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Old 02-06-2005, 09:01 PM   #1 (permalink)
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How to truly "cure" SS

The Right will protest, the left will say it's not good enough.....

Why not just give everyone at birth a Treasury Bill for whatever and make it payable in installments upon reaching age 70.

If death occurs before retirement the T-Bill is returned to Gov't. unpaid.... however, what has been paid by the employee goes to the next of kin. (I die at 30... I paid in $X my wife and kids get $X (with no interest as that goes into helping the disabled.)

Taxes are taken out of paycheck until the investment that is needed to pay for T-Bill (at birth) is paid off. (Say T-Bill is for a million.... so they figure 70 years to make a million would be $.. whatever and that amount is deducted. Kind of like a term life insurance policy).

It may lower the tax, and would definately help employers as they would not have to pay anything (or you could have them pay a percentage if the employee is there for a certain amount of years).

If T-Bill is paid for and retirement has not been achieved...... worker has choice of getting rid of tax or keeping tax and adding on to face value of T-Bill.

I'm sure I'll get hit with a bunch of "can't do's" but instead of negative responses.... why not come up with your own way of fixing retirement funding.
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Last edited by pan6467; 02-06-2005 at 09:04 PM..
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Old 02-06-2005, 09:22 PM   #2 (permalink)
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There is no problem with retirement funding. There is no crisis. In 2018, when SS no longer receives as much in funding as it pays out in benefits, it will remain solvent by dipping into the bonds that were established for this exact purpose about 20 years ago. This was a measure Reagan instituted, and as much as I dislike him, I have at admit that he was very prudent on this issue. This will leave SS solvent for at least 75 years, based on conservative estimates. SS is, in fact, one of the most extraordinarily succesful government social safety nets ever created.

Adding small amounts of money on top of current SS benefits - while ensuring no benefits are ever removed - to be saved, spent on the market, or whatnot is not a bad idea. In fact, done correctly it could help wise investors live with a little extra come retirement. Those who invest poorly will still be left with the levels of benefits that everyone receives now. Varieties of this plan have been discussed by Democrats and many Republicans for years, and would probably be a good thing.

But there is no crisis and no need to "fix" retirement funding.
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Old 02-06-2005, 09:29 PM   #3 (permalink)
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Look if there does become a crisis it's actually more simple than your suggestion.

Just have the SS age situate for common age of death. When enacted, people rarely lived 10 years past retirement... they now routinely live up to 50 years past.

So just have the healthier elderly continue to work. Honestly, who retires permanently in their 40s?
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Old 02-06-2005, 09:52 PM   #4 (permalink)
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Seaver, I'm not sure that idea will work. First of all, the government shouldn't be drastically changing the retirement age. Second of all, the scarcity of jobs right now means that introducing a very large new pool of workers will lower wages further as well as drive out either youngsters - who need to get their careers started and begin paying into Social Security - or the elderly, who will now be without Social Security benefits for several years, from the job market.

Thirdly, the "people live longer" argument isn't really a solid one. Most of the rise in average age length derives from a decrease in child mortality over the decades, not from longer lives lived after the age of 65. In fact, the Social Security Administration explains:

"However, as Table 1 indicates, the average life expectancy at age 65 (i.e., the number of years a person could be expected to receive unreduced Social Security retirement benefits) has only increased a modest 5 years (on average) since 1940. So, for example, men attaining 65 in 1990 can expect to live for 15.3 years compared to 12.7 years for men attaining 65 back in 1940. So the actual increase in time that males can anticipate receiving Social Security is closer to 3 years than to 14."

You can find the above quote here.

You are correct that few people retire permanently in their 40s. That is why Social Security benefits start being paid at age 65.

To sum up: the age issue really isn't a problem, and I don't think it is in the best interest of the government to fix what ain't broke.
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Old 02-06-2005, 10:02 PM   #5 (permalink)
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See the problem is SS was never meant to be a primary income. However, when the Fed made companies match funding and during Reagan severely increased the tax, a lot of companies stopped hiring, started the move overseas (which is hopefully hitting an apex) and cut their pensions and most definately their payrolls. This has made SS become the sole income for many elderly now and in the future.

My plan eliminates the company, allows for growth in company benefits and employment, while providing an actual end of payment by the worker (at his/her option)

We need a plan that takes out the heavy end of the employer while maintaining a growth for the individual. Plus this way, it's not 3 workers paying for 1 or what have you it's the individual paying for himself. And that should appeal to all sides. Especially the fiscal conservatives who don't want to give handouts.
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Old 02-07-2005, 04:27 AM   #6 (permalink)
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Quote:
Originally Posted by guy44
You are correct that few people retire permanently in their 40s. That is why Social Security benefits start being paid at age 65.

To sum up: the age issue really isn't a problem, and I don't think it is in the best interest of the government to fix what ain't broke.
I don't know what the national statistics are but from personal experience I have seen many folks getting laid off in their 50's like myself. One company I worked for was sold and new management got rid of almost all their workers over 50+, except themselves of couse. Older workers make more money, have longer vacations accrued and probably cost more for healthcare.

Some of us after looking for a while have given up finding jobs and have retired. I won't be elegible for SS until I'm 62 so will have to make do with my personal savings and IRA to get by. I wish I had been able to invest my FICA taxes as well. Companies seem to be discontinuing their pension plans more and more. There is not the loyalty that there once was.

I imagine this trend will continue and companies will eliminate pensions and replace older workers with younger less expensive ones. Of course many companies just move their operations overseas. That's why I don't think that raising the retirement age is a good option. Better to let us invest our FICA money so we can retire earlier. I believe it will become increasingly necessary.

My advice to younger workers is to open an IRA account as soon as you can afford to and if the polititians allow you to invest your FICA money as well, jump on it. Don't depend on any company benefits or government program when you get older. This is no longer our father's world and we will have to take care of ourselves.

Last edited by flstf; 02-07-2005 at 04:41 AM.. Reason: sentence structure
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Old 02-07-2005, 06:41 AM   #7 (permalink)
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Quote:
Originally Posted by Seaver
Just have the SS age situate for common age of death. When enacted, people rarely lived 10 years past retirement... they now routinely live up to 50 years past.

So just have the healthier elderly continue to work. Honestly, who retires permanently in their 40s?
Am I missing something? Retirement age is 65. Add 50 years to that, you get...115. I don't know that enough people atain that age to call it routine.
Damn few people retire in their 40's. Unless they've made some very lucerative investments when they were younger. Personally...I don't know of anyone in their 40's that are retired. I do know a few in their 50's, but that's because they were laid off, and have foundit difficult, due to their age, to get on board somewhere else. Retirement wasn't a choice for them. Plus, Social Security doesn't kick in until age 65.
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Old 02-07-2005, 07:57 AM   #8 (permalink)
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Novel idea but it would never be considered.

Social Security has been a windfall for the government in terms of extra cash they can spend.

Anyway, I throw my support behind reform/privatization.

In my lifetime, it will become such that my wife and I will be responsible for supporting one person on SS. However, when it comes time for my payments, they will probably be severly reduced, relative to today's benefit payments.

So, I will be burdened heavily and get a fraction of my monetary input in return--not a very good idea in my mind.

Let me opt out and then take ownership of my own money--I work hard for it and am not too keen on losing it.
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Old 02-07-2005, 10:40 AM   #9 (permalink)
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Here is an article talking about the success of a privatization system that has already been in place for 18 years:

The Alternate Plan has been successful for the past 18 years with a return on retirement investments of about 6-1/2%. That is at least three times the return on a like investment in Social Security right now.

Quote:
In the late 1970's it was becoming clear that Social Security was in financial trouble and that Congress was not dealing with it. What was less known was that local governments had an option to withdraw from Social Security and set up their own retirement programs. The Social Security Administration did require, however, a two-year notification prior to withdrawal. Galveston County submitted notification in 1979 using the ensuing two years to develop an alternative that would cover all county employees.
Quote:
There was, of course, no guarantee this plan would be as successful as designed; and there was considerable opposition from labor unions, minorities and other traditional supporters, including many elected officials. Social Security representatives debated the plan in the employee meetings. By then a majority of the Commissioners Court were strongly supportive of the Alternate Plan. An election for all county employees was scheduled. The election carried by about three to one in favor of the Alternate Plan and the Commissioners Court voted four to one to implement it on Jan. 1, 1981.
As stated in a previous post, on this issue, this is where my support lays.
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Old 02-07-2005, 12:28 PM   #10 (permalink)
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After Enron and the scandals earlier this decade, the market instability, it shows the vulnerability and true risk a "Private" retirement would be. The late 80's and even into today companies are "merging" with others and raping the pension programs to pay for the buyout/ mergers and allowing the boards and upper managements golden parachutes, while the workers are left no pensions and only SS for retirement. If SS goes private noone will have anything but the very rich.

I'm sorry but privatization is not the answer, if anything things will only be worse.

I'm still believing the guidelines I laid out above (though probably needing tweeked and worked on) is the best form of retirement. The burden is off the companies to match funds, the government can still use the monies, but there is a definitive goal and a definitive amount set for the worker. From there if the worker chooses to go into an IRA or 401K, they can.

Especially once their T-Bill is paid off and they stop paying the tax. The worker then has many options such as just spending the money or perhaps rolling it into "supplemental retirement T-Bills" or investments or whatever. But they will always have that guaranteed retirement that is untouchable.
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Old 02-07-2005, 12:45 PM   #11 (permalink)
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Quote:
Originally Posted by pan6467
The burden is off the companies to match funds, the government can still use the monies, but there is a definitive goal and a definitive amount set for the worker. From there if the worker chooses to go into an IRA or 401K, they can.
The problem with this is the same problem we are having today.

If you give the gov't money, they will spend it, with complete disregard to paying it back (republicans and democrats alike). All that would accomplish is substituting a failed policy with another one that is set-up for failure.

What you are offering is very similar to the trust fund set up to protect Social Security. The only problem is that nobody protected the trust fund.

I can appreciate the idea, and would be inclined to consider it, but you still leave the money in the hands of the people who shouldn't have it instead of the people who should.

Now, if the money wasn't available for the gov't's use and could not be touched, that would be a different story all together.


I do, however, have a question about your idea:

Aren't you proposing a system that is based on a 1:1 ratio?

If the tax rate for a ratio of roughly 3:1 is 12.4%, what would be your tax rate to achiece the goal of 1:1?
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Old 02-07-2005, 10:46 PM   #12 (permalink)
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Quote:
Originally Posted by KMA-628
The problem with this is the same problem we are having today.

If you give the gov't money, they will spend it, with complete disregard to paying it back (republicans and democrats alike). All that would accomplish is substituting a failed policy with another one that is set-up for failure.

What you are offering is very similar to the trust fund set up to protect Social Security. The only problem is that nobody protected the trust fund.


True, but you are dealing with a real commodity with a real value (i.e. the T-Bill) which is insured by the government and while they can and do include monies from T-Bills in the budget, they also must pay off those notes when the maturity arises. Same as what a bank does with CDs.

Quote:
Originally Posted by KMA-628
I can appreciate the idea, and would be inclined to consider it, but you still leave the money in the hands of the people who shouldn't have it instead of the people who should.

Now, if the money wasn't available for the gov't's use and could not be touched, that would be a different story all together.
You could figure out a way that the worker would choose a bank into which to place the monies, however, banks are bought, sold traded and the monies would quite possibly have to be transferred from bank to bank if the worker was to move. And private banks would probably want to charge a fee.

Again, my proposal while not perfect allows the government to have income, but at an expense and regulated. There would be no fees and short of the government going totally broke the T-Bills would be paid on time.

Yes, it is what SS should have been. And the government had done a decent job of it. The problem is as described above, people started using it as their sole income because companies raided pension plans and so on. What the government was short sighted on was inflation, longer lives and fewer workers paying for more retirees. Also, companies cutting back on pay and benefits has hurt. Less pay, less tax money paid into the system, even if there are more workers.

And yes, you are very right, though they tried the government never truly stayed out of SS's accounts and kept borrowing.


Quote:
Originally Posted by KMA-628
I do, however, have a question about your idea:

Aren't you proposing a system that is based on a 1:1 ratio?

If the tax rate for a ratio of roughly 3:1 is 12.4%, what would be your tax rate to achiece the goal of 1:1?
Yes, it is very much a 1:1 ratio for my retirement plan, because it would be totally dependant on the worker to pay the principle of the T-Bill off. The tax rate would be whatever the principle needed would be. The worker would have the choice to pay less at first and more as he makes more, or maintain a steady rate and pay off the balance sooner.

Say the T-Bill is a million, now the gov't. and the Fed. decide that over the 70 years till maturity, the principle is $50,000. Thus the worker must pay from start of work till retirement (say 50 years) the sum of $50,000. Now, the worker could have $1,000 a year deducted from his pay OR the worker can opt to have $100 the first few years deducted and then build up, or the worker can opt to try to pay as much as possible at anytime, thus paying off the principle fast and going then into an IRA, 401K or nowhere but himself whatever the worker decides.

Plus, that million paid say in increments of $50,000 a year for 20 years should truly help retirees help the economy and be an influence in it. Also, as ghoulish as it may sound, if a retiree dies before the whole is paid, then the gov't keeps whatever is owed minus any principle left.

This money would be an income tax deduction also. Once the principle is paid, if the worker chooses to keep a retirement he can opt to equal the highest payment and maintain a deduction. However, if the worker chooses no retirement then tthere is no deduction.

What about programs such as disability, SSI and whatever that depends on SS money, now? We still maintain these programs, however since we have decreased the companies burdens of paying into SS we tax them a much smaller percentage to help these. So if a company is matching 12.5% of a workers pay now... the corporate tax rate becomes a min 5% a massive savings of 7.5% compared to today.

Companies expanding and showing increases in employment and wages would get the very minimal tax burden because they are helping to keep the economy growing. Those companies that take the savings and give it to their upper managers and choose to remain stagnant and not increase employment or wages would be taxed the maximum.

It's a simple and easy plan, where everyone is responsible for themselves. We can lessen the burden of the worker and corporation while maintaining a social structure to help the disabled.

The only truly huge problem I can see with this is how and when would you change programs. That is the true stake in the heart of any restructuring to the beaureacratic beast, we now have in SS.
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I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Last edited by pan6467; 02-07-2005 at 10:53 PM..
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Old 02-08-2005, 08:16 AM   #13 (permalink)
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My problem with SS taxes is that people who make over 90,000 pay a rate that is effectively lower than those who make 25,000. Why the artificial cap on where you have to pay SS? Why do NBA, NFL, MLB, NHL (if working), and Paris Hilton get out of the system so early? If we kept the tax on all income (earned, capital gains, etc...) the solvency of the system would take care of itself.

As far as I'm concerned, Bush is following the neocon course here. attempt to bankrupt the government and follow with massive gutting of social programs.
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Old 02-08-2005, 08:44 AM   #14 (permalink)
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Quote:
Originally Posted by jbuffett
My problem with SS taxes is that people who make over 90,000 pay a rate that is effectively lower than those who make 25,000. Why the artificial cap on where you have to pay SS? Why do NBA, NFL, MLB, NHL (if working), and Paris Hilton get out of the system so early? If we kept the tax on all income (earned, capital gains, etc...) the solvency of the system would take care of itself.

As far as I'm concerned, Bush is following the neocon course here. attempt to bankrupt the government and follow with massive gutting of social programs.
That's why the plan I propose would effectively even the playing field. All would put in pretty much the same and get the same back.

Bush's problem is he won't get strict with business and instead of giving away free tax cuts like he has been doing, make the companies work for the tax cuts by raising wages, hiring people, research and development tax incentives.... pure tax cuts with no incentives to spend the money to help the economy will do nothing to help the economy. In fact what it will do is drive the burden of taxes up on the shrinking middle class and eventually the rich, will end up paying far more in taxes.
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I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"
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Old 02-08-2005, 09:06 AM   #15 (permalink)
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I am personally vehemently opposed to a general system of taking peoples' money so you can give it back to them later. While the current system is based off the young supporting the old (which to me is fine - welfare-type initiative are surely necessary and this is no exception), it seems to me that privatization will just lock up your own money. While this is a noble idea for people who would inadequately save/invest for themselves, those people with either a greater fiscal understanding or a good PFA/broker are only getting hurt by this. Not only could the money be well invested by these individual and getting a higher return, but the reinvestment into many different sectors of the market would encourage more even and widespread economic develpoment. In general, the people who know how to use their money are the ones who have it. I would therefore propose that IF any privitization happens (which I do not think it should - under the current plan it's going to cost more than we can afford) the upper class should not have to pay a tax to establish their own social security account.
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Old 02-08-2005, 10:44 AM   #16 (permalink)
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Quote:
Originally Posted by C4 Diesel
I am personally vehemently opposed to a general system of taking peoples' money so you can give it back to them later. While the current system is based off the young supporting the old (which to me is fine - welfare-type initiative are surely necessary and this is no exception), it seems to me that privatization will just lock up your own money. While this is a noble idea for people who would inadequately save/invest for themselves, those people with either a greater fiscal understanding or a good PFA/broker are only getting hurt by this. Not only could the money be well invested by these individual and getting a higher return, but the reinvestment into many different sectors of the market would encourage more even and widespread economic develpoment. In general, the people who know how to use their money are the ones who have it. I would therefore propose that IF any privitization happens (which I do not think it should - under the current plan it's going to cost more than we can afford) the upper class should not have to pay a tax to establish their own social security account.
Your plan is very much based on "trickle down" economics and it doesn't work. We have that now and with the tax cuts the rich have gotten it is not stimulating the economy nor are wages going up. Jobs are still being exported and personal debt is getting higher. While standard of living and education are falling way behind the rest of the industrialized world.

But there in lies the attractive portion to my idea. If you are someone who is fiscally sound and knows how to invest or whatever, then once you payoff your T-Bill you're done. Invest your money how you wish. You have your retirement taken care of, and if you make enough early in life you reap the benefits of being able to spend your money how you wish.

It takes away ANY of this dependancy on younger workers paying into a system that they will never recieve benefits from.

This also helps rebuild the mom and pop shops that are the backbone of our country. Say by age 40-50 you paid off your T-Bill, so you know your retirement is taken care of. You then invested wisely have a nice little nest egg and decide to open a business with it.

The possibilities are endless. Of course we will see people who don't pay up their principles because of laziness or whatever, and while that is a shame, they will be paid for what they did pay into it. (Much like today.)

This is a very doable, and self reliant plan. As I have stated the only true problem I can foresee is how do you switch systems without affecting someone.

Also as inflation goes up, the government can raise the face value of the T-Bill and the principle, since it affects only the generation and not future generations. Example: this year's babies get a million dollar T-Bill (with the $50,000 principle) with a retirement age of 70 ..... 20 years from now the babies born in 2025 may have to get a 1.5 million dollar T-Bill with a $75,000 principle and retirement age is raised to 75 for them because life expectancy has gone up. In either case the person pays it off they have a retirement taken care of.

This also frees up monies from companies and with tax incentives and such provides for research and development, wage increases and new job growth.
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I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

Last edited by pan6467; 02-08-2005 at 10:49 AM..
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Old 02-08-2005, 12:36 PM   #17 (permalink)
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While I would rather have a million dollar T-Bond than the meager return of the SS system, I would much rather be able to invest my retirement money in other ways to get a much larger return like (SP-500 Funds, Global Stock Funds, Small Cap Funds, Real Estate Holding Companies etc...). Unless the government is going to loan us the T-Bond money interest free to be paid off sometime in our lifetime, then the return on them may be higher. If we had personal accounts, folks could still buy T-Bills if they desire.
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Old 02-08-2005, 01:28 PM   #18 (permalink)
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Quote:
Originally Posted by jbuffett
My problem with SS taxes is that people who make over 90,000 pay a rate that is effectively lower than those who make 25,000. Why the artificial cap on where you have to pay SS? Why do NBA, NFL, MLB, NHL (if working), and Paris Hilton get out of the system so early? If we kept the tax on all income (earned, capital gains, etc...) the solvency of the system would take care of itself.

As far as I'm concerned, Bush is following the neocon course here. attempt to bankrupt the government and follow with massive gutting of social programs.
You're making way too much sense for this topic. We wouldn't want to actually have a simple solution that would only affect 3% of the population now would we? Instead we should put the entire population at risk.
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Old 02-08-2005, 07:58 PM   #19 (permalink)
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Quote:
Originally Posted by jbuffett
My problem with SS taxes is that people who make over 90,000 pay a rate that is effectively lower than those who make 25,000. Why the artificial cap on where you have to pay SS?
I don't have a problem with raising the FICA wage limit. But realize that these folks will be eligible to draw more out based on putting more in and they are the ones who don't need SS in the first place. Forcing them to pay for something they don't need makes it resemble more of a welfare plan than a pension plan. Something it was not intended to be.
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Old 02-08-2005, 08:03 PM   #20 (permalink)
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Quote:
Originally Posted by pan6467
It may lower the tax, and would definately help employers as they would not have to pay anything (or you could have them pay a percentage if the employee is there for a certain amount of years).
Then people will get fired right before the employer has to pay into the SS T-Bill
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Old 02-08-2005, 11:01 PM   #21 (permalink)
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Originally Posted by mojodragon
Then people will get fired right before the employer has to pay into the SS T-Bill
True, but employer paying really wouldn't be necessary so it could be optional.... maybe part of a benefits package they offer to long term employees.
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Old 02-08-2005, 11:10 PM   #22 (permalink)
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Quote:
Originally Posted by flstf
I don't have a problem with raising the FICA wage limit. But realize that these folks will be eligible to draw more out based on putting more in and they are the ones who don't need SS in the first place. Forcing them to pay for something they don't need makes it resemble more of a welfare plan than a pension plan. Something it was not intended to be.
FICA the way it is is killing the working man. The rich aren't hit that hard. Raising it would only hurt the working people more.

My idea = an end of that "tax" for all people, with equal disbursement.

The problem with privatizing is, if private consumer debt is high now, imagine what happens to people who are given the money..... I would estimate probably 75% of those who make under 50 grand would spend it and not invest it. So in the end..... we will have truly indigent elderly and that will cause government to spend more on them in the long run.

Again, my plan eliminates a lot of government aid to the elderly, puts more money in their pockets and rewards people for working.

Like I keep saying, I'm sure it would need some work, but overall I see no flaws in my proposal.
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Old 02-09-2005, 05:20 AM   #23 (permalink)
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Originally Posted by pan6467
The problem with privatizing is, if private consumer debt is high now, imagine what happens to people who are given the money..... I would estimate probably 75% of those who make under 50 grand would spend it and not invest it. So in the end..... we will have truly indigent elderly and that will cause government to spend more on them in the long run.
As I understand it, the proposal would still require SS to be a forced 12% savings plan. The only difference being that we could direct our FICA taxes to real (much better) investments and the funds would be held in our names until retirement age.

Out of curiosity, how much would one of these million dollar T-Bonds cost today for a 20 year old and how much are you proposing we pay back the government for buying it for us? Will these be interest free loans to be paid back over our working life?
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Old 02-09-2005, 07:28 AM   #24 (permalink)
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Originally Posted by pan6467
Your plan is very much based on "trickle down" economics and it doesn't work. We have that now and with the tax cuts the rich have gotten it is not stimulating the economy nor are wages going up. Jobs are still being exported and personal debt is getting higher. While standard of living and education are falling way behind the rest of the industrialized world.

But there in lies the attractive portion to my idea. If you are someone who is fiscally sound and knows how to invest or whatever, then once you payoff your T-Bill you're done. Invest your money how you wish. You have your retirement taken care of, and if you make enough early in life you reap the benefits of being able to spend your money how you wish.

It takes away ANY of this dependancy on younger workers paying into a system that they will never recieve benefits from.

This also helps rebuild the mom and pop shops that are the backbone of our country. Say by age 40-50 you paid off your T-Bill, so you know your retirement is taken care of. You then invested wisely have a nice little nest egg and decide to open a business with it.

The possibilities are endless. Of course we will see people who don't pay up their principles because of laziness or whatever, and while that is a shame, they will be paid for what they did pay into it. (Much like today.)

This is a very doable, and self reliant plan. As I have stated the only true problem I can foresee is how do you switch systems without affecting someone.

Also as inflation goes up, the government can raise the face value of the T-Bill and the principle, since it affects only the generation and not future generations. Example: this year's babies get a million dollar T-Bill (with the $50,000 principle) with a retirement age of 70 ..... 20 years from now the babies born in 2025 may have to get a 1.5 million dollar T-Bill with a $75,000 principle and retirement age is raised to 75 for them because life expectancy has gone up. In either case the person pays it off they have a retirement taken care of.

This also frees up monies from companies and with tax incentives and such provides for research and development, wage increases and new job growth.
First off, my plan wasn't based on trickle-down economics... My point was simply that the wealthy don't need social security and, in a privatized system, should have an opt-out. Also, while trickle down economics might not work, market investment or even just consumer spending has a much more positive effect on the economy than money sitting in the welfare pool.

Secondly, let's take your little example and throw some numbers and reality in it, shall we? Sure, you'll make your system sound wonderful if you tell people that they'll get 1 mil for 50 k, but that is likely untrue. Well, perhaps not. We'll see... *Crunches numbers*

Okay... For a fed T-note to mature in 70 years with a 2000% return would require a rate of a tiny bit over 4.25% T-bill rates are currently half that, however they were over 5% in the late 90's, hovered around 3.5% in the early 90s, and during the "Holy fuck inflation is out of control" 80s, they got as high as 10+%, but were mostly around 7% or 8%. Is 4.25% reasonable? Sure. So far so good, Pan!

However, there is a problem in that the T-bill is not "bought" at birth, merely the potential and expectation to be bought are there. This being the case, either the government would have to suck up the interest or the buyer would have to pay more than the initial T-bill purchase price. Let's assume that the government will NOT suck up the interest (as SS could surely not sustain that loss forever, especially when they no longer have revenues). Wait... Since we would all have T-bills and there would no longer be a SS $ pool, SS could not even afford to charge any less interest than they pay out for the T-bill because if they did then they would need some kind of income to make up fro the difference. I welcome someone to try to prove me wrong, 'cause I may be missing something.

This being said, I must assume that the T-bill does not initally have value, but begins to accrue value as the individual starts to pay for it. Let's keep the assumptions of a 20-yr-old start point and a 70-yr-old retirement point, so 50 years of employment. Let's take someone with a wage of $70,000. Granted, very few people will make this much at 20, but lets just say that I picked a high number to pre-adjust for wage increases so I don't have to factor it in later (makes my math more annoying - if someone else wants to do it, go right ahead). So being that we've established SS can't give you more than you've put in, the interest starts accruing at %4.25 once you've put the money in. Let's keep the SS tax rate at 6.2%. This means that $4340 a year would be going into this individuals SS fund. If the employer still payed an equal share, then this would be $8,680 a year. (I'll keep track of both) *excel stuff...*

HOLY CRAP!!! Well, I surprised myself... At a steady 70 k income, the individual would have a T-note worth $746,603.27 at retirement. If the employer was matching his SS taxes, this note would be worth double this, or $1,493,206.54! Now let's figure an inflation rate... Taking a 58-yr average (2004 - 1947) we get... uh... 3.38% This means that the total inflation from when the individual started working until he retired would be... 526%. This would make the present-day value of his retirement funds (that is, if the present-day assumption is made for when the individual is 20) $141,939 or $283,879. Not half bad.

In the current system, if one expected a $2000 monthly SS payout (a good assumption?), with a 2%/yr cost of living adjustment, even if one did not retire until 70, and lived to be 92, that person would still only recieve $864,832.

Well... There's my math. Seems like a resonably good system. I still don't think it's worth the cost of transition right now, but perhaps in a time of lower defecit I could support a program like this one.

What do you guys think?
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Old 02-09-2005, 07:45 AM   #25 (permalink)
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Oh, and just FYI... I thought my $70k-income-throughout assumption may have been poor, so I checked. If the wages increase at the same rate as inflation, then the same social security payouts would result for a person with a starting annual income of $36,650.

I saved my excel sheet this time, so if you want to see it or you want me to crunch more #s, just let me know.
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Old 02-09-2005, 07:49 AM   #26 (permalink)
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Originally Posted by flstf
As I understand it, the proposal would still require SS to be a forced 12% savings plan. The only difference being that we could direct our FICA taxes to real (much better) investments and the funds would be held in our names until retirement age.

Out of curiosity, how much would one of these million dollar T-Bonds cost today for a 20 year old and how much are you proposing we pay back the government for buying it for us? Will these be interest free loans to be paid back over our working life?
Bush's plan I believe is allowing a pecentage to be invested, not all of it. I'm sure there would be fees, and brokerages involved. Plus, the companies are still matching funds.

As for a million dollar T-Bill that has a 70 yr. maturity rate, (given at birth), one does not exist now, but I'm sure a good economist that deals with hypotheticals like this may be able to play around and figure it out.

In my proposal we are paying back ONLY the principle, the amount it would take to invest for 70 yrs. to get a million back.

No, they are not interest free loans, they are the people working and paying off a guaranteed retirement system. Again, it's much the same as going to a bank and buying a cd. you pay $100 and 6mos. later the cd matures and you get $102 back (poor interest rates).

With the T-BIll you and the government would enter into a contract at birth which would say, "I will work and pay the principle and in return you will give me $1 million upon my 70th birthday in 20 installments so that I can retire in comfort." It erases having to pay into SS, or pensions plans (both of which are the same type of contract only NOT AS SECURE).

I'm sure though that if need be, the gov't could add a processing fee.

It's a win-win situation for everyone.

You would get a secured retirement that you paid for.

There would have to be far less government spending on retirees.

And again, companies no longer would have to pay SS or into pensions and therefore can use that money for more jobs and higher pay.
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Old 02-09-2005, 08:29 AM   #27 (permalink)
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C4 -

Interesting work, but if you want to follow pan's idea, than your base number needs to be cut in half as he proposes no matching payments by the employer.

Quote:
Originally Posted by pan6467
And again, companies no longer would have to pay SS or into pensions and therefore can use that money for more jobs and higher pay.
pan -

In addition to fees charged by the gov't, you might also need to include a fee for the employer(s) as well. They might not scream since they wouldn't be matching SS anymore, but they might create a fuss over overseeing these payments. Might be moot though....
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Old 02-09-2005, 08:46 AM   #28 (permalink)
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Originally Posted by KMA-628
C4 -
Interesting work, but if you want to follow pan's idea, than your base number needs to be cut in half as he proposes no matching payments by the employer.
I did the numbers on both scenarios... They're both up there.


Pan, if only the principal is repayed, then the government is losing money. There would be interest accruing (cost to the government) on money that the government has not yet recieved. How do you propose to cover this unaccounted for interest cost if only the principal is paid and it is paid over a long period of time, not even starting until many years after it begins to "cost" interest?
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Old 02-09-2005, 08:47 AM   #29 (permalink)
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The only problem I see here is in the transition.

Since SS is a "pay-as-you-go" system, the current workers are paying for the retirees.

It seems as there would be a major cost with covering SS benefits without any workers paying in. I haven't sat down to figure the numbers, but I imagine that the gov't would have to foot the bill for at least 50 years (probably more since life expactancies have gone up and will continue to go up).

So, we would need to figure out how much SS pays out in benefits per year and multiply it times at least 50 to get a guesstimate of the transition cost.

pan - you do know that Democrats would string you up for this, don't you? Pelosi and Kennedy would personally tie the note and slap the ass of the horse.
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Old 02-09-2005, 08:48 AM   #30 (permalink)
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Quote:
Originally Posted by C4 Diesel
I did the numbers on both scenarios... They're both up there.


Pan, if only the principal is repayed, then the government is losing money. There would be interest accruing (cost to the government) on money that the government has not yet recieved. How do you propose to cover this unaccounted for interest cost if only the principal is paid and it is paid over a long period of time, not even starting until many years after it begins to "cost" interest?
I missed it, but I see it now.
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Old 02-09-2005, 08:54 AM   #31 (permalink)
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The only problem I see here is in the transition.
Realistically, any privitization should be a gradual phasing in, not a sudden shift. So what if it takes damn near forever, it'll get here and be a lot less damaging in doing so. Say every year 2% less goes into the social security "pot" and instead goes to the T-bill. So 20 years from now, you'd be paying 40% to your T-bill and 60% to SS. That way the retirees now don't get blasted with cut benefits, there's never a huge cost to save the remains of the current system, and the middle-age workers still get benefits from both.

Seems simple to me, but legislators are impatient.
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Old 02-09-2005, 09:28 AM   #32 (permalink)
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Originally Posted by pan6467
FICA the way it is is killing the working man. The rich aren't hit that hard. Raising it would only hurt the working people more.
Not raising the percentage taken out, removing the income limit. After you make about 85k, FICA isn't taken out of your checks anymore. Barry Bonds pays just as much FICA as the guy making 90k.

Furthermore, people making ~85k are not the common 'working man.' If anything removing the cap on FICA would allow everyone else's taxes lower.
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Old 02-09-2005, 11:13 AM   #33 (permalink)
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Quote:
Originally Posted by C4 Diesel
I did the numbers on both scenarios... They're both up there.


Pan, if only the principal is repayed, then the government is losing money. There would be interest accruing (cost to the government) on money that the government has not yet recieved. How do you propose to cover this unaccounted for interest cost if only the principal is paid and it is paid over a long period of time, not even starting until many years after it begins to "cost" interest?
You will have the companies paying taxes, albeit a smaller amount but with no rent subsidies for the elderly, madicare and medicaid cut to help only the truly indigent and disabled (as hopefully healthcare will stabilize and the workers will be able to afford insurance on their retirement) it will take care of itself.

Yes, at first there maybe a hit to government, however, if companies hold up their end, better paying jobs, increase in jobs, etc. then the tax base from income taxes increases without any new tax burdens, thereby more money flows in.

And again, as these "T-Bill" babies pay off their principles early, and invest more money enters into the system and companies can expand. Also, those that open new shops (because they have the T-Bills paid off and a little saved) that will add to the tax base, not just federally but locally and statewide.

Right now, the system is squeezing the worker and causing the death of the middle class and it is also telling the workers there isn't much to look forward to in retirement (as far as paying 12% into a bankrupt system). This system allows the middle class to grow, companies to grow, a man to help himself without government handouts, and tells the worker after 50 years of hard work, you will achieve a well deserved decent life.

So short term yes, there would be some problems long term though I think it spurs an economic growth with endless possibilities all of them positive.

And yes, the Dems would hate this because they couldn't inspire fear to the elderly and dependence on the party for votes. The GOP, who knows how they would react. I would say they would still see it as a government hand-out.

Personally, I think it would show people that they are indeed respected and that their hard work was truly appreciated.

Why expand this SS tax on the rich. That's a band aid and will eventually be shown as the rich paying for the poor, almost totally. This takes rich/poor out of the picture altogether and puts the burden solely on the worker himself, he becomes self dependant, with a definitive goal that he and he alone (short of gov't going totally bankrupt) holds the key to.

In the end it is the American dream (work hard for a number of years and retire with a little money to enjoy life and show that all those hard years were worth it) and I truly believe this can be done.
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Old 02-09-2005, 11:44 AM   #34 (permalink)
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Originally Posted by C4 Diesel
HOLY CRAP!!! Well, I surprised myself... At a steady 70 k income, the individual would have a T-note worth $746,603.27 at retirement. If the employer was matching his SS taxes, this note would be worth double this, or $1,493,206.54! Now let's figure an inflation rate... Taking a 58-yr average (2004 - 1947) we get... uh... 3.38% This means that the total inflation from when the individual started working until he retired would be... 526%. This would make the present-day value of his retirement funds (that is, if the present-day assumption is made for when the individual is 20) $141,939 or $283,879. Not half bad.

In the current system, if one expected a $2000 monthly SS payout (a good assumption?), with a 2%/yr cost of living adjustment, even if one did not retire until 70, and lived to be 92, that person would still only recieve $864,832.

Well... There's my math. Seems like a resonably good system. I still don't think it's worth the cost of transition right now, but perhaps in a time of lower defecit I could support a program like this one.

What do you guys think?
This sounds pretty good on the surface. I believe unlike most others that the retirement age will be forced downward as time goes by due to company policies of laying off and/or early retiring high paid older workers. This plan seems to have a nice nest egg for those in their 50s as well.

The type of plan I would like to see should return even more than that and be similar to what the government workers get today. They have 5 different investment funds to put their money into instead of SS. One of these plans is the C fund (stock fund) which has done very well:

1988 11.84%
1989 31.03%
1990 -3.15%
1991 30.77%
1992 7.70%
1993 10.13%
1994 1.33%
1995 37.41%
1996 22.85%
1997 33.17%
1998 12.44%
1999 20.95%
2000 -9.14%
2001 -11.94%
2002 -22.05%
2003 28.54%
2004 10.82%

As you can see it won't take long to build up quite a retirement nest egg and as you get older you can move into one of the bond funds to reduce risk as you get close to retirement age.
Quote:
Begun in 1987, the Thrift Savings Plan, which as of December 2004 had assets of $152 billion, is a retirement-savings plan open to all civilian federal employees, including senators, and all members of the uniformed services.

They can invest as much as 14 percent of their salaries in one of five retirement funds. Consider the rate of return of C Fund, one of the five. It is a common-stock fund, so it should represent the risks that Reid thinks should terrify Americans:

In only four of 17 years has the rate of return been negative. But in 11 years the rate has been greater than 10 percent, in eight years it has been greater than 20 percent, in four years it has been greater than 30 percent. The compound annual rate of return for the last 10 years has been 12 percent, and the return over the 17 years has been 12.1 percent.

Reid participates in the plan, but opposes allowing all Americans the comparable opportunity that Bush is proposing. But if the numbers just cited are the result of roulette, the legislators should let the rest of us into the game in which they are prospering. Harry Reid's Roulette'
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Old 02-09-2005, 11:59 AM   #35 (permalink)
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Originally Posted by pan6467
Right now, the system is squeezing the worker and causing the death of the middle class and it is also telling the workers there isn't much to look forward to in retirement (as far as paying 12% into a bankrupt system). This system allows the middle class to grow, companies to grow, a man to help himself without government handouts, and tells the worker after 50 years of hard work, you will achieve a well deserved decent life.
The T-Bond fund looks like it has some merit. Please see my last post, I think the retirement age will be going down for many. I know several engineers in their 50s who were forced retired early and have given up finding comparable employment. Some are working at places like Home Depot or Golf Couses for about a third of what they were making. Your T-Bond plan builds up a nice amount for these folks as well but they could maybe do even better by investing their FICA tax.

Last edited by flstf; 02-09-2005 at 12:00 PM.. Reason: spelling as usual
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Old 02-09-2005, 01:30 PM   #36 (permalink)
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Originally Posted by pan6467
Yes, at first there maybe a hit to government, however, if companies hold up their end, better paying jobs, increase in jobs, etc. then the tax base from income taxes increases without any new tax burdens, thereby more money flows in.

And again, as these "T-Bill" babies pay off their principles early, and invest more money enters into the system and companies can expand. Also, those that open new shops (because they have the T-Bills paid off and a little saved) that will add to the tax base, not just federally but locally and statewide.

Right now, the system is squeezing the worker and causing the death of the middle class and it is also telling the workers there isn't much to look forward to in retirement (as far as paying 12% into a bankrupt system). This system allows the middle class to grow, companies to grow, a man to help himself without government handouts, and tells the worker after 50 years of hard work, you will achieve a well deserved decent life.
If those are your assumptions, you just went from having me sold to having me vehemently against it. First off, you can't expect that people are going to pay off their T-bills early because they can and it's a financially sound decision. I'm sure most people (esp. the lower and middle classes) are going to going to put off payment as long as possible to improve their immediate quality of life. This would then put an even HEAVIER strain on the government as they are paying even MORE interest on money they don't have. To put a number to it, in your proposed system, even if the T-bill was payed IN FULL on the individuals' 20th birthday, the governement would be eating an additional cost of $64,945 - more than the initial value of the T-bill. If the individual payed in full at 30, the cost to the government would be $124,281. In reality, the person would likely start paying it off beforehand, but many would likely not have it paid off until they were 60+. The average cost to the government could easily be over 3 times the principal. And you're going to tell me that the ones that pay it off early and the reinvestment that fosters is going to cover this? I think that's a pretty hefty leap of faith.

Sorry, pan, but I'm finding that your system is based more off of belief and (hopeful) circumstance than facts and analysis, and I don't buy well into belief and circumstance.
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Old 02-11-2005, 07:12 AM   #37 (permalink)
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Originally Posted by C4 Diesel
If those are your assumptions, you just went from having me sold to having me vehemently against it. First off, you can't expect that people are going to pay off their T-bills early because they can and it's a financially sound decision. I'm sure most people (esp. the lower and middle classes) are going to going to put off payment as long as possible to improve their immediate quality of life. This would then put an even HEAVIER strain on the government as they are paying even MORE interest on money they don't have. To put a number to it, in your proposed system, even if the T-bill was payed IN FULL on the individuals' 20th birthday, the governement would be eating an additional cost of $64,945 - more than the initial value of the T-bill. If the individual payed in full at 30, the cost to the government would be $124,281. In reality, the person would likely start paying it off beforehand, but many would likely not have it paid off until they were 60+. The average cost to the government could easily be over 3 times the principal. And you're going to tell me that the ones that pay it off early and the reinvestment that fosters is going to cover this? I think that's a pretty hefty leap of faith.

Sorry, pan, but I'm finding that your system is based more off of belief and (hopeful) circumstance than facts and analysis, and I don't buy well into belief and circumstance.

First I want to appologize for being late into replying.

I understand your problem with the system I described. I am sure there will be a lot of people that wouldn't pay off their principle until later. Just as I am sure there would be enough to pay it off early to start their own businesses and investment accounts. Thus feeding the economy and raising the tax base for the community and state. Plus, the companies with their new found tax cuts and raising wages, developing new jobs also increases tax base, immensely.

If the state's and localities tax bases rise (along with the Fed's) there is less need for the states and localities to take Fed. funding. Thus less money spent for those areas.

This plan may start slowly, but in the end the tax base rises in every aspect, the elderly are better taken care of, and companies grow. All this means that the Feds can spend less money and maintain the needed programs.

The downside is there would be a hit at the beginning and the transition would be tough but, if someone more knowledgeable about economics could work the numbers I'm sure it could be done.

But it's a dream that I don't think we will never have to worry about as this program will never move farther than here.
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Old 02-11-2005, 10:07 AM   #38 (permalink)
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Pan... Tax bases are not guartanteed to rise. Plus, paying the T-bill off LATER would actually more easily allow individuals to start businesses and create investment accounts sooner than if they payed it early, causing the government to eat even more interest cost.

Also, what makes you say that this is going to encourage any more investment than currently exists? I find that assumption to be completely baseless. People could do that now, anyway. Beyond that, the people who would do such are mostly the better half of the middle class and the wealthy. The upper-middle and upper class invest anyway. The lower half of the classes would probably not invest and put all their money into living expenses and consumer goods as they do now, since most (I presume) are not satisfied with their standards of living. This leaves only a small slice of the middle class that would actually take their SS tax and with iit invest more than they currently are. In addition, I question your view that the average American is just dying to start a business, as you seem to be implying.

...You still aren't providing me with enough substance to convince me that this is worth the governmental cost.
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Old 02-27-2005, 11:01 PM   #40 (permalink)
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Ok, I'll bite on this one:

Um...KMA, is this a joke? I mean, where do I sign up? All sarcasm/skepticism aside, the proposal doesn't give specifics about how to fund it etc. With the current existing SS tax formula?

I actually think it's time to phase SS out altogether. Instead of paying "x" amount in SS taxes, just be responsible for yourself and save/invest it. I'ma big boy, I don't need the gov't telling me how to control my money. I cna save my own money or invest it. I should be allowed to put it into my retirement w/o penalty (read: taxes).
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