Why Is There A 50 to 85 Percent Tax On Social Security? "Entitlement"? Don't Make Me Laugh!

Having just completed our 2018 taxes using Turbo-Tax, we had to check the numbers again to ensure we were not seeing things.  Sure enough, our refund had decreased by an astonishing 74 percent, from over $1800 to barely $465. Also, nearly all the decrease we had traced to an increased tax on our Social Security income - a portion now up to 85 PERCENT!  (Most at 50 percent).

 "Well, ya gotta be a rich senior if you're payin' that much, duh!"

Uh, NO!  According to the Weekend Colorado Springs Independent, the average income in the Springs is $58, 185.  For seniors it's slightly less: $55,000.   Our combined income - including with Social Security, immediate fixed annuities, pensions, is even less than that.  Let me just say if Obama had gone through with his original proposal to disallow taxes on Social Security for seniors with incomes of $50,000 per annum or less, we'd be ok. Okay?

What I'd like to know, really, is why : a) this atrocity exists at all, and b)  isn't more well known? We're hearing and seeing a lot in the financial press about low or no refunds this tax year  e.g.

Expecting a Big Tax Refund? Don't Be So Sure - WSJ

https://www.wsj.com/articles/expecting-a-big-tax-refund-dont-be-so-sure-11548594000

And how this is all to do with the GOP-Trump tax cuts and the fact people received them via incremental increases in their paychecks, but made no withholding adjustments.  A lot of the articles reference retirees, seniors - but nowhere is there any mention of  the impact of Social Security taxes, especially in conjunction with other (putatively sound)  financial decisions - such as purchasing annuities for increased financial security. 

What gives?

Well, I did find this chestnut of info from The Mottley Fool:

"Here are the rules regarding taxes on Social Security benefits, per the Social Security Administration (SSA):

• If you file a tax return as Single, Head of Household, or a Widow(er) and your combined income is:
• between $25,000 and $34,000, then you may be taxed on up to 50% of your benefits.
• greater than $34,000, then you may be taxed on up to 85% of your benefits
• If you file a tax return as Married Filing Jointly and your combined income is:between $32,000 and $44,000, then you may be taxed on up to 50% of your benefits.greater than $44,000, then you may be taxed on up to 85% of your benefits.

Again, this is an absolute atrocity.  For reference and perspective, according to FORBES:

"The 37% marginal tax rate is currently applied to the super-rich group"

FORBES defined this group as making $10,000,000 per year or more. Ten MILLION a freaking year with marginal tax rate 37% while wifey and myself  (and millions of other seniors) are being socked at 50 percent, or 85 percent!  What the hell is wrong with this picture!?  Even capital gains taxes, which generally affect the wealthy more than income taxes, are like the gift that keeps on giving for the rich. Especially as they can write off stock market losses.  (Long-term capital gains tax rates are 0%, 15% or 20% depending on one's taxable income and filing status. They are generally lower than short-term capital gains tax rates.)

Sure, according to the Mottley Fool rubric, one can avoid paying taxes on Social Security. Well, provided one lives at the level of a monk or hermit, or one of those "FIRE" people (who grow their own lentils and tomatoes and fix their own cars, etc.)  So yeah, if as a couple you can keep income down to the base level of $32,000 a year you're A-ok.  And for more perspective, that amount is just a tad below 200 % of the federal poverty level for a household of two ($32, 920) E..g

Federal Poverty Guidelines | Families USA

 Four grades over poverty level  means: no dining out or very little, no traveling to speak of,  no concerts or even movies (okay maybe two per year) and using a bare bones budget which would also include cutting out a big chunk of charity donations.  Can many oldsters live on  32 grand a year? I am sure they could, but I don't see why those who wish to have more ought to be so punitively taxed, as at 50 percent and 85 percent, respectively.  Certainly, no senior ought to be taxed at a higher marginal rate than the richest billionaires! To say this taxation is unfair is surely understatement, but it is also to recognize how it penalizes savers. Just like the Federal Reserve's low interest rates have - in fact, worse!   

Thus, we consciously decided to enhance our long term financial security by purchasing immediate fixed annuities rather than staying in the stock market. The benefit is that we obtained a stable monthly source of income, that was independent of the DOW's volatility and enabled us to account for (and spend)  income in a more stable environment.  However, that additional $1100 a month firmly pushed us into the 50 percent Social Security tax category (and also into the 85%, i.e. with pensions added).  Whichever way you cut it, we are being penalized  for making sound financial decisions.  

This is simply not right!  It also leads me to exhort the Democratic field of presidential candidates to inveigh on seniors' behalf (and once again we are not talking about rich seniors!).  This is to eliminate the taxes on Social Security,  at least for those getting up to $50,000/ year or less. Unless,  perhaps, one is also earning a job income separate from the S.S. benefit.  This is even more crucial now - as per a notice from a seniors' action group - that the Social Security Administration is to begin using the draconian Chain-Weighted CPI (instead of the CPI - E) to determine Social Security COLAs for all seniors from 2020.

It's bad enough we've had a parade of  administrations, from LBJ to the current vipers,  who've consecutively raided the Social Security Trust Fund to the tune of over $3 trillion.  Now they have to gouge out even more in ridiculously exorbitant taxes from millions of moderate income seniors. I mean think of it! A tax hit of 50-85 percent -  compared to the measly 37 %  income tax, or max 20 % capital gains tax,  on the "super rich"!

So there you go, the gov't giveth and the gov't taketh back.  And neither of us is even working any more! I suppose we ought to be thankful for small mercies, i.e. that we aren't getting much more than $44,000 in income! Meanwhile, it looks to me like the entitlement game is all on the gov't side.  (And now Dotard wants to also cut $845m from Medicare to add insult to injury.)

Readers can learn more here:

https://www.fool.com/retirement/2018/12/02/how-much-tax-will-i-owe-on-my-social-security-bene.aspx

Trump Is Right About Leaving Social Security And Medicare Alone

As we heard the "news" that the meeting yesterday between Paul Ryan and Donald Trump was "encouraging" (mainly from a Ryan sound bite clip) it is also true that the corporate media got much wrong when it came to Trump's stance on "entitlements". (A term the Neoliberal uses with abandon to make people believe that they are entitled to no social insurance at all.)

For example, on several talk shows - including MSNBC's  'Morning Joe'  the claim was made that Trump doesn't want to do anything about "fixing Social security" (transl. cutting it) because "he wants it to go bankrupt". However, this is a widely circulated canard and myth given Social Security can't go bankrupt because it has no creditors. So Trump is correct to at least leave it be, free from cuts, even if he doesn't increase it. The true fact here is that Social Security is OWED money from the federal gov't which borrowed from it, it doesn't OWE money to anyone.

As I've shown in earlier blogs:

http://brane-space.blogspot.com/2010/01/us-propaganda-industry-part-i.html

http://brane-space.blogspot.com/2010/01/us-propaganda-industry-part-ii.html

http://brane-space.blogspot.com/2010/01/us-propaganda-industry-part-iii.html

the corporate media continues its effort to brainwash Americans with drivel and propaganda - mainly  on the value of the "IOUs" (actually Treasury bonds) the government has issued as it has raided Social Security monies.

As my Swiss friend Rolf has noted, "if the United States government reneged on paying out those Trust Fund bonds, the Swiss would interpret this as meaning that 'full faith and credit' in any U.S. financial instruments could no longer be counted on" . In his words, from an e-mail in 2002 - after the former Bush Treasury Secretary (Paul O'Neill) averred the SS Trust Funds "contained no real money":

"If they let that happen to their own people, what's stopping them from doing it to foreign bond holders? Nothing! What kind of demonstration is that of full faith and credit? None! At least here in Switzerland we believe it a terrible omen and message to send the international bond community. If you renege on your own people, you can certainly do it to us. So why should we not cash in our bonds when the Social Security betrayal of American citizens arrives?"

What would follow would be a mass withdrawal from all securities: treasurys and monies invested, and by not only Switzerland but all EU nations, and most likely Japan and China too.

Splitting hairs about bond definitions is a fool's errand, because in the end, none of these foreign investors, finance-business types will buy it. At least those with whom I'm acquainted. To them, a bond is a bond is a bond. Whether an IOU from the U.S. gov't to its own people, or an IOU to a foreign investor, or interest on foreign debt..

The following data shows how much has been raided each year just up to 2011. The data from the same Trust Fund sources and GAO:

Year:  ................Amount raided

2011.................$67.0 billion

2010.................$87.0 billion

2009...............$137.0 billion

2008...............$180.2 billion

2007...............$186.0 billion

2006...............$185.5 billion

2005..............$173.5 billion

2004..............$151.1 billion

2003.............$155.6 billion

2002.............$159.0 billion

2001.............$163.0 billion

2000.............$151.8 billion
----------------------------

TOTAL:  $2.63 TRILLION

While it is absolutely true that Social Security can't go bankrupt, it is possible for it to become insolvent if those Trust Fund monies aren't repaid in a timely fashion and the Social Security Administration ends up spending more in the short term than it takes in. This is also why the payroll tax cuts we saw a few years ago are not a beneficiary's  friend because they weaken Social Security's fiscal position. 

As for Medicare, it may stun many people to know that it is by no means a "free" entitlement. First, people have paid into it over a life time at the rate of 6.2% in FICA taxes per paycheck. This is what appears on your W-2 tax form as "Medicare wages". (A smaller  amount deducted from your pay for Medicare Pt. A, which adds to its insolvency. All of it ought to go or 6.2% not 1.3 %)). Thus, it is most certainly not "welfare" and I'd even argue that it can't be called an "entitlement".

Second, Medicare is not free even when you begin receiving it! It is in fact, damned costly! Having been enrolled in a Medicare Part F Supplement plan (which covers what Medicare Part A, and the Plan B don't) I am now finding regular monthly premium increases as I approach my 70th birthday. While Part A, which covers basic care and hospital stays, it only accounts for  80% of these. You still have to find a way to pay the rest. Outpatient and similar services are covered under Plan B, and that is usually deducted from your Social security check - or, if you haven't begun S.S. yet, it comes out of your own income or bank account.

This is why most financial advice media tell seniors they need to have at least a quarter of a million stashed away to cover medical expenses that Medicare doesn't.

So Donald Trump is spot on correct to leave these programs alone!

Paul Ryan, on the other hand, had advocated cutting Social Security then using the monies for tax cuts for the wealthiest (and military buildups) which won't do one scintilla to fix the national debt. As for Medicare, his Ryan plan ("premium support plan".)  is to issue "vouchers" to seniors.  In the best cases this would come to perhaps $10,000 a year and the senior would have to cover from this: all premiums, i.e. for all parts of Medicare used (Part A - standard Medicare, Part B co-insurance, Part D (prescription drugs), and Part F plus any actual copays for medical services provided.

Currently for me the cost of all the premiums is roughly $400 a month for a total of $4800 year. Medical services from a Ryan plan would have also had to include paying for a colonoscopy myself ($1,800) and a soon to be done gall bladder surgery (maybe $5,400).  In other words, I'd have had to pay $2,000 more out of my pocket to get the medical services needed, and we aren't even including all the money shelled out for dental work and eyeglasses, exams.

Even a broken clock is right twice a day, and Donald Trump is at least correct in his stance on the two primary social insurance programs that benefit millions of Americans.

Gracious! Social Security Disability Trust Fund to Go Broke By Next Year? What Will People DO?

Leave it to deficit scolds like David Walker (former Comptroller of the U.S. - often mistakenly referred to as a "former Social Security official") to throw the fear of "the Lord" into millions of disabled folks by hinting their disability benefits will likely expire by next year.

That would leave an estimated 11 million people and their families (often with caregivers)  in the lurch. Walker, in a recent interview on CNBC, claims it's inevitable as there is no real "trust fund" money left to pay benefits, only "debt". Technically, that would mean by early next year all payments would either cease, OR the monthly benefits would have to be severely cut - perhaps by 50 percent or more.

Walker testily asserts the only way out would be for the gov't to take money from the Social Security retirement trust fund and apply it to the disability trust fund. But he more or less compares such a move to musical chairs. Besides, he avers, that doesn't help the problems in the retirement trust fund which is also laden with "debt" only, no real instruments of worth to pay beneficiaries. To which I call bollocks!

Make no mistake that the enemies of Social Security - and there are many, like David Walker - continually go back to the same old tool box to make attacks- hoping that some of the shit will stick, and alas, a lot of it has- including that the Trust Fund is full of useless IOUs. But this is why smart people need to do themselves a favor and inform themselves on the facts. No better book can be found right now than 'Social Security Works' by Nancy J. Altman and Eric R. Kingson, which in their Chapters 8, 10 totally demolishes this "IOU" nonsense, showing these bonds carry the same weight as those dispensed to other countries, including China. In other words, they carry "the full faith and credit of the U.S. government" and - if ever betrayed - will show this nation can't be trusted to pay its just debts. 

Does this former "comptroller" process any of that? No! Because it's easier to try to scare the Bejeezus out of vulnerable people and get their knees shaking. But because Walker is described (by CNBC) as a "former Social Security official" we are asked to take his warning seriously. But why should we when the bozo goes on to claim the general trust fund is approaching bankruptcy. Another wild canard since it is impossible for a program to go "bankrupt" if it has no creditors. On the other hand, Social Security is a creditor to the rest of the gov't - which has taken Social Security monies !

The following data shows how much has been raided each year through 2011, the data from the same Trust Fund sources and GAO:

Year:  ................Amount raided

2011.................$67.0 billion

2010.................$87.0 billion

2009...............$137.0 billion

2008...............$180.2 billion

2007...............$186.0 billion

2006...............$185.5 billion

2005..............$173.5 billion

2004..............$151.1 billion

2003.............$155.6 billion

2002.............$159.0 billion

2001.............$163.0 billion

2000.............$151.8 billion
----------------------------

TOTAL:  $2.63 TRILLION

This is what is now owed Social Security, and just as bonds comprise a form of instrumental debt owed, say to pay for a new school construction in a community  - so do the treasuries the gov't owes to Social Security. 

Yes, technically Walker is correct that the gov't will transfer S.S. bonds to the S.S. disability fund, but don't for a minute believe the trust fund for Social Security is a  sham or worthless. This is just what Social security's enemies want you to think  so we may conclude on that basis David Walker is an enemy of Social Security. He is certainly no friend with his snide and manipulative misinformation.



Further facts on Social Security:

1) Social Security's  Trust fund has historically taken in more money than it pays out in benefits. Currently it is at $2.76 trillion and continues to grow.

2) Without making any changes whatsoever, current projections show Social Security will be able to pay full benefits through 2033.

3) With just a minor tweak to the payroll tax cap - raising it to a mere $300,000, full benefits would be able to be paid through 2100.

4) The system could easily be rendered 100 percent secure, even with higher disability benefits paid out, if congress would cease raiding Social Security moneys for current expenses, including wars.

Neolib Hack Robert Samuelson: Determined To See Oldsters Eating Cat Food!

"What's happening is simple: Spending on the elderly is slowly overwhelming the rest of the federal government" - Robert Samuelson

Well, seems that columnist Robert Samuelson is at it again, beating the drums for elderly austerity and more money for the war machine. It seems this guy never gives up. He's thoroughly Neoliberal after all, having committed himself for years (even in a response email to me some 7 years ago) that no one ought to be receiving money just for breathing. (As most seniors do).

In his latest screed ('The Twisted Priorities of a Graying Nation') we're informed "government is being gutted" and "priorities are being skewed" by a reckless,  profligate over-spending on the elderly. Meanwhile, spending is behind on "vital activities" like defense and financial markets - he references their "regulation"- but if you've read any of his past articles it's really about their expansion, i.e. using further globalization such as the TPP. He and we know the GOOps will never allow more genuine financial regulation, especially as they already killed what was left of Dodd-Frank  in the 2014 end of year spending bill. (This was via a poison pill amendment that was stuck in the spending bill, enabling the banks to once again use FDIC monies to back up their risky trades - leaving us open to another 2008-style meltdown)

As usual he harps on the CBO projection that annual federal spending will grow by $2.6 trillion or 75 percent from 2104 to 2025 and "almost 90 percent of the increase comes from three sources: Social Security, health spending and interest on the federal debt."

Why he includes Social Security is mystifying for a number of reasons, including that Social Security. has never added to deficits given its payroll taxes essentially more than fund its outlays. Right now, in fact, the size of the S.S. Trust Fund is at $2.74 TRILLION which exceeds the $2.6 trillion Samuelson cites as federal spending for S.S., healthcare and interest on the debt! And we're not even including  as S.S. revenue  the taxes on Social Security income which none of these austerity nabobs factor into the mix. Namely, that up to one third of your Social Security benefits can be clawed back once you exceed a specific threshold. Why do none of the austerity fetishists mention that? Well, because it inveighs against their "entitlement" cutting agenda!

Meanwhile, a large part of health care spending is on prescription drugs, a little problem that could easily be remedied by allowing Medicare to do what the VA does, and bargain for the lowest drug prices with PhRMA.   As for the large federal interest on the debt, any moron could have informed Samuelson that the main reason for that is too little income, as in revenue - for all the spending that's being done - mainly on the military since 2001 (When ol' Gee Dumbya decided to cut taxes instead of increasing them when he commenced his "war on terror" - that's now sucked up 13 years and nearly $4 trillion)

Samuelson goes on to whine about "the degradation of government"  and points to the National Institutes of Health "losing nearly 25 percent of its purchasing power" in the last decade. Well, whose fault is that, Maestro? It's the fault of the Repukes who cut the NIH (as well as CDC) budgets which money they preferred to spend instead on military toys like the F-35!

In the same breath he also reports:

"The Internal Revenue Service blames budget cuts and reduced staffing for delays in mailing refunds and responding to taxpayer questions"

But again, this wasn't incepted by Social Security but by the Repukes cutting the IRS budgets as "payback" for what they believed to be singling out right wing groups for greater scrutiny, i.e. when claiming any tax exempt status under Internal Revenue code 501(c)(4). As a result, the 'Pukes cut an additional $346 million from the taxman's budget - virtually tying the IRS' hands to assist taxpayers or to expedite refunds. See e.g.

http://brane-space.blogspot.com/2015/01/if-youre-late-getting-tax-refund-thank.html


Samuelson then rightly wails about the "national parks being hit..since 2010 their funding has decreased by 12 percent in inflation-adjusted dollars and the backlog of deferred maintenance has topped $11 billion."

Again, this awful, deficient funding situation has nada to do with Social Security but the same House Republicans and their cruel austerity punks who also de-funded the SNAP food stamps program in 2013 and want to do the same again now. Don't blame the favorite scapegoat of Social Security but rather a bunch that has its own priorities askew and would ten times rather spend on defense and war toys (now taking up 6.3% of GDP) than domestic programs - including out infrastructure which is falling apart.

Instead of lying his ass off about the need to cut Social Security - making it a red herring for Neoliberal austerity groups like "Fix the Debt" he ought to applaud the program's expansion which - if effected- could ameliorate the ongoing low aggregate demand problem that's keeping our economy down. The solution then is not less senior capacity to spend, but MORE! The more senior spending on goods, services - even health care- the more money infused to create more jobs!

But never mind, Samuelson and his ilk won't be satisfied until the elderly are on a permanent cat food (or kibbles) diet!

See also:

http://brane-space.blogspot.com/2011/05/is-robert-samuelson-for-real.html

and:

http://www.smirkingchimp.com/thread/richard-eskow/60951/the-republicanclasswars-new-front-social-security-for-the-disabled

A Retirement Crisis By 2030? It Doesn't Have To Be

In the June 30th  TIME article: '2030 - The Year Retirement Ends' - we are asked to believe the money will have run out for Medicare already (by 2026) and will be three years from doing so for Social Security. "Generation X-ers will begin moving out of work into their Golden Years" - but only to find out they don't have enough money to live on, and will have to return to work - if even as janitors or Walmart greeters.  And as for those Boomers, well they will be getting the last of the good 'pickings' before the Trust Funds run dry.

All of which is nonsense. Indeed, the very thought the richest nation in the world could even allow a "retirement security crisis" to unfold such as TIME described, is absolute balderdash. The only reason it may come to that (since I am not discounting the greed and egos of our politicos) is the willingness to just sit and do nothing. Oh, and by the way, let's eliminate the 'blame the Boomers' bullshit right now. In that case politicos (actually Reagan and the congress) did do something by increasing the FICA taxes specifically to deal with the projected Boomer onslaught. So what happened? The additional money generated was most spent by the Bushies on their wars of choice and tax cuts! But that's not on the Boomers, it's on the Bushies!

The following data shows how much has been raided each year, the data from the Trust Fund administrators and GAO:

Year:  ................Amount raided

2011.................$67.0 billion

2010.................$87.0 billion

2009...............$137.0 billion

2008...............$180.2 billion

2007...............$186.0 billion

2006...............$185.5 billion

2005..............$173.5 billion

2004..............$151.1 billion

2003.............$155.6 billion

2002.............$159.0 billion

2001.............$163.0 billion

2000.............$151.8 billion
----------------------------

TOTAL:  $2.63 TRILLION

Now, any person with a single neuron for a brain would realize that it doesn't matter if you fill a one gallon bucket with a cup every day (equal to 6 oz.) if there are massive holes in the bottom that let out 12 oz. in the same time! 

Thus, the worker-to -beneficiary ratio is a red herring meant to deflect attention from the REAL problem which is the yearly raids on monies received from payroll taxes and intended to go to future beneficiaries! So long as these raids continue unabated, NO solution or "re-tooling" of the program will work, not raising payroll taxes, not making cuts, NOTHING!  The raiding has to stop first.
Despite this, TIME proffers little but the usual, standard "solutions", including:

1) The government should force workers to contribute more to their 401ks

2) The "entitlements" (Social Security and Medicare) need to be "dealt with" and the system changed.

3) People most affected need to work longer.

4) The 401k needs to be re-tooled

Let's take (2) first and why it is wrong. In nearly all cases "entitlement reform" implies cuts (e.g. "chained CPI") not increased benefits, yet is the latter which is needed. First, Social Security and Medicare are NOT "entitlements" because workers have paid into them over 40 years or more. In many cases, the 6.2% payroll tax is the biggest tax hitting most of the working poor. But they do it because down the road, after their backs are nearly broken from toil and their hands can barely grasp a buck from arthritis, they will have some residue of dignity in their old age. Some semblance of financial independence. (TIME also admits that half of all those over 65 today would be poor if Social Security was eliminated.)

Even then, there are no gifts or freebies! The seniors still have to cough up nearly $100 a month for Medicare premiums, which are deducted from their Social Security, making it even less - say if it's the only income they have. Next, we know that Medicare premiums have risen over 136% the past ten years while Social Security cost of living adjustments have increased barely 30% over the same time. In other words, seniors are losing out by having to shell out ever more which one can consider a de facto cut.

Another support aspect the media conveniently forgets, which is dragging us toward a putative crisis, is the $244 billion lost because the payroll taxes were intentionally discontinued for two years. Incredibly, this move was engineered by the Democrats (mostly Neoliberals, to be sure). At the time I wrote several blog posts excoriating them for deliberately undermining Social Security and hence the retirement security of millions, given Boomers were piling into S.S. (According to TIME, by 2012, 13% of all Boomers had signed up for Social Security).

Now let's look at (1). This is a useless solution because in most cases the inability to max out or even contribute to the 401k is because disposable income isn't enough to allow it. After groceries, utilities and mortgage (or rent) all grab their share, workers find there isn't enough left to put aside - given the meager wages too many Americans earn. Hence, having the government force workers to contribute would merely compound the existing outrage of a pathetic national minimum wage. Unless the government -congress increases the minimum wage to a living wage it has no business trying to force workers to save more on any front - whether for health care, or S.S.

As for getting people to work longer (including delaying social security payments until the person turns 70), that's all well and good if they have a comfy job where their aging bodies can withstand more years without excess wear and tear. A writer, for example, will do ok, so will a taste tester, a 'mystery shopper', a librarian, or a food critic.  A heavy laborer (e.g. coal miner), or even a custodian or trash collector, not so much. Hence, it is foolishness to expect any of the latter group to work to 70 or past it. Nor is there a need to ask them if the country infused its social insurance programs with the money needed - or at least stopped the incessant raids!

The last, re-tooling the 401k, is not much of a solution either - given the 401k is in large measure responsible for the whole retirement security problem. As the article notes (p.43):

"The fragility is  in large part due to the massive shifts in the American retirement system since 1980. That's when the 401k plan was invented by a benefits consultant working on a cash bonus scheme for bankers, who had the idea to take advantage of an obscure provision of the tax code - allowing for deferred compensation of individuals to be matched by their company. The result was the 401k, a savings account that lets employees contribute pretax income from their paychecks. But unlike the traditional pension it doesn't promise a specific regular payment on retirement."

The last sentence is most important and what too many Americans fail to grasp. That is, in order to get regular payments per month which would be like the original defined pension - THEY have to create it themselves! That is, they'd have to have saved enough in their 401ks to generate an amount of money to purchase an immediate fixed annuity which in turn will pay them a steady amount monthly.

But let's understand why the 401k was created in the first place: in order to relieve companies of having to shell out defined pensions indefinitely for their employees - thereby cutting into their bottom lines.  Thus, the 401k emerged as a deliberate device to shift risk from corporations to their workers. And hey, if the workers couldn't amass enough - tough luck!

Another factor: most Americans got into trouble with their 401ks by trying to use them as investment vehicles when they were always designed only for conservative savings. Because of this investment meme - pushed also by the companies - workers often lost money when each Bull market came crashing down (as it did in 2008 and as it will again) or when major corrections occurred.

The best expose of this was perhaps by William Wolman and Anne Colamosca in their book 'The Great 401k Hoax', (2002), which offered the best advice on recognizing real returns as opposed to the bubble variety. With their solid arguments they showed, for any given fiscal environment, what a realist investor could expect to make. As they noted, one needed to look carefully at the percentage profits returned by X, Y or Z company. If it is averaging 1.3% a year, then that is the real return you can expect.  The stock hawkers bejabber of 10% annualized returns, or more often, 7 percent, is purely designed to lure the unwary into stock investment.

The authors' arguments were further reinforced about 6 years later in a London Financial Times article (‘A Metaphorical Proposal’, Mar. 13, p. 11A, 2008) by Michael Skapinker. He cited remarks by Joseph Berardino – chief exec of Arthur Andersen- who noted how the existing reporting system “failed to communicate essential information about the real risks facing companies” to the small investor.

Given that most workers already had problems navigating the complex investment choices most companies offered in their 401k plans, it was easily understood how they were set up to lose money.  This suggests that the 401k either needs to be removed, or radically revamped.

If it is removed what will replace it? The best idea yet comes from legislation pushed through by Kevin de Leon of California which would guarantee a living wage to every Californian working in the private sector, on retirement. De Leon's approach, called the CSC or the California Secure Choice Retirement Savings Program, was signed into law in 2012 and combines the best aspects of defined benefit plans with what used to be the 401k.

Another option would be similar to the proposed MyRA of Obama, which would be expanded to let all middle class workers save in a fund administered by the U.S. Treasury. Such a fund would be 'safe' - meaning the risk factors that we now see dogging 401k plans would be eliminated.

Another solution to any future retirement crisis, is to simply raise the income subject to the payroll tax - say from the current $117,000 to $600,000.  This would extend Social security's lifetime to at least 2075 and with a minimum of pain. (Doing the same for the Medicare FICA taxes, as well as increasing their absolute amounts - say to 4.4 percent would do the same.). Keeping the incomes subject to payroll taxes so low is a fool's errand anyway, given that so many of the wealthiest still insist on taking their 'cut' because they "earned it". So why not increase the income level to reflect that? It is pure political chicanery that it hasn't been done up to now!

Lastly, TIME cites experts (e.g. Paul Taylor) who insist communal living of different generations is the answer. Grandma and Gramps can live with their kids, John and Jill (in their 40s) and their own kids- Rudy and Trudy. Well, maybe - maybe not. It depends whether all living under the same roof can get along harmoniously, at least most of the time. But one thing we mustn't do is "force communal living", i.e. by forcing seniors to delay receiving their Social Security until 70 - so they are compelled to live with Junior and wife (and kids) til then.  That draconian solution is so fraught with peril it doesn't need explanation.

What I don't subscribe to is Taylor's glib pronouncement that:

"There's a growing sense, for all the generations, that no one has been spared and everyone has to suffer to some extent".

But it doesn't have to be that way! If the country made the right choices and especially ceased to involve itself in stupid wars and wasteful nation building projects - there'd be enough money to cover the Millennials' student loans, Gramps' medical ills, and John and Jill's mortgage payment.  Also, as I showed above, the less painful solutions are there - but we have to get our cosseted rich folks to sign on to them - in their own interest.

Would these rich folks really want to live in a nation that's being torn apart by revolution similar to what we see in the Ukraine or Iraq? If we aren't prepared to cut back our yen for empire,  or elicit the one percent to contribute to the commonweal, we will see ever more suffering at home....and even....as author David Cay Johnston put it in a recent salon.com interview, civil distress so severe it might even incite a revolution  that will be "the bloodiest the world has ever seen".

(See: http://www.salon.com/2014/05/22/bloodiest_thing_the_world_has_seen_david_cay_johnston_on_inequalitys_looming_disaster/

Instead of bitching about "socialism" and "takers",  the richest need to see their welfare is as much at stake as those deluged by debt and job loss. As John F. Kennedy once put it:

"If a free society cannot help the many who are poor, it cannot save the few who are rich."

See also:
http://www.smirkingchimp.com/thread/richard-eskow/56585/a-secret-plan-to-close-social-securitys-offices-and-outsource-its-work

John Kass Better Hope He Never Gets Old

Chicago Trib hack John Kass has shot another round to try to launch an inter-generational war with his piece 'Geezer Zombies, Soon to be a Reality' (Denver Post, Oct. 6, p. 5D) While comparing Senate "geezers" (let's recall the Senate is the biggest, most elite millionaires' club in the country) John McCain and Dick Durbin to zombies and even extending the comparison to "the old woman crawling across the ceiling in the hokey horror film 'Legion') he then loses his way entirely by conflating the example with ordinary seniors.

According to Kass:

"The prospect of McCain and Durbin scurrying on the ceiling followed by Mitch McConnell and Harry Reid is horror indeed. So it's a guaranteed money-maker. And that hit will prompt others like 'You Better Kill Everyone Over 30 Before They Drink Your Blood'.

Really, Kass? Why everyone over 30? I can think of select subsets right now that - with stakes driven into their hearts - would make this nation a whole lot better, but you neatly skirt the issue. But you expose your crappy hand when you claim "the real conflict isn't partisan, but inter-generational" then add this claptrap:

"Establishment pols continue bickering over crumbs while refusing to do much about those fiscally ravenous and unsustainable entitlement programs like Medicare, Social Security and Obamacare"

And thereby he places himself in the same category of other Neoliberal rats trying to make us believe seniors can easily do without essential social insurance - thank you very much - while turning a blind eye to the military -industrial- spy complex which is gobbling up massive chunks of the treasury each year.  This Military malignancy has already drained us of over $4 trillion via 2 unpaid for occupations  and it may well be much more, when all the medical needs of the returned Iraq and Afghanistan vets are tended to, as well as their future disability benefits finally paid for.

But does Kass even try to impute the defense -spy state nuts? Oh no, that's off base. But let's take aim instead at ordinary seniors who can end up destitute with one fall, or god forbid, Alzheimers. Instead, Kass piles it on even more, scribbling:

"Unfortunately, the unsustainable federal spending ...will drain today's teenagers and 20-somethings of vital nutrients like cash and jobs. Among the young unemployment rages, job prospects are poor and many figure they will never own a home. Young people know this, or at least feel it as Washington continues to print money."

While Kass appears obsessed with the Federal Reserve's quantitative easing policy ("printing money") he takes his eyes off the real ''ball': vast defense contracts (for toys like the F-35 at $600m each, to build 2,400 of them) and a surveillance state whose budget has now grown to a half trillion a year, including to pay thousands of private contractors to compile meta-data on Americans, and with black budgets.

How can any columnist be so patently blind? Perhaps he willingly does so and wants an inter-generational war on top of the new Civil War brewing now between Southern Tea Party types and northern style liberal governance where all get a piece of the pie.  To confirm this he goes on to spew nonsense about the "baby boomer undead and the teenage zombie hunters" then - to make sure we know he's as crazy as shit house rat, he writes:

"Less than 50 years ago, nearly 30 percent of America's elderly lived below the poverty line. No more. They've switched places with the young and the young don't get it yet. But they will. And if that's not a recipe for conflict, I don't know what is."

So wait, Kass,  you really want to return us to the era of thirty percent elderly poverty?

In fact, the poverty rates for those over 65 and the younger set (21- 34) are nearly exactly the same: 15.6% vs. 15.4% (according to 2012 Census stats) so it's not as if they've "switched places".   Kass' narrative is that greedy seniors are robbing the young blind, but the truth is that the military-industrial spy state is robbing both blind. Rather than put the tail on the military-surveillance expansion it's much easier not to rock the boat of the Neolib paymasters - and blame oldsters instead. Never mind, whatever the predicament of the Millennials now they are much more resilient than the elderly. They have much more TIME and opportunity to bounce back from a setback - economic or physical (especially if they have the sense to sign up for the ACA) than the elderly do. They aren't looking at a prolonged death from Alzheimers, after all, or being confined to a nursing home after a fall. (Or paying more than $4,000 a month to stay under nursing home care!)

Given this, we need to be aware of how the entrenched Neoliberal political Elite continues to make up lies as it attempts to destroy our social insurance infrastructure. If you want to see the real swine behind it go to www.petersonPyramid.org )

The next time Kass or any other overpaid, self-important hack thinks of playing the "generational war" card they need to be reminded of the following:

Seven million children currently live with grandparents - who depend on Social Security to care for them

- 8.5 million other children (including college kids that find themselves jobless and live at home) who live with elder parents that depend on Social Security to make do.

- The tens of millions of 50-plus Americans who, through their tax dollars and Social Security monies, pensions, provide voluntary contributions to support public schools, child health programs, grandparent guardianship programs as well as other charities that care for homeless kids (e.g. Covenant House).

 Concocting war between the generations, pitting young against old, therefore serves no useful or moral purpose. It is merely a cheap, malicious tactic to take attention from the REAL problem: the malignant growth of the Military Industrial Complex to the detriment of all of us outside it!

Meanwhile, the best strategy for right thinking Americans is to fight on for a single payer, Medicare- for- all system, which ultimately would save us at least a trillion over ten years, and eliminate the 120 Americans per day who perish for lack of health insurance. 'Socialized medicine' ? Not any more than the healthcare provided by the VA! 

Clearing the Air On Social Security "Insolvency"

The Wall Street Journal front page story 'Stress Rises on Social Security'  is sure to bring out Tea Party nuts and other assorted deficit hawks and screaming meemies - but all for the wrong reasons. The article reports that the program will now become "insolvent" by 2033 as opposed to 2037, according to the Trustees Report. This Report also states that the funds that pay disability will be exhausted by 2016.  It also claims that the program's worsening outlook "comes from a combination of higher cost of living adjustments - pushing benefits up- and lagging wage growth holding down revenue". Of course, these are straw man arguments as I will show.

Now, let's try and clear the air here and separate the noise from signal. Included among the "noise" I list the following:

- the claim that Social Security is an "entitlement"

- the claim that there aren't "enough workers" to support current benefit recipients.
 
- The claim that Social Security and Medicare are adding to the deficits.

Let's knock these off in turn. First, Social Security and Medicare are NOT "entitlements" because workers have paid into them over 40 years or more. In many case, the 6.2% payroll taxes are the biggest tax hit most of the working poor suffer. But they do it because down the road, after their backs are nearly broken from toil and their hands can barely grasp a buck from arthritis, they will have some residue of dignity in their old age. Some semblance of financial independence.

Even then, there are no gifts or freebies! The seniors still have to cough up nearly $100 a month for Medicare premiums, which are deducted from their Social Security, making it even less - say if it's the only income they have. Next, we know that Medicare premiums have risen over 136% the past ten years while Social Security cost of living adjustments have increased barely 30% over the same time. In other words, seniors are losing out by having to shell out ever more. The WSJ claim of "higher cost of living benefits" therefore doesn't hold water, since they aren't high enough to assure avoidance of de facto Social Security CUTS! (In a separate Denver Post story it's claimed the Trustees attribute part of the shortfall to "energy prices suppressing workers' wages hence payroll taxes" - but that's also a dodge since it take no account of the $244 billion lost because the payroll taxes were intentionally discontinued for two years. Let's at least be honest if we can't be completely accurate! This also dispenses with the WSJ's canard of "lagging wage growth", again, yielding less payroll tax revenue - while overlooking congress' cessation of payroll taxes!)

Let's also bear in mind Medicare only pays 80% of medical bills, and the senior has to pay the rest - which can be significant if it's a serious operation like hip replacement, or an ongoing chronic illness. In addition, Medicare pays nothing for dental work or treatments or eyeglasses. And since dental health often under girds overall physical health then this can be a mighty bummer.

Next, there is the canard that Social Security is losing money because there aren't enough workers to pay in for payroll taxes. While this is a small element, it is maybe 5% of the whole story, the other 95% is the THIEVERY of  congress in raiding Social Security monies. The following data shows how much has been raided each year, the data from the same Trust Fund sources and GAO:

Year:  ................Amount raided

2011.................$67.0 billion

2010.................$87.0 billion

2009...............$137.0 billion

2008...............$180.2 billion

2007...............$186.0 billion

2006...............$185.5 billion

2005..............$173.5 billion

2004..............$151.1 billion

2003.............$155.6 billion

2002.............$159.0 billion

2001.............$163.0 billion

2000.............$151.8 billion
----------------------------

TOTAL:  $2.63 TRILLION

Now, any person with a single neuron for a brain would realize that it doesn't matter if you fill a one gallon bucket with a cup every day (equal to 6 oz.) if there are massive holes in the bottom that let out 12 oz. in the same time! 

Thus, the worker-to -beneficiary ratio is a red herring meant to deflect attention from the REAL problem which is the yearly raids on monies received from payroll taxes and intended to go to future beneficiaries! So long as these raids continue unabated, NO solution or "re-tooling" of the program will work, not raising payroll taxes, not making cuts, NOTHING!  The raiding has to stop first.

Currently a bill is before the Senate, designated S. 123 which would have the desired effect by protecting Trust Fund money instead of allowing it to be used for military occupations, military toys, tax cuts or other useless PORK. This bill will require all payroll allocations to go explicitly to pay benefits of both retirees and the disabled. It would, had it been enacted in 2000, have made available that $2.63 stolen trillions and we'd not now be hearing about "insolvency". Also, ONE less year's thievery - say from 2009- would easily have covered the $128.9 b allocated for disability payments last year (WSJ, p. A4), with change left over!

Last, let's dispense with the bull that Social Security is adding to the deficits. NO, it is not, because those deficits are tabulating PUBLIC debt not the private debt of the Social security shortfall - which is OWED TO BENEFICIARIES and no one else! No outside bond trader, bond pirate or other form of parasite such as now terrorizing the Eurozone nations.

The truth is that a holder of private debt, like a household, has a very different relationship to debt than a government like the United States, which issues its own currency. For families and businesses, paying back debt means they have to sacrifice current consumption (spending). But the government doesn’t have this same constraint. You’ll rarely hear this stated, but the government’s ability to spend now is actually independent of how much debt it holds and what it spent yesterday.

To put it another way: Technically one can remove the $2.63 trillion the government owes the Social security Trust Fund (because of repeated raids or "borrowings") from the total National Deficit because Social Security has no EXTERNAL  "collectors". It is the gov't that OWES Social security not the other way around. Thus, the alleged $15 trillion deficit is actually more like $12.3 trillion.

Contrary to Tea Party lore and the banter of the austerity hawks, it isn't Social Security that has created the massive deficits as money owed to outside agents, such as the Chinese, but rather the unpaid for Bush tax cuts, and the endless stupid military occupations - both of which have now contributed nearly $6 trillion.

Can Social Security be rendered whole and avoid shortfalls? Yes, but first the drain must be halted. S. 123 must therefore first be passed! After that, the sanest solution to preserve the integrity of the program is simply to increase payroll tax wage thresholds to the $300,000/yr. level. That simple increase will assure the program's solvency until at least 2067. Of course, the tax phobic repukes refuse any increase of revenue via taxes, even payroll taxes on the top 5%. But if they do, then neither Obama or congress must yield to any "cuts".

When more people finally pull their heads from where the sun doesn't shine they might be able to see these issues clearly, as opposed to reporting to hysteria.