Writer's Social Security analysis flawed

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Shakespeare wrote that “a rose by any other name would smell as sweet.” But a Ponzi scheme, when offered by the federal government, is called Social Security.

Any program outside of Washington, D.C., that takes money from people at the bottom and gives it to the people at the top is a pyramid, or Ponzi, scheme. Social Security was started in 1935 as a way to collect additional tax revenue allegedly to pay benefits at age 65 – when the average American life expectancy was lower than that. The problem is that the government didn’t plan on us living so long. The taxes collected are put into the general treasury and spent by politicians to buy votes as needed.

As to the Rev. Paul Cook’s suggestions on how to make the program stronger (“Fix Social Security; it’s no Ponzi scheme,” Sept. 20), he suggested taking the cap off wages and making everyone pay the Federal Insurance Contributions Act tax on all earnings without limit. When I started my career, the cap was more than $40,000: it is now $106,000.

Cook probably doesn’t realize that most of the higher earners are self-employed. Self-employed earners pay double – once as the employee and again as the employer. That works out to be about 14 percent; add 3 percent for Medicare and we “rich” people get to pay 17 percent of our income before we get to pay federal or state taxes.

At a 36 percent marginal rate, that means someone such as Cook’s doctor will be paying 60 percent of his income on his top earnings (14 percent Social Security plus 3 percent Medicare plus 36 percent federal plus 7 percent state equals 60 percent).

I hope I haven’t lost Cook in the weeds with all these numbers. God only asks for 10 percent. You can’t fix it when you don’t even understand it.

I am not wishing Cook would lower our costs anytime soon. But I hope he doesn’t try what the federal government does in the real world, or the minister’s friends in D.C. will have him preaching from a jail cell. But then again, he then won’t need Social Security at all.

Let’s hope Cook’s biblical exegesis is better than his Social Security analysis.

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wtinney
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wtinney 09/21/11 - 11:49 pm
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Well written! Amazingly

Well written! Amazingly accurate given our Social Security program was first modeled after Germany's. The age limit was decided because relatively few lived to that age. In 1935, our average age of life (life expectancy) was roughly 55 years. Now, it stands at roughly 78 years - which means that, for seniors that live to the average life expectancy age, 13 full years of benefits. That is a staggering amount being that they would easily exhaust any "contributions" they made within 4 years at this time. Again, no one will listen as they're close or within the senior age classification. They will say "that's my money" when a tax can never be claimed as anyone's individually. Sad but true, one of the most conservative groups in America, the elderly, when it comes to this issue, are proud socialists.

Vito45
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Vito45 09/22/11 - 12:50 am
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wtinney: "Sad but true, one

wtinney: "Sad but true, one of the most conservative groups in America, the elderly, when it comes to this issue, are proud socialists."

Yep, can't get a darned one of them to agree that SS is an entitlement. All they have to do to prove they aren't part of the entitlement crowd is to agree to quit taking SS once they have drawn out their contributions plus average passbook (guaranteed) interest for the years their money has been there. Otherwise, they are on welfare once their own money is gone. It is just that simple.

bjphysics
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bjphysics 09/22/11 - 12:54 am
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Did Ponzi invest the money he

Did Ponzi invest the money he received from investors?

bjphysics
36
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bjphysics 09/22/11 - 01:11 am
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If the government let me keep

If the government let me keep my money and invest it I could make much larger returns and have a safe and secure retirement. I could have invested the money in the dotcom boom, no wait, forget that. Well I could have invested the money in the telecom boom, tilt/reset, I didn’t mean that. OK, I could have invested the money in mortgage-backed securities during the real estate boom, cancel that.

Those are bad examples but here’s one that makes pure sense; bank the money in a safe but low-interest account until it gets to $200K. Then go to Vegas and put it all on Red 21! I’m riding high now baby, look out Ft. Lauderdale, here I come.

southernguy08
499
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southernguy08 09/22/11 - 06:08 am
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BJ, you could invest it in
Unpublished

BJ, you could invest it in our government. You know...the one that's 14 TRILLION IN DEBT. How's that for a safe investment? Oh wait...you already have. Thanks Uncle Sam.

avidreader
2963
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avidreader 09/22/11 - 06:29 am
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I assume the AC publishes

I assume the AC publishes fantasies like Mr. Cook's, simply to attract a response such as Mr. Goss's. It works. Well said, Mr. Goss. I'm sure the Rev. Cook is a good, honest man, but he sure did not do his homework before writing to the AC. As F.S. Fitzgerald writes, "He's the kind of man who nibbles at the edge of stale ideas."

rmwhitley
5526
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rmwhitley 09/22/11 - 07:23 am
0
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Churches are tax exempt. What
Unpublished

Churches are tax exempt. What do people expect their clergy to espouse? They will glorify guvmint because guvmint ( really us the hard working tax-payer) subsidizes their activities.

hounddog
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hounddog 09/22/11 - 07:38 am
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'If the government let me
Unpublished

'If the government let me keep my money and invest it'
No the bureaucrats take it and SPENT IT ALL to buy from votes from the entitlement crowd.

Carleton Duvall
6305
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Carleton Duvall 09/22/11 - 08:09 am
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When the government takes

When the government takes your money and tells you that it will provide you a income for life beginning at age 65 or age 62 at a reduced amount that is not welfare. It is no more welfare than buying a life annuity from an insurance company. Some people get more than they put in and some people less. No,we seniors don't want to give it up. Neither would you young whippersnappers.

Carleton Duvall
6305
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Carleton Duvall 09/22/11 - 08:21 am
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FYI, I retired at age 62 and

FYI, I retired at age 62 and have been drawing social security for 24 years. I also bought a life annuity at age 70 and have been drawing an amount from it for 16 years. I have outlived the life expectancy tables by about 10 years. Each month I laugh on my way to the bank because I am living off someone else' dime. That is the luck of the draw, not welfare.

desertcat6
1140
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desertcat6 09/22/11 - 08:56 am
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The letter writer is

The letter writer is partially correct when he states "taxes collected are put into the general treasury." According to the SSA, "Tax income is deposited on a daily basis and is invested in "special-issue" securities. The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund. Money to cover expenditures (mainly benefit payments) from the trust funds comes from the redemption or sale of securities held by the trust funds, and is just enough to cover an expenditure. The amount bought in 2010 was $1,020 billion, while the amount sold was $929 billion."

In other words, there were $ 91 billion in SS security holdings spent on other general revenue items last year, and no way to determine how much of the overall deficit spending went to redeeming $ 929 billion in SS securities. The technical/legal aspect of purchasing and redeeming SS securities enables some to ignore/refute how "Ponzi-like" SS really is since taxes are converted to securities before any payments are made with redeemed securities.

Of course, there is nothing illegal about this "Ponzi-like" arrangement since all this occurs within the framework of the law. It's also worth noting that the SS securities aren't invested in anything other than the general fund. A losing proposition as long as we continue to operate with a deficit.

Carleton Duvall
6305
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Carleton Duvall 09/22/11 - 09:17 am
0
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Interesting Analysis,

Interesting Analysis, desertcat6. I don't know what it means in the long run except that something needs to be done. The obvious change that would solve at least part of the problem would be to raise the retirement age a little ever five or so years. This would not be popular but would, at least , be realistic. Life spans , as has already be noted, are increasing. They are in the mid seventies where they were in the low sixties when the social security law was enacted. None of Dr. Cook's suggestions are reasonable. Most are socialistic and wealth redistribution. Sadly, his suggestions appeal to too many people.

Chillen
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Chillen 09/22/11 - 10:03 am
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I am not counting on social

I am not counting on social security. I believe that by the time I retire it will be officially bankrupt.

This is due to several key factors:
1. Social security counts on young workers to come in in large numbers and replenish the fund. That is not happening now. Young Adults, even with college degrees, are unable to find work or are finding menial, poor paying jobs due to obama's depression.
2. Certain types of young folks are not even bothering to look for work - following in their mothers welfare footsteps.
3. Americans are living longer (good thing). But, that means they are collecting so much more than they put in and the systems is being sucked dry.
4. Very few of those collecting social security disability truly are disabled and totally unable to work. I'll bet that 9 out of 10 can work doing something but choose to sit at home instead. FRAUD.
5. Last but not least, the government is in charge of this program. Enough said.

desertcat6
1140
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desertcat6 09/22/11 - 10:08 am
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I'm with you on that, scooby.

I'm with you on that, scooby. Sadly, the SSA confuses the issue when they also publish official document that suggesting they are deficit neutral. In their "A SUMMARY OF THE 2011 ANNUAL REPORTS" from the Social Security and Medicare Boards of Trustees they say things like "Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983" and "Because the primary source of income for OASDI and HI is the payroll tax, it is customary to compare the programs’ non-interest income and costs expressed as percentages of taxable payroll" (http://www.ssa.gov/oact/trsum/index.html). No where in this document does it hint at the poor quality of the investment in the general fund and real impact of SS on the deficit now. Non-interest income is just another name for securities redeemed at face value sans interest from the general fund - an investment that earned zero.

Little Lamb
43827
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Little Lamb 09/22/11 - 10:13 am
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Chillen, you forgot factor #

Chillen, you forgot factor # 6:

6. The Democratic congress in 2009 or 2010 (I can't remember the exact year) enacted a reduction in Social Security payroll taxes. This was done at the urging of Marxist economist Robert Reich to "jump-start" the economy. While I appreciate any tax cuts, it is dangerous to cut Social Security taxes because it just starves the Social Security trust fund and will make the Social Security System go bankrupt that much sooner.

bjphysics
36
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bjphysics 09/22/11 - 11:59 am
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desertcat6: How much money

desertcat6: How much money did the Social Security Trust Fund (just SS not Medicare) take in last year and how much did it (just SS not Medicare or SSI) payout?

Carleton Duvall
6305
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Carleton Duvall 09/22/11 - 12:41 pm
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bjphysics, I could not find

bjphysics, I could not find the actual numbers but the annual report shows a $49 billion deficit for 2010. The report estimates an improvement for 2011. I know, you did not ask me for this info but being that I had nothing else to do I Googled it.

bjphysics
36
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bjphysics 09/22/11 - 01:09 pm
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That seems at odds with

That seems at odds with this:

Q. “What were the amounts of securities bought and sold during recent years?”

A. “The amount bought in 2010 was $1,020 billion, while the amount sold was $929 billion. See investment transactions for more detail and earlier years.”

http://www.ssa.gov/oact/progdata/fundFAQ.html#n4

Or this:

Took in $865 bil, paid out $701 bil.

http://en.wikipedia.org/wiki/United_States_federal_budget

And the trust fund has $2.6 trillion in the bank by this:

http://www.ssa.gov/cgi-bin/investheld.cgi

bjphysics
36
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bjphysics 09/22/11 - 01:10 pm
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Debt clock; great fun: watch

Debt clock; great fun: watch the Social Security Trust Fund going UP not down!

http://zfacts.com/p/461.html

burninater
8847
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burninater 09/22/11 - 01:16 pm
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"We rich" Mr. Goss states,

"We rich" Mr. Goss states, before describing how onerous the tax code system is.

Question: if the rich are truly taxed at onerous levels, why is it that, after all those taxes are paid, they are still ... "We rich"?

To continue with the Shakespeare theme, "the lady doth protest too much, methinks ..."

Cassandra Harris
-3
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Cassandra Harris 09/22/11 - 01:19 pm
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physics - they don't want to

physics - they don't want to click on your link and you know why?
Well....... http://www.youtube.com/watch?v=UXoNE14U_zM

harley_52
22105
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harley_52 09/22/11 - 01:42 pm
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Little Lamb
43827
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Little Lamb 09/22/11 - 01:46 pm
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Slightly edited, but

Slightly edited, but Burninator posted:

If the rich are truly taxed at onerous levels, why is it that, after all those taxes are paid, they are still rich?

Here we have the heart of the redistributionist ideology. They are envious of wealthy people. They want to tax the rich not for a fairer government, but rather to make the rich become poor through excessive taxation.

harley_52
22105
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harley_52 09/22/11 - 01:49 pm
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Chillen has listed some

Chillen has listed some excellent reasons for concern, but those of you who are somehow convinced most people outlive their paid-in benefits should go back to the calculators.

Little Lamb
43827
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Little Lamb 09/22/11 - 01:57 pm
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Harley has a good point,

Harley has a good point, there. One of the cruelties of the Social Security System is the huge numbers of people who die before they file their Social Security claim for benefits. Everything they put in is forfeited. I we were to put Americans into four groups:

Black Men
Black Women
White Men
White Women

We would see that the average life expectancy for black men is the lowest and average life expectancy for white women is the highest. Thus, black men who die before age 65 are subsidizing the Social Security payments to those old white women.

If Social Security were to be converted into a personal account retirement system, similar to an IRA or 401(k), then your estate would receive your payments and earnings. You would designate the beneficiary instead of having Uncle Sam spread it out over society.

harley_52
22105
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harley_52 09/22/11 - 02:07 pm
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Little Lamb said ...."...Here

Little Lamb said ...."...Here we have the heart of the redistributionist ideology. They are envious of wealthy people...."

The heart of the "redistributionist ideology" is marxism. It's not so much an "envy" of wealthy people, it's more a loathing for them. They're evil. Rich people are rich because they achieved their wealth by unfairly exploiting the working class to the detriment of those who actually did the work in the first place. The wealthy are evil. They owe their fortunes to the workers and, eventually, the workers will rise up and take it back.

It is all pure, unblemished, unabashed Marxism, even to the attacks on the family and religion. It's all just as Marx said it would be and after the workers defeat the "rich" capitalists everything will be cool.

Obama and his ilk think their purpose in life is to get the process moving and expedite it however they can.

desertcat6
1140
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desertcat6 09/22/11 - 02:19 pm
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Biggest reasons for the

Biggest reasons for the conflicts in numbers is the various numbers the SSA puts out and what programs they represent. SSI taxes did exceed expenditures in 2010, but SSDI had a trustee reported 23 billion shortfall. Roll shortfalls in Medicare parts A and the rest, and the total SS program is either paid w/ Medicare/SS taxes or, depending on how you count the reported 204 billion from the general fund Medicare part B and D needed up front, not.

Regardless, all the taxes paid directly to these programs are converted into special securities daily and the money goes into the general fund. The money the securities represent is the trust fund - not actual dollars in some walled off account. To pay benefits securities are cashed in from the current year general fund, and dollars are transferred to the SSA to cut checks.

harley_52
22105
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harley_52 09/22/11 - 02:51 pm
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Little Lamb said.... "If

Little Lamb said....

"If Social Security were to be converted into a personal account retirement system, similar to an IRA or 401(k), then your estate would receive your payments and earnings. You would designate the beneficiary instead of having Uncle Sam spread it out over society."

And that brings up the other thing many fail to consider when comparing what one takes out to what has been paid.

The amount the FICA deduction from Employees' paychecks represents only half of his true payment into the system. The employer pays the other half and must be considered as a payment to the employee deferred by government decree. If the withholding rate is seven percent, then the actual contribution rate is fourteen percent AND some reasonable rate of return over time must be applied to consider what is the true value of the contribution over the employee's lifetime.

Carleton Duvall
6305
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Carleton Duvall 09/22/11 - 03:03 pm
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One point that needs to be

One point that needs to be made to those of you that are concerned about someone else getting your share of your social security account if you die young. Social security is like fire insurance on your home. It is there if you have a fire. If you don't have a fire it goes to someone who does have a fire. Social security is paid to you if you live to be 62-65. If you don't it goes to someone that lives to that age. It is a safety net. As i said earlier it has been great for me. The problem with social security is not it's intent but the poor administration of it's funds including actuarial determinations , inflation and poor investment of it's assets. It needs an overhaul, correction, it has needed an overhaul for years but our politicians won't act for fear of their jobs.

harley_52
22105
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harley_52 09/22/11 - 03:22 pm
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I'm not personally concerned

I'm not personally concerned about "someone else getting your share of your social security account if you die young." My comments are intended to address those who believe we "baby boomers" are somehow slovenly eating up all the Social Security money so there won't be any left for them.

As to your "fire insurance" analogy, it's not completely appropriate since even if you aren't here to collect it, some of it will go to your spouse as long as she's alive.

And I agree completely that it is mismanagement of the program and the fund that are the real problems.

And as far as problems with entitlement programs go, Social Security problems are dwarfed by Medicare and Medicaid problems.

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