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Morning Joe is prattling on about Austerity, aka Shared Sacrifice ... Simpson Bowles.

Scarborough is stating without facts or reason, that "raising taxes on the rich" will not fix Social Security.


Those with a bit more economic depth, might disagree with Mr. Scarborough:


The Only Social Security Reform Worth Considering: Raising the Ceiling on Income Subject to It

by Robert Reich, robertreich.org -- July 22, 2011

[...]
Social Security isn’t responsible for the federal deficit. Just the opposite. Until last year Social Security took in more payroll taxes than it paid out in benefits. It lent the surpluses to the rest of the government.
[...]

Greenspan’s commission must have failed to predict something. What?

Inequality.

Remember, the Social Security payroll tax applies only to earnings up to a certain ceiling. (That ceiling is now $106,800.) The ceiling rises every year according to a formula roughly matching inflation.

Back in 1983, the ceiling was set so the Social Security payroll tax would hit 90 percent of all wages covered by Social Security. That 90 percent figure was built into the Greenspan Commission’s fixes. The Commission assumed that, as the ceiling rose with inflation, the Social Security payroll tax would continue to hit 90 percent of total income.

Today, though, the Social Security payroll tax hits only about 84 percent of total income.
[...]


Instead of railing against the Democratic Party Joe, how about trying a little Math.


Simply tie the FICA Ceiling level to Inflation and to the ever increasing rate of Income Inequality -- and you're so-called "problem" is gone, Joe. Just ask Alan Greenspan -- that was the "solution" he prescribed (Ceiling = 90% of ALL wages), from back in your day -- when "cooperation and big ideas" ruled the congressional roost.



Originally posted to Digging up those Facts ... for over 8 years. on Mon Oct 01, 2012 at 05:53 AM PDT.

Also republished by Income Inequality Kos.

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Comment Preferences

  •  OK. Let's try it. (4+ / 0-)
    Recommended by:
    jamess, Horace Boothroyd III, Sylv, Sue B

    Let's do it, and we can review in ten years, and see if it worked.  If it doesn't, then point made.

     

  •  There is enough wealth in this world (6+ / 0-)

    to feed, educate, medicate, clothe, and house every human on the planet.

    The fact we choose not to speaks volumes.

    Education is a progressive discovery of our own ignorance.

    by Horace Boothroyd III on Mon Oct 01, 2012 at 06:01:25 AM PDT

  •  This does not work (1+ / 0-)
    Recommended by:
    Losty

    Merely pegging the ceiling to 90%  doees not work the way you think it will. Given the  fiscal inequality, the 1% skew the figures so much with their huge salaries, that  tying  the ceiling to 90% will actually hurt those making between $110K and $250K  much more than the rich fatcats who still basically get off scot free. The President's propossal is much fairer where the  cap remains around $110K and the  once  an individual passes $250K per year,  the cap is lifted for income   over that $250K. this way those making  a good wage, but  certainly less than what is entirely comfortable are protected in keeping with the Democratic pledge not to raise  taxes on those making less than $250K

    •  Inequality (3+ / 0-)
      Recommended by:
      Egalitare, tobendaro, Sue B

      That is Reich's point

      Inequality was never factored in.

      It needs to be now.


      ALL Wages, no matter who's hoarding them.


      Are you ready to Vote? Are you still 'allowed' to Vote?
      -- Are you sure?

      by jamess on Mon Oct 01, 2012 at 06:16:00 AM PDT

      [ Parent ]

    •  I think you may have confused payroll (2+ / 0-)
      Recommended by:
      jamess, JeffW

      tax with income tax. What Reich is arguing is that 90% of income earners pay payroll taxes, in other words lift the payroll tax ceiling from $106,000 to a high figure that would mean more wealthy people pay more in payroll taxes. The other issue is that the government borrowed money from the Social Security system and now some conservatives are trying to figure out how to default on these loans. To repay these loans will require an income tax increase. This money is a part of the national debt that was spent from the 80s until today. We spent this money in order to provide tax cuts and now the bill has come due. So there are two issues here funding of the program into the future to cover boomers and paying back the fund the money borrowed from the fund to fight wars and give tax breaks to the wealthy.

      Bowles-Simpson recommend cutting benefits and raising the retirement age. This is a way of defaulting on the debt the government owes the Social Security system. Remember Al Gore and the lock box and how the media laughed. Well Al was right and it has come back to bit us in the ass. Any talk of lowering benefits or raising the retirement age is an attempt to partial default on the money owed to Social Security by the government. And that is why the Grand Bargin stinks. It abandons the Democratic Party's protection of the safety net and promises made to workers in the name of lower taxes and defaulting on a sacred obligation.

      •  Yep, that's why Rethuglicans have been (1+ / 0-)
        Recommended by:
        JeffW
        The other issue is that the government borrowed money from the Social Security system and now some conservatives are trying to figure out how to default on these loans. To repay these loans will require an income tax increase. This money is a part of the national debt that was spent from the 80s until today. We spent this money in order to provide tax cuts and now the bill has come due.
        Bowles-Simpson recommend cutting benefits and raising the retirement age. This is a way of defaulting on the debt the government owes the Social Security system.
        yapping about the "Social Security crisis".  This point needs to be made frequently, thank you for making it now.  

        Renewable energy brings national global security.     

        by Calamity Jean on Mon Oct 01, 2012 at 09:11:34 PM PDT

        [ Parent ]

      •  i do, and the media was right. (0+ / 0-)
        Remember Al Gore and the lock box and how the media laughed.
        the only way the gore lockbox works is to literally leave billions in cash sitting there, doing nothing. not earning interest results in a loss of value over time, due to inflation. so the $100 dollars that went into the lockbox last year is now worth $98 in constant dollars. by law, those excess receipts must be invested in special, interest bearing, gov't bonds, with the funds then going into the treasury's general fund. absent literally leaving piles of actual cash sitting in a vault, gathering dust, those excess funds will get into the hands of congress.

        unless you have a way around this, mr. gore's idea made no actual sense in practice.

  •  He IS correct about that (1+ / 0-)
    Recommended by:
    Calamity Jean

    however, before the middle class are asked to chip in some more, the obscenely low tax rates for the Super Rich really, really HAVE to fixed first.

    •  SS (3+ / 0-)
      Recommended by:
      slinkerwink, Sue B, Calamity Jean

      has nearly a 3 Trillion SURPLUS  

      which the USA has borrowed.


      The USA needs to pay it back,

      with Interest.


      Are you ready to Vote? Are you still 'allowed' to Vote?
      -- Are you sure?

      by jamess on Mon Oct 01, 2012 at 06:17:23 AM PDT

      [ Parent ]

      •  Those are basically accounting tricks (0+ / 0-)

        the bottom line is that revenue going into the federal government coffers is completely fungible and that surplus is completely, absolutely meaningless in any real sense.

        •  It needs to stop being fungible because that tax (2+ / 0-)
          Recommended by:
          slinkerwink, jamess

          is not fungible in terms of how we can pay it back.  If they gave the money to the wealthy and to the military then both those have to be factored in.  If they gave us all tax cuts(which they did) then we our taxes need to be raised, we need to consider the SS money the same as if we lent it to China.

        •  That's not true (2+ / 0-)
          Recommended by:
          jamess, Calamity Jean

          It is not "fungible", the Federal Government had to borrow those funds not re-appropriate them. The SS Trust owns Treasuries and the Treasury Department is required by the Constitution to honor debts. It can no more fail to pay back these treasuries then it can fail to pay back treasuries owned by any other pension fund.

          •  No, that is not how it works (in theory) (0+ / 0-)

            a lot of people made that argument in the past, but Obama's payroll tax cut/holiday put the lie to that misinformation:

            Wouldn’t expanding the payroll tax holiday just make this problem worse?

            No. Under the current payroll tax cut that expires at the end of this year, employees are only paying 4.2 percent – instead of the standard 6.2 percent – of their wages into the Trust Fund. The original legislation for this policy (as well as the BPC proposal for a full holiday), however, ensures that the Trust Fund is not shortchanged. The General Fund of the government will transfer the foregone revenue dollar for dollar back to the Trust Fund, such that it is made whole in real time with no impact on Social Security’s financing. This is one apprehension that can be put to rest.

            link

            IOW, the $$s seemlessly sloss back and forth between the general fund and the SS "lockbox"

  •  got to run (0+ / 0-)

    play nicely.


    Are you ready to Vote? Are you still 'allowed' to Vote?
    -- Are you sure?

    by jamess on Mon Oct 01, 2012 at 06:18:12 AM PDT

  •  ceiling hasn't beeen raised in 30 years (3+ / 0-)
    Recommended by:
    Constantly Amazed, tobendaro, jamess

    I think they should raise the ceiling to at least 200K    The answer to saving social security is pretty simple.

  •  Here's my plan for SS (1+ / 0-)
    Recommended by:
    jamess

    It is slightly different:

    Keep the currently reduced rate.  - The point being that the most regressive tax we have should be minimized.

    Eliminate the current cap and move it to whatever it takes to make the current projection for solvency between 30-50 years.

    Update the cap annually for inflation, and readjust it upwards or downwards every 4 years at the midterm point between presidential inaugurations (So next time would be January 2015) to keep it in the 30-50 year range.  

    Keep the marginal rate constant above the cap by having the next to highest income tax bracket pick up where SS stops.  The highest bracket should start at wherever the top 1% percentile begins @40% if we are in balance, 50% if we are in deficit, and lower if we have paid off the debt.  

    Cheers.

    Certainly from our standpoint, this gives us a sense of momentum -- when the United States has accolades tossed its way, rather than shoes. - PJ Crowley

    by nsfbr on Mon Oct 01, 2012 at 06:23:13 AM PDT

  •  Scarborough is confused and under a lot of (3+ / 0-)
    Recommended by:
    jfromga, a2nite, jamess

    pressure.....his advice is being REJECTED by the rest of the country and his compadres on msnbc....must hurt.

  •  geez, do none of these people know the basics (0+ / 0-)

    of budgeting?:

    Social Security isn’t responsible for the federal deficit.
    yes dr. reich (and dr. krugman) it is, in part. now, for purposes of full disclosure, i am not a nobel prize winning economist, nor have i ever been a member of any president's cabinet. i am but a simple country cpa, with a minor in econ. i've also been doing my job for the bulk of my adult life, not quite 30 years now.

    first, one must understand the basic difference between a budget and an income statement, the two are not the same, and represent two completely, yet not unrelated, things.:

    budget: a schedule of receipts and expenditures. if the expenditures exceed the receipts, you have a deficit. if receipts exceed expenditures, you have a surplus. we like us some surpluses. if receipts and expenditures are equal, you have a balanced budget. balanced budgets are good, but not as life affirming as surpluses. budgets are traditionally done using the cash method: cash receipts we expect to receive, and cash payments we expect to make.

    income statement (P & L): a schedule of revenues and expenses for a specific period of time, usually a calendar year, but always a 12 month cycle. if revenues exceed expenses, you have a profit. if expenses exceed revenues, you have a loss. notice the difference in terminology? those words actually have specific meanings, and they are NOT interchangeable. income statements can be done using either the cash or accrual method of accounting. most companies use the accrual method, as it reflects a more accurate matching of revenues and expenses for the period.

    here's where dr's reich, krugman, stiglitz, et al go astray, with respect to social security and the budget deficit:

    the social security trust fund consists of special gov't bonds (debt), purchased with the excess FICA taxes paid during the year. if FICA taxes received during a year are not sufficient to make the social security payments required, some of those bonds must be cashed in, and the funds used to cover the shortfall in receipts. this means the gov't must either take money from the general fund, to redeem those bonds or, lacking sufficient funds in the general fund, borrow the money (sell other bonds) to do it. the required expenditure results in a deficit (or, as is more likely, simply adds to the already existing deficit for the year, which must be made up for in borrowed funds).

    this is actually pretty simple, and why all these obviously really, really smart guys keep getting it wrong is a mystery to me, a simple country cpa. it turns out to be a mystery to some other diarists on kos as well, as one of them (don't ask me who, i forget) recently wrote a diary on this very issue.

    so, to summarize: social security payments do not add to the country's LOSS for the fiscal year, but they most assuredly can and do add to the country's DEFICIT for the fiscal year.

    any questions class?

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