Social Security now vs. then
Quote: WizardI'll stop you here. Social Security was not meant to keep retirees at the same level of income they averaged over their working life. No, it provides just a small fraction of that, roughly one-third. It is expected that the retiree will have other retirement income from a private pension and personal savings.
Very well put. Too bad we cannot get even one politician to say this.
I am tired of people saying "you can't live on social secutiry!" Well, every financial planner alive tells every client this. And any number of other sources does as well.
Though I am still curious--did the few years increase in life expectancy really knock the worker/retiree ratio from 36:1 to 3:1 (and less!) or was something else at play. And for the sake of showing what caused the problem and a different way of looking at it, how high would the retirement age need to be to get us close to this ratio? I think people get hung up on the "indicidual life expectancy" thing too much. Instead of showing we live longer, I feel we need to explain how we retire sooner in life relative to death to explain it. For example, would raising the retirement age to 80 (SWAG number) get the ratio back to where it was when the ratio back up?
The real number in 1941 is bantered at 48:1, then 18:1 in 1950. This number is actually the contributing to collection ratio (if you don't accumulate the credits, you don't collect).
That ratio has been steadily decreasing and it's because the general workforce and demographics is shifting older.
Quote: mkl654321I don't really care what you can fucking stand and cannot fucking stand. I did not ever claim to be an "expert"--I proffered my opinion on a subject. For what it's worth, thought, I am CERTAIN that YOU don't know enough about these subjects to tell whether someone is an expert or not.
And if you don't like people articulating opinions with which you disagree, I suggest that you stay away from internet discussion boards. In fact, don't leave the house, and don't turn on the TV, or you might hear or see something else that you can't fucking stand.
As someone who has read both the SSA's acturarial reports - as well as independent acturarial stidies, I can assure you that I know enought to know that your claim about needing to double payroll taxes was absurdly off the mark. Your follow up calculation of 47% increase is still wrong by a wide margin. I am not an actuary and never made absolute, dogmatic and unsubstaintiated claims to imply that I was. You are entitled to your own opinion but not your own facts.
As for the misspellings and the rude rant - I apologize. I was typing on my mobile and I had a very long, bad day at work dealing with hard heads that were positive they were subject matter experts on every damn topic. That came up. Your posts both there and on the plaza hotel thread struck such a similar chord that I went on a rant.
As I mentioned way back ss is nowhere near the crisis people seem to believe and it doesn't need to be drastically overhauled. The real impending problem is medicare. And no one has good answers there.
The main medicare problem is the rapidly increasing haelth care costs. I still can't understand the economics as to why medical care goes up 10% or so every year. What is driving that? And I don't mean the gross dollars spent on health care because of an aging population. Rather why do procedures and hospital costs continue to become more and more expensive each year?
And at the risk of sounding like a member of his campaign staff, Rep. Ryan on Medicare / Medicaid:
Ryan on Medicare
Quote: CalderI wonder whether the problem needs to be divided in two. Is it possible that only a patch or temporary fix is needed to get through the bump created by the Baby Boomer retirement? After that demographic has passed, the requirements for solvency may change significantly. That's why I like the idea of privatizing a portion of Social Security contributions going forward.
And at the risk of sounding like a member of his campaign staff, Rep. Ryan on Medicare / Medicaid:
Ryan on Medicare
From a personal perspective I would love to have a private account. However since the entire system is really a ponzi sceme since its creation, I don.t see how that is ever feasible without a huge additional cost. I think it is something wll over $1 trillion. Id be interested in the Wizard's opinion on private accounts and why he opposes them.
Regarding Ryan's roadmap, yeah it works for 'fixing' medicare in that we just say seniors get x amount of dollars no matter what, then the budget problem is solved. Not sure if that could ever work politically though.
Quote: ruascottAs someone who has read both the SSA's acturarial reports - as well as independent acturarial stidies, I can assure you that I know enought to know that your claim about needing to double payroll taxes was absurdly off the mark. Your follow up calculation of 47% increase is still wrong by a wide margin. I am not an actuary and never made absolute, dogmatic and unsubstaintiated claims to imply that I was. You are entitled to your own opinion but not your own facts.
As for the misspellings and the rude rant - I apologize. I was typing on my mobile and I had a very long, bad day at work dealing with hard heads that were positive they were subject matter experts on every damn topic. That came up. Your posts both there and on the plaza hotel thread struck such a similar chord that I went on a rant.
If the "facts" you refer are projections for the future (which most of mine were), then I am indeed "entitled" to them, even by YOUR exalted standards. In any case, AS I SAID, I never claimed to be an expert. But it should be noted that even the "experts" are GUESSING when they try to analyze the fiscal dynamics of the next several decades. So am I entitled to speculate? Am I entitled to offer an opinion? Am I entitled to project from existing data? DAMN RIGHT I AM. Even if some people don't agree with (as in: like) the conclusion I reach.
Do I actually KNOW what's going to happen in 2050? Of course not. Neither do YOU, so criticizing the conclusions I reach seems kind of silly, since you have no real idea what will happen then, either. And as far as anybody being an actuary--I never knew that being able to predict the future was part and parcel of that profession.
I accept your apology for your ranting. I must note, however, that an element of what made you angry is that you DISAGREED with a prediction I made on another thread. People will say things you don't agree with, and people predicting (guessing) the future will PARTICULARLY say things you don't agree with. That's a necessary element of this ol' free speech environment we all (supposedly) inhabit. Therefore, I suggest you get used to reading and hearing things with which you disagree.
Quote: ruascottThe main medicare problem is the rapidly increasing haelth care costs. I still can't understand the economics as to why medical care goes up 10% or so every year. What is driving that? And I don't mean the gross dollars spent on health care because of an aging population. Rather why do procedures and hospital costs continue to become more and more expensive each year?
I'd put the reason for the increase to two things. First, the quality and complexity of care keep going up. Second, health care is labor intensive and defies automation completely. Whereas a hotel on the strip can put in a self-serve kiosk for check-in, you cannot replace a nurse with a kiosk.
Quote: ruascottRather why do procedures and hospital costs continue to become more and more expensive each year?
I don't know, but people don't want (I assume) the kind of costs savings that works for Walmart since their health and even their lives may be involved. Whereas everyone doesn't get gold standard care, I hazard to guess that everybody still wants it (if they could get it).
Whatever the answer, I don't expect health care to ever be coming cheap. It may become leaner, but I suspect it's always going to be up there with other major expenses in life.
Quote: rxwineI don't know, but people don't want (I assume) the kind of costs savings that works for Walmart since their health and even their lives may be involved. Whereas everyone doesn't get gold standard care, I hazard to guess that everybody still wants it (if they could get it).
Whatever the answer, I don't expect health care to ever be coming cheap. It may become leaner, but I suspect it's always going to be up there with other major expenses in life.
People are of a mindset it is supposed to be cheap. Where getting your car hooked up to a diagnostic machine will be $50-100 they want an office visit for their doctor to be $10.
Quote: ruascottI don.t see how that is ever feasible without a huge additional cost.
That's why the private accounts are proposed for younger workers; in Ryan's plan, age 55 and younger. Older workers are exempt from that provision. Current receipts will cover the Baby Boom bulge, while encouraging (or forcing) people to save for themselves, and reducing the government's liability for those workers upon their retirement.
If the numbers work, it seems to be a common sense approach with the added benefit of keeping the privately-held funds from the clutches of a free-spending Congress. Upon one's death, left over funds are turned over to heirs, a reminder to those in Washington that the money was not theirs in the first place.
Quote: mkl654321the time it took ... to receive payments equal to ... lifetime [contributions] was one year.
This hasn't been true since the 1950's. Current Social Security payroll tax rate is 12.4%. Over 40 years, that's 4.96 years of income. But the benefits are only a fraction of income.
Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.
Social Security holds Treasury bonds that should have the same value as other Treasury bonds. The financial imbalance is not dire, requiring only minor adjustments. Escalating medical costs make Medicaid and Medicare bigger problems.
Social Security combines insurance with forced savings and welfare. An important premise is that people who have consistently worked and paid deserve more than people who have not. So Bill Gates deserves benefits, but my useless brother-in-law who just sponged off his parents and wives deserves to eat dogfood.
1. Ask your grandparent/parent/relative that collects social security what the monthly amount is. This varies depending on a couple of different things, but I think it's about $2,000 per month on the average.
2. Look at your paycheck to see how much is taken out for social security. If you make $75,000 - the amount some pointy-headed professor says makes you happiest - then you pay in $382 per month.
3. Divide the amount collected by the amount paid in, you get about 5.25. In other words, it takes about 5.25 people to support on retiree.
I haven't done the math, but social security returns something like minus-1%, and you don't have any equity in it. By comparison, a typical retail savings account returns something like 0.2% - 0.4%, and it's all yours.
In other words, you're better off stuffing your money in a mattress than by "investing" in social security. How compassionate.
WTG, FDR.
Quote: ItsCalledSoccerIf you make $75,000 ... - then you pay in $382 per month.
You pay 6.2% and your employer pays 6.2%. That's $387.50 + $387.50 = $775.
Mkl654321 and ItsCalled Soccer should master arithmetic before trying economic policy.
Quote: kimleeYou pay 6.2% and your employer pays 6.2%. That's $387.50 + $387.50 = $775.
Mkl654321 and ItsCalled Soccer should master arithmetic before trying economic policy.
Don't act superior, or say snarky things, when your own analysis contains a fundamental blunder:
The employee actually pays the entire $775. His wage is adjusted downward by his employer to compensate for the expense of employer-paid payroll taxes, of which Social Security is a large part.
And there was nothing wrong with my--or Soccer's--arithmetic. There was also nothing wrong with Soccer's assertion that the net return on Social Security funds collected is negative, and that a private savings account would be superior. You might disagree with some of the conclusions he and I draw, but that's a whole 'nother ball of wax.
If you look at what would happen if you retired today, if you made $75,000 for the past 35 years, you would have contributed 110,088.90 and your employer would have contributed the same. This takes into account the maximum contribution caps and deduction percentages as is found on the SSA website.
Your monthly income from social security would be $2,353. Per year, that is $28,239. You would make your $110,089 that you contributed back in under 4 years. SSI indexes its payments to inflation.
Now let's look at if you would have contributed your entire amount in a fund that somehow made 7 percent each year. At the end of 35 years of employement, having contributed the same amount into some non-taxable vehicle (401k), you would have amassed $323,082. If you paid yourself out $28,239 a year and indexed it at 3 percent (say inflation) while your money continued accrue interest at five percent, you would run out of money in your 14th year of retirement. Then what?
The problem with private investment is that there are too many scheisters out there engaging in Ponzi schemes. You might start withdrawing in the middle of a recession. Your investments might be unwise. Take a look at the retired who had to return to work at retirement because they invested in say, Enron or WorldCom. Not all of us are smart people when it comes to investment. You have the option of investing everything over 6.2 percent into a 401(k).
The SSI formula is a sliding scale. You get 95 percent of the first $761/month earned, 32 percent of the next $3,825/month, and 15 percent of the amount over that. SSI does favor the poor, virtually guaranteeing that those making minimum wage will continue to make that through retirement.
Quote: ItsCalledSoccer3. Divide the amount collected by the amount paid in, you get about 5.25. In other words, it takes about 5.25 people to support on retiree.
Rendering it a Ponzi scheme that puts Madoff to shame.
Quote: boymimboNo, you pay 387.50. The employer pays the other 387.50. It's not a taxable benefit.
If the employer didn't have to pay the government that $387.50, he could afford to pay it to you. The equilibrium wages paid in US labor markets reflect the fact that what an employer actually pays for labor is wages+taxes+expenses associated with labor. The proportion of that total that is actually paid as wages is in part a function of those taxes. In other words, an employee is paid LESS, dollar-for-dollar, by the amount of the payroll taxes an employer must pay. Therefore, the employee really pays the tax, in that he is forced to accept lower wages so that the employer can divert some of that expense money to tax.
It's like sales tax, which is actually a PURCHASE tax as the payer (the merchant, in this case) can pass the tax directly on to the consumer.
Quote: boymimboSSI does favor the poor
Of course, it wasn't intended as a money making scheme but a safety net. Even privatized, it should serve that purpose and not be subject to more risk than federally insured bank deposits, or something of that nature of risk. (IMO)
Quote: ItsCalledSoccerThe following might be an easier way to do this ...
1. Ask your grandparent/parent/relative that collects social security what the monthly amount is. This varies depending on a couple of different things, but I think it's about $2,000 per month on the average.
2. Look at your paycheck to see how much is taken out for social security. If you make $75,000 - the amount some pointy-headed professor says makes you happiest - then you pay in $382 per month.
3. Divide the amount collected by the amount paid in, you get about 5.25. In other words, it takes about 5.25 people to support on retiree.
I haven't done the math, but social security returns something like minus-1%, and you don't have any equity in it. By comparison, a typical retail savings account returns something like 0.2% - 0.4%, and it's all yours.
In other words, you're better off stuffing your money in a mattress than by "investing" in social security. How compassionate.
WTG, FDR.
There is one problem with your argument: Your parent won't be collecting benefits for the 45 years that you contribute, so there will be a period of time when you're contributing to no one's direct benefit. As well, you likely have brothers, sisters (and even children) who are contributing to that same parent's SSI income. The average beneficiary in 2008 received 12,100 with 50.9 million recipients (not 24,000). Income from SSI is still exceeding expenses. This is why the program has not one broke yet.
It does take about 5.25 people to support a retiree. But there are today, about 5.91 contribut
Quote: mkl654321If the employer didn't have to pay the government that $387.50, he could afford to pay it to you. The equilibrium wages paid in US labor markets reflect the fact that what an employer actually pays for labor is wages+taxes+expenses associated with labor. The proportion of that total that is actually paid as wages is in part a function of those taxes. In other words, an employee is paid LESS, dollar-for-dollar, by the amount of the payroll taxes an employer must pay. Therefore, the employee really pays the tax, in that he is forced to accept lower wages so that the employer can divert some of that expense money to tax.
It's like sales tax, which is actually a PURCHASE tax as the payer (the merchant, in this case) can pass the tax directly on to the consumer.
Not likely in corporate America. If they did not have to pay SS taxes the CEO would just up his pay by another $2M and those of his/her cronies by a like amount. Thieving bastards is an appropriate comment.
Part of our problem too is we have off shored much work that has not been replaced by other forms of employment. This is going to put a huge drag not only on SS funds, but on the whole tax structure in general. A nation full of unemployed people is a nation going nowhere fast.
Finally, any program that says I have to stay employed until age 65 or 70 is not realistic in today's environment, at least not in large corporate America. The older worker is seen as highly paid and not up on the latest gadgets and training. So if you are lucky enough to still be employed at 55, you will be fortunate if you get to decide when you stop working. Chances are, that decision will be made for you, and it won't be when you are 70, unless you are in executive management.
Quote: boymimboThere is one problem with your argument: Your parent won't be collecting benefits for the 45 years that you contribute, so there will be a period of time when you're contributing to no one's direct benefit. As well, you likely have brothers, sisters (and even children) who are contributing to that same parent's SSI income. The average beneficiary in 2008 received 12,100 with 50.9 million recipients (not 24,000). Income from SSI is still exceeding expenses. This is why the program has not one broke yet.
It does take about 5.25 people to support a retiree. But there are today, about 5.91 contribut
This is upside-down thinking. It's not the government's money, and it's not the retirees' money. We may be used to thinking that way, but it's still upside-down. It may *feel* right, but all that means is we're used to thinking upside-down. It doesn't make it right-thinking.
It doesn't matter that, as of this moment, the fund may be, in-and-of itself, solvent. And, the money doesn't sit in some account unused for 45 years; it goes to someone who's of retirement age right now. Well, at least some of it does ...
The government has been taking this money all these years. It's not a savings account, it's essentially a sweep account that functions as an additional tax, in the sense that it funds government spending outside of the stated purpose of the social security law.
Now, I get that money sitting in a mattress is not a great option and investment of funds makes some sense. But there are two things going on here:
1. If it's going to be invested anyway, let We The People invest it on our own. We all know how efficiently the government "invests" our money.
2. Lest you assume that We The People are too stupid to invest in at least a retail savings account (which would make someone an elitist), the government is not doing any better ... see also minus-1% return. Find a 40-year market period or savings account where the average return has been less than minus-1% (unadjusted for inflation; the government invests in the same inflationary environment), and we'll talk.
The concept may have seemed generous, but it's a big rip-off, and there's every reason to distrust it.
Quote: RaleighCrapsNot likely in corporate America. If they did not have to pay SS taxes the CEO would just up his pay by another $2M and those of his/her cronies by a like amount. Thieving bastards is an appropriate comment.
Part of our problem too is we have off shored much work that has not been replaced by other forms of employment. This is going to put a huge drag not only on SS funds, but on the whole tax structure in general. A nation full of unemployed people is a nation going nowhere fast.
Finally, any program that says I have to stay employed until age 65 or 70 is not realistic in today's environment, at least not in large corporate America. The older worker is seen as highly paid and not up on the latest gadgets and training. So if you are lucky enough to still be employed at 55, you will be fortunate if you get to decide when you stop working. Chances are, that decision will be made for you, and it won't be when you are 70, unless you are in executive management.
I think this is a little cynical. Sure, there are idiot CEOs out there, but there are idiot lawyers, doctors, politicians, priests, taxi drivers, hotel desk clerks, etc., etc., and yes, even idiot casino owners out there. Not all CEOs are "thieving bastards." And being chintzy does not = being a thieving bastard.
Market forces are real, and they're very powerful. Salary pressures are among them. Any "savings" by a CEO that didn't pass on this hypothetical "savings" would be short-term. He would lose employees, and his company would suffer, because, believe it or not, employees change companies if they can get a higher salary somewhere else.
Think of it this way. Casinos that don't offer some sort of comp system still make money, but not as much as the ones that do offer them. So, in a sense, the owner of the casino that offers comps is "greedy" because he wants to make more money. The chintzy casino owner earns less money. He's chintzy, but he's not a thieving bastard. Same with the CEOs.
Quote: ItsCalledSoccer
It doesn't matter that, as of this moment, the fund may be, in-and-of itself, solvent. And, the money doesn't sit in some account unused for 45 years; it goes to someone who's of retirement age right now. Well, at least some of it does ...
The government has been taking this money all these years. It's not a savings account, it's essentially a sweep account that functions as an additional tax, in the sense that it funds government spending outside of the stated purpose of the social security law.
The concept may have seemed generous, but it's a big rip-off, and there's every reason to distrust it.
There are two ways to assess the future solvency of the Social Security program:
1. The government continues its practice of looting SS payments and putting them into the "general fund".
2. It doesn't do that, but rather, allocates payments directly to benefits, putting any surplus in the "trust fund".
Obviously, the whole scheme will last longer in scenario #2. But the gummint has tremendous inertia. To switch to #2 would be a profound paradigm shift--the gummint does a LOT of things a certain way for no better reason than it has always done them that way (see: electoral college). So the following is inevitable: the gummint will have an increasingly voracious appetite for funding as the Obamaesque national debt climbs and climbs. The rapidly decreasing pool of earners will be straining just to make the interest payments on that debt. Sooner or later, some gummint official who has a political death wish will have to stand up and admit that the emperor has no clothes, and nothing is in the trust fund, and Social Security is dead.
THIS IS INEVITABLE, and will happen all that much faster if the gummint doesn't sequester SS revenues into the trust fund, AS IT IS SUPPOSED TO DO UNDER THE LAW THAT CREATED SOCIAL SECURITY. Entering numbers on the ledger to fake the existence of a "trust fund" is the sort of fraud that in the private sector, would get you thrown in prison.
I am certain that the system, as it stands, will not last beyond 2025. It may collapse even sooner. Hasta la bye bye, monthly green check.
Quote: ItsCalledSoccerI think this is a little cynical. Sure, there are idiot CEOs out there, but there are idiot lawyers, doctors, politicians, priests, taxi drivers, hotel desk clerks, etc., etc., and yes, even idiot casino owners out there. Not all CEOs are "thieving bastards." And being chintzy does not = being a thieving bastard.
Market forces are real, and they're very powerful. Salary pressures are among them. Any "savings" by a CEO that didn't pass on this hypothetical "savings" would be short-term. He would lose employees, and his company would suffer, because, believe it or not, employees change companies if they can get a higher salary somewhere else.
Think of it this way. Casinos that don't offer some sort of comp system still make money, but not as much as the ones that do offer them. So, in a sense, the owner of the casino that offers comps is "greedy" because he wants to make more money. The chintzy casino owner earns less money. He's chintzy, but he's not a thieving bastard. Same with the CEOs.
I will see your little cynical and raise you a lot cynical ;-)
Since I am quite a bit off topic I have deleted my response.
Quote: ruascottThe claim that payroll taxes would have to be doubled to bring the system into balance just proves that he has no clue ...
Quote: mkl654321I am CERTAIN that YOU don't know enough about these subjects to tell whether someone is an expert or not.
I am certain you are not knowledgeable.
Quote: mkl654321The employee actually pays the entire $775 ... there was nothing wrong with my--or Soccer's--arithmetic.
Soccer calculated $382, not $775.
You posted that recent benefits recovered lifetime contributions in one year.
You also posted that payroll taxes need to be doubled to balance benefits.
Your failure to grasp the basic budgetary arithmetic leads you to alarmist conclusions.
Quote: RaleighCrapsNot likely in corporate America. If they did not have to pay SS taxes the CEO would just up his pay by another $2M and those of his/her cronies by a like amount. Thieving bastards is an appropriate comment.
Part of our problem too is we have off shored much work that has not been replaced by other forms of employment.
The prevalence of viewpoints like these shows just how valuable a college course in economics would be for people who hold those viewpoints.
Wages are dictated by the market for labor, and that market functions pretty much in the classic sense. If some mean, greedy, nasty, evil, no-good CEO doesn't pay a high enough wage, his company will lose workers, as someone else WILL offer higher wages. The threshold is dictated by the market for labor. To say that the evil CEO will just be able to stuff that money in his pockets is ignorant of the fact that he does not control the market, and, I might add, is populist and silly to boot.
To all that moan and wring their hands about "off shoring" and "outsourcing"---WE BENEFIT from those practices. The economic concept, "the principle of comparative advantage" applies. If Gupta in Bangalore can process insurance claims for $5 a day, then that frees up our domestic insurance claim processors to do something else that produces more value. We get insurance processing at $5/person/day instead of whatever it cost us before. All parties benefit, including those who temporarily lose their jobs (they will eventually find jobs that produce more value, and thus get paid more). It's a beautiful mechanism, and its existence is a powerful argument for unfettered trade. Unfortunately, the populist (again) sentiment for "not sending our jobs overseas" impels the government to enact harmful trade barriers.
The continuing tragedy of our democratic government is that uneducated people participate in decisions about which they know little or nothing, using populist mantras as a poor substitute for rational analysis.
Quote: mkl654321how valuable a college course in economics would be ...
The continuing tragedy of [internet forums] is that uneducated people [like me] participate in [discussions] about which they know little or nothing
Dude, you are innumerate. You try to control dice at craps and don't grasp basic magnitudes in football scores.
Quote: mkl654321If you can get the Saints at anything smaller than -21, BET THE HOUSE on them.
Quote: mkl654321that the evil CEO will just be able to stuff that money in his pockets
Well, they really need to stop reporting CEO salaries, and reporting of taking bonuses while on loans from the government to avoid their own bankruptcy, and golden parachutes as they leave not just successful companies, but failing companies. This gives the public a false impression.
...and, furthermore, just for an added bonus, how the start of the various labor movements were totatly unprovoked by circumstances.
Quote: mkl654321The prevalence of viewpoints like these shows just how valuable a college course in economics would be for people who hold those viewpoints.
Wages are dictated by the market for labor, and that market functions pretty much in the classic sense. If some mean, greedy, nasty, evil, no-good CEO doesn't pay a high enough wage, his company will lose workers, as someone else WILL offer higher wages. The threshold is dictated by the market for labor. To say that the evil CEO will just be able to stuff that money in his pockets is ignorant of the fact that he does not control the market, and, I might add, is populist and silly to boot.
To all that moan and wring their hands about "off shoring" and "outsourcing"---WE BENEFIT from those practices. The economic concept, "the principle of comparative advantage" applies. If Gupta in Bangalore can process insurance claims for $5 a day, then that frees up our domestic insurance claim processors to do something else that produces more value. We get insurance processing at $5/person/day instead of whatever it cost us before. All parties benefit, including those who temporarily lose their jobs (they will eventually find jobs that produce more value, and thus get paid more). It's a beautiful mechanism, and its existence is a powerful argument for unfettered trade. Unfortunately, the populist (again) sentiment for "not sending our jobs overseas" impels the government to enact harmful trade barriers.
The continuing tragedy of our democratic government is that uneducated people participate in decisions about which they know little or nothing, using populist mantras as a poor substitute for rational analysis.
"People who hold those viewpoints" probably got them from first hand experience! While I do not dispute the value of book smarts, many times real life experience can be a much better education path. Those who can combine both paths of education have the most value.
We BENEFIT from off shoring, ONLY if that leads to a direct reduction in our rates or costs. Right now, the only real people benefiting are the CEOs and the stockholders of company X, assuming the stock price goes up.
Did the 1,000 people in America who are now unemployed benefit? If so, how?
Did the government who is paying unemployment comp benefit?
Did the income tax collection fund increase because we have 1,000 fewer jobs here?
For that matter, did the corporation that moved to off shore work now pay more in taxes since they are presumably making more due to decrease employee costs? You know they are not paying more taxes!
I agree with the premise that finding a way to do something cheaper benefits the economy, but ONLY if those savings are passed on to the consumers, AND, if the displaced workers are able to find new work that pays them the same wages. Otherwise, the gains made are offset by a smaller tax base, and more gov't payouts in unemployment.
I am not a socialist by any means, but I think we have a serious problem on our hands when a company removes 3,000 people from their workforce, and then the CEO gets a 25%, $4M pay raise, because the company numbers look so good. Or, the company suddenly gets rid of their pension plan, thereby putting their older workers at risk, and the CEO bags a huge increase, again because of the stellar numbers that resulted from the pension savings. I don't begrudge a big payout to a CEO (although some of these numbers are absurd), IF they are growing their company. But when a company gets good numbers by cost cutting, offshoring, and layoffs, that CEO SHOULD NOT be rewarded with more money. If they had not been given the increase, they could have kept the people employed, WHICH BENEFITS THE ECONOMY,and the company numbers would have been the same.
I highly recommend reading 'House of Cards' by William D. Cohan for some insight into our current corporate culture in the US. It is primarily about the fall of Bear Stearns, but touches other areas of the financial implosion as well.
Quote: RaleighCraps"People who hold those viewpoints" probably got them from first hand experience!
I agree with the premise that finding a way to do something cheaper benefits the economy, but ONLY if those savings are passed on to the consumers, AND, if the displaced workers are able to find new work that pays them the same wages. Otherwise, the gains made are offset by a smaller tax base, and more gov't payouts in unemployment.
Actually, most fundamental economic concepts CANNOT be gotten from first-hand experience, because most of those conceots are counterintuitive. (A small businessman will see a number of the principles of microeconomics explicated before his eyes, but only if he's paying attention.)
If labor is outsourced because it's cheaper elsewhere, then the consumer benefits, whether or not anyone "passes on" the savings. The product/service associated with that labor will have a lower price in the marketplace. If the company using that cheaper labor pockets all the profits and continues to charge the same prices, then some other company will take advantage of that cheaper labor, and undercut the first company by offering lower prices, and the second company will take market share from the first.
As far as the displaced workers are concerned, the principle of comparative advantage means that their talents are better employed doing something else. They will experience temporary hardship due to dislocation, but that is a function of the free market: if you sell something (in this case, a specific type of labor), and the supply of that goes up, then you either have to accept lower profits (wages), or sell something else. But society as a whole benefits from an increased supply of that commodity.
You have to let go of the comic-strip-character CEO image. They aren't all evil, greedy, cackling fat cats who heartlessly slash jobs to maximize profits while unemployed former workers freeze to death in the snow. For one thing, a CEO is AN EMPLOYEE OF THE COMPANY. His JOB is to maximize profits, part of which is minimizing losses. If he did not do this, he would not be earning his salary. He may also earn bonuses (note that you always have to say, "FAT" bonuses) for superior performance in this regard. Those bonuses are part of his employment contract, and if the shareholders (who are the only ones who should have any say in the matter) don't like it, they shouldn't have hired him in the first place, or at least not contracted for bonuses.
A CEO's, and a company's, objective isn't necessarily "growing the company". That objective is actually to maximize profits (NOT earnings). If profit can be maximized by laying off workers, then the CEO is being responsible to his shareholders by instituting those layoffs. What he gets his "FAT" bonus for is taking those steps that make the company profitable (or stop it from becoming unprofitable), even if those steps are unpopular.
Not every CEO is Mister Burns, but many of the actions they take IN FULFILLMENT OF THEIR EMPLOYMENT CONTRACTS make them seen that way to those who are most affected by those actions. I would argue that the CEO who saves his company from going under by laying off 20% of his workers DESERVES that fat bonus, not the least because the remaining 80% STILL HAVE A JOB, which they wouldn't have had if the evil, greedy, scheming CEO hadn't cruelly slashed all those 20% jobs. The populist view is that the CEO destroyed all those jobs just so he could get that fat bonus for himself. That ascribes a high degree of immorality to a class of persons who, despite populist imagery, are, for the greatest part, responsible, diligent, and intelligent individuals. They aren't the Simon Legrees every pundit and latte-sipper makes them out to be.
Quote: kimleeYour failure to grasp the basic budgetary arithmetic leads you to alarmist conclusions.
If your implication is that you think social security is in great shape, then the reality of the situation differs greatly from your thinking. Any ostensible "mistake," posited by posters on a random internet forum, is not evidence to the contrary.
I can't make you believe that social security is in big trouble if you are really hell-bent on thinking that it's not. When it crashes, though, don't complain that you weren't told.
I, too, think alarmism sucks ... except when it's time to be alarmed. And, "alarmed" doesn't always = "run around like the sky is falling." With respect to the philosophy behind, the actual treatment of, and the future condition of social security, the reality of the situation is that it's time to be alarmed.
Quote: ItsCalledSoccerit's time to be alarmed.
CBO estimated that raising the payroll tax by two percentage points (from 12.4% to 14.4%) over 20 years would ... solve the 75-year shortfall.
We have the genius mkl654321 lecturing people on college economics. He thinks payroll taxes need to be doubled. CBO thinks they need a 2% increase.
Quote: kimlee
We have the genius mkl654321 lecturing people on college economics. He thinks payroll taxes need to be doubled.
Why not just have our paychecks sent right to Uncle Sam, like they want to do in the UK? They can take whatever they think is proper and send us the rest. Imagine how grateful we'd be. MKL would cry himself to sleep at night at the justice of it all...
Quote: kimleeCBO estimated that raising the payroll tax by two percentage points (from 12.4% to 14.4%) over 20 years would ... solve the 75-year shortfall.
http://en.wikipedia.org/wiki/Social_Security_debate_(United_States)
We have the genius mkl654321 lecturing people on college economics. He thinks payroll taxes need to be doubled. CBO thinks they need a 2% increase.
kimlee, your thinking is ideologically motivated. You choose to believe this "CBO" person/agency/whatever because he/it reaches a conclusion you LIKE, while you try to crap on me because I reach a conclusion you DON'T like.
In point of fact, you can't refute my reasoning (which I amended to say that only a 47.5% increase would actually be needed). That's probably why you haven't even tried to do so. Guess what, kimlee--"Well, this guy says you're wrong!!!!!!!!" doesn't constitute a very compelling argument.
And whoever or whatever this CBO is, his conclusion that such a tiny increase can cover both the drastic increase in beneficiaries and the drastic decrease in payers that is certain to happen in the next 20 years, is...well, naive, ludicrous, and downright dangerous if anyone significant believes it.
And I'm not a genius (by definition, as a function of measured IQ), but I'm pretty damn smart. Especially compared to anyone who thinks Social Security is doin' jest fine.
Quote: kimleeI am certain you are not knowledgeable.
Soccer calculated $382, not $775.
You posted that recent benefits recovered lifetime contributions in one year.
You also posted that payroll taxes need to be doubled to balance benefits.
Your failure to grasp the basic budgetary arithmetic leads you to alarmist conclusions.
That certainty is a function of your own ignorance, which is, unfortunately, a function of your ideology.
You need to reread what I said, this time for comprehension. The employee actually pays both parts of the tax.
The statement I posted was true regarding recent benefits. I never stated a particular year.
I have modified my assertion to not "doubled", but merely increased by 47.5%. Read my post for comprehension (dimming, for a moment, the ideological red haze that obscures your reason), and see if you can follow the logic.
Your thinking, however, will not be modified because you are not the sort of person who ever acknowledges that his thinking needs to be modified.
And my football comment about Saints -21 was obviously hyperbole. If you couldn't even comprehend that, well then, you are just...plain...stupid. (Not that I really think you didn't understand that; you just chose to distort and misinterpret something I said in order to "bolster" your "point".)
Quote: ItsCalledSoccerIf your implication is that you think social security is in great shape, then the reality of the situation differs greatly from your thinking. Any ostensible "mistake," posited by posters on a random internet forum, is not evidence to the contrary.
I can't make you believe that social security is in big trouble if you are really hell-bent on thinking that it's not. When it crashes, though, don't complain that you weren't told.
I, too, think alarmism sucks ... except when it's time to be alarmed. And, "alarmed" doesn't always = "run around like the sky is falling." With respect to the philosophy behind, the actual treatment of, and the future condition of social security, the reality of the situation is that it's time to be alarmed.
I think you're talking to a brick wall. Fortunately, reality-denial thinking like his is not widespread. Otherwise, the problem would be postponed until it was far too late to deal with it.
kimlee reminds me of an early chess computer. It thought five full moves ahead--no more. So if it saw it was about to be checkmated in five moves, it would throw away its queen just to move that outcome from five moves in the future, to six--over its "event horizon". Those who say that Social Security is jest fine have a similarly truncated event horizon.
Quote: kimleeCBO estimated that raising the payroll tax by two percentage points (from 12.4% to 14.4%) over 20 years would ... solve the 75-year shortfall.
http://en.wikipedia.org/wiki/Social_Security_debate_(United_States)
We have the genius mkl654321 lecturing people on college economics. He thinks payroll taxes need to be doubled. CBO thinks they need a 2% increase.
Wow, speaking of elementary math errors. 2% is a lot different than 2 percentage points. Even the CBO got that right.
The actual %D is (Q1 - Q0) / Q0 = (14.4 - 12.4) / 12.4 = 16% increase. But putting that elementary math error aside ...
A 16% increase for the next 20 years will save social security? I guess you assume the government will stop raiding it. Anyone want to bet on that?
A 16% increase is MASSIVE. Believe it or not, people spend less money if they have less money. And, businesses lay people off if the cost to employ is too high. An unemployed person contributes zero, and his "company" match also contributes zero. The CBO's number ... whatever its veracity ... doesn't account for that, and therefore can't be relied upon.
But hey, like I say ... go ahead and believe what you want. Just don't say you weren't warned WHEN it crashes.
Quote: ruascottBTW, both the cbo and independent analysts have shown that the entire system can be brought into balance over the next 75 yrs by increasing the payroll tax from the current 12.4% to 14.4%. A 2% increase phased in over 20 years.
Quote: mkl654321You choose to believe this "CBO" person/agency/whatever.
I'm a professor (with the relevant Ph.D.). Our host, the Wizard of Odds is an actuary. You are ignorant of the (nonpartisan) Congression Budget Office, fail basic budget calculations, yet hector about "college" economics!
Quote: kimleeI'm a professor (with the relevant Ph.D.). Our host, the Wizard of Odds is an actuary. You are ignorant of the (nonpartisan) Congression Budget Office, fail basic budget calculations, yet hector about "college" economics!
Quit using terms like "ignorant". You are a being a complete asshole when you do that. Not a single one of your posts has been absent such name-calling. If your points are so strong and unassailable, then you don't need the name-calling to bolster them. Act like a decent human being, even if it is out of character for you to do so.
And I didn't "fail" anything. I note that despite three requests to do so, you have NOT refuted my calculations. I didn't care to look up what your "CBO" source was. Why? Because as another poster pointed out, the "2%" increase you quote contains a basic, elementary mathematical error that would not escape a third grade child! When you quote garbage, I'm not inclined to look up exactly WHO said that garbage.
I don't really care about your so-called degree (and the stupidity of your remarks has made me seriously doubt that you even have graduated from high school, let alone have an advanced degree). In any case, you're an arrogant prick. You refuse to acknowledge the validity of opinions that disagree with yours. YOUR analysis is deeply flawed, you haven't refuted MY analysis, but I could tolerate that if you weren't such a jerk about it. How about if you at least CONSIDER THE DISTANT POSSIBILITY that there might be opinions and viewpoints that are valid EVEN IF YOU DISAGREE WITH THEM?????
Ideologically distorted thinking like kimlee's, and misguided manipulation of statistics (as kimlee does), will pretty much ensure that the Social Security disaster will come to pass. There are HUNDREDS of people in power who sound exactly like kimlee. That means that there's no real hope for rationality in our government.
Quote: mkl654321
If you posit a 2:1 worker:retiree ratio, then each retiree ... must receive one half as much from each worker as that worker needs ... . At current rates, this is accomplished by a total levy on the worker and his employer of 16% (rounded up).
The current worker:beneficary ratio is 3.2:1. This alone would mean that a reduction in the ratio to 2:1 would result in a 27% tax rate necessary to maintain equiibrium.
How do you calculate 16% or 27%?
To get the 27% rate at the reduced ratio, I solved for (3.2/2)= x/16. I should have used x/15.3, so the correct number is 26%, not 27%. This would fold into my other calculations to result in a number more like 46%, not 47.5%.
Quote: mkl654321I solved for (3.2/2)= ... x/15.3, so the correct number is 26%
The solution is not 26%, it is x=24.48%. This proves my point - you can't do basic algebra, arithmetic, and rounding.
You also repeated your error of calling Social Security SSI and included Medicare, which makes your calculations incomparable with previous ones. Basically you can't keep numbers straight.
It is interesting you called me ideological, since I have not advocated anything beyond correct arithmetic. I'm merely calling you innumerate. A high school Algebra I class would be a good start, followed by a civics class to learn about the CBO.
Quote: kimleeThe solution is not 26%, it is x=24.48%. This proves my point - you can't do basic algebra, arithmetic, and rounding.
You also repeated your error of calling Social Security SSI and included Medicare, which makes your calculations incomparable with previous ones. Basically you can't keep numbers straight.
It is interesting you called me ideological, since I have not advocated anything beyond correct arithmetic. I'm merely calling you innumerate. A high school Algebra I class would be a good start, followed by a civics class to learn about the CBO.
I made an arithmetical error. It was after midnight when I made that post. People make mistakes. Making a mathematical mistake does not making a person "innumerate", any more than making a spelling error makes a person illiterate. As a self-professed "PhD" (again, which I highly doubt), one would think you would grasp that distinction. But your urge to be an asshole apparently trumps all.
My point is basically the same regardless of the precise arithmetic. I challenged you to refute my argument, not to point out realtively trivial math errors. You have failed to point out any flaws in my REASONING; instead, due to your ideologically driven urge to "prove me wrong", you have fallen back on the cheap shot of pointing out where I didn't round up or down. And YES, you ARE ideologically driven, because you selectively data-mine to prove your point. So a single "nonpartisan" (my ass!) government agency throws out a set of numbers. So what?
And I don't accept your condescension. It's a favorite tactic of an asshole to say "take a high school class in this or that, neener neener neener". The fact of the matter, Mr. pseudo-PhD, is that I'm smarter than you, because I know how to delve into the substance of an argument, rather than evade doing so by picking apart petty details.
By the way, I could have easily looked up what you probably meant by "CBO". But since your post referring that agency contained a mathematical error by a factor of eight, either you were in error or they were, and in either case it meant that your thinking was grossly flawed. Furthermore, you were cherry-picking in any case--unless you want me to believe that you would have quoted the CBO if they had DISAGREED with your preconceived notions. As another frequent poster on these boards is wont to say, "lol".
In any event, your demeanor has meant that you have forfeited the privilege of conversing with me. I would rather discuss concepts than mathemtaical minutae, and no matter what, I would rather NOT discuss ANYTHING with an arrogant bastard. You're blocked from now on; find someone else to tussle with, and point out their incremental mathematical errors (while continuing to tolerate your own 800% errors). That should make you well liked here.
Be sure to say something snarky in reply.
Quote: mkl654321So a single "nonpartisan" (my ass!) government agency throws out a set of numbers. So what?
By the way, I could have easily looked up what you probably meant by "CBO".
The CBO was created as an independent nonpartisan agency by the Congressional Budget and Impoundment Control Act of 1974.
From Stanford.
If there's one thing I've learned, it's that people - whether "smart" or "stupid" - hold their political and religious beliefs for reasons outside of pure intelligence. While intelligence is not absent in politics or religion, it is often used as a rationalization for one side's justification of superiority over the other.
The human psyche is far more influential than our pure reason in these matters. I've seen brilliant Ph D's and the completely unschooled engage in petty pissing matches and weep mightily over the memories of their parents.
You are both idiots. No one wins an internet argument, you both look stupid, and it makes people not want to participate in the forum.
Give it a rest.
Quote: ItsCalledSoccerNo one wins an internet argument.
Sorry to drag you into it. My only motivation for mentioning you was to give company to Mkl654321 to indicate this issue was about math, not about a particular person's politics. But really Mkl654321 has made the only annoying mistakes in this thread.
I agree with you that raising Social Security contributions by 2% is a large increase. It's just not a catastrophic magnitude. The real jeopardy is Medicare growth and the government deficits that will force it to raid the Social Security trust fund.
Quote: ItsCalledSoccerI have a Ph. D.
You are both idiots.
Spoken like a PhD.
So you get to toss out insults, and we don't? You are exhibiting the same kind of arrogance as kimlee. You may have an advanced degree, but you're an elementary schooler in terms of human relations.
Can you not perceive with your PhD mind that saying, "Stop attacking each other, you idiots!" is a bit, shall we say, hypocritical? No, I actually think you can't. Book larnin' and social stuntedness. The two all too often go together.
I also don't believe that you think either one of us is an "idiot". Only an idiot would read our posts and conclude that, and I don't think that you're an idiot. Therefore, you're blowing smoke, and being insulting for insult's sake.
