Obama's economic plan - Soak The Rich

[BeAChooser]

Originally Posted by BeAChooser
Then its nothing but a welfare program ...

And that's bad...because?

I have no objection to welfare programs that are called welfare programs as long as those who receive the benefits aren't overly irresponsible in their actions (and even there I will often given them a break). But I object to welfare programs that disguise themselves as something else and then are badly run on top of it. I object to welfare programs that give money to people who then spend on average 6% of their income on lottery tickets. If you insist on taking my money (at gunpoint) to give to those people, the least you could do is ban them from buying lottery tickets. The least you could do would be to ensure that the program is well run and managed. And currently, it is NEITHER. And folks here don't seem to care.

 

[Pookster]

Sorry about that, I didn't intend to imply that you were the one saying such things. My comments were intended to support of what you had been saying.

I was thinking that was probably the case.

 

[Pookster]

FALSE. The tables on the SSA website (http://www.ssa.gov/OACT/STATS/table4a1.html ) clearly show that in 2007 the assets in the fund were $2 trillion dollars. Expenditures in 2007 were about 500 billion, BUT 675 billion was added to the fund that year (of which 560 billion was NEW contributions). In other words, new contributions currently cover expenditures AND THEY HAVE FOR OVER A DECADE. The 2 trillion dollars in assets is NOT money that will be spent in the next few years. In just the past 3 years, contributions have exceeded expenditures by over 60 billion a year. So at least some of those assets could safely be invested in something more wise than obviously the SS trust managers have done the last 70 years.

What about baby boomers about to retire don't you understand? That's what the surplus was created for with changes made to social security back in the 80's. Are you really this ignorant about the issue?

Just because it's been that way from the beginning doesn't mean we have to keep throwing good money after bad.

Then by all means, lets hear a viable alternative. And no ...

Well I just offered you one. Let's see what you do with it.

... you didn't offer one that was based on knowledge of the system as it is today. Try again. You might want to get informed first about how the current system came to be as it is today though. You clearly aren't.

 

[gdnp]

I have no objection to welfare programs that are called welfare programs as long as those who receive the benefits aren't overly irresponsible in their actions (and even there I will often given them a break).

Why is it that I find this assertion less than sincere?

But I object to welfare programs that disguise themselves as something else and then are badly run on top of it. I object to welfare programs that give money to people who then spend on average 6% of their income on lottery tickets.

Let's see...Lottery tickets pay out about 50% of the money they take in for prizes. The rest, after expenses, goes to fund government programs. No one is forced to buy tickets. Even the winnings are taxed.

Can you give me an example of a government revenue program that you would find less objectionable than lottery tickets?

If you insist on taking my money (at gunpoint) to give to those people, the least you could do is ban them from buying lottery tickets. The least you could do would be to ensure that the program is well run and managed. And currently, it is NEITHER. And folks here don't seem to care.

The government takes in money in social security and invests it in government bonds. They pay out the money in benefits.

When one makes accusations of poor management, usually one is suggesting that expenses are too high or the investment choices are poor. Since you have not asserted the former, It would appear your claim of poor management is based entirely on the investment choices.

The problem with this assertion is that the government is investing the social security money in itself. If the SSA were not buying treasury bonds, the government would have to fund things like the Iraq war by selling additional T-bills to other investors. T-bill rates would go up, and the benefit to the SSA would be counteracted by higher budget deficits.

The effect of investing social security dollars in the S&P 500 needs also to be considered. This would cause a massive influx of money into the stock market, driving up stock prices--at least for the S&P 500. Would this cause a bubble? What about when the boomers retire, and start selling all that stock? Might that cause a market crash?

 

[BeAChooser]

1) it is not a welfare program. Ones retirement income is dependent on the monies one paid in over ones lifetime.

Everyone retiring after 2000 gets negative returns from SS. Those in their 30s today will get as little as 50% of their contributions back. Even the lowest income workers will get back less than they put in. Why? Because the money is being given to others. And that's the very definition of welfare.

Those who do not participate in the system are not entitled to benefits.

Not true. Fifteen percent of contributions are put in a fund to take care of people with disabilities, many of who will not work a day in their life in a paying job.

2) Right now, since I am not self-employed, Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program takes 6.2% of the first 102,000 I make, not 12 percent of everything I make. Or do you believe that if this tax were eliminated that the company that employs me would automatically increase my salary by the 6.2% they save?

Of course, many people in the US are self employed and do pay 12.4 percent. Now, in your case, maybe your employer would not automatically increase your salary by 6.2%. Maybe, instead, they'd lower prices on whatever goods they make or service they perform by 6.2 percent, effectively giving you a big raise. You see, that is the beauty of the free market system. Companies will naturally compete and if one can sell a product for 6% less than now and still make the same profit it was making, others will have to do the same or go out of business. Odd how liberals never seem the grasp the fundamental nature of a free market.

3) You should read up on the slippery slope fallacy. The OASDI rate has been 6.2% since 1990. The fact that it could be raised in the future is irrelevant.

Tell that to our children. And don't forget to mention to them that with the current system, they will get far less than they put into the system back when they retire. And that's not even considering the loss of investment opportunities for those contributions.

Obama's plan does not raise the rates, just alters the income cap.

First of all, why not increase the rates for the 100,000 to 250,000 income group? Just admit that's a political decision ... not one based only any rational analysis of what should be done economically.

Second, what effect do you think increasing SS on the top income group will have? Economists might tell you it will lead to less investment ... less jobs ... a lower GDP. And the effect of that?

Third, it may not raise rates, but it's certainly taking money from someone. Maybe that someone will decide not to be so generous come bonus time. In which case even the lower income groups will be affected.

Fourth, it doesn't solve the real problem. That if the government wants to PRETEND like its a retirement plan for people they should be wisely investing those contributions rather than letting them sit in accounts that get a third of the return they could safely get.

If you have a credible source that predicts a future rate of 20 or 30 percent (you did say "that's where things are headed") I would like to see it.

Well currently, the Social Security administration is telling us that unless changes are made, all retirees by the year 2040 will see a cut in benefits of 22 percent and even more every year thereafter. That's effectively the same as saying they need to increase the tax rate to 15%. And if history is any guide, the SSA is underestimating the problem.

And this is from the Social Security Administrations own website:

http://www.ssa.gov/pubs/10055.html

The Future of Social Security
SSA Publication No. 05-10055, May 2008,

... snip ...

Some people believe that Social Security taxes should be raised so that all future benefits could be paid. They want to increase the current combined payroll tax rate, which is now 12.4 percent. Critics argue that payroll taxes are already very high, having been raised 20 times since the program began, and that many more workers already pay more in payroll taxes than they do in income taxes. And they point out that eventually Social Security taxes would have to be raised by about 50 percent to pay for all benefits owed.

So certainly 20% rates are in the cards. And that assumes that government doesn't get even more generous with other's money. And how likely is that ... especially if democrats are in control?

 

[BeAChooser]

Are you really this ignorant about the issue?

Ignorant? I'm not the one satisfied with a 4.6% return on 2 trillion dollars in 2006 when we could have gotten double or even triple that quite safely. I'm not the one satisfied with getting back $1700 a month when one could be getting back far more than that and still retain the principal.

... you didn't offer one that was based on knowledge of the system as it is today.

ROTFLOL! I reserve that laugh for the really ironic comments. I used the SSA's own data for the the last decade to prove my case. Do you argue that the numbers are wrong? No. Do you point out any specific flaws in my logic or calculations? No. What you do is make me think you are about to exit this debate the way democrats usually exit debates.

 

[Tsukasa Buddha]

Yes they do. All the time. What do you think funds are but collections of different stocks? Don't you know that you can buy funds that invest in every single stock in the S&P 500? Or even larger groups of stocks? You can buy into funds that invest in stocks around the world and that move the assets back and forth between stocks, bonds and fixed assets as the conditions warrant. These are very secure and over the long haul far out perform SS. So why couldn't the government instead of taking SS from you, just decree that you must put the same amount of funds in something like the S&P 500?

When the first line of the SSA site says "A secure, comfortable retirement is every worker's dream", the government is selling it as an investment system. Therefore, my concern is not a strawman. By taking SS from me when I could invest it much better, the government is actually making it harder for me to have a "secure, comfortable retirement".

Mutual funds are not risk free, and I'd expect a fund that invests in every single stock in the S&P500 would require a substantial initial investment.

As to the bolded, c'mon. That is only saying it is an investment system in your mind.

 

[Tsukasa Buddha]

Everyone retiring after 2000 gets negative returns from SS. Those in their 30s today will get as little as 50% of their contributions back. Even the lowest income workers will get back less than they put in. Why? Because the money is being given to others. And that's the very definition of welfare.

Ah, so you admit it isn't an investment system ?

 

[Meadmaker]

I have no objection to welfare programs that are called welfare programs as long as those who receive the benefits aren't overly irresponsible in their actions (and even there I will often given them a break). But I object to welfare programs that disguise themselves as something else and then are badly run on top of it. I object to welfare programs that give money to people who then spend on average 6% of their income on lottery tickets. If you insist on taking my money (at gunpoint) to give to those people, the least you could do is ban them from buying lottery tickets. The least you could do would be to ensure that the program is well run and managed. And currently, it is NEITHER. And folks here don't seem to care.

You're going to tell retired people how they have to spend their money? Come now, you can't be serious. Personally, I would ban all government sponsored gambling, but that's beside the point.

And you are going to object to a program based on how it was sold? You would have to cancel most of the federal budget.

You make a big deal about mismanagement based on poor investment choices, or that you could do better. You probably could. Key word: probably, but what's left for those who don't do so well?

The government couldn't do any better, because if it invested in the stock market, the stock market would no longer be a free market system, and prices would get totally out of line with real economics because there was this flow of money guaranteed by law to flow into it. Alternatively, we could give government money managers options on which companies to send your tax dollars to. How well do you suppose that would work out? Do you see any potential for corruption there? So either the government invests blindly, in which case it screws up the market, or it invests based on the choices of money managers, in which case you would get levels of corruption previously undreamt of.

So, instead, there's the smoke and mirrors trust fund. (It really is smoke and mirrors. I can explain if anyone is intersted.) That would be awful, except the one "real" think about the trust fund is that it does represent a promise to pay to the next generation of retirees. Promises won't pay the bills, but they are a start.

Social Security transfers money from young people to old people. Forget how it is sold or how it is presented, is that a bad thing? What's the alternative?

 

[Meadmaker]

Mutual funds are not risk free, and I'd expect a fund that invests in every single stock in the S&P500 would require a substantial initial investment.

The first part is correct. The second isn't. Index funds do that, and you can invest in them for small amounts.

 

[JEROME DA GNOME]

Here is a novel thought. How about the government not spending the excess monies collected from the tax in the general fund?


We would have ZERO problem with Social Security if the government had not spent the extra monies collected in the first place.

Why would anyone BELIEVE that the new monies collected will be saved for SS? We were lied to in the 80's.

 

[BeAChooser]

Originally Posted by BeAChooser
I have no objection to welfare programs that are called welfare programs as long as those who receive the benefits aren't overly irresponsible in their actions (and even there I will often given them a break).

Why is it that I find this assertion less than sincere?

Why is it I don't care what you think? You can't argue the facts so you attack my sincerity. I see. And why is it I doubt the sincerity of most democrat leaders on this topic?

Let's see...Lottery tickets pay out about 50% of the money they take in for prizes. The rest, after expenses, goes to fund government programs. No one is forced to buy tickets. Even the winnings are taxed.

Oh this is just hilarious. Rather than address the fact that those at the lowest income and education levels (the needy you folks whine about so much) spend an inordinate amount of their resources on lottery tickets, you throw out red herrings? And not very good ones at that. Apparently you are unaware that studies show that most of the government programs the lotteries fund do not benefit the groups that buy the most lottery tickets. And apparently you think its a good thing they are not forced to buy tickets. But then you think it's good thing to force them to put their money in "insurance" that returns a fraction of what it takes in from most individuals. Go figure. And by the way, Social Security is taxed for many people.

Can you give me an example of a government revenue program that you would find less objectionable than lottery tickets?

One that doesn't derive the majority of it's revenue from those who can least afford to part with that money?

The government takes in money in social security and invests it in government bonds.

Well that explains the measly return on investments. No imagination, I guess, by those running the system.

When one makes accusations of poor management, usually one is suggesting that expenses are too high or the investment choices are poor. Since you have not asserted the former, It would appear your claim of poor management is based entirely on the investment choices

Actually, I don't know a whole lot about the former but if history and other examples in our government are any guide, I'd be willing to bet the overhead cost of the system exceeds that in the private sector for even better services. And it looks like I might be right:

http://findarticles.com/p/articles/mi_hb3458/is_199701/ai_n8234569 "The overhead costs involved in collection and disbursement of Social Security funds are more than 60% of the benefits from the scheme. Collection costs include cost due to the loss of working hours and the negative impact on economic production. Disbursement involves the cost of telephone calls made by the public on the toll-free number of the Social Security Administration and the disincentive to work. A personal retirement saving scheme involves lowest costs."

The problem with this assertion is that the government is investing the social security money in itself. If the SSA were not buying treasury bonds, the government would have to fund things like the Iraq war by selling additional T-bills to other investors.

ROTFLOL!

The effect of investing social security dollars in the S&P 500 needs also to be considered. This would cause a massive influx of money into the stock market, driving up stock prices--at least for the S&P 500. Would this cause a bubble? What about when the boomers retire, and start selling all that stock? Might that cause a market crash?

The total valuation of the NYSE and NASDAQ companies on January 1, 2001 was $18.3 trillion dollars. It's even larger today. The investment of 4% of people's social security contributions, up to $1100 dollars, wouldn't even cause a blip on that. Yet the democrats are adamantly against it ... likening it to the end of the world. Go figure.

 

[Tsukasa Buddha]

The first part is correct. The second isn't. Index funds do that, and you can invest in them for small amounts.

Heh, well we have different ideas of what a small amount is .

I know that I looked into doing a regular fund that didn't invest in everything and it was just too much.

 

[JEROME DA GNOME]

Heh, well we have different ideas of what a small amount is .

I know that I looked into doing a regular fund that didn't invest in everything and it was just too much.

Now is the right time to purchase Real Estate, if you are looking for long-term investments.

 

[BeAChooser]

Mutual funds are not risk free

No, but we have 70 years of data saying it essentially is if you invest in a wide enough group of stocks ... like the S&P 500. The truth is, if those company were to completely collapse, so would the US government. Besides, I showed you folks an example where investing over a 55 year period and then withdrawing the money during the lowest point of a major stock market crash, the return would still far outperform the social security system as it now stands.

, and I'd expect a fund that invests in every single stock in the S&P500 would require a substantial initial investment.

Actually no. You can invest in stock index funds with as little as $1000 initially and then contribute smaller amounts thereafter. Anyone earning more than $25,000 under Bush's suggested plan could meet that requirement. And I'm talking about the US government collecting the money and then investing the funds itself. Believe me, it would have no problem meeting the minimum requirements.

 

[Meadmaker]

Heh, well we have different ideas of what a small amount is .

I know that I looked into doing a regular fund that didn't invest in everything and it was just too much.

Well, certainly "small" varies according to circumstance. You should be able to find an index fund that will let you invest for about 1000 dollars.

 

[Pookster]

Ignorant?

Quite.

I'm not the one satisfied with a 4.6% return on 2 trillion dollars in 2006 when we could have gotten double or even triple that quite safely. I'm not the one satisfied with getting back $1700 a month when one could be getting back far more than that and still retain the principal.

Neither am I. But then, I recognize political reality when I see it. Too bad you don't.

ROTFLOL! I reserve that laugh for the really ironic comments. I used the SSA's own data for the the last decade to prove my case. Do you argue that the numbers are wrong? No. Do you point out any specific flaws in my logic or calculations? No. What you do is make me think you are about to exit this debate the way democrats usually exit debates.

You ignorantly used that data. Why was the surplus created beginning in the 80s? You do realize the surplus will begin to be drawn down in 2017, right? You do know that there will be fewer and fewer contributers into a system with more and more retirees for some time to come, correct? You have little clue about the issue you're discussing. I'm about to exit the debate? Hardly. I'm not even close to being an expert on social security, and I can call your BS, nonsensical political rhetoric and bluster very easily. Sir, you're out of your depth in a puddle when it comes to this.

So again, how do you propose to close out social security without leaving current and near retirees out in the cold? If so, describe it. How do you pay for current and near-future retirees already too far committed to social security being there while at the same time doing away with social security withholdings for younger workers and letting them invest in their own retirement? And don't forget that without young contributers to social security, we start drawing down the surplus right now in a big way.

 

[BeAChooser]

You're going to tell retired people how they have to spend their money?

No, I was talking about those still contributing to the SS system.

And you are going to object to a program based on how it was sold? You would have to cancel most of the federal budget.

Maybe that's not a bad idea. See Larry Elder.

You make a big deal about mismanagement based on poor investment choices, or that you could do better. You probably could. Key word: probably, but what's left for those who don't do so well?

You don't understand what I've been saying. I'm not suggesting (and neither did Bush) that we allow folks to invest in individual stocks. The investments, whether made by individuals in private accounts, or the SSA as the managing body, would still have to pass some risk standards. That's why I talks about stock index funds. And even a politician could invest in those wisely.

The government couldn't do any better, because if it invested in the stock market, the stock market would no longer be a free market system, and prices would get totally out of line with real economics because there was this flow of money guaranteed by law to flow into it.

ROTFLOL! Gee ... Do you really think that allowing folks to put a third of the 12% they contribute (or a tenth, at the higher income levels) to a personal account that would be invested in the American companies rather than an entity that produces ABSOLUTELY NOTHING is bad?

Social Security transfers money from young people to old people. Forget how it is sold or how it is presented, is that a bad thing?

I suggest you go back and look at the original reason for starting SS. It's purpose wasn't to bankrupt America. That's why originally they only took 2% of a few thousand dollars.

What's the alternative?

I just gave you folks one.

 

[BeAChooser]

Quite.

Would you like me to report you for personal attacks? Keep it up.

You do realize the surplus will begin to be drawn down in 2017, right?

Yes I do. For the next 9 years, the SSA predicts it will take in more money in contributions each year than it spends. So during that time, that 2 billion dollar could be considered assets that should be invested WISELY. Because if you do that, it will grow.

Let's do a little calculation. In 2006, the SS trust fund made 4.6% on its assets. That was a very good year because on average it makes only 2.2%. Now the S&P 500 returns an average of about 8.5% or more. And few if any downturns in the market have exceeded 9 years. Let's see what would happen to that 2 trillion in 9 years if we invested it more wisely.

You can use this little calculator.

http://www.moneychimp.com/articles/finworks/fmbasinv.htm

2 trillion dollars growing 2.2% a year for 9 years becomes 2.4 trillion dollars.

2 trillion dollars growing 8.5% a year for 9 years becomes 4.17 trillion dollars.

The year after that, 4.2 trillion with a 8.5% return would become 4.52 trillion dollars. In which case, the fund would still be showing a surplus in 2018 because expenditures would likely exceed what was being collected in new contributions by only a fraction of 300 billion dollars. And at some level of return, perhaps even 8.5%, doing what I suggest will actually begin to allow the level of required contributions to be reduced over time and still break even. And bad years in the market are not a problem because by the year 2017, expenditures will only exceed new contributions by a very small fraction of 4.52 trillion dollars ... so there is a big buffer to damp out the ups and down of the market on a yearly basis. And notice that I've completely ignored the additional surplus contribution between now and 2017. That will make the fund grow even faster than I calculated.

You have little clue about the issue you're discussing.

Right. Your understanding of this issue is staggering. I'm in awe.

So again, how do you propose to close out social security without leaving current and near retirees out in the cold?

I just told you, but maybe the math is too difficult.

 

[JEROME DA GNOME]

In 2006, the SS trust fund made 4.6% on its assets. That was a very good year because on average it makes only 2.2%.

Now how exactly does that happen when the government spends the money?

Who is paying interest?