Social Security - There is no Crisis
The social security system is the most efficient govenment program to date. As I recall, it spends about 1% of its total outlays on overhead - the rest is available to be disbursed. The SSA itself claims that 99.8% of all claims are without problems - that is an astounding figure [chart is here, on p. 4 of the pdf]. The Bush administration is playing 3 Card Monty [again] by saying one thing in order to get another (See 9/11-Iraq, WMD-Iraq, NCLB, etc.). In this case, they want to rape SS in order to 'give' people private accounts. These accounts would add up to about 2% of someone's supposed SS payroll taxes. For a typical middle class person, that may add up to $700 per year. Somewhere between 2-3% will go to Wall Street to cover the costs (already minimally double what the USGov charges). And, of course, if the stock market crashes, you lose. You get nothing.Fundamentally, Social Security is a compact between generations. I pay now to help my grandmother. And many others. SS is in mass surplus, and will be for the forseeable future, insomuch as one can prognisticate 75 years in the future. That, my friends, is pretty far away. Here is what the Social Security Adminstration defines "FICA" as (FICA is the acronym that shows up on your paycheck statement) from their webpage here:
Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA). The payroll taxes are sometimes even called "FICA taxes."
Additionally here is the perfect quote from the federal goverment about what SS is all about:
The payroll taxes collected for Social Security are of course taxes, but they can also be described as contributions to the social insurance system that is Social Security. Hence the name "Federal Insurance Contributions Act."SS is a social insurance system, plain and simple. It is meant to be able to keep the elderly, the infirm and some others that qualify out of abject poverty. It is usually just enough to keep people out, and if they did not have this, there would be many more in poverty that would be clammoring for services and help from the federal, state and local governments. Your taxes would increase.
Bottom line - Social Security good, W and Cheney bad for yelling "Fire!" in a crowded room. You can get much more from the following websites:
[updated 4/29/2006 - fixed busted link now that the original webpage is a jobs seeking page]
[there is no crisis webpage from the Way Back Machine - some good links still here
angrybear.blogspot.com - this is a great economic blog which uses reality and economic sense to furnish ideas on the US and global economy and not David Stockman-like supply side junk. It can be a bit over my head (they are not talking about stainless steel ported valve clusters, fugacity or the Langlier Saturation Index, things which I studied in college and out of school ;o) ) but the summations are usually pretty clear to me.
[Update 23JAN05 - From Josh Marshall at TPM, he has linked to this chart which shows all SS recipients broken down by congressional district, total beneficiaries and some other great detail - thanks to techpolitics.org for this page -- RBE]
[Update 25JAN05 - from the AARP site, an open letter detailing that, simply stated, the AARP will oppose the dubya initiative completely -- RBE]
posted by jimboses @ 5:56 PM
6 Comments:
The math for the republicans just doesn't add up. We know from financial sector balance sheets and prospectus records that the fees charged for managing accounts are higher than the 1% overhead you cite.
However, you could make a convincing argument that the return on investment from a private account will yield higher returns. But do we really want to trust the financial industry with all of that money? Last time I checked corporate america was going through significant ethical turmoil: mutual fund scandals, false earnings reports, enron, to name a few...
The financial institutions of this country don't deserve the opportunity. They didn't earn it.
Johnny! 1st real comment on this bloggy thing I've got going...ahh, sometimes it seems were the only ones looking to do this...but that's OK...
I think we may have been talking around each other a little - my comment on the expenses of social security were specifically for the SSA and not for any other expenditure by private business, etc. Strictly speaking , the SSA had gross assets in the last FY of $BN 2137.9 dollars (based on stats on the SSA website at http://www.ssa.gov/finance/2004/FinPosition.pdf). The outlays for admisitration and other expenses were a 'paltry' 8.9 billion dollars. Doing the math, the SSA expended 0.41% of its total assets last year to administer all those checks.
If you have numbers on what businesses spend strictly on FICA, I'd love to see them. Personally, I think that it'd be tough for companies to tease out that number from payroll taxes, 401(k) admin costs, etc. For most small companies, they have one person doing all of that stuff, and I doubt even the best small companies that track $$ to the gnat's ass (like mine) differentiate between FICA and state, fed, payroll, etc. taxes and withholdings admin time.
http://www.cbo.gov/showdoc.cfm?index=6060&sequence=0
Revenues by Source
Federal revenues derive from various sources: individual income taxes, social insurance (payroll) taxes, corporate income taxes, excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts. In recent years, individual income taxes have typically produced nearly half of all revenues and claimed between 8 percent and 10 percent of GDP (see Figure 4-3). Social insurance taxes (mainly for Social Security and Medicare's Hospital Insurance) are the second largest source of receipts. They generate approximately a third of federal revenues and amount to a little less than 7 percent of GDP. Corporate income taxes contribute about one-tenth of overall revenues and have usually represented between 1.5 percent and 2 percent of GDP. Revenues from other taxes, duties, and miscellaneous receipts (including profits from the Federal Reserve System) make up the balance and together constitute about 1.5 percent of GDP.
During the post-World War II period, corporate income and excise taxes have declined in importance and payroll taxes have become more significant. Since the early 1950s, corporate income and excise taxes together have declined from nearly half of receipts to less than 15 percent. Over the same period, payroll taxes have increased from slightly more than 10 percent of revenues to more than one-third.
In 2004, receipts of individual income taxes equaled 7 percent of GDP--1 percentage point below their postwar average of 8 percent. The level of those receipts in 2004 was lower as a percentage of GDP than in any year since 1951. The level projected for 2005, although higher, is still unusually low by postwar standards.
Over the coming decade, the path of total receipts will be primarily driven by individual income taxes. Receipts from those taxes, measured relative to GDP, are projected to rise by 3.4 percentage points from 2004 to 2015, more than accounting for the projected increase of 3.3 percentage points for total receipts relative to GDP over that period.
About half of the growth in individual receipts will result from changes in tax law including a lower alternative minimum tax (AMT) exemption beginning in 2006; higher tax rates on dividends and capital gains starting in 2009; and an increase in statutory tax rates, reduction in child credit amounts, contraction of joint filers' tax brackets, and other changes in 2011 that will increase taxes. The other half of the growth results from the structure of the tax code, which causes tax rates effectively to rise as income grows, and from other factors, such as a rapid increase in distributions from tax-deferred retirement accounts.
Other revenue sources will change somewhat during the baseline period but with little net effect over that decade. Corporate income taxes are also expected to grow in importance for the next few years as the investment incentives enacted in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and the Job Creation and Worker Assistance Act of 2002 (JCWAA) expire. But after rising to 1.8 percent of GDP in 2005 and 2006, corporate income taxes are expected to slip back to their current levels and then below by 2009. Estate and gift taxes are expected to drop to historically low levels relative to GDP in 2010 and 2011 as a result of the phaseout of the estate tax and then regain their previous importance after the tax is reinstated in 2011. Excise taxes will continue their slow decline in significance as a revenue source.
Those changes--especially the ones associated with the individual income tax--will markedly increase the total tax revenues collected by the federal government. From the lowest ratio of revenues to GDP in nearly 50 years--16.3 percent in 2004--receipts in CBO's projection rise to 19.6 percent of GDP in 2015, a level matched or exceeded only a half-dozen times since 1945.
http://www.cbo.gov/showdoc.cfm?index=6060&sequence=5&from=0
Social Insurance Taxes (Figure 4.4)
In CBO's projections, revenues from social insurance taxes claim a roughly constant share of GDP, remaining between 6.4 percent and 6.5 percent of GDP from 2005 through 2015 (see Table 4-4). In relation to wages and salaries--the approximate base of those payroll taxes--revenues are projected to decline somewhat, from 14.1 percent in 2005 to 13.9 percent by 2015, as a result of relatively slower growth in receipts from unemployment taxes, declines in the share of earnings below the taxable maximum amount for Social Security, and declines in revenues for other federal retirement programs
The largest components of payroll tax receipts are taxes for Social Security (called Old-Age, Survivors, and Disability Insurance, or OASDI) and Medicare's Hospital Insurance (HI). A small share of social insurance tax revenues comes from unemployment insurance taxes and contributions to other federal retirement programs (see Table 4-5).
Social Security and Medicare taxes are calculated as a percentage of covered wages. Unlike the HI tax, which applies to all covered wages, the Social Security tax applies only up to a taxable maximum, which is indexed to the growth of wages over time. Consequently, receipts from OASDI and HI taxes tend to remain fairly stable as a proportion of income as long as covered wages are a stable share of GDP and the distribution of income from wages remains relatively unchanged.
CBO projects that social insurance tax receipts will increase slightly relative to GDP in 2005. That increase primarily reflects changes in the accounting for individual income tax and social insurance receipts, as in the analysis of income tax receipts discussed above. In producing its estimate for the level of receipts in 2005, CBO estimates actual receipts for 2004 before the Treasury makes its final determination. In CBO's history and forecast for individual income tax receipts, the opposite effect occurs, so overall receipts are not affected. The increase in payroll tax receipts in 2005 is augmented by other factors, notably an anticipated increase in state unemployment taxes as states replenish their trust funds following the outflow of funds for unemployment benefits during the 2001 recession.
From 2005 onward, payroll tax receipts are expected to decline very gradually as a fraction of both wages and GDP for three reasons: states will largely finish replenishing their unemployment trust funds this year, revenues associated with other federal retirement programs will be lower as the number of workers covered by Railroad Retirement and the old Civil Service Retirement System declines, and a slightly larger fraction of total wage and salary income will be above the maximum level of earnings subject to Social Security taxes. Another factor offsets a portion of the decline: CBO expects that wages and salaries as a share of GDP will rise slightly from 2006 through 2010, boosting social insurance receipts relative to GDP.
Compared with its projections last September, CBO is now estimating about $59 billion more in social insurance tax receipts for the 2005-2014 period. Changes in CBO's economic forecast--mainly higher projections of nominal wages and salaries in the later years--account for $60 billion of that change. Reestimates because of technical factors and recent legislation were very small.
A chart from Kos showing Lindsey Graham plan (essentially what W is proposing) and the loss in benefits compared to what you'd earn under the current system:
http://www.dailykos.com/images/user/3/plan2.jpg
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