October 27, 2010
Another Problem With Entitlements Is That People Feel Entitled to Raises, Too
I've been meaning to comment on this casting of the non-increasing Social Security payments for a couple of weeks:
As if voters don't have enough to be angry about this election year, the government is expected to announce this week that more than 58 million Social Security recipients will go through another year without an increase in their monthly benefits.It would mark only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.
Look, there's a method by which the Social Security Administration calculates whether and by how much it is more expensive for recipients to live and adjust their payouts accordingly. Two years ago, that method yielded a higher-than-justified increase. Now, with a stagnant experienced economy no increase is justified.
The solution is to eliminate policies that increase costs (such as taxes) that don't factor into the equation and that hamper the healthy growth of our economy. Demanding more money as a handout just because a raise is expected and might be wrestled out of the political system will prove counterproductive.
Wow, and all along I thought the private sector pension plan didn't include compounded cola's. Just the second year without a raise since 1975? I'm going to have to pay more attention to other people's business.
Posted by: michael at October 27, 2010 2:06 PMMost COLAs are based on an index that has little to do with many people. For instance, house prices are usually included. If you are not buying a house, or contemplating it, that is a meaningless number.
I am sure there is a lot of infighting over which index is to be used. For instance, how did LIBOR ever become the index for adjustable mortgages? That is the overnight rate for loans between London banks.
Posted by: Warrington Faust at October 27, 2010 3:51 PMThe solution is to eliminate policies that increase costs (such as taxes) that don't factor into the equation and that hamper the healthy growth of our economy.
The words in parentheses (such as taxes) are very arguable - assertion denied. In case you haven't noticed there is a huge argument going on about this - read the papers or some other blog.
Demanding more money as a handout just because a raise is expected and might be wrestled out of the political system will prove counterproductive.
Perhaps, but that is another arguable assertion. This Social Security recipient is not clambering for additional funds, but this Social Security recipient would like to see the ceiling raised so as to assist in providing for the common welfare.
Others say put in a Social Security "donut' from the current ceiling to $300,000 or so(economists can compute the exact amounts here) and raise the ceiling to $1,000,000 or so and Social Security is safe and sound and very solid.
OldTimeLefty
OldTimeLefty
Seems to me you are old enough to remember when the SS tax stopped at $5200. Don't you wonder what happened?
Posted by: Warrington Faust at October 27, 2010 7:52 PMFaust: LIBOR tracks the bank's cost of short-term funds better than the Prime rate, which used to be the basis for home equity loans. That is why it is used.
Posted by: BobN at October 27, 2010 8:25 PMMichael,
How is Social Security a private-sector pension plan? Pretty sure its run by the government...
Posted by: Justin Katz at October 27, 2010 9:04 PMYeah, I guess you're right. Lets get rid of it and put everybody into 401K's
Posted by: michael at October 27, 2010 9:36 PMI fully expect that to be the case by the time I'm old enough to collect. The open question is whether my grandchildren will be put into further debt to prolong a shadow of the benefits the Boomers are going to receive or we can begin resolving the difficulties now.
Social Security is a Ponzi scheme and those whom the government has forced to "invest" in it are about to begin suffering — at first with the pain disguised, of course, with the budgetary strain that a bucket full of IOUs will put on the rest of government.
Posted by: Justin Katz at October 27, 2010 9:44 PMSocial Security is another thing where I think there might be middle ground. Not enough people are putting enough money away for retirement, and the method by which Social Security finances their payouts is insane. Why not allow those of us making less than 'a lot' of money who -do- put away enough for ourselves get a little abatement on our SS contributions, and eliminate the ceiling on the taxed income. It would essentially be a tax break for the responsible middle class. I don't think it's absurd to tax millionaires instead of people making 40K, so long as the people making 40K are saving responsibly for themselves.
The way it would actually work would be to keep things as they are, eliminate the ceiling, and then refund a portion of individual 401k contributions from SS contributions at tax return time. Since 401k contributions are capped, the rebate would encourage everyone to max out their personal retirement contributions, but still collect SS money from folks making more than 150K or so. Yes, it's 'redistributive' and 'progressive', but at least it seriously encourages savings and personal responsibility.
With the elimination of our parents' 'one job for life' and private pensions, and not enough herding of folks into personal savings to replace them, we're going to hit a wall in a few years where the majority of voters is dependent entirely on SS, and they'll vote themselves a middle-class retirement on the backs of my generation.
Posted by: mangeek at October 28, 2010 8:35 AMWarrington,
Yeah, I remember. Republicans screamed "foul"; the nation survived and poor people and rich survived.
OTL