OT: 1 Trillion explained

[LarryC]

This time, my comments are inserted above in bold italic.

Larry-- Thanks for drilling all that out. You have way more patience than I do!!

Mark, read it again. I think he admitted that there was a rather large component of SS that is welfare. His original proposition was that there was not a welfare element. Finding this to not be true, Larry responds with "So?".

I "admitted" no such thing. SS is not welfare, as I said and explained repeatedly. Never soaked in, apparently.

You still don't understand the subject or what I write, and you apparently disagree with me because I won't buy into some claimed linkage between a vague policy proposal and current SS financing. No such link was actually specified in any kind of detail, so naturally I don't buy it. This area is extremely complicated, and vague, supposed cause-and-effect relationships are speculative and hypothetical. Not good enough for policy making.

IIRC, the "so?" was in response to a non-sequitur where you thought made a point and it didn't.

EDIT: I can't find the list of fundamental differences between social insurance and welfare that I thought I posted, so here are the most important ones:

• Social insurance (e.g., Social Security, Medicare) is an EARNED benefit specified in statute, paid into by beneficiaries during their working years. Welfare is an UNEARNED benefit. Recipients do not pay into the system.
• Social insurance eligibility depends on meeting statutory criteria, e.g., over 65. It is NOT dependent on income or personal resource criteria. In contrast, welfare is dependent on exactly those things -- one cannot go on welfare unless he/she falls below certain income and resource limits, such as whether one owns a car or house.

These are stark and fundamental differences. The two kinds of programs can't be shmooshed together, although a certain percentage of people can be eligible for both, but administered separately.

[Jeff Matthews]

Larry, I apologize to you. I thought you admitted that welfare was a part of social security. I thought this because you admitted you were not aware that there were minimum payments set for the poor, regardless of how much they paid in. To me, that equals welfare. I thought your original point was there was not welfare in the SS system because it all depended on what you paid in. That is why I showed you proof that that was not correct. If you did not pay in enough, you still can receive certain minimum payments. Is that not welfare in your mind? I thought you acquiesced that it was and were just saying "so?". If you don't think that is welfare, okay. But I don't understand why you wouldn't recognize it as welfare.

Mark, I am very familiar with the wealth distribution figures you would have me reasearch. Yes, I know the top 20% own 80% of the net wealth in America, and on and on...... It is an interesting statistic to say the least.

Think of this when you consider the point about your GINI oberservations: 0 is perfect equal distribution. 1 is the most imperfect, where all wealth is owned by a single individual.

Now, 0 would represent what the communists want (in theory). 1 would represent what the capitalists want (for each of themselves, if they could, in theory). These comparative numbers don't say a lot about whether our coefficient is "better" or "worse." It depends on what you want in a society. I will ask you this: If our coefficient makes us "way down the list," then, why are we the number one nation in terms of where the immigrants want to settle and raise their families? Why does the rest of the world want to come here if we are so far down the totem pole, and it is so unfair? I think the coefficient is just a number which can be ranked. What is the "healthiest" number is ripe for much debate. To me, I think the proof is in the pudding just due to the plain fact that this country is where the most immigrants in the world seem to want to be. They aren't coming here because Denmark is better. If our GINI was "worse" than say, Denmark, then why doesn't Denmark have near as much an immigration issue as the US? You can see I repeatedly put "worse" in quotes for effect.

[LarryC]

Larry, I apologize to you. I thought you admitted that welfare was a part of social security. I thought this because you admitted you were not aware that there were minimum payments set for the poor, regardless of how much they paid in. To me, that equals welfare. I thought your original point was there was not welfare in the SS system because it all depended on what you paid in. That is why I showed you proof that that was not correct. If you did not pay in enough, you still can receive certain minimum payments. Is that not welfare in your mind? I thought you acquiesced that it was and were just saying "so?". If you don't think that is welfare, okay. But I don't understand why you wouldn't recognize it as welfare.

No apology needed in this spirited debate in an extremely complicated area. Just a little frustration is all. Although I was not aware of the minimum payments provision, the individuals involved had to have paid in for 40 quarters in order to be eligible at all. Not like welfare where just being poor and in some eligibility category is enough to start eligibility determination.

To explain a little further, SS payments have always been RELATIVELY higher for lower-income beneficiaries in relation to what was paid in. I don't look on that as welfare, because "welfare" to me means the state-run public assistance programs for the poor, not the Nation's social insurance programs for everyone. I see now that that's what you meant by "welfare element." I make a clearer distinction than you do.

[Jeff Matthews]

No apology needed in this spirited debate in an extremely complicated area. Just a little frustration is all. Although I was not aware of the minimum payments provision, the individuals involved had to have paid in for 40 quarters in order to be eligible at all. Not like welfare where just being poor and in some eligibility category is enough to start eligibility determination.

To explain a little further, SS payments have always been RELATIVELY higher for lower-income beneficiaries in relation to what was paid in. I don't look on that as welfare, because "welfare" to me means the state-run public assistance programs for the poor, not the Nation's social insurance programs for everyone. I see now that that's what you meant by "welfare element." I make a clearer distinction than you do.

You might also note that the work history requirement is waived for those who are too young to have a sufficient work history. That is a very important distinction that should also be made clear.

Then, there is SSI, which is part of the SS system, and which pays benefits irrespective to work history. The only requirement is age.

"These amendments also established the Supplemental Security Income (SSI). Immigrants who had never paid into the system became eligible for SSI benefits when they reached age 65. SSI is not a Social Security benefit, but a welfare program, because the elderly and disabled poor are entitled to SSI regardless of work history. Likewise, SSI is not an entitlement, because there is no right to SSI payments."

http://en.wikipedia.org/wiki/Social_Security_(United_States)

[Islander]

why are we the number one nation in terms of where the immigrants want to settle and raise their families?

I'm not so sure about that "number one nation for immigrants" claim anymore. All the first world nations are experiencing it, whether from Africa, Asia, or eastern Europe. Canada may be the number one nation for immigrants from the US, so what does that tell you? They don't just come for the hockey...

[LarryC]

You might also note that the work history requirement is waived for those who are too young to have a sufficient work history. That is a very important distinction that should also be made clear.

Then, there is SSI, which is part of the SS system, and which pays benefits irrespective to work history. The only requirement is age.

Not so. SSI is a partial federalization of certain WELFARE categories (old age, blind, and disabled), but is not Social Security social insurance! Important parts of it are still run by the states, while the federal part is administered by the Social Security Administration. Because it is welfare, there is no pay-in by recipients, and the benefits are not earned (read the distinctions I set forth above). Instead, recipients can only get benefits by having very low income and resources. It's a big stretch to call it "part of the SS system."

Therefore, it is NOT true that the "only requirement is age." Rather, the category requirements are (1) old age, or (2) disability, or (3) blindness, and the key requirement is to fall below that state's income and resource limits. Those historically have been pathetically low, but that's another story.

In contrast, Social Security has NO income limits, and is an EARNED benefit because the beneficiaries pay into the system.

"These amendments also established the Supplemental Security Income (SSI). Immigrants who had never paid into the system became eligible for SSI benefits when they reached age 65. SSI is not a Social Security benefit, but a welfare program, because the elderly and disabled poor are entitled to SSI regardless of work history. Likewise, SSI is not an entitlement, because there is no right to SSI payments."

Pretty much what I just said.

Comments in bold. BTW, the reason I get so exercised is that enemies of SS have been very clever at finding ways to equate SS with "help" for the poor, and to undermine and raise doubts about trust fund integrity by mooshing SS financing into general revenue taxation.

It's for that reason that I tend to agree with MDeneen that you seem to have been guzzling kool-aid from talk radio in anr effort to (1) continue to shift wealth to upper income levels and (2) hand over SS tax monies to the Wall St. barony. That's just what the country needs -- to knock over the one stable sector of retirement benefits and put it in the same vulnerable sandbox with housing and securities. How would you like your retirement to be permanently based on today's stock market and housing tumble, and inflated only by the CPI for the remainder of your life?

[LarryC]

nm.

[Jeff Matthews]

Mark, I get your take. Here's mine.....

If you feel you have talent, work-ethic and at least a little propensity for good things to happen to you because of those traits, you want to be in America, or at least somewhere like America, where capitalism reigns and wealth concentrates. You believe you can use your talents - and with maybe just a little luck - you can amass more than average wealth. At least you have the chance, which itself is very important to a motivated person.

If you feel you are not special, not talented in terms of what it takes to amass wealth, and/or your work-ethic is not so good, then, you want to be on the island you mentioned - where everyone gets the same amount of fruit and survives.

True?

[Jeff Matthews]

Mark, I am very familiar with the wealth distribution figures you would have me reasearch. Yes, I know the top 20% own 80% of the net wealth in America, and on and on...... It is an interesting statistic to say the least.

MD: No, it's much much worse than that Jeff. It's 1% owns 40% and GROWING.

My comments in bold.

No. You were counting only "financial wealth, which excludes home equity and other things. I was talking about net wealth.

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

[Jeff Matthews]

Mark, I get your take. Here's mine.....

If you feel you have talent, work-ethic and at least a little propensity for good things to happen to you because of those traits, you want to be in America, or at least somewhere like America, where capitalism reigns and wealth concentrates. You believe you can use your talents - and with maybe just a little luck - you can amass more than average wealth. At least you have the chance, which itself is very important to a motivated person.

If you feel you are not special, not talented in terms of what it takes to amass wealth, and/or your work-ethic is not so good, then, you want to be on the island you mentioned - where everyone gets the same amount of fruit and survives.

True?

Hi Jeff--

Your first graph is a reasonable take on laissez-faire principles. Your second graph erroneously equates one's belief in justice with "not a good work ethic." And of course, like most Westerners you associate "work" and "motivation" with "race for more money." Under your definition Jesus had a "bad work ethic." And in fact, any person involved in works of the the spirit, or even works of the mind, would likewise have a bad work ethic. I won't go into the use of your terms "non special" and "not talented," which don't remotely describe alternative to compulsively chasing more money.

To be fair, your view is the predominant view of the mass consumption culture of the West. The competition for more things, bigger houses, more money and the winning stock is "the purpose of your life." In this quest you find the entire reason and use for "motivation" or "talent" or "intelligence." The essence of it being it must be used against others (competition) and always for material (measurable) gain otherwise it is wasted, or of no value.

In your model where talent, motivation and work ethic is only useful when applied to gaining more share from others, you might one day when you have some time ponder these issues:

-what actually occurs over time as the competition gets ever more fierce while your talents remain relatively fixed?

-what are the reasonable limits to anyone using competitive force? Stealing? Killing? War? Mass Destruction? What are your limits? What if your limits are far shorter than others?

-Does a winner take all game enhance or detract from human survivability?

-when the end of your time comes, you'll be happy to simply count up your share?

Thankls for the discussion. As always, entertaining!

But Mark, looking at your paragraph above, which I bolded, you seem to indicate that there is more to life than money. I agree with that. You also seem to indicate that for some people, there might just be too much focus on money out there. Okay, I can agree with that. If money is not your bag, don't ask for it for nothing. Just learn to be content without it. Let the others whose "thing" is chasing the buck keep their buck.

This whole debate has been to ponder "why people should get money without having to work for it." Now, I must stress your opinion regarding your belief that there is misplaced emphasis on chasing the buck. It is a "value" and is not easily subject to proof, if it is at all. I will not try to challenge that opinion. However, if you want to chase money, chase it and make it yours. If you don't want to chase money, fine. Just be content not having it. But don't complain because you want money but don't have the desire to emphasize it like the others do.

[Jeff Matthews]

"... which has nothing to do about getting money without working for it."

Well, I showed you that was not the case in a large respect. So, I guess that's about it. There's nothing left to say.

[Jeff Matthews]

Mark, I'll take you for your word on all that. As regards this type of "insurance," you bet I think it is bad. A guaranteed minimum pay-out regardless of whether the insured pays a premium or how much the insured paid by way of premium. No actuarial would suggest that makes good business sense from an insurance perspective.

Now, for part two of my criticism. Again, I'll just take your word on how it all is supposed to work. If this social security trust fund is all it is cracked up to be and people receive on the basis of what they pay (as you suggest), then why the urge to lift the caps? The social security system was a system designed to prevent contributors from becoming impoverished. This was to be accomplished by way of their contributions - i.e. forced savings. Do you think making people pay in beyond the current caps is all that necessary? Are these folks really threatened all that much by future poverty? Are you suggesting this upper class needs even greater protection from poverty?

Answer: I know you could give a rat's patootie about the rich saving even more money. So, where were you expecting their additional contributions to go? Please answer me that.

[Jeff Matthews]

Your example does not equate. Poor people also pay a higher percentage of their incomes on food. I asked what do you propose should happen to the extra contributions you would have the rich make by lifting the caps. You dodged that one big time.

So, you are asking the rich to pay 6.2% into a program that is, according to you, supposed to pay you back according to what you paid in. So, if the caps are lifted, would you propose, too, that all the additional revenue from the lifting of the caps go only to those who paid in excess of the caps?

I bet you wouldn't....... which makes it welfare you are proposing. Come on, Mark, admit it. You'll feel better. []

[LarryC]

Mark, I'll take you for your word on all that. As regards this type of "insurance," you bet I think it is bad. A guaranteed minimum pay-out regardless of whether the insured pays a premium or how much the insured paid by way of premium. No actuarial would suggest that makes good business sense from an insurance perspective.

I think that's a legitimate political decision for our legislators to make. I'd be very surprised, though, if some insurance companies don't also have some sort of minimum payments where they think they should make on general social principles. No figures, but since we're talking bottom here (which seems to be quite a hang-up for you), I doubt that it would cost much in the larger picture of things.

Now, for part two of my criticism. Again, I'll just take your word on how it all is supposed to work. If this social security trust fund is all it is cracked up to be and people receive on the basis of what they pay (as you suggest), then why the urge to lift the caps? The social security system was a system designed to prevent contributors from becoming impoverished. This was to be accomplished by way of their contributions - i.e. forced savings. Do you think making people pay in beyond the current caps is all that necessary? Are these folks really threatened all that much by future poverty? Are you suggesting this upper class needs even greater protection from poverty?

It seems to me that SS is a variety of things -- yes, to prevent impoverishment of the poorest (an amazing % of recipients have no other income than the $1,000 or so/month many of them get), but also as a valuable supplement to many people's retirement plans and/or pensions and keep them from being too poor, too. Many people don't realize (until they retire) that retirement income is pieced together from several sources, one of them SS, instead of one source as in their working years.

In fact, this makes the point that SS is an extremely popular program, and politicians try to degrade it at the peril of their political lives! It's not for nothing that it's called the "third rail of American politics." It seems to me that proponents of undermining or doing away with it would do well to quit wasting their time trying to persuade you and me!

Anyway, faltering retirement plans can reach at least into the middle class, and it can change rapidly. To the degree that 401(k) plans, annuities, and pension plans tank, SS will become even more valuable to those individuals. That's why I mentioned earlier that SS is a valuable mainstay of stability with so much uncertainty (and worse) around.

The keys to why raising the caps may be necessary are that (1) $ payouts and intake are estimated, and many factors can change over time, making for great uncertainty over time; and (2) tax rates and payment formulas would have to be juggled frequently to keep financial reserves very to payout amounts. The chart below shows that income to the the OASDI trust fund (determined by the last tax increases in the 1980s) will stay above outgo until the middle of this decade, and then start dropping in the 3rd decade of this century. Previous charts have shown the balance line crossing to 0% around 2042, i.e., when SS payments would have to drop to 76% of the levels for that time to keep the balance at zero. Since the political process makes it extremely difficult to raise taxes more than once every 20 years or so, the idea is to do it at one time and get it over with! Similar to what Ronald Reagan and his Greenspan commission did in the 1980's.

Answer: I know you could give a rat's patootie about the rich saving even more money. So, where were you expecting their additional contributions to go? Please answer me that.

I'd be delighted for Mark to take this one, but it's what I said MANY times above -- they are loaned out to other federal agencies via special purpose bonds whose interest and principle are returned to the trust funds. I do have two comments, though --

• I don't think the SS system should collect excessive revenues and surpluses; and
• This does give the FG some additional money to play with, until they have to pay it back -- not so good on general principles, IMO, plus general revenues have to be raised and used to pay the interest on those bonds. So, unless I'm wrong and/or just don't understand it, this is one area where general revenues do go into the trust funds, as interest payments on the bonds. Those shouldn't be excessive, either IMO.

I'll see what I can add, while Mark re-gathers himself. Once again, it's easier to insert above in bold.

[Jeff Matthews]

Okay, Larry. So, you want to increase it. That's all you have to say. I am aware of the issue about its solvency and the arguments about taking a hit to nip it in the bud.

I see all of your points, but even so, I will have to say, you two seem awfully reluctant to just come out honestly and say, "Yes, I want the rich to pay more into it, and I want to re-direct the extra they pay to the poorer recipients." It's easy. It's quick. It's honest. Say it. []

Is "welfare" such a bad word? Does that word embarrass you? Look, if you feel that way, stand up, be proud about it, and declare it is the way you believe. [{][}]

[LarryC]

Okay, Larry. So, you want to increase it. That's all you have to say. I am aware of the issue about its solvency and the arguments about taking a hit to nip it in the bud.

I see all of your points, but even so, I will have to say, you two seem awfully reluctant to just come out honestly and say, "Yes, I want the rich to pay more into it, and I want to re-direct the extra they pay to the poorer recipients." It's easy. It's quick. It's honest. Say it.

So far, you haven't seen a lot of my points, including that one. Again, this is a complicated area, technically and conceptually. Getting in over one's head without realizing it is all too easy.

As for your quote: It would be dishonest to say that. Not my thing.

Is "welfare" such a bad word? Does that word embarrass you? Look, if you feel that way, stand up, be proud about it, and declare it is the way you believe.

How could you have missed all the times above that I said "welfare"? Note, however, that I always used it accurately.

[Jeff Matthews]

I think at this point, there truly is nothing more. You originally had no understanding of Social Security and thought it was welfare for the poor. Now you understand it, but you simply want the rich to be able to avoid it. You don't like the concept of some minimum insured pension. Fine. We disagree. I have showed you two addition tax schemes we have had for a long time - sales tax and income tax - and neither one has a "cap" for the rich to avoid paying.

There you go again. I did not think all SS was welfare for the poor. I do think there is a great deal of welfare paid out of it. Much paid to the lazy. You, on the other hand, can't seem to find it in your heart or intellect to admit that what you are proposing is greater welfare. You've given all the justifications for lifting the caps. You've compared to the other welfare-laden tax schemes - namely income and sales tax. But somehow, you can't just jump out and admit the truth about what you would propose. It is greater welfare. Is that so bad in your mind? Apparently not, but it seems clearly the word "welfare" is. It does have a bit of a bad connotation doesn't it? (Bait).

Switching gears, did you see the segment on 60-Minutes yesterday covering the RAM (I think "Remote Area Medical") charity? That was a pretty good segment.

[Jeff Matthews]

Larry, you're right. I do not recall your suggesting caps should be lifted. I think you just somewhat indicated that the argument against lifting them (at least to the extent of taking more from the rich and giving more to the poor) is not sound. It would appear to be an easy jump to conclude from criticism of that argument that you would support lifting the cap, but in all respects it would still be an assumption.

[artto]

If everyone paid into SS, at the same percentage rate, regardless of income level, it seems to me that the SS tax rate could come down to some relatively miniscule level. How? Well, let’s do some math.

Current US labor force = 155,000,000 (source: Bureau of Labor Statistics, US Dept. of Labor)

US median income = $35,500 (source: Google Answers)

Social Security 2008 income (estimated) = $8,400,000,000 8.4 billion (source: Social Security Online)

If we use my suggestion above, and lower the SS tax rate from the current 15.3% (includes 1.45% medicare) (source: Social Security Online) to 0.5%, this would yield $27,512,500,000

Total median income (labor 155,000,000 x median income 35,500) of $5,502,500,000,000 taxed at 0.5% = $27,512,500,000 27.5 billion ~ three times the current revenue!

From this scenario you can clearly see that we could reduce this tax even further

The median US income is currently about $35,500 (source: Google Answers). This is where the “cap” should be placed ~ on collecting SS, not paying taxes for it. The rich guy isn’t going to miss the 0.5% any more than the person earning $35,000, in fact probably less. In the end the rich person isn’t going to complain about receiving a “measly” $35,000 per year either ~ he/she will take it ~ just as they do now. And when the poor working guy has to hit the streets he still gets the $35,000 per year too. The difference here is he needs it.

And for those of you who think that “the rich” shouldn’t have to pay in as much dollar wise simply because it’s assumed they won’t need it, you had better think again. Maybe after you’ve seen a couple of generations of your family’s wealth disappear (we’re talking multi-millions here) ~ through no fault of their own ~ lets say because a health issue for instance, then maybe the world will look a little different to you.

[oldtimer]

I'm not sure i get this. My father in law joined the navy for wwII, and worked for the government basically until his retirement. He does not get social security because there is a separate system for government employees. They get a pension, but not social security. What did McCain do for his social security? He has been a senator for a long time. Senators have their own pension benefits too. In fact, Anyone in congress gets a better pension and benefits than most of us. Let's say you have contributed in the private sector but then become a member of congress. Since it carries much better benefits should there not be a deletion of social security? I realize in sheer numbers it is small, but morally do you see it like I do? Now the ss deducted from joe sixpack's paycheck is a tax. It's called a tax. It is there to pay for the retirees in the system (albeit an entirely mis-managed system due to fund raiding by the same members of congress who don't need it). So why is it then a disgrace if current workers are paying for today's retirees? That's what taxes do. They redistribute income. It boils down to a refusal to call an ace an ace and a spade a spade. Politicians are good at that.