Republicans in full retreat over tax cuts for 160 Million

[chrisrobin]

funny story... all these tax cuts are scheduled to expire right after the 2012 elections.

I read a Washington Post story today referring to it as "Taxageddon." something like 500 billion in tax increases across the nation right after the election.

It's about time. In the fifties, if you made over $3 million, you were in the 90% tax bracket. The country prospered. There was no class warfare. Wealth was accrued. How could this happen? How come nobody drew Hitler mustaches on Eisenhower posters? Now, our "leaders" are pissing and moaning over a 15% tax rate.

 

[Kulindahr]

It's about time. In the fifties, if you made over $3 million, you were in the 90% tax bracket. The country prospered. There was no class warfare. Wealth was accrued. How could this happen? How come nobody drew Hitler mustaches on Eisenhower posters? Now, our "leaders" are pissing and moaning over a 15% tax rate.

We understood, then, what it meant to be a country.

 

[Stardreamer]

Where did all this come from?

"Privatizing" Social Security doesn't have anything to do with corporations, it has to do with making your account actually yours. Instead of it just sitting there behaving according to the whims of that body known as Congress, you could decide that you want your account to, for instance, ride with the mean return of US industrials, or stick it in a prime-minimum certificate of deposit, or invest it across all US pharmaceuticals, or sink it into Las Vegas casinos, or....

Okay, probably not that last item, because there would have been restrictions on what sort of risk you'd be allowed (though Vegas is hardly high-risk, except for the people who lose their money there). So the only "stockholders" would have been the people who are now -- us, with our accounts. The only "CEOs" would have been the people we call the Social Security Administration -- same for a bureaucracy. The only difference is that you would have been able to go online and look at all the charts showing your history and your balance and projections, and with that there would have been a button to click saying "manage my account". Click on that, and you would have gotten to a page showing investment options, and an amount you could invest yourself -- equal to not quite 5% of your total account.

And once you were receiving Social Security payments, you could keep doing that. And the beauty would have been that if when you died there was a balance remaining, your heirs could have gotten it (or you could have donated it against the U.S. debt or left it to bolster the health of the SS fund).


That's all that privatizing meant -- that you'd be able to control a teensy little part of your own account, if you felt you could get a better return than the government was (not hard -- even just calling Edward Jones and telling your agent to handle this money for you would have done that, for the entire existence of Edward Jones).

I wonder how many more dot-com millionaires there might be right now if that had been allowed starting under Reagan. The only difference would be that they couldn't have it till they retired, because it would be in their SS fund.

Too right, the 'surplus' in the SSI funds now are invested in government T-Bills. Right now what you get back out of SS is subject entirely to the whims of congress because you don't actually own your SSI account, it is all one big lump account that its payed out of. If all the money you paid in was put into an account you owned and invested in those very same T-bills without the SSI mess you would actually get more money back! This has been shown by CATO and others who examined the history. YOU ARE LOSING MONEY BY LETTING THE GOVERNMENT OWN YOUR SSI MONEY!!!! Why do you want to do that?

 

[Kulindahr]

Too right, the 'surplus' in the SSI funds now are invested in government T-Bills. Right now what you get back out of SS is subject entirely to the whims of congress because you don't actually own your SSI account, it is all one big lump account that its payed out of. If all the money you paid in was put into an account you owned and invested in those very same T-bills without the SSI mess you would actually get more money back! This has been shown by CATO and others who examined the history. YOU ARE LOSING MONEY BY LETTING THE GOVERNMENT OWN YOUR SSI MONEY!!!! Why do you want to do that?

And until NASA brings back a two-kilometer long nickle-iron asteroid to refine in orbit and put the money from selling it into a SS lockbox, nothing will change.

 

[evanrick]

funny story... all these tax cuts are scheduled to expire right after the 2012 elections.

I read a Washington Post story today referring to it as "Taxageddon." something like 500 billion in tax increases across the nation right after the election.

this is why romney is in trouble. Obama could take him to task over the tax issue alone. i think the GOP has realized how risky a romney nomination would be.

 

[Just_Believe18]

It is bizarre the Republican Party is so reluctant about providing payroll tax relief to 160 million Americans because it will add to the deficit when they adamantly believe in preserving the Bush Tax Cuts that have added trillions of dollars to the national deficit over the last 10 years. The Bush Tax Cuts have NEVER been paid for.

 

[Stardreamer]

I don't believe this, Stardreamer.

Not once, not twice, but three times, have I heard John Boehner complain about the fact that the poor pay no taxes. Indeed, both Romney's and Cain's tax plans would have effected a huge tax increase on the poor.

This is because they believe that the rich pay too much taxes as it is.

Just watch:

If the Republicans win, the poorest are in for the largest tax increase you ever saw.

Look back at what I said. "The current Republican positions doesn't favor raising taxes period, they only wanted to see cuts made elsewhere to balance the revenue loss to SSI..

That does not say that Republicans completely oppose raising taxes but that the current tea party logic flowing through the party wants cuts before taxes.

There is a strain of logic in the conservative circles that those who pay no taxes at all are less likely to have a vested interest in ensuring the government is a good steward of the tax monies it collects. But that simply part of the flat tax or consumption tax arguments that everyone should pay at least a minimum tax, even if its no more than a service fee. That's philosophical argument aside from the budget debate. The reality is most people pay into the SSI so its really not to relevant.

There are also conservative economists who, I think rightly point out, even if you can tax the rich excessively without damaging the economy, there simply isn't enough rich people to tax that will make the difference. You have to branch out into the middle class to bring in enough revenue at the current rates of government spending.

 

[Stardreamer]

Kulindahr, privitazing Social Security would defeat the original purpose, wouldn't it?

Social Security was supposed to be an insurance against pension plans being raided, banks going bankrupt, and stock plans going belly-up, trusts being wiped out overnight Like what happened in 1929.

If you want to privatize it, you might as well just get rid of it completely.

BTW, Las Vegas is a VERY bad idea!!! Take it from an insider. Half the casinos here are near complete collapse.

So we replaced it with a system that is being raided by Congress, going bankrupt and being wiped out demographically. Of all the options for savings for retirement it is only slightly better than burying your money in the back yard (which would also protect it from the evil market). A recent studies found that a person who put their SSI funds into private investment accounts (government regulated) their entire life AND retired in 2008 at the height of the 'worst recession' since the great depression, they still would receive more money than they would get from SSI.

If you really want the security the SSI provides you could take that money and invest it in a fund that trades only in US Treasury bills (the same place SSI invests its funds) and get a greater return.

Here is film that explains the reasons for all this:

[ame="http://www.youtube.com/watch?v=sMGAi8aGeYM"]http://www.youtube.com/watch?v=sMGAi8aGeYM[/ame]

The real issue is not that private accounts are a risky or dangerous investment, they aren't. Its that the government simply doesn't have the upfront money it would need to make the change without some folks getting burned. Of course folks are going to get burned anyway, current and near-term recipients are getting a lousy rate of return, and young workers are going to get a negative rate of return on their money.

 

[Kulindahr]

Kulindahr, privitazing Social Security would defeat the original purpose, wouldn't it?

Social Security was supposed to be an insurance against pension plans being raided, banks going bankrupt, and stock plans going belly-up, trusts being wiped out overnight Like what happened in 1929.

If you want to privatize it, you might as well just get rid of it completely.

Well, there wouldn't be any pension plans to raid, or worries about banks going bankrupt, and though it's theoretically possible someone's investments could get wiped out overnight, it's extremely unlikely -- if the kinds of things people would be allowed to invest in got wiped out overnight, there wouldn't be enough left economically for the SS promises to be worth anything anyway.

 

[Kulindahr]

So we replaced it with a system that is being raided by Congress, going bankrupt and being wiped out demographically. Of all the options for savings for retirement it is only slightly better than burying your money in the back yard (which would also protect it from the evil market). A recent studies found that a person who put their SSI funds into private investment accounts (government regulated) their entire life AND retired in 2008 at the height of the 'worst recession' since the great depression, they still would receive more money than they would get from SSI.

If you really want the security the SSI provides you could take that money and invest it in a fund that trades only in US Treasury bills (the same place SSI invests its funds) and get a greater return.

Here is film that explains the reasons for all this:

http://www.youtube.com/watch?v=sMGAi8aGeYM

The real issue is not that private accounts are a risky or dangerous investment, they aren't. Its that the government simply doesn't have the upfront money it would need to make the change without some folks getting burned. Of course folks are going to get burned anyway, current and near-term recipients are getting a lousy rate of return, and young workers are going to get a negative rate of return on their money.

That's why I said the only way SS is going to get fixed is if NASA can bring us back a nice fat NiFe asteroid -- one a kilometer across would be worth about $20 trn.

 

[Stardreamer]

Stardreamer, I can't watch the film due to some obscure computer reasons. (I'll tell you only if you ask, otherwise I don't want to bore you.)

But according to Money magazine--hardly a leftist magazine--Social Security is quite fixable. (Medicare, by contrast, is quite a different matter.)

The question remains as to whether or not it SHOULD be fixed. I just ask you to please look at history, in particular the events of the 1920s and1930s. The economic tsunami that hit the world wiped out literally millions of retirement funds.

Social Security was implemented as a direct antidote to that kind of tsunami, Stardreamer. It was meant to be an insurance against anything like that ever happening again.

I believe it deserves fixing, and I see all attempts at privatization as "defeating the whole purpose" of Social Security. On a more personal level, the idea of giving Wall Street all that money to squander sickens me to the core of my being. I cannot think of anything more imprudent.

I maintain that if Social Security is to be privatized, it might as well be completely ended.

The idea of having 'Social Insurance' as it was called not a bad idea. My problem is not with having a safety net. The problem with Social Security is it is basically a flawed system that if it were being run by anyone else but the government would have its caretakers rounded up and jailed for fraud. And yes you can fix Social Security but only by screwing its recipients and the tax payers even more. The problem is so huge now that no matter what you do short of pumping billions of dollars into the system will be able to fix it without cheating the recipients.

The proposed privatization does two things. One is taking the money the government says is yours and ACTUALLY making it yours. The second is to invest that money in ways that give you a better rate of return WHILE maintaining the security of the account through government supervision of the investment accounts.

You couldn't just take your money and stick it in investments where there is a risk of it being wiped out. A risk that has been greatly reduced anyway given the changes made to the markets after the Great Depression. As Kulindar pointed out these investments are such that in order to wipe them out, the economy would have to completely collapse in which case your money is meaningless anyway.

BUT if fear of the market is your concern YOU DON'T HAVE TO INVEST IN THE MARKET. Your private account invested in the SAME government bonds that the SSI uses will still give you a better and MORE SECURE return than the current SSI system. No market investment needed.

I have never understood why so many defenders of the status quo, get up in arms at financial companies gouging and ripping off their investors but are perfectly happy and defend the government doing the same thing.

 

[Kulindahr]

The proposed privatization does two things. One is taking the money the government says is yours and ACTUALLY making it yours. The second is to invest that money in ways that give you a better rate of return WHILE maintaining the security of the account through government supervision of the investment accounts.

Well, a small portion of it. Under the Bush plan, I would have been able to take charge of something like 4.6% of my account.

You couldn't just take your money and stick it in investments where there is a risk of it being wiped out. A risk that has been greatly reduced anyway given the changes made to the markets after the Great Depression. As Kulindahr pointed out these investments are such that in order to wipe them out, the economy would have to completely collapse in which case your money is meaningless anyway.

I don't remember the details of the restrictions, but high-risk investments would have been excluded. I presume that would have been a simple matter of taking the evaluations by Edward Jones and a couple of other investment outfits and averaging them.

BUT if fear of the market is your concern YOU DON'T HAVE TO INVEST IN THE MARKET. Your private account invested in the SAME government bonds that the SSI uses will still give you a better and MORE SECURE return than the current SSI system. No market investment needed.

I have never understood why so many defenders of the status quo, get up in arms at financial companies gouging and ripping off their investors but are perfectly happy and defend the government doing the same thing.

Set and match.

 

[Kulindahr]

But Stardreamer, you haven't addressed the central point:

if Social Security is privatized, it might as well be dismantled completely, because it defeats the original purpose.

We've both addressed that. I'd argue that it enhances the original purpose, because it would mean people could have a sense of ownership and actually get a better retirement.

 

[Kulindahr]

Not really, Kulindahr, because you two haven't addressed the enforcement problem.

Who would oversee the situation? How would they prevent people, undergoing temporary impecunious times, from withdrawing it early, even under a tax penalty? The temptation would surely be too great to resist, and you'd end up with a number of people--maybe quite a number--who had nothing to retire on.

The enforcement end of it would add another layer of bureaucracy, which is the very thing Libertarians seek to avoid.

What prevents me from taking my money out of a five-year CD early?

And even if somehow people could, they'd impact their SS account by about 5%, and, having wiped out what they had to invest with, wouldn't be able to touch the rest (well, technically, they'd be allowed to use 5% of new payments into the account, but that would be easy enough to fix).

 

[Kulindahr]

@Stardreamer:

I trust the government more than private enterprise with the money, because for 80plus years, it's still running. Money Magazine says that minor tweaks could keep it running until 2060 or so. You are correct in the fact that it wouldn't be painless, but from what I read, the pain would be felt mostly at the top of the income brackets, for whom it's really not desperately needed anyway.

By contrast, the Stock Market has crashed at least twice that I know of during that time. I knew at least one person who died before his investment was recouped.

And even with the stock market crash, the performance of an account with a median-return from the market is still better than the return on SS.

In other words, the government is ripping us off. People like to claim that those who paid into SS are getting back more than they paid, but that's extremely deceptive -- they're getting back less than a mediocre performance in the market would have given them.

 

[Kulindahr]

That didn't happen in his case. He lost all the money he'd earned in stock market gains, plus many more $$$ in his own money. He never got that money back, Kulindahr, because he died too soon.

Were they in a government-supervised program? Were his choice limited according to risk? Were his investments time-averaged?

To answer your question about the 5-year CD: you can withdraw that money at any time, but you have to pay a penalty.

I remain convinced that very many people, facing hard times, will pay that penalty, and take that money early, just like they do now for 401ks.

I did a five-year CD and couldn't get it back at all -- period. That was the contract.

The thing is that on the "privatization" scheme, you still can't take the money out of your SS fund except according to the SS rules. If you dumped all of your five percent into one stock that inexplicably increased in value by a factor of a thousand, so that your portion was now larger than the government-managed portion, you still couldn't take it out until retirement, because the money would technically not leave the SS fund. That's why I used to scoff at them calling it "privatization" in the first place -- all they were doing was two things: letting you manage some of the money while it stayed in the fund, and letting you will any remnant of that to an heir. That's it -- you wouldn't be allowed to take a vacation with it, or use it as collateral for a loan, or anything else; it would still be part of the SS fund, subject to all the SS rules.

You mentioned that at present the limit on Bush's idea was 5%. I'm not comfortable with it, because it opens doors. Some politician later on will decide to raise that 5% to 10%, and so on. This will fuel to a "race to the top", and it will lead to full privatization.

Yeah, like the fund will ever be healthy enough to do 10% -- as I said, the only way that sort of thing will happen is if NASA hauls back a kilometer-across NiFe asteroid and the proceeds went into the SS fund.

At this point even 2% isn't feasible, because the money isn't there -- Congress is borrowing every single cent that goes in. To get to a point where the Bush plan would be feasible, we need to get the national debt down under five trillion with unemployment below 5%. Doing that is going to take virtually full energy independence (meaning no imports from off-continent, and less than 20% total energy from imports), and a neutral balance of trade. Those are going to require heavy investment in infrastructure.

Unless NASA grabs that asteroid or some unforeseen technical breakthrough vaults the U.S. economy into an enormous lead over all other nations, I don't look for SS "privatization" to be feasible soon enough for me to take advantage of it.

And once again, I say that instead of full privatization, you might as well just get it over with and end the program entirely.

If the economy and budget allowed, I'd even go for full "privatization" so long as it had that one firm border: the money still stays in the SS fund.

I just thought of a better term for it: "partnerization", because what it really proposed was letter people be partners with the government: the SS fund held the money, but people could move it around in terms of investments. I actually have a friend who has an investment fund run that way -- he can go online and shift money from one stock to another or one industry to another, but it still stays in the fund, and only comes out under the pre-set rules. He has it set up for retirement, and the rules are "SS -5", meaning all the rules are what SS has except he can start five years earlier. He can even choose a minimum rate of return, though the higher the minimum, the greater restrictions on his freedom in investing (last I know he was at a 2.25% minimum return, which allows pretty good latitude in playing with his money -- though even at the market's worst recently he never had to rely on that minimum).

@Stardreamer: you beautiful man, I want to toss that boomerang right back at you:

It never ceases to amaze me that some people distrust the government with their money, but utterly trust private enterprise whose whole existence is based on greed, the basest of desires.

Must disagree with that last: corporate enterprise may be based on greed, but private enterprise is not. Corporate enterprise is a subset of private enterprise, but only a partial subset.