Charming. The only ‘process’ SS needs is the lifting of the payroll tax cap above $110,000. Why is it so hard for politicians to do what 99% understands needs to be done.

The “tax cap” has been lifted nearly every year for the last 40 years.

If Obama or Geithner or any of other Democratic leadership 1% enablers wanted to do anything but cut SS benefits, they would have uses some clear language and made some clear proposals by now. They’re not on our side.

This administration’s admiration for the Bowles-Simpson treatment of Social Security is endless. The B-S plan raises SS eligibility by two years to 69. Through changes to the PIA formula all benefits are flattened into a basic benefit between 8 and 14 K, severely disconnected from income contributions Figure 2 shows this flattening into a ‘basic benefit’ which our kids would be subjected to.

Geithner’s move divides the opposition by falsely reassuring and perhaps disarming those who are prepared for a fight now on Social Security. The refocusing on stopping cuts to Medicare and medicaid is a diabolically artful move to cut their opposition in half. The learning curve on Medicare and Medicaid is a bit steep. But I can assure you that 400 billion dollars in cuts will hammer beneficiaries of both programs and raise the costs to those seeking medical treatment.

I heard Nancy Pelosi, over the weekend, say on t.v. or radio that she, too, thinks that SS should be dealt with separately, not as part of this negotiation, and she suggested raising that tax cap as a possible solution. I find that to be somewhat reassuring.

So Americans can approach retirement with dignity and with the confidence they can retire with a modest guaranteed benefit.

I don’t think this needs any parsing.

I think it’s legitimate to look at medical costs. This industry will not restrain itself. It has to be restrained, somehow.

And? It needs to be lifted above $110,000.

Because they don’t want to.

Why shouldn’t all income be taxed for it?

This maybe a bit of political genius. There is no way that social security will be undermined if it is part of a separate process. No Way.

SS and Medicare are the ONLY government programs left that are beholden to the PEOPLE. Repugs have been trying to do away with it for decades. Geithner, Bernanke, and most of those on the Banking and Finance committees are neocons that wish to ruin ordinary people.

We have already been stuck in the gut with Bush’s Part-D program and that issue should be dropped completely from any fiscal cliff or budget talks, PERIOD!

That’s the other elephant in the room. Those like Romney who can afford to live off investment income end up with a much lower tax rate because most of their money isn’t income from working but from the work of others, and that income isn’t subject to social security taxes.

It should! They all get their monthly benefits regardless of their wealth.

The poison pill to SS was already administered with the Payroll Tax Holiday.
Now the narrative is to protect the middle class from a “Tax Increase” if it is allowed to expire. This is a vital part of the SS formula.
I suspect that the Demokrats will do something like health care reform, eventually require everyone to invest in a privatized retirement fund of some kind, like we are required to buy private health insurance. Wall St. is going to be crawling naked through pig shit with delight.

Not by nearly enough.

The reason SS is facing a shortfall is that US wages haven’t kept pace with inflation. The solution is to remove the cap on wages and also have it apply to income streams growing *much faster* than inflation.

-stewartm

So? What’s wrong with that?

It should be raised again and raised much higher.

Why should it be?

So Americans can approach retirement with dignity and with the confidence they can retire with a modest guaranteed benefit.

As it stands now, everyone gets a modest guaranteed benefit based on the average of the highest 35 years of salary income (currently capped at $110,100). If you double the cap, the guy averaging $50,000 (inflation adjusted) won’t get any more, but the guy making $220,200 on average will get a bigger retirement check.

Is that snark or are you serious?

If you’re serious, I’d kindly suggest that you guess again. No offense intended. If I missed the snark tag, then I agree with you.

They all get their monthly benefits regardless of their wealth

This is true, but their monthly benefit is capped just like their payroll tax. Romney’s benefit check will be based on $110,100 income in 2012. If the only process is to raise the cap as suggested in #1, his monthly retirement benefit would be based on him earning $20,000,000 in 2012. That would be one big check (every month for life).

The percentage of covered earnings subject to the tax max is currently 86% of all earnings. The historical average since the beginning of SS in 1937 is 83%.

When people comment that the cap should be removed and that the tax should be applicable to all income, no one is expecting to have an unfair or unsound benefits formula to go along with it.

No one objects to a rich person paying more to ensure a mansion than a working person pays to ensure a modest home, and the former getting a larger payout if something goes wrong, as long as the terms of the contract are fair, and the insurance company has a sound basis for calculating premiums and benefits.

There would presumably need to be a minimum SS benefit, a fair cost-of-living calculation based on the real needs of real people in a real economy, and some way of ensuring the payout formula was actuarily sound given projected revenue and demographics.

It’s not clear why you seem to expect that doing such a calculation is impossible.

The percentage of covered earnings subject to the tax max is currently 86% of all earnings.

It was upped to cover 90 % in 1983 to cover the Baby Boomer retirement. That shortfall is due both to unemployment and to the fact that American wages haven’t kept up with inflation.

You keep trying to wanting to make this a formula issue, when the simple solution (as I said) is simply to ditch the formula, remove the cap, and apply the SS tax to other income streams.

-stewartm

No, SS doesn’t go to people who don’t pay in–unless you’re talking about disability. But I believe disability comes out of the general fund. Someone who’s expert jump in, here.

I think it’s quite possible, in fact I think it’s being done now.

As far as the calculation is concerned, payroll taxes went up around 20 times from 1950 to 1990, and not once since then. Isn’t that more overdue (terms of the contract are fair) than an raising the cap which has been done every year for the last 40?

Nope. Raising the rate is a regressive tax. Removing the cap and applying the tax to all forms of income is a progressive tax.

The Evolution of Social Security’s Taxable Maximum

Heh, I think it’s funny that I agree with you that the raising the rate is a regressive tax and removing the cap and applying the tax to all forms of income is a progressive tax, but you don’t agree with me that paying massive benefits to the wealthy and puny benefits to the poor is unfair.

In 1951 Social Security Commissioner Arthur Altmeyer argued for the tax max increase to maintain the relationship between benefits and preretirement earnings for middle and higher earners.

Testifying before the House Ways and Means Committee, he suggested that “if the wage base is not raised, the differential between benefits for low-wage and high-wage workers will not adequately represent their differences in levels of living…”

Good resource.

Interesting. I think we’re back in 1937.

I haven’t seen any proposals that would result in “massive” vs “puny” yet. Until then, it’s something to be aware of but not a given in removing the cap and extending the tax to all forms of income. Some difference between the lowest and highest payout can still be fair.

There’s certainly a problem with linking benefits to wages now, insofar as we’re racing to the bottom on wages for many people in this country. However, that’s a separate discussion.

but you don’t agree with me that paying massive benefits to the wealthy and puny benefits to the poor is unfair.

I would have no problem with a minimum payout greater than today.

But you seem fixated by the formula. The “massive benefits to the wealthy” only occur if you keep the formula in the place, fetish-like. There is no reason, none at all, why you can’t simultaneously a) still cap the maximum benefit and b) remove the cap on taxable income.

So what if SS is a net loss for the very rich under those terms? Besides, in a way, even the rich don’t lose because they will still have if everything else goes wrong and they lose their wealth a source of retirement income that can’t be taken away.

-stewartm

It is not the separate process that makes folks nervous, it’s the idea the Social Security should be “dealt with”.

I agree with that, even though that wasn’t part of #16 above.

SS started out as a lump sum, then a fixed monthly check, then the “formula”.

No reason it can’t be changed to whatever Congress wants.

Good point, even if it’s not “dealt with”, they’ll still only have to reduce benefits by 25%.

Not unless they paid it out of general revenues.

-stewartm

I get $46367 by 1937 dollars by the top rate.

But using 1980 dollars, there’s not been much if any increase in the top rate.

-stewartm

No reason it can’t be changed to whatever Congress wants.

And, as a social insurance program, if you increased taxes to pay for it and increase benefits, it’s not without a benefit even for those at the top incomes who pay in more than they’ll get out.

You could say something similar about many kinds of insurance. You might pay in more than you will collect in payments, and often that’s exactly what you hope happens. But it’s still worth having just in case things go wrong.

-stewartm

“I suspect that the Demokrats will do something like health care reform, eventually require everyone to invest in a privatized retirement fund of some kind, like we are required to buy private health insurance.”

And the Dummokrats still think Roberts upholding the “mandate” was a good thing. The point of the entire ACA was to 1)Bailout the insurance industry, which was becoming more and more doomed with rising unemployment 2)Make the mandate a precedent that will be used when they come along to turn over SS to Wall St.

Roberts made the ultimate Corpo Tool move, not a “progressive” move.

I wanted to throw up listening to Dems praise his decision.

Anybody know where Mr. Peabody and Sherman keep the “Way Back” machine?

When is Geithner LEAVING??????

Well, that’s not soon eneough for me.

There’s something about the phrase “modest guaranteed benefit” ….. I don’t know…..it makes me think of cat food! How well will “modest” support “dignity”??

That’s why the cap should just go away and then tax ALL INCOME… NO CAPS, No problems with funding..Same could be done for Medicare…

That’s based on actuarial analysis of a generation of workers who haven’t been born yet.

Well, as I understand SS, it’s a progressive payout, so the person earning less will get relatively more in return.

I think it should be raised because the very well off and wealthy are doing extremely well while most others are doing much worse, therefore more people are going to have to live off SS alone, rather than pensions, the wealth of their homes and jobs that pay well. Therefore, it’s the morally correct thing to do to have the well off shell out more in taxes to help hold up the system.

Good point.

I heard that Obama really likes Geithner.

Currently 86% of all income is subject to SS payroll tax. Removing the cap will add 14%, which if there are changes to the benefits formula, may be enough. Without changes to the formula, lifting the cap barely fixes anything.

Oh, and there is no cap on Medicare payroll taxes, so the same could not be done.

Currently 86% of all income is subject to SS payroll tax. Removing the cap will add 14%, which if there are changes to the benefits formula, may be enough. Without changes to the formula, lifting the cap barely fixes anything.

Maybe *only* if *wage* income is the basis. The poster said “ALL INCOME”.

As I have shown you, taxing ALL INCOME with no caps you could *double* SS payouts and still make SS solvent. I have given you the figures that say you could do this with just capital gains and dividends alone, let alone interest income and corporate profits.

As for Medicare, taxing all income sure would help matters.

-stewartm

By making SS solvent, does that include utilizing the trust fund?
If so, what financial dynamics occur when Tresaury interest and principal is redeemed to pay the cash shortfalls?
Don Levit

It means that SS needs no additional revenue from the general revenues.

-stewartm

The actual cash from the general revenues is the same way we pay for all government expenses. It is an immediate expense, and increases the deficit.
You seem to suggest there is a store of wealth in the trust fund, which can be liquidated without any budget ramifications.
Don Levit

The “tax cap” has been lifted nearly every year for the last 40 years.

Can’t the tax cap be dropped entirely?