How does one pay interest to ones self?
"Although I don't support kicking the can down the road, SS is relatively easy to fix. It is really just a matter of arithmetic. You can use a combination of measures including extend the retirement age for full benefits, increase the payroll tax, change the COLA formula, raise the cap faster than currently is the case, etc. Medicare is much more difficult to fix."
This can only be done for a limited period of time before the system collapses. Look at it this way. Say there are 100 people on SS and 1000 people employed and paying taxes into the SS system from which the retired folks are being paid. Each year a few more people retire, reducing the amount going into the SS fund while the number of folks collecting these funds has risen. You can extend the retirement age all you want but as long as you want and in the beginning that will help but as long as the pool of workers is shrinking and the number of retirees is growing the system cannot remain viable.
The average lifespan is around 80 years while the retirement age is around 67 for full benefits. How high do you want it to go? How about we raise it to 82 so people pay into up until the day they die and nothing is ever paid out in the majority of cases?
Private plans, even if the money is ONLY allowed to be put into CD's will give a wage earner with an average wage of just $40,000 throughout his life a nest egg of $555,000 at age 65 (I assumed just 3% interest compounded 1 time annually). Right now I can put this money in a guaranteed lifetime annuity which would pass to my wife should I die, and get $2312.00 per month. Also if my wife worked (likely) she would get the same from her account, which means a total of $4600 per month. based on average of $40,000 annual earnings for 2 people this is far more then SS would ever pay AND the remaining money upon death of the recipient is passed on to the spouse or whomever is the designated beneficiary. There is absolutely NO reason NOT to privatise the SS system and do so immediately. The sole reason it is not being done is purely political.
The same way we borrow from ourselves.
This can only be done for a limited period of time before the system collapses. Look at it this way. Say there are 100 people on SS and 1000 people employed and paying taxes into the SS system from which the retired folks are being paid. Each year a few more people retire, reducing the amount going into the SS fund while the number of folks collecting these funds has risen. You can extend the retirement age all you want but as long as you want and in the beginning that will help but as long as the pool of workers is shrinking and the number of retirees is growing the system cannot remain viable.
In 1983 we faced a similar situation with SS. Reagan and O'Neill struck a Faustian bargain and we got the P.L. 98-21, (H.R. 1900), which was supposed to fix the system for the next 75 years. The bill raised taxes and reduced benefits, including raising the retirement age to 67 for full benefits. In 2016 we will be back in the same situation, i.e., SS permanently in the red.
The pool of workers won't be shrinking, but the ratio between workers and retirees will. It was 16 to 1 in 1950; it is 3.3 today; and by 2030 it will be two to one as the baby boomer cohort retires and our society continues to age. Your example is static and fails to include the measures I suggest that policymakers will use to kick the can down the road, i.e., raising the retirement age; increasing payroll taxes, changing the COLA and benefit formulas, increasing the cap more rapidly, etc. I don't advocate them. I favor personal accounts and privatization to get the government out of the pension business.
The average lifespan is around 80 years while the retirement age is around 67 for full benefits. How high do you want it to go? How about we raise it to 82 so people pay into up until the day they die and nothing is ever paid out in the majority of cases?
I assume that is a rhetorical question. There is no doubt in my mind that raising the retirement age for full benefits will be part of a package to make SS solvent for the next 75 years. I also think there will be some sort of means testing eventually. The Dems want to keep this system going at all costs and the Reps are scared to death to talk seriously about privatization. By 2030 one in five Americans will be 65 or older, twice what it is now. They will have a major impact on whatever solution is developed. I see another Reagan-O'Neill deal that will be bad for the country in the long term.
Private plans, even if the money is ONLY allowed to be put into CD's will give a wage earner with an average wage of just $40,000 throughout his life a nest egg of $555,000 at age 65 (I assumed just 3% interest compounded 1 time annually). Right now I can put this money in a guaranteed lifetime annuity which would pass to my wife should I die, and get $2312.00 per month. Also if my wife worked (likely) she would get the same from her account, which means a total of $4600 per month. based on average of $40,000 annual earnings for 2 people this is far more then SS would ever pay AND the remaining money upon death of the recipient is passed on to the spouse or whomever is the designated beneficiary. There is absolutely NO reason NOT to privatise the SS system and do so immediately. The sole reason it is not being done is purely political.
I agree. You are preaching to the choir. The problem is that the political will is lacking to privatize the system. It is most popular among young people, but they don't have the electoral clout. And the Dems will demagogue any attempt to eliminate the system. It creates a dependency on the governent. One third of current SS recipients depend upon SS as their sole source of income. SS constititutes more than half of the retirement income for two-thirds of the current recipients. Most Americans today are ill-prepared for retirement.
SS is a pay as you go system. For most of its existence, it has been a cash cow for the government, which uses the "surplus" as part of its revenue. When SS goes into the red, i.e., paying out more than it is taking in, then the government acts to put the system into the black so that they can again use the "surplus" revenue for other purposes.
I attended a week long seminar on SS a number of years ago sponsored by CATO. We had a star studded cast including a Nobel prize economist, five members of Congress including Paul Ryan, Jim DeMint, and Clay Shaw, David Walker of GAO, OMB, think tanks like the Concord Coalition etc., It was an interesting, informative discussion of the issues involved. I also had an opportunity to speak with Tom Saving, a long time public member of the SS and Medicare Board of Trustees. Tom mentioned that he believed that SS should be a line item in the federal budget and the SSTF abolished. This would force Congress to address the $13 trillion unfunded liability that SS represents. And it would eliminate the "surpluses" that are just another way to get tax revenue. 80% of Americans now pay more in payroll taxes than they do in income taxes.