are extended”

Dems: “Let’s try to at least pass the 9/11 First Responders Bill first”

Repubs: “NO! Tax cuts or filibuster”

Dems: “Ok, we can make a deal. You get YOUR tax cuts and we pass the First Responders and DADT”

Repubs (Mike Williams): “By the way democrats, these are your tax cuts now”

Seriously Michael? Obama makes a compromise with the Republicans who have publicly promised to hold up ALL legislation until the tax cuts are passed and then you come and say they are Obama’s tax cuts? Get a grip; that was beyond partisan hackery which is rather surprising coming from you. .

(Report Comment)
John Schultz December 29, 2010 | 9:39 a.m.

Jack, zero risk in Social Security also means zero reward. George Kennedy's op-ed in favor of Social Security that I rebutted stated that the average Social Security benefit was $13,860. That sure sounds like a great safety net to me. Thank you, big government, for taking our money and proving a pittance in return.

(Report Comment)
Michael Williams December 29, 2010 | 9:50 a.m.

Jack says, "Social security is not a retirement plan or a pension....."
_________________________

MW: Unfortunately, that's how folks think of it, and that's how they planned to use it. But apparently that planning didn't include any math, which means there is going to be a great awakening real soon.
__________________________

Jack: SS is simply a social safety net for the senior class.
___________________________

MW: Not a very good social safety net, methinks.

I think many folks missed my point about a privatized SS. The plan involved setting up a few gov't approved funds that had risk factors ranging from "almost no risk...like T-bills" up to "moderate risk...large cap stock fund". A person would not be allowed to invest in the stock market willy-nilly, and he/she would not be allowed to speculate in derivatives or...say...land or gold.

Whatever the case, this plan is certainly better than one that involves the government spending the money on other things, then depending upon younger workers to pay you off. If they can. Even worse, when you and your significant other die, the money is ALL gone.

I don't call the current plan a great plan....I call it no plan at all.
____________________________

The President simply responded to the realities of the election. So did Congress. That's what politicians do. It is neither a valid nor pretty defense to whine, "Well, they didn't let us do it." Democrats had two years controlling the Presidency and Congress to address this question. In light of that fact, I simply can't give credibility to complaints about the results of a last-minute lame-duck session.
_____________________________

Jack: "Without SS how many millions from your generation would be living in poverty very soon?"

MW: Several millions. And this will be WITH social security. $15K/year IS poverty.

(Report Comment)
Jack Hamm December 30, 2010 | 7:29 a.m.

@ Michael

Before Social Security the United States had a rather consistent historical poverty rate for senior citizens of about 35%. Since Social Security has been enacted the poverty rate for seniors is well below 10%. It has worked and you cannot argue with that; it is a FACT that SS achieved its objective.

"Several millions. And this will be WITH social security. $15K/year IS poverty."

No, for 1 person $10,830 is living in poverty. Moreover, as stated several times by myself and even you, SS was never meant to be lived off of in retirement. It is meant to keep seniors out of poverty; to keep them fed and housed which it accomplishes easily. Now if millions planned on it being their retirement that is not the fault of the SS system that is the fault of dumb citizens. The SS system is not broke.

"Whatever the case, this plan is certainly better than one that involves the government spending the money on other things"

Again, the government wasting the SS trust fund is not the fault of the SS system; it is a fault of bad politicians. The SS system is not broke, the people we elected to office are.

Michael, I would like you to explain how you would do your privatized system in a real world situation without either doubling the SS tax for the next 30 years or cutting off everyone who is currently receiving benefits.

I am a relatively young man. Right now I pay SS tax and my funds go to pay for someone who is currently on the system maybe even like yourself. Now if we switch to a privatized system my funds go into an interest bearing account or investment instead of to paying a current benefit leaving nothing to pay for current benefits. So, we either have to raise my taxes drastically in order to pay for both or they have to cut off your generations benefits (frankly I could see the first scenario happening; we all know it would not be the first time your generation has stolen from mine). We know that benefits are not going to get cut off because that would leave tens of millions of seniors in absolute poverty and we also know how strong their voting block is.

Yes your generation screwed up and did not save for their retirement. This is not the fault of the SS system, the government or anyone else besides the individuals that failed to save for themselves.

(Report Comment)
Michael Williams December 30, 2010 | 11:02 a.m.

Jack: The very fact that the SS system involves politicians IS the reason it is broken. That is, if the system involves any risk that we elect the wrong officials, then that system is broken or well on its way there. It should be independent of gov't officials excepting in the dictated funds into which you can invest.

No, I'm not on SS yet, even tho I'm retired. So, you aren't contributing to me.

$10K may be a legal definition of poverty, but $15K/year/person is certainly an operational definition of poverty. Could you make it on that? Me neither.

I will address your other comments about how I would change over to a privatized system, but I need to take grandkids back home. Later.

(PS: If you are a relatively young man, then you should be screaming-bloody-murder for privatized SS. The current SS program is a liability to you. A privatized SS account would be an asset to you.)

(Report Comment)
Jack Hamm December 30, 2010 | 11:59 a.m.

@ Michael

I could easily live off that amount as I already live with less and so do millions of Americans. My cost for basics (rent, food, clothes and transportation) is well under $10,000/year and I eat out plenty and have a rather decent place. I do make much more than this but I do not live up the limits of my income so that I avoid the situation that your generation is about to find themselves in.

"The very fact that the SS system involves politicians IS the reason it is broken"

Every system is going to have politics in place; your complaint is not grounded in the reality of our society and culture. Even your proposed plan had government involvement correct?

"The plan involved setting up a few gov't approved funds that had risk factors ranging from "almost no risk...like T-bills" up to "moderate risk...large cap stock fund"

Letting politicians choose the investment vehicles does not worry you? You don't think Wall Street lobbyist will be bribing our legislators to make sure they are chosen as the government option? 330 million new investors will create a lot of profit for someone; sounds like a situation ripe for corruption.

Both your plan and the current one have the possibility for corruption and misuses as will all other potential plans. These are the basic realities of the human condition. If you are going to argue against these then you’re not worth debating as you are not thinking in realistic terms.

(Report Comment)
Jack Hamm December 30, 2010 | 11:59 a.m.

“PS: If you are a relatively young man, then you should be screaming-bloody-murder for privatized SS. The current SS program is a liability to you. A privatized SS account would be an asset to you”

Personally I would prefer to invest my own income for my retirement but this issue is about not just me but over 300 million people and I can recognize that which is why I am not for privatization. I do not trust the average person to save for themselves and historical evidence supports my concerns. I believe that allowing millions to go into poverty would have much worse effects on my well being than if I am not allowed to invest my SS taxes myself. I believe that privatizing SS would open the door to corruption and usurping of power from the people to a handful of individuals. I also believe that privatizing SS is not possible without either stopping benefits to everyone currently on it who paid into the system their entire lives or without raising my taxes by double (or some form of compromise that screws both generations). I am not willing to screw over the entire baby boomer generation or my own generation so that I will profit a few more thousand dollars at the end of my days. I am also not willing to stop the benefits being paid to the children of workers that died which also come out of Social Security or the benefits paid to the permanently disabled that come out of Social Security. In the end I understand that as an American I have a duty to my fellow citizen; something that seems to have been lost in American thought after WWII.

I am going to be very blunt with this Mike. I recognize that this is not about me but about us. I recognize that the “what is best for me attitude” that you are using is what led to your generation taking this country from political and economic hegemony to its decline that we are seeing today. Last, I recognize that we are all interdependent on each other. Another citizen’s well-being affects my well-being significantly and vice-versa. The goal of SS was to solve a problem that had been plaguing human civilization for thousands of years; the elderly starving to death because they were no longer useful as a means of production. SS solved that problem and does it very efficiently. If we destroy this program it will just be one more thing that my generation looks at as a massive failure, both morally and politically, by your generation.

(Report Comment)
Andrew Sommer December 30, 2010 | 12:06 p.m.

“These are the basic realities of the human condition. If you are going to argue against these then you’re not worth debating as you are not thinking in realistic terms.”

No neo-con lives in reality which is exactly why their policies have screwed up the real world so much.

“If we destroy this program it will just be one more thing that my generation looks at as a massive failure, both morally and politically, by your generation.”

As a member of Jack’s generation I second this and I can say that the majority of my peers feel the same way. I have a feeling that when it comes time for my generation to write the history books the baby boomer generation and their politics will go down as the cause for the end of American dominance. We will spend the rest of our lives cleaning up their mistakes and paying off their debt and the sad part is that most of them don’t even see what they did to their children’s and grandchildren’s generation and the ones who do don’t seem to care (morally bankrupt) which is why they continue to do it.

(Report Comment)
John Schultz December 30, 2010 | 12:28 p.m.

Jack, can you definitively state that Social Security is the sole reason for the decrease in senior poverty? Could the post-World War Two economic boom also account for the increase in seniors' prosperity?

(Report Comment)
Andrew Sommer December 30, 2010 | 12:49 p.m.

@ John

We can safely say the answer to your question is no just like previous economic booms in countries across the globe and history did not see decreases in elderly poverty during economic booms.

Seniors got left out of boom periods for very basic and simple reasons that have already been stated; "they were no longer useful as a means of production". A boom time does not affect seniors because they do not have the means to be a part of the production process and thus do not benefit or profit from the economic upswing. If wages and benefits are increasing it does not affect a person who is no longer a wage earner. Moreover, a person living on savings in retirement would see these economic booms as detrimental as they tend to come with inflation and higher relative price levels (when concerning fixed incomes) which their savings are not immune to, effectively decreasing the relative size and utility of their savings.

(Report Comment)
Andrew Sommer December 30, 2010 | 12:51 p.m.

@ Jack

Sorry I answered John's question for you, couldn't help myself :)

(Report Comment)
Michael Williams December 30, 2010 | 2:23 p.m.

Jack says, "If you are going to argue against these then you’re not worth debating as you are not thinking in realistic terms."
____________________________

You believe I don't think in realistic terms?
My life says you are dead wrong.
In fact, I seem to have been "spot on".

But, if you don't want to discuss and debate with me, I guess I'm ok with that. Go preach to your own choir; you probably won't be exposed to new ideas from which you can choose or reject, but you'll find complete agreement. That can be comforting.

(Report Comment)
Michael Williams December 30, 2010 | 3:12 p.m.

John Schultz: I checked out your missive from the provided link. I liked it.

I also liked Ellis's subsequent comment. Folks aren't born stupid.....after that, all bets are off.

SS was created for the generation of folks that preceded mine (I'm a baby boomer); that generation is about gone. Those folks needed it. That generation went through hell, yet did exactly what it should have done......give the next generation a better start, a better philosophy, than they had. They gave us a post-war economic boom and...most important...a set of values that worked.

And the flower children screwed it up royally. Many of them did, anyway....not all.

Baby boomers....a generation of me-first, I want "crap", save no money, I deserve (fill in the blank), anticapitalists who played the grasshopper when they should have embraced "ant-hood". And their kids aren't much better.

And now they are gonna pay. Or at least, they should pay. But they won't because folks like Jack Hamm will have to pay it for them because it will be confiscated from his wallet. I think that's a shame, but that's the only way to continue this mess (note, I did NOT say fix...I said "continue"). I think the pre-boomer generation should continue to receive SS until they are gone as a generation. A portion of current payments into SS should go to paying that obligation. Any remainder should be privatized until the current SS obligations are gone.

As for those who criticized me for advocating privatization by using gov't approved funds (i.e., gov't is still involved).....I'm willing to back off that. I would be perfectly happy with no program at all...my preferred situation.

I simply do not believe in the philosophy of doing the same thing over and over...and expecting a different outcome. We are faced with a substantial attitude adjustment. "Kicking the can down the road" has to stop, both financially and mentally.

What ever happened to "take care of your parents"?

(Report Comment)
Ricky Gurley December 30, 2010 | 3:28 p.m.

I don't know much about this stuff, as I have said before.. But I do know one thing....

For those of you that have received Social Security and then support destroying Social Security for the "good of the people"...

It is a lot easier to tell the little boy that did not get any cookies because there was not enough to go around, that he should think of more than just himself; while you are eating your cookies.......

Ricky Gurley.

(Report Comment)
John Schultz December 30, 2010 | 3:45 p.m.

Andrew, Jack's premise about Social Security reducing senior poverty might be true for the seniors that were around when the program was implemented. My reference to the post-WW2 economic boon was that it lifted that generation and others, i.e. today's seniors. I wouldn't be surprised if seniors as a whole are the wealthiest segment of the population due to decades of accumulating wealth and investing compared to younger folks.

Take a look at the letter to the editor that I linked to and see a real way to ensure seniors can retire not in poverty and not reliant on mine and Jack's payroll taxes (short version, $100/month invested for 44 years in a tax-free Roth IRA yields a $600K nest egg). By forcing people into Social Security, it denies people the chance to build their own wealth that doesn't disappear when they die.

(Report Comment)
Jack Hamm December 30, 2010 | 4:13 p.m.

@ John

"Take a look at the letter to the editor that I linked to and see a real way to ensure seniors can retire not in poverty and not reliant on mine and Jack's payroll taxes (short version, $100/month invested for 44 years in a tax-free Roth IRA yields a $600K nest egg)."

I agree with this method and use it myself. Unfortunately we know that the average person will not do so, whether it is the baby boomer generation or my own. We know that people will typically consume now in preference to future consumption. This is not rational behavior or smart financially planning. However, it is part of the human condition. Over generations will we erode away at this problem to the point where the average person does have the education and fortitude to put off current consumption for savings? I believe that we will as I believe that humans constantly progress. However, this is a long and slow process and we have to have a system in place that helps us avoid the worst possible situation; millions of seniors starving to death or bringing their children who support them to financial ruin.

(Report Comment)
Jack Hamm December 30, 2010 | 4:21 p.m.

@ Michael

“You believe I don't think in realistic terms?
My life says you are dead wrong.
In fact, I seem to have been "spot on".

I said that knocking Social Security for having political inputs was unrealistic; especially considering that you yourself advocated a program with political involvement that offered an opportunity for corruption that the current system never could achieve. All human systems are going to have aspects of politics, corruption and inefficiency; these are basic undeniable aspects of the human species. The concern is to what degree these aspects are present in a system. Ignoring these issues or arguing against one program because it possesses some of these aspects while touting another program as superior even though it also possesses the same aspects is unrealistic. BTW, is using your wife as a point of reference a reliable source in this context? Think she might be slightly biased towards her husband’s argument over that of a stranger on the internet?
“As for those who criticized me for advocating privatization by using gov't approved funds (i.e., gov't is still involved).....I'm willing to back off that. I would be perfectly happy with no program at all...my preferred situation”

We know this is not possible. A large segment of the population will not save for retirement regardless of what system is in place unless they are forced to. This is why the government must be involved. The alternative is letting these people live in poverty in their senior years which will result in far greater problems for all of us.

Michael, generally I think we agree on what the problems are we just have differences on what the solution is. This issue is fundamentally different. I do not believe that the social security system is the problem. It has worked amazingly for decades and would continue to for many decades to come if politicians had not stolen the Trust Fund. Is it a problem that so many people think they can rely on SS for retirement but that is not the fault of the SS system just like the politicians are not a part of the system.

Example:
A 16 year old girl gets her first car and treats it like crap. She does not change the oil or other fluids, keep air in the tires etc. When the car breaks down her dad is obviously upset. If he was acting like you he would blame the car instead of his daughter. However, we both know that it is not the car’s fault; it did its job perfectly. The fault lies with the girl who did not use it properly just as many citizens do not plan properly and many politicians used SS funds improperly. We need to repair SS to the state that it should be in (refund the trust fund) just like the dad should repair the car. However, just like the dad should focus on teaching his daughter proper maintenance practices we need to teach our population basic savings techniques and more importantly motivate them to act on those techniques.

(Report Comment)
Michael Williams December 30, 2010 | 4:54 p.m.

Jack says, "If he was acting like you he would blame the car instead of his daughter."
_________________________

Absolutely incorrect. I blame the daughter, and I blame those who failed to plan ahead.....both are gonna do without their car without much sympathy from me.

SS may have worked in the past, but it's not going to work much longer. There are only 2 alternatives other than the one I prescribe: We can either tax YOU more, or we can extend the time before one can collect benefits.

You've already stated your opinion about taxing you more.

And you better hope the time before one can collect benefits doesn't get extended, either. Those old folks are inhabiting the jobs YOU will need (as you get older)....which in this economy and the one we are facing for quite a while, isn't very palatable to you, I suspect.

(Neither alternative is a fix. They are just another "kick the can down the road" thingie)

There is only one hope: Keep the benefits for all those of the generation before mine, then cut it off. Or, if that is too drastic for you, I'd even agree with "If you were born before 1970, you'll get benefits. Otherwise, get to work on your own retirement plan". This is consistent with my view that if you haven't figured out the difference between an asset and a liability by the time you are 40, you are toast anyway and have no right to expect assistance from anyone other than your own relatives.

Fact is: You are gonna pay someone else's retirement AND provide for your own. And provide for your family, too. The things you (collectively, perhaps not you specifically) must do in your next 40+ years are already cast in stone...whether you (collectively) realize it or not. It's a done deal.

Hey, you are disgusted, I am disgusted.....we're both disgusted. The only place we disagree is that you think there is a "fix" that fixes the current program that you want to keep.

I heartily disagree. I think you and your youngun's are skrood.

(Report Comment)
Michael Williams December 30, 2010 | 5:00 p.m.

On a related note, most baby boomers have IRAs or equivalent. I do not know the average value of those IRAs, but I do know there are a LOT of shares in those IRAs.

Think about what is going to happen when the baby boomers start to cash in those IRAs for day-to-day living expenses.

"To cash in" means selling stock. Selling stock means you have to have a buyer. Being a buyer means there must be a demand, which is volume-based....if there is a large volume of stock available for sale (aka, baby boomers selling), then the price goes down. Ergo, the stock market goes down, which means it gets harder for the corporations providing jobs to get cash for job creation. Oh, and the remaining value of boomer IRAs goes down, also.

It won't be pretty.

(Report Comment)
Jack Hamm December 30, 2010 | 6:10 p.m.

@ Michael

“Fact is: You are gonna pay someone else's retirement AND provide for your own. And provide for your family, too. The things you (collectively, perhaps not you specifically) must do in your next 40+ years are already cast in stone...whether you (collectively) realize it or not. It's a done deal.

Hey, you are disgusted, I am disgusted.....we're both disgusted. The only place we disagree is that you think there is a "fix" that fixes the current program that you want to keep.”

I agree completely. Your “fact is” section is the most likely situation unfortunately. I however don’t think there is a fix because I do not think there is anything to fix. I think we adjust the tax rates and benefits to reflect current economic and population conditions just like we did in the 80s and will have to do again in the future and leave the system in tact. I believe this will leave a large segment of the baby boomer generation in a tough place. They will not be left in poverty in the sense that they are starving or homeless but they will see a substantial decrease in their standard of living. I say to them; “you reap what you sow”. This allows the SS safety net to stay viable for the younger generations ensuring that they will not retire to a life of poverty while doing the same for the current generation and not transferring the cost of the baby boomers retirement to future generations. Some members of the generation may help their parents financially through their golden years but it will be by their choice. The most important thing is to start educating and encouraging strong savings and investment strategies to those still in the workforce so that they do not repeat the mistakes of those that came before them. The thing that really bothers my generation is that your generation thinks that your opinion matters. SS is a dead issue for the baby boomers. We are talking about MY future retirement and MY future taxes. Just because many baby boomers messed up and failed to properly plan to supplement their social security income does not mean that my generation will make the same mistake.

(Report Comment)
Jack Hamm December 30, 2010 | 6:12 p.m.

“On a related note, most baby boomers have IRAs or equivalent. I do not know the average value of those IRAs, but I do know there are a LOT of shares in those IRAs.”

I read recently that 50% of baby boomers have zero net assets or retirement savings (I will try to find and post the article). Those are the people I am concerned about. On the other hand many baby boomers have done a terrific job of financial planning and they will reap the benefits of their hard work.

“Think about what is going to happen when the baby boomers start to cash in those IRAs for day-to-day living expenses.”

Hopefully as you sell financial assets to close down your IRA younger people like me will buy those assets to start up our IRAs. The problem I see though is my generation not having the ability to do so even if they wanted to. If cost of living continues to rise and real wages continue to stay stagnant resulting in pooling all wealth and income into a few hands younger generations may not have the income available to create enough demand in investment markets to balance the supply of investments coming from the retiring generation.

(Report Comment)
Michael Williams December 30, 2010 | 6:48 p.m.

Jack: "I say to them; “you reap what you sow”."

Me: Agree. I'm just glad I figured this out long, long ago. Of course, my dad and mom had a lot to do with this. Don't forget, tho....these folks have been politically active for a long time, and they vote. You'll have to deal with this. Good luck with that, lol.
__________________________

Jack: ",,,because I do not think there is anything to fix."

Me: So long as politicians have access to use the so-called SS Trust Fund (which doesn't exist, does it Al Gore?), the system is broken and there is something to fix.
__________________________

Jack: "Hopefully as you sell financial assets to close down your IRA younger people like me will buy those assets to start up our IRAs."

Me: There's lots more of us than there are of you...which again means too much volume. 'Tis true, you'll get the shares cheap, but that means the money available to retires (present and future) goes down. You'll have to deal with that, probably by increased SS taxes or somesuch.

It won't be long before the wealthy will be of your generation. They will be the ones who are now paying attention to assets, liability, financial matters, fundamentals of the marketplace, politics, delayed gratification, etc., and they will probably be based in countries other than the US that are favorable to them.
____________________________

As for boomers who have planned well, I wonder how many of them have planned so well that they can last 20-25 years? A million dollars ain't much at retirement if you have good health. Less, if you don't.

(Report Comment)
Paul Allaire January 1, 2011 | 8:04 p.m.

At this point it probably doesn't matter what we do because the dollars we have obliged ourselves to pay out and the dollars that we collect in taxes are going to be worth such a small amount it's not even worth discussing.

You blame Obama. I blame Bush.

http://webspace.webring.com/people/mr/ri...

Or wait. Maybe it really will SUCK.

(Report Comment)
Yves Montclear January 1, 2011 | 8:16 p.m.

Can't we blame Paul Slinkey?

Paul Slinkey wrote:
--You blame Obama. I blame Bush.--

(Report Comment)
Paul Allaire January 2, 2011 | 1:22 p.m.

You could. Actually, it really was my fault. I wanted to destroy us because I hate your freedom.

(Report Comment)

Leave a comment

Speak up and join the conversation! Make sure to follow the guidelines outlined below and register with our site. You must be logged in to comment. (Our full comment policy is here.)

  • Don't use obscene, profane or vulgar language.
  • Don't use language that makes personal attacks on fellow commenters or discriminates based on race, religion, gender or ethnicity.
  • Use your real first and last name when registering on the website. It will be published with every comment. (Read why we ask for that here.)
  • Don’t solicit or promote businesses.

We are not able to monitor every comment that comes through. If you see something objectionable, please click the "Report comment" link.

You must be logged in to comment.

Forget your password?

Don't have an account? Register here.

advertisements