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View Diary: The NW Plan: How we eliminate $15.4 trillion of Soc Sec debt for $1.50/WEEK (34 comments)

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  •  Re: reimbursement rate (4+ / 0-)

    You don't want high-end earners to complain they're not getting a fair return on the extra tax they pay. And, it is true that the benefit formula reimburses lower earners at a higher reimbursement rate than high earners.

    Social Security isn't an investment, it's retirement insurance.  As far as the rich are concerned, they already complain about SS - if it were up to most of them, SS wouldn't even exist.  Let 'em complain.  When they do, we'll simply ask the rest of Americans whether they think it's right for rich Americans to pay a lower tax percentage than the rest of us have to.

    •  We're already overpaying into social security (2+ / 0-)
      Recommended by:
      Big Tex, dsteffen

      thanks to the last time it was fixed.

      Lift the cap. The rich can afford to pay as much as I do in taxes.

      The only people who are happy with their health insurance plan, haven't used it yet.

      by Hens Teeth on Mon Jun 01, 2009 at 10:57:17 PM PDT

      [ Parent ]

      •  DI and OAS are different programs (1+ / 0-)
        Recommended by:

        Although it is normal practice to talk about Social Security as a combined entity legally and operationally OASI (Old Age/Survivors Insurance) and DI (Disability Insurance) are separate programs with separate Trust Funds which have separate dates of shortfall and depletion.

        The Trustees of Social Security are mandated to notify Congress when either Trust Fund or the combined OASDI TF falls out of Short Term Actuarial Balance which is to say a projected Trust Fund ratio of less than 100 (one year of reserves) in any of the following ten years. The DI Trust Fund failed that test a year ago which is why the Northwest Plan raises DI Fica by 0.20% in 2010 and then 0.10% in 2011. This puts DI into Actuarial Balance until 2043 when another 0.10% increase puts it in full balance through the 75 year actuarial window.

        DI started running cash deficits in 2006 (income from taxation less than cost) and had to start drawing part of its interest earnings in cash. By around August 2008 it was drawing all of its earned interest in cash and started drawing down principal. Current projections show the entire DI Trust Fund disappearing in 2020. It is past time to put DI back on the glide path to actuarial balance and the NW Plan does just that.

        On the other hand OAS is still running cash surpluses from taxation and will continue to do so until 2017. Even after that its interest earnings will cause its balance to increase through 2023 at which point those balances will start to shrink. Around 2026 those balances will have shrunk to the point that 2035 will project to have less than one year of reserve, meaning that OAS will fail the test for Short Term Actuarial Balance. If those projections are correct that event will Trigger a further set of tax increases starting in 2026, once again at around 0.20% per year (the equivalent of $1/week takehome inflation adjusted). But if the economy performs better than projections that Trigger point would be moved back and/or the tax increase scaled back in size.

        That is the essense of the North West Plan, it introduces a permanent fix via a flexible mechanism.

        Plus cap increases backfire both politically and mechanically. It makes no sense to direct more cash flow through a Trust Fund that is in surplus. All you end up doing in increasing the interest burden going forward. The argument is a little lengthy, those interested can check out: Why benefit cuts and cap increases backfire

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