Posted on 06/06/2009 11:48:52 AM PDT by moneyrunner
In 1962 GM had 464,000 workers and was paying benefits to 40,000 retired workers. There was one retiree for every 11.6 employees. The average age at death was 67. GM currently has 62,000 hourly workers and 29,000 salaried workers in the USA. Today GM also has 493,000 retired workers drawing benefits and the average age at death is 77. That is 5.4 retirees for every single active GM worker. Over 75% of the retirees were hourly workers. The average retiree receives $37,800 in payments annually plus medical benefits.
There is no possible way that a single employee can support 5.4 retirees in the manner they have become accustomed. This is why the UAW has already begun cutting benefits to current retirees as a result of the bailout deal. GM has transferred its liabilities to a trust and as part of the bailout the UAW gets a 17.5% ownership position in GM plus some other payments. When GM comes out of the bankruptcy they will no longer have this monster cash drain. Unfortunately retirees will be forced to live on drastically reduced income levels.
(Excerpt) Read more at moneyrunner.blogspot.com ...
Like the pyramid sceems from the late 70’s early 80’s
With the confiscatory tax rates that will be needed to support social security, illegals will go back home when they realize they’re going to be baby-boomer retirement slaves.
Dream on. Illegal workers cannot support our SS system. In 1950 there were 16 workers for every retiree, today it is 3.3, and by 2030 it will two workers for every retiree. And by 2030 one in five in this country will be 65 or older. The system is unsustainable as currently structured.
Anyone who plans on SSI in their retirement is out of their freaking minds (I used to say “anyone under 50, but then I got there...”)
I plan on living on welfare in a trailer park.
Of course, the “trust fund” does NOT exist, but nobody in the MSM will explain that logical fact, to the public.
100% of the benefit will be taxable to the retired folks.
100% of earned income will be subject to SS taxation, for those of us who have not, yet, retired.
The “full retirement age” will be increased to age 70.
Removing the cap would represent the biggest tax hike in history. I doubt it will happen. The cap goes up every year now. It is now $106,500 up from $76,000 in 2000. Eliminating the cap on wages subject to the OASI payroll tax would generate only enough revenue to delay the date of the system's insolvency by a few years
Removing Social Security's Tax Cap on Wages Would Do More Harm Than Good
The “full retirement age” will be increased to age 70.
SS is a pay as you go system. The last time it went into the red, Congress passed P.L. 98-21, (H.R. 1900), which raised taxes and reduced benefits, including raising the age for full benefits from 65 to 67. The fix was supposed to make SS solvent for 75 years. By 2016, SS will be in the red again or just 33 years later.
Congress will just kick the can down the road again by making some fixes to keep the system running a little longer, e.g., change the COLA formula, make it a more means tested system, change the benefits calculations, etc. No matter what they do in this regard, the system is structurally unsound. It is unsustainable over the long term unless the system is changed. Personal accounts with a small defined benefit system is the way to go.
Youth, take some advice from me, do not rely on our Government. Invest in IRA, 401k or something safe.
I believe I read this week that due to the economic down turn that the SS is in the red now. That is that SS is now paying out more than is coming in. They are actually cashing in some of the Treasury Certificates.
Yes, it will.
Taxes on the “rich” are more politically acceptable.
The earnings cap is almost certain to be removed, on all payroll taxes.
what is considered safe anymore?
I can’t imagine what that would be. I used to think that Blue Chip stocks and Utilities were safe investments. I learned recently I was wrong.
Municipal bonds have also been losers. Right now one of what used to be the riskiest investments seems to me to be the safest; commodities namely metals. Copper, steel, platinum. Stuff I wouldn’t touch before.
The Obama economy is completely BassAcwards.
Xer Ping
Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations are doing that Gen-X and Y will end up paying for.
Freep mail me to be added or dropped. See my home page for details and previous articles.
I suggest you read the link I provided on its impact. No politician, including Obama has propopsed that solution. The employers would have to come with the matching amount and if you were self employed, it would be huge, especially for small business owners. And then there is the little matter of benefits.
You might see a raising of the cap to $250,000 or some lower amount. It is certain that it will not be removed altogether.
Recession draining surplus from Social Security fund; Excess vanishing faster than anticipated
Since when does proving a bad idea IS a bad idea -—
STOP the bad idea?
Yes, you are right.
It IS a bad idea.
NO, you are wrong -—
It will happen anyway!
No, you are wrong. There is not the political will or the votes to do it. The Dems would be committing political suicide by voting to lift the cap entirely nor would they vote to tax all SS benefits. AARP would torpedo any such efforts that would tax all SS benefits. Less than one-third of the current SS beneficiaries pay taxes on their benefits.
And where do you suggest that the money might come from?
Necessity will force action on this front.
It will only seem “fair” to the libs to “means test” Social Security with a higher tax on benefits.
They have done it TWICE before. Why do you think it impossible to do this, now, with the most liberal government we have ever had?
Youth, take some advice from me, do not rely on our Government. Invest in IRA, 401k or something safe.
As I stated before, they will employ the same strategy they did in 1983 when SS went into the red. I see a slight rise in the retirement age, some slight changes in the computation of benefits as suggested by Fred Thompson, and some tinkering with the COLA formula and taxation rates for those at the higher end of the economic ladder. The Dems will not do anything that hurts those at the bottom of the ladder in terms of taxation. SS is actually much easier to solve than Medicare, at least for the short term. The Dems will kick the can down the road rather than make the hard decisions.
It will only seem “fair” to the libs to “means test” Social Security with a higher tax on benefits. They have done it TWICE before. Why do you think it impossible to do this, now, with the most liberal government we have ever had?
With only one third of the 50 million Americans receiving benefits now paying taxes on them, the Dems can make some slight changes, but they are never going to tax all of the benefits. It would be polticial suicide. And remember, starting next year, one milliion Americans a year will be added to the SS rolls.
I am far more worried about Medicare/Medicaid. The Train Wreck Ahead Medicare is rolling toward disaster, and there is no easy way to fix it.
The automakers promised these pensions, but did not fund them at the time the liability was accrued.
Why only make the upper income a little upset with you? Why not “go for gold” and make ALL of the SS benefit taxable?
(Notice, I do not advocate for this solution, but it does seem the easiest, most efficient way to “means test” a program that can not continue to pay out the same benefits.)
Look at it this way, which is more likely:
1.) an actual cut in SS benefit amounts?
or
2.) Simply taxing the SS benefit?
Obviously, it is much easier to simply TAX the benefit.
As it stands today, even “tax free” municipal bond interest is added into the formula for considering the taxation level of SS benefits.
Also, the lower income folks pay NO TAXES now. It would be fairly easy to simply treat SS benefits as income, without even impacting the “poor” -— if nothing else, the “floor” for “free” SS benefits could remain the same, or rise slightly.
Another point which the libs don't like to address:
The “earned income credit” was first devised as a way to reimburse the working poor for their “payroll taxes” -— which is really awful, in practice:
The “poor” might pay virtually NOTHING into SS, yet they are often likely to receive all of their benefits tax free!
There are no trust funds.
The money is gone!
No institution can lend money to itself.
It is impossible for the SS system to loan money to the US Treasury.
There IS NO MONEY!
I am conceding nothing. There is a big difference in taxing all SS benefits for the 50 million people now receiving them, which would mean that two thirds of the people not paying taxes on them or abour 34 million, would be added to the rolls. I stated that some of the changes Obama might do is to increase taxes on the third who are already paying taxes on their benefits and perhaps add a few more who aren't. But there is no way Obama will commit political sucide by expanding taxes to 34 million recipients and their swelling numbers as the baby boomer cohort retires.
Why only make the upper income a little upset with you? Why not “go for gold” and make ALL of the SS benefit taxable?
Because of the numbers and econcomic status of those involved. Under current law, you will have to pay federal taxes on your benefits if you file a federal tax return as an "individual" and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000. Two-thirds of the 50 million SS recipients do not pay taxes on their benefits under the current law. The monthly SS benefit for a worker is around $1100. How do you think it would play politically if you started taxing these folks?
Look at it this way, which is more likely: 1.) an actual cut in SS benefit amounts? or 2.) Simply taxing the SS benefit? Obviously, it is much easier to simply TAX the benefit.
False choice. There are many different things you could do to fund the program in the short term, including raising the worker and employer contributions from the current $6.2% each. That has not been raised since 1990.
Also, the lower income folks pay NO TAXES now. It would be fairly easy to simply treat SS benefits as income, without even impacting the “poor” -— if nothing else, the “floor” for “free” SS benefits could remain the same, or rise slightly.
80% of Americans pay more in payroll taxes than they do income taxes. What you want to do is tax the SS benefits for those already retired or disabled or are survivors. Now you seem to be changing your mind.
The “poor” might pay virtually NOTHING into SS, yet they are often likely to receive all of their benefits tax free!
That applies to a lot of people, about two-thirds of the recipients. And then there are the spousal benefits, which a spouse can receive without ever contributing to the system.
Why did you think I put surplus in quotes? Here is how the system works. SS is a pay-as-you-go system. Once all the revenue is collected from the payroll taxes and benefits are payed out, the money left over, i.e., the "surplus," is deposited in the general fund to be used as Congress sees fit.
In return, Treasury deposits the amount of the surplus into the SS Trust Fund in the form of non-market, interest bearing T-bills. They represent an unfunded liability, which is why they are included in the $11 trillion national debt as "Intragovernmental Holdings," which are different than the publicly-held portion of the national debt.
When payroll tax revenue is not sufficient to cover benefits, as happened in th3e early 1980s, the SSTF T-bills are redeemed by the USG to pay the benefits. Of course the USG must come up with the money from somewhere by increasing taxes, borrowing more money, or cutting spending or some combination thereof. The rationale for the SSTF is that it is better to owe the money to ourselves than borrow it elsewhere, like from the Chinese.
A few years ago I had an interesting discussion with Tom Savings, one of the SS Trustees, at a week long seminar on SS. He suggested that we abolish the SSTF and just include SS as a line item in the federal budget. It would be a more transparent and realistic way of dealing with SS. And the payroll tax would be seen for what it is, just another form of income taxes.
The problem with the entitlement programs except for Medicare Part B is that they are on automatic pilot and benefits paid out are not related directly to revenue received. COLAs and increasing medical costs are outpacing revenue and Congress can do little to stop it given the existing laws. And if we go into a period of high inflation, SS benefit payouts will skyrocket due to the COLA.
All CD interest, outside of a retirement account, would be taxable when earned.
Lots of people own CD’s but do not make enough income to pay taxes at all, on their total income!
SS is out of money the minute we quit putting in more than we take out -—
Since there is NO “trust fund” at all!
No, but it will add tens of millions paying on their benefits, not only federally but at the state level, especially if you treat them like income.
All CD interest, outside of a retirement account, would be taxable when earned. Lots of people own CD’s but do not make enough income to pay taxes at all, on their total income!
You seem to want to keep this Ponzi scheme going, even if it means taxing us to death. The system is broken and is unsustainable. In 1950, we had 16 workers for every retiree, today it is 3.3, and by 2030 it will be two. You can't tax your way out of this abomination. The USG should get out of the pension scheme business as over 30 other countries have already done. Privatize most of it using personal accounts. Have a small defined benefit insurance program to cover disability and survivor benefits.
There is a trust fund. It is filled with interest bearing T-bills that are only redeemable by the USG. The problem is that the USG must come up with the money to redeem them out of the general fund. The SSTF really is just a manifestation of the full faith and credit of the USG to pay the SS benefits. And by 2036, the SSTF T-bills will be gone and SS will only be able to pay about 75% of the benefits.
1.) The “cap” on W-2 and Self Employment earnings that can be taxed, by Social Security, WILL BE REMOVED.
What on Earth would you expect from a Marxist President who PROMISED to “spread the wealth around”???
2.) The age for normal retirement, or full retirement benefits, will be increased. Yes, that has happened already, but it is going to happen again.
3.) The benefit itself will be subject to higher taxation levels, if not made 100% taxable. As stated earlier, just because the benefit would become fully taxable, does NOT mean that everyone will owe taxes on that benefit. The Standard Deductions are still there. The Exemptions are still there.
Also, keep in mind, that the formula, now, for taxation of SS benefits has “floors” of close to $25,000.00, which triggers a mathematical formula which dictates that 50% of your SS benefit, over $25,000 should be added to your taxable income.
Also, at about $34,000, 85% of your benefit, over $34,000 should be added to your taxable income, under current law.
(The above is for SINGLE individuals, the levels are about $32K and about $44K for married filing jointly)
Well, this does not tell the whole story.
The “taxation” formula ALREADY includes ALL forms of taxable income, pensions, IRA or retirement distributions, W-2 earnings, capital gains etc.
Also, the “taxation of SS benefits” formula also includes the municipal bond interest.
So, the current tax provisions are complicated, concerning the taxation of SS benefits, but let me put this to you another way:
THE RICH ALREADY PAY TAXES ON 85% OF THEIR BENEFITS!!
It would get rid of a complicated formula to simply make them pay taxes on 100% of the benefit.
Single taxpayer formula:
PENSION $26,000.00
IRA 8,000.00
SS 4,000.00 (half of 8,000, per formula)
Muni bond 2,000.00
In this case, 50% of the excess over $25K is taxable.
That would be $15k/2 or $7,500 even without the second table. We must adjust this figure, however, to show that only the amount between $25K and $34K is included in this figure. That would be $9K/2 or $4,500.
in this case, 85% of the excess over $34K is taxable.
That would be $6k X .85 = $5,100.
Over $25k but under $34K $4,500.00
Over $34K $6,000.00
The formula, in this case would indicate several things. First, up to $10,500 of SS can be “taxed”, from this calculation, but that is $2,500.00 more than was actually earned, in SS benefits. So the figure must be adjusted to the actual benefit amount. Then it must be adjusted again, since this person is allowed to have 15% of SS benefits “tax free” or not included in the formula.
So, this person, receiving a very SMALL SS benefit, would be taxed on roughly:
$8,000
85%
there is only a true “cap” on the 85% figure. Even if the formula dictates that 100% of SS is “taxable” the law currently states that only 85% of your benefit, as a maximum, can be added to your income for tax purposes.
I might have some minor errors in the calculations. My point is only that it is very easy for most everyone with any earnings at all to find themselves paying taxes on their SS benefits.
I firmly believe that the taxes on SS benefits will go up.
Talk to your insurance agent, lol.
Buy annuities. Deferred annuities avoid the tax.
Also, the “exclusion allowance” in an immediate annuity also helps avoid taxation.
Milton Friedman said it best:
“The only way that the Treasury can redeem its debt to the Social Security Administration is to borrow the money from the public, run a surplus in its other activities or have the Federal Reserve print the money -— the same alternatives that would be open to it to pay Social Security Benefits if there were no trust fund. But the accounting sleight-of-hand of a bogus trust fund is counted on to conceal this fact from a gullible public”
What I want is one thing.
What I predict is something else.
I have not advocated the “solutions” that I predict, I simply predict them.
IT WON'T BE REMOVED. Obama has never proposed removing the cap complete no would Congress ever approve it. It would be DOA.
2.) The age for normal retirement, or full retirement benefits, will be increased. Yes, that has happened already, but it is going to happen again.
I agree. It just won't be 70 like you stated.
3.) The benefit itself will be subject to higher taxation levels, if not made 100% taxable. As stated earlier, just because the benefit would become fully taxable, does NOT mean that everyone will owe taxes on that benefit. The Standard Deductions are still there. The Exemptions are still there.
Just is not going to happen. Obama and the Dems are not going to approve any increased taxation for those at the lower end of the economic spectrum. THERE WILL BE NO 100% TAXATION OF BENEFITS.
SS IS BROKEN AND UNSUSTAINABLE. MOREOVER, MEDICARE AND MEDICAID ARE ABOUT THREE TIMES WORSE OFF THAN SS. WE CAN'T TAX OUR WAY OUT OF THE PROBLEM.
Means testing of benefits is not politically do able.
More over, income is dynamic, and it would be an expense, to government, to grant and take away benefits each year, based on income.
(Oh, one exception: We DO means test Medicare, to some small extent, not everyone pays the same premiums. Expect Part B premiums to become even more expensive, for those who are not in poverty. But this is easier to do, since most "premiums" are already deducted from SS checks, which is an easy way to "means test" Medicare by reducing SS benefits) You are contradicting yourself and you don't even realize your contradictions.
YES, these programs are not sustainable -— and changes in the programs, themselves, is therefore REQUIRED!
The easiest way to make a very quick change is to say that “nobody earning less than $25,000 will be taxed on their Social Security” WITHOUT TELLING PEOPLE HOW THE FORMULA REALLY WORKS!
It is the complicated formula, itself, for taxing benefits, which pretty much guarantees that the taxable amount will go up, since nobody seems to understand current law, anyway. The tax system will be our government's method to "means test" Social Security. Count on it, it is going to happen.
We reduced benefits in 1983 and raised taxes. When you raise the retirement age, you reduce benefits. When you tax benefits, you reduce benefits.
Means testing of benefits is not politically do able.
The computation for SS benefits is already weighted to help those who are at the bottom of the economic ladder. Medicare B charges different premiums depending upon income. We are headed towards means testing of entitlements. The graduated income tax is another example of redistribution of income. Of course means testing is doable and probably more politically palatable given the growing number of people who don't pay income tax. Their vote counts as much as those who are wealthy.
But this is easier to do, since most "premiums" are already deducted from SS checks, which is an easy way to "means test" Medicare by reducing SS benefits
LOL. That makes no sense at all.
The easiest way to make a very quick change is to say that “nobody earning less than $25,000 will be taxed on their Social Security” WITHOUT TELLING PEOPLE HOW THE FORMULA REALLY WORKS!
The information is already available publicly. When does the individual become accountable and responsible for being informed? This is the same kind of liberal crap that blamed the mortgage lenders for people who took out subprime loans and couldn't make their mortgage payments.
Most people have no understanding of SS and how it works. Mindless people prattle on about lock boxes and bankrupt trust funds, which are not the reason why SS is going bankrupt. We get the government we deserve.
Not really. You could raise the payroll tax from 6.2% to 6.5% and very few people would complain, especially if it was explained that the last time the rate was raised was 1990. I am not in favor of any tax increases. I want the system privatized.
Nothing is going to happen this year or next [mid-terms] on SS. Obama is going to appoint some phony commission that will study the issue and make recommendations. This has been done many times being with Monyihan. But the status quo is not an option. Something has to be done by 2016. My guess is that Congress will kick the can down the road to make SS solvent a few more years rather than make substantive, long term reforms, just like they did in 1983.
IMO, your predictions are wrong.
Milton Friedman also said, “You cannot simultaneously have free immigration and a welfare state.” The entitlement programs are being impacted significantly by immigration, legal and illegal.
But this is easier to do, since most “premiums” are already deducted from SS checks, which is an easy way to “means test” Medicare by reducing SS benefits
LOL. That makes no sense at all.
You really are living in La La land if you think a higher payroll tax is a politically viable alternative.
It is MUCH easier, politically, to adjust a formula that nobody understands anyway (Including you?) as to the taxation of SS benefits.
So what if the payroll tax has not been raised for some time? If you think that taxes MUST be raised every few years, regardless of economic or political consequences, you are not in the real world -— and before long we will be at 80% total tax rates!
The REASON that I PREDICT that taxes on the SS benefit will be key to any political solution is obvious to most of us who study the issue very long:
Any “tax on benefits” will be partially “self correcting” -— reducing the strain on the system caused by COLA increases and reducing the strain on the system caused by those newly retired who begin to draw benefits.
You will be making the system itself a source of funds for the system.
Politically, the under 65 crowd will NOT be excited about paying more into the SS system when the Trumps and Gates of the world are still getting 15% of their benefits completely tax free.
“SOCIAL SECURITY IS BROKE”
“MEDICARE IS BROKE”
“Shouldn't we fix the programs we already have, before we stack even more debt on our kids and grand kids?”
“Shouldn't we make sure that Social Security and Medicare will be there, for our kids and grand kids, before we come up with another program that the government can not afford?”
“Shouldn't we make sure that China is willing to loan us the money for these new programs, before we spend all of this new money?”
Of course, when I said “we can not reduce benefits” -—
I clearly meant that we can not, politically, cut the benefit checks for those who are already retired.
As I indicated previously, Medicare Part B is means tested and the only entitlement program that links premiums to revenue. The prescription drug program, Part D, offers subsidies to people with low incomes as well.
Those are the facts.
The standard $96.00 Part B Premium is, roughly, 25% of the average Part B expense.
Part A is 100% taxpayer subsidized.
Part D is subsidized at about more than $30.00 per month, per person on Medicare Part D.
Your premiums, for Part D alone, are related to actual expenses -—
But even AFTER your contributions to all of your premiums, deductibles, co-pays or gap coverage -—
The taxpayers are paying, on average, $1,660.00 per month, for you and your wife, together!
Yes, you earned it.
However, such government expenditures should not be carried by the young families trying to make ends meet, who have trouble paying for their own health care expenses.
It would be far smarter for the politicians to use the tax code as a way to “means test” benefits for SS and for Medicare.
It is more poltically viable than taxing all SS benefits by removing the cap altogether. Small businesses, among others, will raise holy hell. FYI: AARP's solution: increasing the income cap to $150,000; increasing the payroll tax by 0.5 percent for both workers and employers, and changing the benefit formula to make the program more progressive. AARP has a huge membership base of 35 million, which makes it a big player in SS reform. I despise the group, which is forcing an enormous wealth transfer from the young to the old.
So what if the payroll tax has not been raised for some time? If you think that taxes MUST be raised every few years, regardless of economic or political consequences, you are not in the real world -— and before long we will be at 80% total tax rates!
Unlike you, I am against all tax increases to support this Ponzi scheme. Entitlements are consuming about half the federal budget and will rise to 71% by 2060 if nothing is done.
The REASON that I PREDICT that taxes on the SS benefit will be key to any political solution is obvious to most of us who study the issue very long:
I will compare my knowledge of the issue with yours anytime.
Any “tax on benefits” will be partially “self correcting” -— reducing the strain on the system caused by COLA increases and reducing the strain on the system caused by those newly retired who begin to draw benefits.
THE SYSTEM IS UNSUSTAINABLE THE WAY IT IS CURRENTLY STRUCTURED. IT IS A MATTER OF DEMOGRAPHICS. BY 2030, WE WILL HAVE JUST TWO WORKERS FOR EVERY RETIREE. AND BY 2030, ONE IN EVERY FIVE AMERICANS WILL BE 65 OR OLDER. YOU MUST EITHER INCREASE TAXES OR DECEREASE BENEFITS OR PROBABLY BOTH. FOR EXAMPLE, TAKING THE EARNINGS CAP OFF WILL JUST ADD A FEW YEARS TO THE SOLVENCY OF THE SYSTEM.
Politically, the under 65 crowd will NOT be excited about paying more into the SS system when the Trumps and Gates of the world are still getting 15% of their benefits completely tax free.
They should get excited about paying into a Ponzi scheme. Unfortuantely, the sheeple don't have a clue and will go along with what the elites tell them. The Dems love the entitlement programs because it makes more and more people dependent upon government.
You are mixing apples and oranges.
From what you just posted, you used “cap” and also “payroll” and then talk about taxation, but do not make clear that you are dealing with payroll taxes.
Lets try to be clear here.
I do think that the “cap” on the amount of earnings subject to SS taxation, for wage earners, will go up -— in fact I think that cap might be eliminated entirely!
As far as the taxation of benefits that are already being received, my math, above, though not all inclusive of all the details, clearly shows that it most middle class folks, on SS, are being taxed on 50% to 85% of their benefits NOW! The formula is simply awkward, and most people do not understand that they are being taxed on SS.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.