At Work

In my humble opinion, here’s what’s wrong with America

You can think what you will of the political parties and individuals who lead them, but the most dangerous people are individuals who mislead and create class envy. They are closely followed by uninformed Americans who want to believe and feel others should pay for what they want or believe they deserve.

Let’s keep our perspective. There are roughly 400 billionaires in the US, not that earn a billion dollars, but have a net worth mostly in stocks and real estate, mostly earned through their own efforts creating or growing businesses. There are about 1,400,000 American household taxpayers who fall in the top 1% and who earn an average $1.2 million. There are 6.7 million in the top 5% and they earn on average $418,218 and they pay 58% of all income taxes.

So, we agree, 0.33% of all Americans should be responsible for paying to increase Social Security benefits for everyone else? Keep in mind that you only need to earn about $160,000 a year to be in the top 5%.

The Social Security system was designed to be paid for by participants and their employers with the eventual benefit based on earnings and years of participation. In addition, the formula that provides the monthly benefit favors lower income workers by providing a higher benefit relative to Social Security taxable earnings. In other words, higher income Americans subsidize lower income.

The only thing wrong with Social Security is the failure of every Congress in the last twenty years to meet its obligation to keep the program sustainable by making minor changes over the years to adjust for the changing population, life expectancy, etc. Every member of Congress knows the facts and has seen the urging of the Trustees to take action.

If Americans want a higher future Social Security benefit they should all be willing to pay a bit more during their working years rather than expecting others to fund it thereby turning Social Security into another form of welfare.

And while we are on this topic, how much more Social Security is enough? What does increasing benefits mean exactly? 5%, 10% more, giving Americans 70% of their pre-retirement income?

It’s nice to throw around buzzwords like “more,” “increase,” “wealthy,” “fair share,” “free” and the like. It’s quite another thing to live in the real world and be honest with people.

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17 replies »

  1. Let’s see, taking money from those who earned it (in various ways) and giving it to others “deemed” necessary, needy, and assumed they are owed this is called “Socialism” I believe.

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  2. RD, I think it is great that a person can make 6 figure income and save for retirement or have a company pension, but get real, they earned it. Maybe they did maybe they did not. We all know that the people at the top of any company are figure heads and the people below them do most all the work. I found this to be true in the USAF, when I made MSGT at 13 years of service my number of meetings and paperwork increased, but I was told that I could no longer work on the electronic equipment. My actual workload decreased, but I was responsible for 130 workers and 45 million dollars of electronic equipment.

    My 88 year old mother gets $770 per month SS and $93 in SNAP and every time she gets a COLA her SNAP benefit goes down, so much for helping the poor.

    Melton Friedman called Social Security the biggest wealth transfer scheme to the rich ever devised. Billions of dollars in debt to the rich who do not need it to stay out of poverty or to live well in retirement.

    I am not anti rich, but I realize that the lower paid in our society provide the labor to make them rich and we should make sure that no retiree should live a substandard life in retirement, no matter what their income was while they were working, even as a stoker at Walmart.

    So if means testing comes to SS so be it. My guess is the payroll tax will be increased to cover the coming shortage and we will just make the current workers and employers pay for it, just as it has always been.

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    • There is work and there is work. To say those at the top don’t work is not fair or accurate. The folks below them could not work or perhaps wouldn’t have jobs if it were not for the people who create, plan, fix strategies, raise financing, create marketing plans, etc. and the people at the top could not succeed without the day to day workers. Labor does not make people rich, their creativity does. When it comes to anything manual I am incompetent, but I managed 45 people and $200 million in benefit plans, negotiated union contracts, etc. at the same time I realize I could do none of that without the skills of the union workers. I started out at the very bottom and over fifty years got close to the top, I paid SS benefits for over sixty years. The notion I should not receive a benefit based on what I paid in taxes is alien to me, sorry.

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      • I did not say those at the top do not work, I said their ability to make money relies on the labor of lower paid workers. I realize that there is no free lunch, but if SS needs to be fixed the ones at the top of the economic ladder should take the biggest cut, as they are in a much better position to maintain their standard of living.

        No one has paid for their SS benefit, the money we paid in payroll was spent on the retirees that left the workforce. Any extra was spent by the government. The SS trust fund bonds do earn interest (paid by the government) but as they are cashed to pay benefits the government has to borrow money, making future generations poorer. This needs to be fixed so SS is truly self funded by taxes and any extra should be invested in the stock market so we do not continue to add to the national debt.

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      • There is no need for any cuts. There are many easy fixes to make the program sustainable. If congress had done its job gradually over the last 20 years it wouldn’t even be an issue. In an upcoming post I outline one was to fix it, but there are many combinations.

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      • I have no faith in Congress and the cuts are coming if they do nothing. I am a realist when it comes to Congress
        You know the Ds will cut the program for the richest retirees and get uninformed voters to vote for them. Those evil Rich that the Ds want to blame for all our problems.

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  3. The cliche that demographics is destiny is exaggerated, but uncomfortably true. Social Security worked well when it was introduced, when there were 12 paying in, for every one taking out. Then, it still worked well for decades when there were 7 paying in, for every one taking out. Now? I believe it is 3 paying, for every one taking out. And that is decreasing to 2 as the bottom half of the baby boom generation qualifies for Social Security.

    What is past is not prologue.

    The system will both by financial necessity and political expediency be more wealth transfer and less “fair retirement” for all.

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  4. Since Social Security is a welfare program, then lets get rid of the payroll taxes and get rid of qualifying for Social Security and just raise everybody’s income taxes to cover the increase in welfare costs. We should also stop calling it Social Security and call it the Old People’s Welfare Fund.

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    • The payroll tax is not ever going away. Employers would love it. It would save them 6.2 % of payroll costs. If the Congress was smart, since they just gave business the biggest tax cut in history, they should raise the payroll tax on employers to cover the coming shortage.

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      • All it would take even now is for the payroll tax to increase 2.78% half paid by employer and worker. Imagine if that had been done gradually over 20 years. Actually the percentage would have been less.

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  5. the formula that provides the monthly benefit favors lower income workers by providing a higher benefit relative to Social Security taxable earnings. In other words, higher income Americans subsidize lower income.

    Not exactly true – Since no one has paid for their total SS benefits, a more correct statement would be current workers are paying for everyone’s SS benefits and the trust fund and taxes on SS benefits make up any shortage.

    I would like to see the SS system fixed, but I am not sure Congress will do it.
    Means testing is coming, there is no reason that someone with $100,000 per year in retirement income should get a SS check, no matter how much was paid in taxes. Of course if income changes they would be able to get a SS benefit.
    Since no one has paid enough in taxes to equal what they will receive in over a 20+ year retirement.

    I know a lot of people do not think that is fair, but the SS system was started to keep retirees out of poverty, not provide a windfall to the rich.

    Also, if Congress fails to act by 2034 we can all just take a cut in SS benefit and then apply for any of the other programs the State and Federal governments have for the poor.

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    • You are mixing up two different things. The fact is that when calculating the benefit the formula gives a higher benefit at the low end of the income amount. They are called bend points. If most of a persons average income for SS purposes is above the bend points they get a lower percentage in the calculation.

      If a person has paid SS taxes all their life and perhaps most of it at the maximum amount, why shouldn’t they receive their full earned benefit? What has any other income to do with it? They paid their fair share and more into the system even in retirement they pay via income taxes. Do you seriously think SS should be turned into a gigantic welfare program? You have a unique view of “fair” and what windfall may be. I have paid into SS since 1955 and still do today. I think I earned my share regardless of what other income I also earned.

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      • Other income has everything to do with it. SS was set up to keep retirees out of poverty not provide a windfall to workers who made several times more than what the average worker made during their working careers.

        Not everyone can be a CEO or VP – There just are not enough of those jobs.
        Many companies no longer provide a pensions for workers. But workers that are covered by a pension should get a lower SS benefit.
        Should self employed who pay both halves of the SS tax get a bigger check, maybe.

        I would be taking a cut in my SS benefit, but i believe the best thing Congress could do is change SS so each worker gets the same check each month.

        Yes I do believe for the nations workers SS should be and has always been a Welfare System
        that is just called a retirement system. Benefits are earned after just 10 years of work and there are survivors benefits, you cannot really call it a retirement system any longer.

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    • JRATT – I agree that Social Security was originally meant to keep widows from dying in the streets. If one assumes that Social Security is only meant to lift one out of poverty (or the street) then nobody should need more than $12,140 / year for a widow and $16,460 for a retired couple. This figure is based on what the US poverty income is for 2018. I realize that most retirees would be forced from their homes and could not afford their Medicare co-pays, but that is the government’s figure for poverty.

      The $12k figure is the only thing that is fair. That was the promise of paying into Social Security was all about. Would it be fair to make an income test based on that and only getting the amount money you need to be lifted out of poverty even after paying in all those years?

      Giving money via means testing is pure welfare. Paying into a program with a promise of getting something back is a contribution program which was why you have to qualify for Social Security. Welfare you just prove that you are poor.

      Why should a person who paid more into the program get nothing under your suggestion? Since Congress has messed up the original intent of Social Security with COLAs and expanded benefits, using a means test would only change the program to a welfare tax on the rich to give to the poor and therefore you do not need to qualify to be taxed.

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      • Dwayne, we all pay taxes that support the government, but may not see any direct benefit.

        “Why should a person who paid more into the program get nothing under your suggestion?”

        Because they have other retirement income their SS benefit should be less or no more than the average amount, not more. SS is a welfare system period, as know one has paid for their total benefit.

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      • And how did they get that other retirement income. Perhaps working for it, saving, taking risk? I just don’t get the idea that (except poor and otherwise truly needy and unable to do for themselves) other Americans are entitled to more from those who have earned their money fair and square.

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