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View Diary: Since when did Entitlements become a Bad Thing? (215 comments)

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  •  thank you for this clear explanation. (0+ / 0-)

    I never before understood why raising the income cap wasn't the simplest and best solution.  It still might be, but it does muddy the argument if one is arguing "fairness."

    Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it. --Mark Twain

    by SottoVoce on Sun Jan 23, 2011 at 10:02:19 AM PST

    [ Parent ]

    •  Exactly. Raising the cap undercuts progressive (5+ / 0-)

      arguments that "this is not welfare, I paid for my benefits."  See, for example, billybam's post right below this.  Billybam's argument is legitimate largely because of this "you get what you pay for" structure that FDR, among others, insisted on.  If you eliminate that structure -- i.e., if SS turns into a system where the rich pay for the less wealthy -- it makes the "I paid for it, that's why I deserve it" argument less credible.

      The long-term POLITICAL question is whether changing the structure of SS -- from a "I pay for the benefits I get" (what it, roughly, is now) to a "the wealthy subsidize the benefits of everybody else" (i.e., raising the cap WITHOUT also raising the retirement payout in a commensurate way) makes it easier to, in the long-range, attack SS as "welfare for the elderly."

      I'm not suggesting there is a "correct" answer.  I'm suggesting that there is no simple and obvious solution here.    

      •  Social Security is a social insurance program (3+ / 0-)

        that is funded through dedicated payroll taxes called Federal Insurance Contributions Act (FICA).

        Insurance is the pooling of risks. The fortunate end up paying for the less fortunate. Letting the most fortunate out of the pool skews the system.

        •  point [5] (0+ / 0-)

          Special {Security} issues can be redeemed at any time at face value {from the General Fund}.

          It's some kind of "insurance" pool.

          a revolving one perhaps.

          I dream of things that never were  -- and ask WHY NOT?
          -- Robert F. Kennedy

          by jamess on Sun Jan 23, 2011 at 10:36:46 AM PST

          [ Parent ]

        •  Not exactly. Insurance is a pooling of risks (2+ / 0-)
          Recommended by:
          Clem Yeobright, Justanothernyer

          that some will need the benefits and some will not.  When SS was originally structured, many people would never need the benefits because they did not outlive their wage-earning years.  That's the "pooling of risks."  The insurance basis was not intended to be a system where the rich subsidized the insurance of others.  FDR ("musn't have a dole") recognized that.   Insurance is not a system where, if you pay premiums on a certain amount, and there is an event that triggers a payout of your benefits, the insurance company looks to see how many other assets or how much income you have to calculate your payout.

          A person who insures a $100,000 house, and one who insures a $500,000 house, do not pay the same in premiums (i.e., SS taxes).  But their payout is based on what they insure (the house value, or the wage value) that is insured, and the amount of premiums (taxes) they pay out.  If you have two families, each with a $250,000 house, and one family has an income of $100,000, and one family has an income of $500,000, and each insure the full value, and pay premiums on $250,000, and their houses burn down, they get the SAME INSURANCE PAYOUT.  That's because payouts are based on premiums they paid, which in turn were based on the value of what they insured.  You don't pay the second family less than the first because they had more income.  That's the system SS is based on -- you get payouts based on the premiums (taxes) you pay, which in turn are based on the value of benefits you insure.

          I'll give you another (closer to home) example.  Under the federal flood insurance program pre-Katrina (I'm in New Orleans) the flood insurance covered losses up to $250,000, regardless of (1) how much your house was worth) and (2) how much income you have. For 20 years, I paid flood insurance premiums based on $250,000, even though my house was worth more than that.  However, when I lost my house in Katrina, my payout was based on a total value of $250,000, not on the actual value of my house and not based on any consideration of my income.  

          SS works roughly the same.  There is some progressivity to payouts at the upper levels, but not enough to destroy (in the minds of the public) the "you get what you pay for" nature of the system.  

          •  Well said (2+ / 0-)
            Recommended by:
            RJDixon74135, jamess

            Income and wealth re-distribution are proper and necessary but they do not have to be accomplished through Social Security.

            Leave SS alone and fund General Welfare programs through the General Fund (income and other taxes).

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