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I have seen a lot of misleading statements regarding Social Security’s (SS) financial health and future. To help educate myself, I decided to take a journey through the nuts and bolts of the program. Join me as I go through the history, dispel myths, and discuss the financial health of Social Security on the 76'th anniversary of its first payouts.  

When I hear Social Security mentioned I think of my grandfather. From a very young age he told me to “save your money”. Most of us probably have a similar memory of a family member. Saving a little each week for the future would be prudent, but do we? For most of us that would be a no. Many are just trying to survive, buy groceries, and pay rent. This is understandable given poverty is at an all-time high. So think of Social Security as your grandfather, taking just a little out of your weekly check and investing that for your future, whether you like it or not.

There are two trusts that make up what we call Social Security. The first is the Old-Age and Survivors Insurance (OASI) for Retired workers, their families, and survivors of deceased workers. The second is the Disability Insurance (DI) for disabled workers and their families. Both trusts together are called OASDI or simply Social Security.

Social Security was created by President Franklin D. Roosevelt. The signing of the law (below) took place on August 14, 1935.  The program was enacted as a self-funded program not dependent on ANY federal revenue.

1. Rep. Jere Cooper (D-TN) 2. Rep. Claude Fuller (D-AR) 3. Rep. Robert Doughton (D-NC) 4. Rep. Frank Buck (D-CA) 5. Rep. John Boehne, Jr.(D-IN)  6 . Sen. Robert Wagner (D-NY) 7. Sen. Alben Barkley (D-KY) 8. This individual is presently unknown. 9. Sen. Robert LaFollette, Jr., (PROG-WI) 10. Rep. John Dingell, Sr. (D-MI). 11. Sen. Augustine Lonergan (D-CT) 12. Frances Perkins 13. Rep. Frank Crowther (R-NY) 14. Sen. William H. King (D-UT). 15. Rep. David J. Lewis (D-MD) 16. Sen. Byron Patton "Pat" Harrison (D-MS) 17. Sen. Joseph Guffey (D-PA) 18. Senator Edward Costigan (D-CO), 19. Rep. Samuel B. Hill (D-WA) 20. Rep. Fred Vinson (D-KY)  21. President Franklin D. Roosevelt.

On Jan 15, 1935 -- two days before being submitted to Congress -- FDR noticed the actuarial tables contained a large federal revenue injection beginning in 1965. This was against his instructions on how the plan should work. He summoned Secretary Perkins to the White House and directed her to fix this error immediately. One day later as promised, the plan was submitted as a fully "self-supporting" program. I would have hated to be the person working 36 hours straight to fix that mistake!

Ernest Ackerman
The first beneficiary was Ernest Ackerman (right), a Cleveland motorman. During his one day participation (Jan 1937), a nickel was withheld from his pay. He retired the next day and received a lump-sum payment of 17 cents. During the first few years the plan paid out one-time lump-sums allowing the trust to build up reserves. The payout method changed in December 1939.

The first recipient of a monthly benefit was Ida May Fuller, from Ludlow, Vermont. She participated for three years in the program and retired on January 31, 1940; her initial monthly check came to $22.54. Ten years later, a cost of living adjustment (COLA) was added. The photo (left) shows Ida May Fuller receiving her first COLA increased benefit on October 3, 1950.

Ida May Fuller

Between 1950 & 1972 COLA was applied only if Congress enacted special legislation. After 1975 COLA became automatic and was linked to the consumer price index (CPI). Interesting note here, because of this law present day beneficiaries did not receive a COLA increase in 2010 and 2011.

Counter to some right wing blog claims, President Obama had no influence on this automatic adjustment. The 2010 mid-term elections were held just a month after the second announcement of no yearly increase. Looking at old posts on those sites, I see commenters fanning the conspiracy flames just before the 2010 elections. I am thinking this may have helped with Republican gains.

Social Security is funded through a separate 12.4% payroll tax on wages up to $113.7K. Half is paid by the employee (6.2%) and half by the employer (6.2%). This revenue is deposited into the trust accounts. Contrary to popular belief, the trusts have never been moved to the “general fund”. I believe the confusion lies in how it is treated for federal budget accounting purposes. The program has been On-Budget and Off-Budget several times. Currently, it is considered Off-Budget and as such is noted in federal budget documents.

The program went On-Budget in 1968 with President Johnson’s administration. MarshWiggle commented that President Johnson wanted defense spending to appear smaller in the federal budget. I tend to agree with that opinion, as Johnson was trying to cope with the runaway costs of the Vietnam War.
The official reason from the Social Security web site;

This 1968 change grew out of the recommendations of a presidential commission appointed by President Johnson in 1967, and known as the President's Commission on Budget Concepts. The concern of this Commission was not specifically with the Social Security Trust Funds, but rather it was an effort to rationalize what the Commission viewed as a confusing budget presentation.

MarshWiggle also asked what the Federal spending would look like today with SS removed. So let’s do that.

I treated SS as a separate entity and removed all SS payments (700B) for OASDI. I also added in all interest payments (115B). You’ll notice there is still a Social Security spending category for 102 billion. This is a Government transfer to make up for the payroll tax reduction as part of Tax Relief, Unemployment Insurance Re-authorization, and Job Creation Act of 2010. Because the program operates as a separate trust the scheduled payroll revenues still had to be provided.

Removing the off-budget items crowns a new king on the spending hill... Defense. I am sure the military industrial complex and their minions in Congress like to keep SS on all federal spending charts. I wonder how everyone would view defense spending if it was consistently shown in this manner.

Another interesting rumor is that Democrats enacted the law taxing SS benefits.  Actually, President Regan signed the 1983 Tax Amendments into law (pictured). Funny how those rumors start and spread huh?

President Reagan signing the 1983 Amendments into law. Looking on are, left to right: Sen. Bob Dole (R-KS); Rep. J.J. "Jake" Pickle (D-TX); Rep. Claude Pepper (D-FL); Rep. Bob Michel (R-IL); Sen. Daniel Patrick Moynihan (D-NY); Rep. Tip O'Neill (D-MA); Rep. Barber Conable (R-NY); Sen. Howard Baker (R-TN)
I wanted show a bit of the history of the program because it’s pretty cool. To understand what’s happening today you should always look at the history of any program. You can’t help but think of the many beneficiaries’ that have been helped and are being helped by this program.

The diagram below shows the 2011 Social Security transactions for OASI program. When you hear people saying SS is on the verge of insolvency, they’re referencing the DI program. Yes, the disability insurance (DI) program is currently using its savings to fund payouts. But it is not insolvent, yet. It needs attention, and I wish Congress would work on this (more on why later).

According to the Trustees, the OASI program is in good shape. “Debbi Downers” often get around this good news by stating the OASI fund is currently paying out more than it takes in. Yes, that’s very clear from the above chart (592B in & 604B out) if you disregard interest payments. The plan detractors conveniently forget about that large sum of money saved up. Why is that huge amount there anyway? The Answer, Baby Boomers. It was just a few years ago that the leading edge of this population bubble started retiring.

From the Trust Annual Report;

Trustees Report, Long-Range Results
The dollar level of the combined trust funds declines beginning in 2021 until assets are exhausted in 2033. Considered separately, the DI Trust Fund becomes exhausted in 2016 and the OASI Trust Fund becomes exhausted in 2035.
When they say “assets are exhausted” they are referring to the built up savings. The Trustee’s point out that the smaller DI fund needs adjustments by 2016 or (they suggest) it could borrow from the larger OASI fund. Both funds together are projected to be OK until 2033 and after that they could pay ~75% of benefits until 2086. Let's see how a congressman interprets this information on his website.

From Rep. Ken Calvert. (R-CA 42nd District) web site

As it has become increasingly obvious that Social Security will go bankrupt without action, Congress has been working to find a solution. The Social Security Board of Trustees has reported that payroll tax revenues will remain above program costs until 2017; thereafter the financial solvency of Social Security will be severely compromised.
Notice he is only discussing the DI trust and calling it Social Security. He’s picking and choosing pieces of the different plans to paint a scary picture. If you look quickly, the takeaway is bankrupt, 2017, and severely compromised. Talking about SS going bankrupt is used often because it gets seniors attention, rightfully so.  

Counter to Fox Viewers understanding, there is no vault at Treasury full of worthless IOU’s. The program assets are extra money collected to pay for the boomers as they retire. If you had extra money what would you do with it? Most likely put it in the bank and earn interest right? Or would you bury it in your back yard with treasure map, probably not.

From the SSA web site;

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds and not available to the public.
So no, China is not allowed to own any of our SS Bonds.

Below is a chart showing yearly receipts, expenditures, and fund balances for the OASI trust. The gold bars (purposefully selected color) are scaled on the right, and the lines showing inputs and outputs are scaled to the left. Excess yearly funds are shown when the blue line is above the green line. You can see that there is quite a surplus (2.5T) built up starting with Reagan’s adjustment in 1983.

There are a couple of things floating around in the media that bother me right now. First, the description of the problem, many are pointing out the DI program shortfalls, and calling that a SS problem in general. The DI program is small in comparison to the larger OASI program. The chart shows the size of both programs in 2011.

Republicans have been ignoring this issue because they believe people drawing DI are moochers (maker & taker theory). They cite the growth of the program as proof of this. When in actuality participant numbers have stayed pretty consistent. Most increases are due to an aging population and an expansion of what qualifies you as disabled. Paul Krugman recently discussed this here on his blog. By the way that expansion of disabilities covered by the DI program… Yep, signed by Reagan in 1984.

Now my other aggravation involves solutions being tied to deficit talks. Social Security has never added one penny to the deficit or debt. Making adjustments to the program won’t lower our deficit/debt one penny. So it’s a bit sneaky to “put it on the table” for spending talks.

The program does eventually need an adjustment (before 2033) and the two solutions getting the most press are switching to chained CPI, or raising the retirement age. Both are looking at the program wrong.

Chained CPI was discussed here by kenm and it described how this would hurt future seniors. Increasing the retirement age is often cited along with the talking point that people are living longer. Joan McCarter dispelled this falsity recently here and Krugman here by pointing out that yes the wealthy are living longer, but the poor, not so much.

Nic-Nac from The Man With The Golden Gun
Republicans keep pushing beneficiary cuts as the solution. It’s like they believe anyone collecting benefits is living in the lap of luxury.  Side note here, anyone drawing SS is not living on a private island waited on hand and foot by Nic-Nac. Many are working part time (look at those Wal-Mart greeters), or living with adult children to make ends meet. It would be very difficult to live independently with an average monthly benefit of $1,230. SS was never intended to be a sole retirement source for senior citizens, but most private funds have gone away and  more people find themselves relying solely in these benefits.

Taking away from the retiree’s in any form should not be a solution. I believe we should bring in more revenue as a way to shore up the program. How about adding a 3 or 4% tax to carried interest? That would ensure people not paying any payroll tax would contribute to our seniors. Mitt Romney would actually pay a bit more on his ridiculously low tax rate, a rate lower than most of us.

My preferred solution –- majority of Americans agree -- involves raising the cap on wages included in the payroll tax, currently it is set at 113.7K. Why not raise it to 300K, 500K, or 1M? SS would then be similar to Medicare which currently does not have a cap on qualified wages.

We ALL need to keep a close informed eye on Social Security during the upcoming negotiations. A $2.5 trillion dollar carcass attracts an awful lot of hungry predators in tailored suits. Wall Street has been eyeing that piggy bank for a long time, drooling at the thought of getting their hands on it. I am worried changes are being pushed now to keep that huge surplus built up. A future Congress could then pass a law using it for something else (super bad idea). Remember that surplus was only created in anticipation of the baby boomers. I fear it may be a prize negotiated away during an off the record back room deal.

We need to shift the current narrative away from cutting benefits too instead raising funds coming into the program. Social Security has allowed our seniors to have a little piece of mind in their retirement years. This has been especially evident during the recent downturn; the program helped them weather the crisis better than most. Let’s help ensure that Social Security will continue to support our disabled and elderly long into the future.

Remember, most of us will eventually pass “GO”, it would be a shame to proceed straight to the poorhouse.

Originally posted to simple serf on Sat Feb 02, 2013 at 11:40 AM PST.

Also republished by Social Security Defenders, Invisible People, In Support of Labor and Unions, and Community Spotlight.


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Comment Preferences

  •  Great post. Social Security is the bedrock (25+ / 0-)

    program that Americans love because they know 2 things.
    One, they pay for it and two, it is the best run federal program there is.  I would add that it is a huge hedge against poverty in old age or among disbled Americans.  To mess with this program besides extending it is an exercise in insanity on a massive social level.

    •  I can't agree with you more!!! (10+ / 0-)

      As I said above, we need to keep an eye on SS and make sure that money stays in the plan.
      America should measure its greatness by how well we take care of our poor & elderly.
      Not by our GDP or corporate profits.

      •  simple serf - if the cap was raised to $500K (4+ / 0-)

        would you allow the monthly retirement benefits to rise in a corresponding fashion?

        FDR never taxed investment income because SocSec is wage insurance. Investment income doesn't stop when we retire so there is no need to insure it. As FDR stated "from capital nothing is asked and nothing is given".

        "let's talk about that"

        by VClib on Sat Feb 02, 2013 at 12:48:17 PM PST

        [ Parent ]

        •  I see your point on the interest income (3+ / 0-)
          Recommended by:
          elwior, musiccitymollie, Marihilda

          It just burns my a$$ that the wealthy can get away from paying any payroll tax.

          If I understand your question correctly...

          Should the upper end of the SS benefits paid out be raised if the wage cap is being increased. At first pass, no because most of the folks in those higher brackets have other sources of retirement income.
          I would need to do some research though I am answering from my feelings as opposed to looking at the data.

          What do you think?

          •  If you raise the cap, but don't raise the payout (8+ / 0-)

            you have breached one of the fundamental building blocks of SocSec. The program was never intended to redistribute income from high earners to low income earners. While the SocSec algorithm has a very progressive bias the program has broad bipartisan support because the public believes that you "get what you pay for" and there is no free ride for retirement benefits. If you raise the cap you can't cap the benefits. Each dollar of contribution has to have some economic benefit associated with it or it is just an income redistribution program which FDR warned against. He understood that if the program was viewed as welfare it would be easier to attack politically. As he said "never the dole, not the dole". It was one of the reasons he wanted SocSec to have an independent funding source and not paid from income taxes.  

            "let's talk about that"

            by VClib on Sat Feb 02, 2013 at 04:48:03 PM PST

            [ Parent ]

            •  Thanx for explaining that!! (2+ / 0-)
              Recommended by:
              VClib, ozsea1

              I appreciate that perspective/insight and agree with your reasoning.
              I change my above answer.
              I can do that right? LOL

              •  It's already progressive/distributive (3+ / 0-)
                Recommended by:
                simple serf, ozsea1, Tom Anderson

                I did a diary on it before based on this report (PDF) from the Urban Institute. If the upper limit were to be raised and the pattern held those at the highest income levels would be contributing even more than they could expect to get in return. I think that is the whole basis for the attack on the program.

                Growth for the sake of growth is the ideology of the cancer cell. --Edward Abbey

                by ricklewsive on Sat Feb 02, 2013 at 09:20:07 PM PST

                [ Parent ]

                •  Yes, but if the bipartisan Fiscal Commission (5+ / 0-)

                  (Bowles-Simpson) gets it way, it will lose a great deal of its progressivity.

                  Respectfully, I believe that the basis for attack on the program is a desire to funnel funds away from Social Security into private investment accounts, and/or insurance companies (see Tom Harkin's new proposal).  Here's the link.

                  And further, the PtB want to cut Social Security benefits in order to 'offset' the budget, when they drastically cut the marginal tax rates of the wealthy and corporations.

                  Please see Bowles-Simpson's The Moment of Truth.  Here's the link.


                  "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

                  "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

                  by musiccitymollie on Sat Feb 02, 2013 at 10:25:09 PM PST

                  [ Parent ]

                •  Thanx for that report (0+ / 0-)

                  I have printed and its on my reading pile...
                  Your diary (the poll) I wanted to select Wall Street and Republicans, since one seems to be controlling the other!

        •  Tax policy looks at the combo of taxes (2+ / 0-)
          Recommended by:
          simple serf, VClib

          If the ceiling for Social Security were raised to $500,000 the income tax schedules would need to be adjusted downwards from the current ceiling to the new ceiling to avoid excessive tax rates.  Without this, the marginal tax rates for those with earned income from self employment of $400 to $500,000 range in a state with a 10% tax rate would become approx 64% and reduce their after tax marginal income by 25%.

          Few Americans would consider that level of taxation as equitable.

          The most important way to protect the environment is not to have more than one child.

          by nextstep on Sat Feb 02, 2013 at 02:47:16 PM PST

          [ Parent ]

          •  You're kidding, right? (2+ / 0-)
            Recommended by:
            simple serf, BrianParker14

            "We the People of the United States...." -U.S. Constitution

            by elwior on Sat Feb 02, 2013 at 03:00:07 PM PST

            [ Parent ]

            •  No, Do the calculations. (3+ / 0-)
              Recommended by:
              simple serf, VClib, Bruce Webb

              39.6% Federa Income tax
              16.2% Social Security and Medicare (not Fed Income tax deductible)
              10% State income tax (Approx 50% deductible due to phase out for deductions.

              Net marginal tax rate is 63.8%, person keeps 36.2% of what they make.  The current situation is a marginal tax rate of 51.4% with the person keeping 48.6%.

              Going from keeping 48.6% to only 36.2% is a reduction in after tax marginal income of 25.5%.

              In your vision of "Fair" is a person keeping only 36.2% at the margin Fair?

              The most important way to protect the environment is not to have more than one child.

              by nextstep on Sat Feb 02, 2013 at 03:16:54 PM PST

              [ Parent ]

              •  I don't think you get it. (4+ / 0-)
                Recommended by:
                simple serf, BrianParker14, mkor7, ozsea1

                "We the People of the United States...." -U.S. Constitution

                by elwior on Sat Feb 02, 2013 at 03:24:01 PM PST

                [ Parent ]

              •  nextstep - elwior would be happy if the (2+ / 0-)
                Recommended by:
                johnny wurster, simple serf

                marginal rate on high income earners was 95% and would think that was fair.

                "let's talk about that"

                by VClib on Sat Feb 02, 2013 at 04:49:24 PM PST

                [ Parent ]

                •  Some just don't get it. (10+ / 0-)

                  According to the capitalist bible, Forbes:

                  "By sitting on their growing investments, the richest five Americans made almost $7 billion each in one year. That's $3,500,000.00 per hour."

                  That's more in one hour than most two income households will earn in eighty hours of work, working every week for forty years.  

                  And they use some of that stolen productivity to tell us we've got to take even less...

                  From Paul

                  "According to a review of tax documents from 2007 through 2011, Peterson has personally contributed at least $458 million to the Peter G. Peterson Foundation to cast Social Security, Medicare, Medicaid and government spending as in a state of crisis, in desperate need of dramatic cuts."
                  That's "at least".  And that doesn't include the Koch's, de Vos', Waltons, Simmons and the other sociopaths.

                  Some just don't get it.

                  Mostly we hear distortions and misleading statements causing us to argue among ourselves and not understand what the truly wealthy are doing to us.

                  95% tax would only leave them w/one hundred seventy five thousand dollars an hour.  How would they live?  The average worker (not household) earns twenty-six thousand dollars a year. So, the wealthy make in one second what an average worker makes in seven years. In ONE SECOND.  We wouldn't want to hurt those job creators.

                  "If you want to make G-D smile, tell him your plans." Vin Scully

                  by BrianParker14 on Sat Feb 02, 2013 at 07:36:01 PM PST

                  [ Parent ]

                •  The marginal rate was close to that (1+ / 0-)
                  Recommended by:
                  Tom Anderson

                  in the Eisenhower years. The economy did quite well during that period. As you know.

                  Furthermore, there's a fundamental difference between marginal rates (potential) and effective rates (realworld).

                  The effective rates are usually lower, esp for those taxpayers who rely more on investment or other forms of passive income, which are not subject to SS tax.

                  Again, as you and nextstep both know.

                  The "extreme wing" of the Democratic Party is the wing that is hell-bent on protecting the banks and credit card companies. ~ Kos

                  by ozsea1 on Sun Feb 03, 2013 at 10:11:28 AM PST

                  [ Parent ]

          •  Please see my comment above reference the (2+ / 0-)
            Recommended by:
            simple serf, NoMoreLies

            "tax overhaul" that is being negotiated, as we speak.

            The Simpson-Bowles proposal, The Moment Of Truth, recommends slashing the top marginal rates for the wealthy and corporations.  

            So it appears that this will hardly be an issue in the near future [if their proposal serves as a framework for the so-called Grand Bargain.]

            See the link above.


            "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

            "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

            by musiccitymollie on Sat Feb 02, 2013 at 10:33:03 PM PST

            [ Parent ]

        •  I've answered this question (3+ / 0-)

          many times.

          monthly retirement benefits to rise in a corresponding fashion?
          Index the benefits increase so that the higher-income recipients receive a progressively less than 1:1 increase.

          All beneficiaries would get an increase, just less so for the more well-off. All have skin in the game and no rw squawking about it being a welfare program.

          You know this before you ask the question, no?

          The "extreme wing" of the Democratic Party is the wing that is hell-bent on protecting the banks and credit card companies. ~ Kos

          by ozsea1 on Sun Feb 03, 2013 at 10:05:51 AM PST

          [ Parent ]

          •  oz- I agree that the payout curve (3+ / 0-)
            Recommended by:
            simple serf, ozsea1, Tom Anderson

            could bend even further to favor lower income earners and make each marginal dollar for a very high income earner translate into a smaller increase in a future SocSec benefit. I favor this as well. What I oppose is raising or eliminating the SocSec cap on earnings but capping benefits.  

            "let's talk about that"

            by VClib on Sun Feb 03, 2013 at 12:37:38 PM PST

            [ Parent ]

            •  VC - we agree (3+ / 0-)
              Recommended by:
              simple serf, VClib, Tom Anderson

              As you and I discussed previously, this is necessary to avoid the means-testing meme that leads to rw shrieking about SS being a welfare program.

              It's very easy to get lost in the weeds (details) on this subject, but the essentials are easy enough for all stakeholders to grasp.

              Which is why the onepercenters and their enablers, here and elsewhere, are trying so hard to confuse the issues at hand.

              The "extreme wing" of the Democratic Party is the wing that is hell-bent on protecting the banks and credit card companies. ~ Kos

              by ozsea1 on Sun Feb 03, 2013 at 01:08:18 PM PST

              [ Parent ]

  •  There Was a Diary Yesterday About How Much Defense (11+ / 0-)

    is really in the budget. Combine that chart with 1-2 of yours and the point about SS vs military really leaps out.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sat Feb 02, 2013 at 12:01:20 PM PST

  •  Excellent diary, very informative (6+ / 0-)

    Hopefully, this will help some folks here understand a little better how SS works.

    Democratic Leaders must be very clear they stand with the working class of our country. Democrats must hold the line in demanding that deficit reduction is done fairly -- not on the backs of the elderly, the sick, children and the poor.

    by Betty Pinson on Sat Feb 02, 2013 at 12:32:12 PM PST

  •  Thanks ss. (9+ / 0-)

    I have worked for SSA as a disbility analyst for 7+ years.  The program is well run, with a lot of reviews for tech & quality.  We also pride ourselves on the short amount of time it takes to close a case.  [I wish military disability would look at the program for some clues on how to do that, but I suspect their problems are multi-layered.]  And, depite RW snipes about "takers," it is harder to qualify than people assume.  Some people's stories are heartbreaking, and I don't know what they do when we can't allow their claim.  

    "The light which puts out our sight is darkness to us." Thoreau

    by NancyWH on Sat Feb 02, 2013 at 12:45:01 PM PST

  •  Excellent diary. Thank you. n/t (2+ / 0-)
    Recommended by:
    simple serf, elwior

    That's one more thing to add to my long list of small problems. --my son, age 10

    by concernedamerican on Sat Feb 02, 2013 at 02:31:49 PM PST

  •  re worthless IOUs: (5+ / 0-)
    Recommended by:
    simple serf, elwior, VClib, Marihilda, ozsea1

    I think the idea there is that the same party - the federal government - straddles both sides of the transaction.  say I owe you money, and I also own a note receivable from my wholly owned LLC, and I say, "tell ya what, I'll give you whatever repayment I get from my LLC.". would you take that deal?  probably not, and you shouldn't, because I can unilaterally change the terms on you.  there's a similar dynamic here; as a legal matter, the bonds could be cancelled (its not a default if both parties agree to modification, so the 14th amendment isn't implicated), the benefits cut, etc.  IOW, what maintains the program isn't the legal enforceability of the bonds but the political pressure to sustain it.

  •  I am extremely concerned about (5+ / 0-)

    cuts to Social Security, Medicare, and Medicaid. These are important safety nets people need. I am 74.  Maybe my Social Security won't be cut.  But people who are younger may need it someday.  When you are older and unable to work, Social Security is very important to living a reasonable life.

    Say "No" to Chained CPI.

    by Arlys on Sat Feb 02, 2013 at 03:34:54 PM PST

    •  Current retirees' benefits will be affected if (2+ / 0-)
      Recommended by:
      simple serf, greenbell

      the Superlative (Chained) CPI is implemented.

      But I'm guessing that you know that, from your "signature line."  :-)


      "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

      "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

      by musiccitymollie on Sat Feb 02, 2013 at 10:38:02 PM PST

      [ Parent ]

  •  It's our money but greedy rotten rich see a pile (7+ / 0-)

    Money & plan to steal it using their puppets, including the RW MSM, thanks for the warning.

    My generstion is slated to get royally screwed, per the evil RW TGOP plans.

  •  Tax all SS benefits (2+ / 0-)
    Recommended by:
    elwior, simple serf

    Another way to help fund SS is to tax all SS benefits, not just 85% of benefits, as is currently the case. There's a threshhold income before any benefits are taxed, and that threshhold protects all low-income and middle-income beneficiaries. Only the well-off pay any tax at all on their SS benefits. The tax begins at 50% of the benefit amount (a tax initiated by President Reagan, as the diary points out) and goes up to 85% (this increase was signed by President Clinton). For the well off, 100% of SS benefits should be subject to taxation. BTW, all the revenue generated by the taxation of SS benefits goes into the SS trust fund.

    •  Thanx Gerald.. (1+ / 0-)
      Recommended by:

      Its amazing that slipped my mind.
      Because of the graduated tax bands the lower incomes would be spared this increase.
      I think the key to that idea would be explaining it properly to all. The RW would spin that as an increase on all seniors.


      •  Taxing 100% of SS benefits (1+ / 0-)
        Recommended by:
        simple serf

        "The RW would spin that as an increase on all seniors."

        Probably so, and you're right: the key is to explain it properly. (It's surprising to me the idea hasn't gotten more mention.)

        •  It hasn't been mentioned (0+ / 0-)

          because look at the past examples...
          Death panels, 700B taken from Medicare, etc...
          Explaining complicated things is difficult when there is an echo chamber working against you


        •  Why should one do that, since most of what that (5+ / 0-)

          does is reduce the sums payable to seniors, at a time when the other sources of income for seniors are being attacked or destroyed, the AMR/American Airlines destruction of already earned pension benefits at or after retirement being only the most recent example and the death of so many 401ks being another.

          One can have only SS income and by reason of COLA alone, go over the limit, and promptly get a ten percent or more hit on one's income, taking one down below the limit again.

           I can manage on what I have in no small part because I own my house and car outright and have no debt. Not everyone is so lucky, especially in high income and income tax states (my state does not have an income tax). And, of course, I have reasonably good health so the rising copays in Medicare Advantage plans  (my local hospital doesn't take regular medicare at all) and the donut hole in Part D don't eat me alive. Most people are not so fortunate.  

          •  I agree, Christy. And considering the fact that (1+ / 0-)
            Recommended by:
            simple serf

            the Fiscal Commission has recommended drastically lowering the marginal tax rates for the wealthy and corporations (offsetting them with cuts to Social Security and Medicare), I can't see asking low and middle income seniors to make any more sacrifice, than is already being asked.

            That would be political suicide, to even think about it, IMHO.

            I'm just still hoping that the Dems have the good sense to stay away from 'striking a Grand Bargain,' LOL!


            "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

            "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

            by musiccitymollie on Sat Feb 02, 2013 at 10:55:23 PM PST

            [ Parent ]

      •  If you and Gerald are recommending that low and (4+ / 0-)
        Recommended by:
        simple serf, NoMoreLies, Marihilda, ozsea1

        middle income Americans are to be shielded from paying taxes on Social Security, and that the increase is strictly on the wealthiest Americans, I concur.

        So, please disregard my comment below.

        ***That is, of course, unless your measure of "higher income, or wealthier Americans" fits the "Bowles-Simpson model."

        You know, the one that establishes new bend points at the very lowest working class income levels, at the same time claiming that they are lowering Social Security benefits for only "wealthier Americans."

        Love their 'parsing of words,' LOL!  Gotta give 'em credit though, for being creative.  :-)


        "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

        "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

        by musiccitymollie on Sat Feb 02, 2013 at 11:42:03 PM PST

        [ Parent ]

        •  Taxes on SS benefits (2+ / 0-)
          Recommended by:
          simple serf, musiccitymollie

          "If you...are recommending that low and middle income Americans are to be shielded from paying taxes on Social Security..."

          Absolutely, and that's already the case. For those who depend on SS benefits, the threshhold for taxing benefits is high enough that their benefits are not taxed (nor should they be).

  •  Mostly awesome!! and Republished (2+ / 0-)
    Recommended by:
    simple serf, ozsea1

    To the dKos Social Security Defenders Group!

    That said I have niggling quibbles. Then again the Intertoobz are out of commisssion in the place I live this weekend, yet cable still works, and I have been a Niner fan since 1964. So rather than niggle and nibble at the edges, I am going to watch the Har-Bowl and leave it at this:

    Awesome!! And Republished!!

    (tho woe betide you if the Niners lose. Because you DON'T want to get crosswise with a SS numbers junkie with a grudge against the world-because those quibbling mole hills WILL turn into towering mountains) - SocSec.Defender at - founder DK Social Security Defenders group - (hmm is there a theme emerging here?)

    by Bruce Webb on Sat Feb 02, 2013 at 05:18:36 PM PST

  •  Really excellent, should be required (4+ / 0-)

    reading for all Senators and Congressmen.  And the consensus here is strong for raising the cap, how come that's never mentioned in the media and they keep talking about raising the retirement age?

    •  I don't know for sure but I think... (2+ / 0-)
      Recommended by:
      richardvjohnson, ozsea1

      they hear the talking point regarding people living longer and think "well that makes sense"
      I see stories explaining the problem with that logic from Krugman, Joan here at kos, etc... but still it gets repeated.

    •  That's because the Washington Elite, (2+ / 0-)
      Recommended by:
      simple serf, richardvjohnson

      who own our politicians and the mainstream media, don't want the masses to even consider that option.  :-)


      "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

      "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

      by musiccitymollie on Sat Feb 02, 2013 at 11:01:28 PM PST

      [ Parent ]

  •  Good post! (1+ / 0-)
    Recommended by:

    If I had any say-so in how to increase funding for Social Security (both SSI & SSDI), here are my choices:

    Remove Chained CPI

    Remove wages cap entirely

    Increase both employer and employee tax rate equally [IF the wage cap were removed entirely, the FICA increase wouldn't have to be much, possibly not even implemented for a few years yet.]

    As long as it's a self-sustaining fund ... AND (MOST IMPORTANTLY) providing our less-than-intelligent Congress Critters do NOT borrow against the fund for their infernal illegal and unconstitutional wars!!! ... there would really not need to be a whole lot of adjustments made.

    Medicare is the one that NEEDS fixing!

    Remove the corporate sector from government entirely.  The LAST thing we need is more of OUR tax dollars going to even MORE corporations!!!

    Make Medicare the default not-for-profit single-payer option for medical insurance.  Pass laws that enable ALL people to buy into Medicare (remove the corporate link to Medicare Part D that forced seniors and disabled people to buy corporate prescription insurance, make it part of Medicare Part A and Part B, or keep it part of the general umbrella of Medicare, but remove the corporate connection that shuffles money from insurance corporations to pharmaceutical corporations like a money-laundering scheme).

    Put caps on the amounts hospitals and clinics and pharmaceutical corporations can charge.  They've gotten out of hand because the first thing they did years ago is start charging more ("because salaries increased, machines got more expensive"), which then necessitated "supplemental insurance" be bought by seniors and disabled people (who are already receiving only subsistence money from SSI or SSDI).  Those fancy diagnostic machines have been paid for a hundred times over by now (or more).  Those medical facilities are for-profit places, which means poor people paid for the executive bonuses and shareholder pay-outs.

    That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power.
    -- Franklin D. Roosevelt
    Fascism should rightly be called Corporatism, as it is the merger of corporate and government power.
    -- Benito Mussolini
    I firmly believe $COTU$ made an unconstitutional decision in favor of corporations by "magically" [with an erroneous "legal" decision] making the insurance premiums and the $1000 fine/penalty if we don't buy their cockamamie corporate medical insurance into a "tax."  There is NO good reason to force We The People - by law! - to contribute to the profit margins of corporations which makes us liable for the executive bonuses and shareholder payouts.  This started with the military-industrial complex that Eisenhower warned us about, then became a rite of passage for oil corporations and mercenary corporations because of the illegal and unconstitutional wars..., then the lobbyists got in there for the insurance, medical, and pharmaceutical corporations and they even wrote the legislation!  Democrats are not without blame; Bill Clinton signed Gramm-Leach-Bliley in 1999, which repealed Glass-Steagall..., which led to deregulating banks, the housing-insurance crisis, Casino Wall Street, and "too big to fail" by 2008, and now those same organizations are "too big to jail."

    That was every bit as unconstitutional and illegal as making money into a "free speech" issue for corporations, as just as unconstitutional and illegal as the pretzel logic used by both Dumbya's and Obama's legal attorneys that say "enhanced interrogation" is not torture and making AUMF under Dumbya and now under Obama the right to commit illegal and unconstitutional war decisions.  The US Constitution is VERY clear about war powers.  Declarations of war can only be made by Congress, and financing a war is the duty of Congress (with the specified time limit of two years, no less!!!].

    Our three branches of government are out of control heading us down the path to fascism..., and they must be stopped.

    I'm sick of attempts to steer this nation from principles evolved in The Age of Reason to hallucinations derived from illiterate herdsmen. ~ Crashing Vor

    by NonnyO on Sat Feb 02, 2013 at 07:54:09 PM PST

  •  "Her," not "him" (6+ / 0-)
    He summoned Secretary Perkins to the White House and directed him to fix this error immediately. One day later as promised, the plan was submitted as a fully "self-supporting" program. I would have hated to be the guy working 36 hours straight to fix that mistake!
    I don't mean to quibble, but Frances Perkins was the first woman to ever be appointed to a cabinet post, a distinction worth noting.

    Thanks for an interesting and illuminating diary.

    "The NRA says 'guns don't kill people, people do.' But I think that the gun helps." -- Eddie Izzard

    by babaloo on Sat Feb 02, 2013 at 08:18:36 PM PST

  •  Very nice diary. (5+ / 0-)

    Thank you. And I want to reinforce the point that SS is well-run, with a personal anecdote.

    About six weeks ago I applied online to start my Social Security benefits. Last week I was called by a Social Security case worker updating me on the status of my application. I have dealt with the Apple Genius Bar and Apple phone support, some of the best customer support in the business, and this fellow from SS was right up there with them. He explained everything very patiently, including confirming the choices I made on my application, reminded me of decisions that have to be made when my wife reaches full retirement age, and gave me the benefit amount and the date I will see the first payment. In closing he gave me his full name along with both a direct-dial phone number to his desk and a toll-free office number in case I should call when he is out.

    Impressive. Your government truly at work.

    We're not generating enough angry white guys to stay in business for the long term. --Sen. Lindsey Graham (R-SC)

    by uffdalib on Sat Feb 02, 2013 at 11:17:58 PM PST

    •  I thank you for the diary, also. Enjoyed reading (2+ / 0-)
      Recommended by:
      simple serf, ozsea1

      the background of the Social Security program.

      And to think that right-wing ideologues would destroy it, if we allow it.


      "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

      "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

      by musiccitymollie on Sat Feb 02, 2013 at 11:48:49 PM PST

      [ Parent ]

      •  A thanx right back at ya! (1+ / 0-)
        Recommended by:

        You have added a lot of good information. I appreciate all the Simpson/Bowles references. I will have to read up on that.
        Since it wasn't voted out of committee I have not given it the attention that it deserves. You've shown me that.


        •  You're welcome. Reference Bowles-Simpson-- (3+ / 0-)
          Recommended by:
          NoMoreLies, simple serf, ozsea1

          I take them very seriously.  Especially since I saw a video of Jack Lew being interviewed by Financial Times reporter James Politii.  [The only reason that I don't provide the link here, is because I can no longer access the video since my subscription to FT has lapsed.]

          Bottom line--Lew stated that the President supported "all six pillars of The Moment Of Truth (the Fiscal Commission's recommendations, which as you pointed out, did not get voted out of the committee, but it being pushed by "The Fix The Debt Campaign," The Pete Peterson Foundation, etc., etc.)

          And, I took that as a "bad sign" since the Commission Report is comprised of "six sections."

          Doesn't bode well, I'm afraid.


          "Only he who can see the invisible, can do the impossible." --Frank L. Gaines

          "If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

          by musiccitymollie on Sun Feb 03, 2013 at 12:19:13 AM PST

          [ Parent ]

  •  If its my piggy bank - let me cash out. (0+ / 0-)

    I retired 8 years ago and will turn 62 in 4 years. Let me out, just give me the amount marked as my contribution, no interest required, and let me go on my way.

    But, no, it is not my piggy bank.
    It belongs to the governement and they will parcel it out as they see fit.

    I voted with my feet. Good Bye and Good Luck America!!

    by shann on Sun Feb 03, 2013 at 04:48:35 AM PST

    •  They don't parcel it out 'as they see fit'. They (2+ / 0-)
      Recommended by:
      simple serf, ozsea1

      parcel it out by the laws governing the SSI fund.  If they 'gave you back what you put in', then they would be parceling it out 'as they see fit'.  So, no, it is not your piggy bank.

      To any wingnut: If you pay my taxes I'll give you a job.

      by ban48 on Sun Feb 03, 2013 at 07:18:54 AM PST

      [ Parent ]

    •  Or, here is a better idea: Call your auto (2+ / 0-)
      Recommended by:
      Kentucky DeanDemocrat, ozsea1

      insurance company and tell them you are cancelling your policy because you have never used it and all you want is all of your past premiums back.  You can then diary it and tell us all how that worked out :)

      To any wingnut: If you pay my taxes I'll give you a job.

      by ban48 on Sun Feb 03, 2013 at 08:53:34 AM PST

      [ Parent ]

    •  By law, you are paying insurance premiums (1+ / 0-)
      Recommended by:
      simple serf

      to an insurance policy, not contributing to an investment fund.

      There is a significant difference.

      The "extreme wing" of the Democratic Party is the wing that is hell-bent on protecting the banks and credit card companies. ~ Kos

      by ozsea1 on Sun Feb 03, 2013 at 11:13:36 AM PST

      [ Parent ]

  •  The aspect of the debate you are missing is that (1+ / 0-)
    Recommended by:

    every dollar of social security surplus collected is a dollar of income tax reduced.  Since the social security tax is a capped flat tax it is very regressive.  Income taxes are moderately progressive, so the benefit of income tax reductions mostly benefit the rich.  So what you really have is wealth redistribution - money is collected from the poor as SSI surplus and given to the wealthy as income tax cuts.   That is why the republicans will fight tooth-and-nail against anything that does not keep social security in perpetual surplus.

    To any wingnut: If you pay my taxes I'll give you a job.

    by ban48 on Sun Feb 03, 2013 at 05:55:24 AM PST

    •  Nature of SS tax (1+ / 0-)
      Recommended by:
      simple serf

      "Since the social security tax is a capped flat tax it is very regressive."

      Right on the front end, wrong on the back end. Relative to what they put in during their working years, low- and middle-income workers will get more in benefits than high-income workers. There's no question that the tax is regressive during the working years, for exactly the reason you mentioned: the cap.

      •  They are taking back out of the fund. The (0+ / 0-)

        interest charged to the general fund is around 4% average and new issues are under 2%.  So the "more" is poor and working class passing the buck around.  The wealthy bank a huge tax reduction and they keep it as-long as the fund is in surplus.

        Think of it this way:  I collect $10k from working people to support $9k in SSI expenses, so the wealthy get $1k in tax cuts.  Next year more retirees enter the system but more people pay in, so now I collect $11k from working people and spend $10k on SSI expenses, so the wealthy get another $1k in tax cuts.  Expenses go up, retirees get "more out than they put in", but every year the surplus is spent as tax cuts for the wealthy.  

        Except, we aren't talking about $1k, we are talking about $2.7T.  The tax is entirely regressive on the working class and poor as a whole.  And the republicans will fight tooth & nail to make sure the fund stays in surplus and the $2.7 turns into $3T into $4T into $5T....

        This will never change as long as the fund is in surplus and the interest rate is a crap 2%.  Of course, this can easily be fixed by increasing the amount of interest SSI charges the general fund.

        To any wingnut: If you pay my taxes I'll give you a job.

        by ban48 on Sun Feb 03, 2013 at 07:11:13 AM PST

        [ Parent ]

        •  hmm, text got scrambled... (1+ / 0-)
          Recommended by:

          I meant to start off by saying "They are taking more out of the fund, but the surplus flow is constant.  The 'more' is simply transfers within the poor and working class representing cost-of-living adjustments and a minuscule amount of interest.  The wealthy keep their tax reduction as-long-as the fund stays in surplus, so it is in-effect a permanent transfer of wealth.

          To any wingnut: If you pay my taxes I'll give you a job.

          by ban48 on Sun Feb 03, 2013 at 07:16:47 AM PST

          [ Parent ]

  •  I only agree with lifting the cap only if the (1+ / 0-)
    Recommended by:

    surplus is spent down and the system reverts to pay-go.  The surplus serves no purpose if it is never redeemed and doesn't pay meaningful interest. Interest on new issues is under 2%, and the only 'crisis' is for the wealthy who are losing their income tax subsidy as the surplus crests and the threat of redemption nears.  If we cannot redeem $2.7T  now, we'll never redeem $5T later, and we are better off with paygo where each years revenues match each years expenses.

    To any wingnut: If you pay my taxes I'll give you a job.

    by ban48 on Sun Feb 03, 2013 at 08:49:24 AM PST

  •  Windfall Elimination Provision (0+ / 0-)

    This should really be discussed any time Social Security is discussed. I've worked all my life between universities (social security paid) and the VA (no social security paid). I'm amply qualified both for a government pension and social security. Yet, my social security will be cut down to almost nothing.

    This sort of blows the old piggybank model. And of course it's grossly unfair.

  •  Very well written. Reminded of stories I've heard (1+ / 0-)
    Recommended by:
    simple serf

    from people who were alive during the FDR era.  It was a big deal for that whole first generation who received Social Security.  For people who were 20 in 1935 and retired at 65 in 1980 it was still a pretty big deal to have Social Security payments in retirement.  It's pretty sad that there are people who have been convinced pretty easily not to expect anything.  It's like willingly emptying your pockets for a thief and they think they're smart. The problem is that since it's "Social" they'd empty everyone else's pockets too.  

    "Democracy is a life; and involves continual struggle." ---'Fighting Bob' LaFollette

    by leftreborn on Sun Feb 03, 2013 at 10:56:10 AM PST

  •  One other pt: Wall Street ALREADY HAS the $2.7T (2+ / 0-)
    Recommended by:
    simple serf, musiccitymollie

    surplus.  It isn't cash in a buried vault, it has been redistributed as income tax reductions.  $2.7T in social security surplus = $2.7T in income tax reductions.  Wall Street already has the surplus.  They don't want to give it back.  They want a perpetual surplus that grows forever and ever and is NEVER redeemed.

    That is also part of the joke of 'privatization'.  The surplus is already privatized, except the recipients of the surplus get to keep their gains and only owe 2% in interest back to the general fund.  The point of privatization is to turn the 2% into 0% into a loss....

    To any wingnut: If you pay my taxes I'll give you a job.

    by ban48 on Sun Feb 03, 2013 at 12:32:31 PM PST

  •  Common right-wing errors (2+ / 0-)
    Recommended by:
    simple serf, Tom Anderson

    They show a budget with "entitlements" and ignore the FICA tax going into the system.  They don't understand that when Social Security was redone several years ago it effectively raised the age for receiving full benefits to the 68 year old range.  For example I took SS at age 62 in 2004, but I could not earn more than about net $14,000 a year until I was about 67 or 68.  Very hard to live on so little, but if one earns more than that net, SS not only stops paying the money, they charge interest and a fee.  SS benefits are low by standards of other countries.  One does not pay tax until income is over about $25,000 for two.  My husband and I live on less than that and I think it is poverty level for two people.  Medicare is not free.  $100/mo comes from SS check and gaps require additional insurance for another $100/mo plus co-pays.  Not easy for poor old people.  Not only do we not need to listen to the right-wing who seem to enjoy bashing old people, but we need to get the money away from Congress because the temptation to steal it is too strong.  Put it in a government-backed department that is regulated for honesty.  Social security is very responsive allowing you to see what you have paid and what you will receive when you are the correct age.  Protect it and it will make a difference when you are old unless your Daddy it Mitt Romney.

  •  Clearly, it is the Filthy Rich's (tm) piggybank... (0+ / 0-)

    ... didn't you get the memo?

    So you old people had best get about dying and decrease the surplus population so the filthy rich pigs can buy a bigger yat-chet.

    Selfish old people, meh. ;P

  •  Federal Budget $2.3 Trillion (1+ / 0-)
    Recommended by:
    simple serf

    MarshWiggle has a good question in asking how much the federal budget is without Social Security. In the 2011 budget, without Social Security and Medicare spending not covered by payroll taxes, was about $2.3 trillion and defense was definitely the largest amount.

    In addition to the $699 billion shown, there were other expenditures for national security, including probably $100 billion or so for ongoing operations in Afghanistan and other places, the Dept of "Homeland" Security, and the Dept of Energy (which actually houses the nukes, not the Dept of Defense--despite Rick Perry's profession that he'd get rid of it).

    The figure above for Medicare is also higher than it should be. The total spending for Medicare in 2011 was about $480 billion, but about $188 billion of that came from payroll taxes. One reason Medicare has a much lower revenue stream is because it has not kept pace with enormous increases in healthcare costs.

    By my calculations about half of the actual federal budget is related in one way or another to national defense.

    I didn't include in my calculations interest paid to the Social Security fund, which would make the total federal budget perhaps a bit lower.

    The primary reason both Social Security and Medicare are not entirely funded by payroll taxes is because wages and jobs have not kept pace. Since we started shipping jobs overseas wages have fallen and the share of business income going to them has dropped from 60% in 1980 to 50%. The depressed funding for these programs reflects the degree to which workers have suffered economic decline since the 1970s.

    What's important about this is that Republicans are constantly claiming enormous "government spending". Social Security and Medicare are not government spending. These programs require employers to pay the natural cost of their labor. By increasing the per-hour costs they make sure employers pay workers what they need to survive not just while they are working but while they can't work. The money is not converted to government money, but rather flows from one group of consumers to the same group (after retirement).

    We need to strike back at Republicans and remind them that their numbers on "government spending" are off by over a trillion dollars a year. Even in Washington, that's a fair amount.

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