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View Diary: SS not SUSTAINABLE !!!!!! (25 comments)

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  •  What is the rationale, I wonder, for the SS income (1+ / 0-)
    Recommended by:
    MKSinSA

    cap?

    •  plumbobb - this is why we have a cap (8+ / 0-)

      It's important to understand the fundamental structure of the Social Security system. It is a wage insurance plan, it has never been intended to be a vehicle to redistribute income from the wealthy to those earning less although as currently designed has a progressive feature in the benefit calculations. There is an important reason for the cap and removing it completely would end SocSec as FDR designed it and as we have always known it.

      SocSec is a wage insurance program. Each person "insures" their own salary and wages based on the contributions they, and their employers, make into the program. The reason for the cap is that high income earners have other retirement assets and don't need to "insure" all of their earnings. It's also why investment income is excluded from SocSec payments, because investment income doesn't stop when we retire so there is no need to "insure" it. If SocSec had no cap some people would have six figure annual SocSec retirement benefits. If you take the cap off of contributions, but cap payments, you have changed SocSec as we know it. SocSec is not a plan to redistribute income and that is why it has its own funding program and isn't funded by general tax revenues.

      The sensible path is to raise the cap over the next ten years until 90% of all wages and salaries are captured and allow benefits to increase as well. That solves the funding problems with SocSec.

      "let's talk about that"

      by VClib on Mon Dec 10, 2012 at 08:13:24 AM PST

      [ Parent ]

    •  VC nails it (2+ / 0-)
      Recommended by:
      plumbobb, nextstep

      to paraphrase FDR

      IF we take nothing from capital we owe nothing to capital.

      FDR wanted retirement insurance for wage earners. Not retirement for people making money from capital. So the law was carefully written and challenged in the Supreme Court, then upheld.

      The trick to make SS challenge proof was to use a tax, FICA, but in essence to use FICA like payments for an insurance policy.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Mon Dec 10, 2012 at 10:02:09 AM PST

      [ Parent ]

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