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Gov. Perry propose flat tax.

Oct 25, 2011#1

Chibibar

http://news.yahoo.com/rick-perrys-economic-fix-20-flat-tax-cap-022547777.html

The plan starts with giving Americans a choice between a new, flat tax rate of 20 percent or their current income tax rate,” Perry writes. “The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.”

hmm. This is a different flat tax that we forumite have talk about. Is he proposing income flat tax?

Oct 25, 2011#2

Dave

It still gives the rich a hefty cut in taxes. When asked, Perry responded, "I don't care about that."

http://thinkprogress.org/economy/2011/10/25/352379/perry-tax-breaks-rich-dont-care/

Flat. Taxes. Don't. Work.

Say it with me, you fiscally ignorant dipshits.

Oct 25, 2011#3

strawman

Dave said:
Flat. Taxes. Don't. Work.

Say it with me, you fiscally ignorant dipshits.

Why don't they work?

I can see a lot of problems with his particular plan, but why are you claiming that flat taxes don't work? Assuming, of course, that there are no taxes below a certain income (ie, low and no income households are not taxed) then what is wrong with a flat tax for those above the poverty level?

Oct 25, 2011#4

Dave

Because even though the taxes are a proportion of income, because of costs of living, the flat tax punishes the lesser incomes.

Let me find some studies to back me up.
Added at: 12:26
Read through this: It's interesting.

http://www.usnews.com/opinion/articles/2010/05/03/debating-the-pros-and-cons-of-a-flat-tax

Oct 25, 2011#5

Chibibar

Dave said:
Because even though the taxes are a proportion of income, because of costs of living, the flat tax punishes the lesser incomes.

Let me find some studies to back me up.

But what about the post about prebate and stuff, would that work?

but all I see is empty promises, but it is interesting to see a proposal for it. I mean if you cut ALL taxes out and slap on Federal Flat tax, +state flat tax, and +city flat tax, add prebate for income below X dollars and taxes only tax upon spending.

Too simple to work?

Oct 25, 2011#6

sixpackshaker

A flat tax with exemptions will not work. I always considered the goal of a flat tax was to present a clear tax-code, with a low enough tax rate that would make exemptions unnecessary. Low enough to bring tax cheats into the fold too. Then by cutting out bureaucracy and bringing in nearly the same funds as before... save enough money to offset the percentage loss in the tax code.

Oct 25, 2011#7

Dave

Perry's plan would be a flat tax with loopholes for his rich buddies. Way to go! :thumbsup:

Oct 25, 2011#8

Tress

Oh hey, a Republican proposes a tax plan that vastly favors the wealthy. What a shock.

Oct 25, 2011#9

strawman

Lots of democrats support tax plans that don't tax investment income. Beyond that, how is a flat tax "vastly favoring" the wealthy? Again, assuming that there are no taxes for those below a certain income level (or rebates, or whatever mechanism you want).

Oct 25, 2011#10

Chibibar

stienman said:
Lots of democrats support tax plans that don't tax investment income. Beyond that, how is a flat tax "vastly favoring" the wealthy? Again, assuming that there are no taxes for those below a certain income level (or rebates, or whatever mechanism you want).

Well, if you are going income level (instead of sale flat tax to cover all that is what I was proposing) what about Steve Jobs' income? he get paid $1 a year officially. So his income is $1 per year. That is well below the income level.

That is why I personally think of putting all into sales tax. Regardless how much money you MAKE, you have to pay taxes on stuff you buy (now granted tax exempt for business and religious places are iffy, but I say no exception. It is like with NuSkin, when you order products from the HQ, you pay the RETAIL value in Tax to them so you can recoup it when you actually sell the product and the business file the taxes directly to the government.

Oct 25, 2011#11

strawman

Chibibar said:
Well, if you are going income level (instead of sale flat tax to cover all that is what I was proposing) what about Steve Jobs' income? he get paid $1 a year officially. So his income is $1 per year. That is well below the income level.

That has nothing to do with a flat tax, though, and everything to do with not taxing investment income.

Personally, I think income is income, investment or otherwise, so it should all be taxed.

Those that back no or low investment taxes claim that they are spurring job growth by encouraging people with a ton of money to keep it in companies, and not in assets/banks/mattress/etc. I'm certain that taxing investment income would discourage investing - but I'm not convinced that not taxing it is actually creating jobs either.

I'd put a tax on investment income that wasn't re-invested. If you take a dividend and use it to invest in another company, then it's tax free. Once you pull it out to spend it on something else, or store it in a low-risk investment (CD, savings, gold, etc) then you pay your normal tax rate on it.

I wouldn't have a problem with a sales tax except that 1) it makes running a business more complex (sending taxes to state and fed, tracking two different tax rates), 2) our economy runs on consumerism, which would suffer a blow, and 3) as others have pointed out it unfairly taxes the poor - even prebates wouldn't be sufficient. Note that today there are many people who could and should be on food stamps and other assistance programs but can't or won't go to the effort (which turns out to be non-trivial) of doing the paperwork for them. The consumerism angle is interesting - right now people are ok with a 20-30% income tax, but the instant they find that their candy bars and cars cost 20-30% more for a federal sales tax, they're going to stop spending.

Further, it doesn't solve the problem of investment income. The rich would again see very, very low taxes, while the poor would be taxed on every cent because they have to use 100% of their income on purchases, which would be heavily taxed, while the rich only have to spend 1-5% of their income on purchases.

Oct 25, 2011#12

GasBandit

Somehow I don't think this will help take Perry's campaign out of its tailspin. You guys got lucky - take it from a Texan, a Perry presidency would be a nightmare. If only we had some way of getting him out of the governor's office, too, without having to vote for the only thing worse: a Texas Democrat.

Oct 25, 2011#13

Chibibar

GasBandit said:
Somehow I don't think this will help take Perry's campaign out of its tailspin. You guys got lucky - take it from a Texan, a Perry presidency would be a nightmare. If only we had some way of getting him out of the governor's office, too, without having to vote for the only thing worse: a Texas Democrat.

I still don't support the guy but was interesting that he propose it, but I got confuse with the whole weird convoulted proposal.

Oct 25, 2011#14

GasBandit

Chibibar said:
I still don't support the guy but was interesting that he propose it, but I got confuse with the whole weird convoulted proposal.

If you ask me, the problem is the flat tax is still a tax on production. Replacing it with a consumption tax makes more sense to me.

But that's just another one of my wacky pipe dreams.

On another note... I wonder why capital gains tax is flat? Surely if the problem is the warren buffets of the world only paying 15% taxes because their income is really just capital gains... wouldn't it make sense to make a progressive slope to capital gains taxes? Hypothetically of course.

Oct 25, 2011#15

AshburnerX

Aren't Texas Democrats like Unicorns? You know... a fabled beast the exists in legend, but has never seen the light of day? Also, there are tons of fakes, but they are just Texas Republicans with horns glued on their head?

Oct 25, 2011#16

GasBandit

AshburnerX said:
Aren't Texas Democrats like Unicorns? You know... a fabled beast the exists in legend, but has never seen the light of day? Also, there are tons of fakes, but they are just Texas Republicans with horns glued on their head?

They are real, and they look like this.

Oct 25, 2011#17

AshburnerX

So they are goblins, not unicorns?

Oct 25, 2011#18

GasBandit

AshburnerX said:
So they are goblins, not unicorns?

With bubblegum pink neckties.

Oct 25, 2011#19

Krisken

GasBandit said:
If you ask me, the problem is the flat tax is still a tax on production. Replacing it with a consumption tax makes more sense to me.

But that's just another one of my wacky pipe dreams.

And we're back to killing the poor, who spend 100% of their income just to stay alive and the rich hoarding and not spending again.

Oct 26, 2011#20

GasBandit

Krisken said:
And we're back to killing the poor, who spend 100% of their income just to stay alive and the rich hoarding and not spending again.

Prebate. And I can show you way more "rich" people who spend with no taxable income than you can show me ones with income that don't spend anything.

Oct 26, 2011#21

Krisken

Yeah, you said prebate. I'm kinda done here.

Oct 26, 2011#22

Chibibar

Krisken said:
Yeah, you said prebate. I'm kinda done here.

what is wrong with prebate?

Oct 26, 2011#23

Krisken

1. The prebate is supposedly going to help eliminate the IRS, or rather the need for so many employees at the IRS. This is a crock. Who makes sure people are claiming the proper number of people in a household?

2. It prebates the amount of tax a family will pay on certain spending allowances determined by the government, and is set nation wide. Isn't this what we're trying to avoid? More complications?

3. How long before one group of people complain that the prebate is set too high and another that the prebate is set too low? Shit, we can't even get our congress to tax millionaires properly.

4. People who complain already about Social Security, a check being cut from the government, would be all over this. How can a group of people who believe that Social Security should be done away with turn around and advocate for a program which does the same thing?

These are just a couple problems I have with it. There are more, believe me. The only reason to advocate a prebate is to remove it at a later date.

Oct 26, 2011#24

GasBandit

1) Don't we already have most of that data from the census?

2) Again, don't we already have that information? How does this complicate, rather than simplify?

3) How can there be an argument when the math is shown?

4) The issue with social security isn't the government cutting a check, the issue with social security is that it is a ponzi scheme, where payouts come only so long as more people are paying in than drawing out, which is becoming less and less the case.

Oct 26, 2011#25

Krisken

Again, done. Any moron that calls Social Security a ponzi scheme should have his head examined.

Oct 26, 2011#26

Chibibar

I see. You do have many points.

In an ideal perfect world everyone should have access to basic home/apartment and basic food. If you work, then you can have access to better home, stuff, food etc etc. Yea that is socialistic type society that will never work in the real world.

Right now, there are so many taxes and loopholes that average person can't understand, but I do see that we are paying a lot in taxes
Paycheck = initial tax and services like Medicare, SS
Owning a home = yearly property tax. Paid with the money you get with paycheck
buying anything = sales tax of various degree, Hotel tax, airplane/security tax, sin tax and what not.

Sadly, being a homeowner I get tax 3 times with my measly check

(property tax, buying food, and initial paycheck taxes)
and I hope that I file my taxes correctly or have income tax. Some states (not Texas) have state income tax.

That is just the basic and not including all the other taxes people don't know about.

I personally wouldn't mind paying a single tax like sales tax. Sales tax already have to be divided with different group. It exist in the system like in Dallas there is Dart Tax (1%) local sales tax and state sales tax. Just add federal level and get rid of all other taxes. (like no more property tax, income tax)

I buy something (which will happen) I pay a sales tax. Now of course from my understanding it would be like 20-25% I think that is better than trying to find loopholes like the rich to avoid all kinds of taxes like 1$ yearly income or investment/off shore accounts.

When a person spend 1000$ a night a room, BAM there is the tax (sales tax)
buying a cup of coffee

now of course this means that no one get tax exemption either so all entities have to pay sales tax.

I haven't figure out on Corporation or education sale tax exemption yet.
Added at: 16:36

Krisken said:
Again, done. Any moron that calls Social Security a ponzi scheme should have his head examined.

Isn't the bases of a Ponzi scheme is that the current "members/payment" pays toward the previous generation?

Now from what I heard the issue is not the "ponzi" but the law that allow government to dip/access SS money for other projects which now has become a "ponzi like schemes" The baby boomers put a ton of money into it, but most of those money were paid to the previous generation (which is not as big) but the government dip into it (from what I understand) and now our generation (gen X and Y) are trying to help cover the Baby boomer generations cause the money is gonna run out.

Oct 26, 2011#27

Krisken

Chibibar said:
Now from what I heard the issue is not the "ponzi" but the law that allow government to dip/access SS money for other projects which now has become a "ponzi like schemes" The baby boomers put a ton of money into it, but most of those money were paid to the previous generation (which is not as big) but the government dip into it (from what I understand) and now our generation (gen X and Y) are trying to help cover the Baby boomer generations cause the money is gonna run out.

That I have a problem with as well. That fund should never have been touched by the government.

Oct 26, 2011#28

GasBandit

Well, yes, if the money was kept in a separate "social security, YOU CANNOT SPEND THIS ON OTHER THINGS" fund, then it would... stop being a ponzi scheme.

Oct 26, 2011#29

AshburnerX

GasBandit said:
Well, yes, if the money was kept in a separate "social security, YOU CANNOT SPEND THIS ON OTHER THINGS" fund, then it would... stop being a ponzi scheme.

Then legislate that, instead of trying to get rid of it entirely.

Oct 26, 2011#30

Covar

Krisken said:
Again, done. Any moron that calls Social Security a ponzi scheme should have his head examined.

You're right. It's really more of a pyramid scheme, seeing that it's not quite linear.

Oct 26, 2011#31

Norris

GasBandit said:
Well, yes, if the money was kept in a separate "social security, YOU CANNOT SPEND THIS ON OTHER THINGS" fund, then it would... stop being a ponzi scheme.

So amputate the toe rather than get the ingrown nail taken care of is what you're saying, basically?

"The problem with my toe is that the nail is ingrown! Clearly, it need to be removed."
"Why not just, y'know, get the nail fixed."
"Then it would cease to be an ingrown nail and I'd have no excuse to amputate it. Fuck that toe."

Oct 27, 2011#32

GasBandit

People putting words in my mouth again. Krisken said "people" who want to eliminate social security. I've never argued for *eliminating* it, I have argued for privatizing it. Once again you guys are straw-manning me.

Oct 27, 2011#33

sixpackshaker

GasBandit said:
Well, yes, if the money was kept in a separate "social security, YOU CANNOT SPEND THIS ON OTHER THINGS" fund, then it would... stop being a ponzi scheme.

But just enough Floridians voted against the guy that was going to put the SS money in "a locked box."

Oct 27, 2011#34

Chibibar

GasBandit said:
People putting words in my mouth again. Krisken said "people" who want to eliminate social security. I've never argued for *eliminating* it, I have argued for privatizing it. Once again you guys are straw-manning me.

I think to some "privatize" would pretty much kill it

It was all good until the government can dip into it and invest to stuff they shouldn't be doing and lose a ton of money (again I read this somewhere but too lazy to reference it all) I mean if you think about it, where did all the money the Baby boomers (the largest population in terms of SS income earners) gone to? the previous generation is not as big that is why they are calling "baby boomers"

Oct 27, 2011#35

Necronic

GasBandit said:
1) Don't we already have most of that data from the census?

The census is not an adequate way to do tax information. It is unreliable on the individual level and is only done once every 4 years or so. Moreover, while people may (for the most part) be telling the truth right now, if you were to do this it would incentivize cheating which would screw up both the tax info, as well as the basic census info that is needed.

It would be like trying to build a car with a Chilton's manual.

Edit: Also Perry's flat tax proposal is ridiculous (in terms of income tax at least.) How much money would an individual have to earn, with the current marginal tax brackets, before a flat tax was justifiable?

I don't know the number for sure, but based on my own income and some really rough (as in I am just guessing) extrapolation, the 20% flat tax would only be preferable when you are in the 100K+ income range. Meaning that all it really accomplishes is a complication of the tax code (since you can still do it the traditional way) and a tax cut for the rich.

Someone should have spent less time on the farm and more time studying his numbers. I'm referring to Perry here......not Gas......

Oct 27, 2011#36

GasBandit

sixpackshaker said:
But just enough Floridians voted against the guy that was going to put the SS money in "a locked box."

I thought that was still in debate? Heh... But if you believed him in any case, I've got a nice beachfront condo in arizona to sell you.

Chibibar said:
I think to some "privatize" would pretty much kill it

Somebody ought to tell Galveston, TX that - they privatized their social security before Congress changed the law to prevent anybody else from doing so, and it's outperformed the nationalized version.

Oct 27, 2011#37

Chibibar

GasBandit said:
Somebody ought to tell Galveston, TX that - they privatized their social security before Congress changed the law to prevent anybody else from doing so, and it's outperformed the nationalized version.

Heh. It was meant to reply of people putting words in your mouth.

You said privatize. they hear "kill it"

Oct 27, 2011#38

Krisken

Chibibar said:
I think to some "privatize" would pretty much kill it

Yes, exactly how I feel on it. Once it starts going to Wall Street, you can start kissing that all goodbye. 401K's used to be pensions.

Oct 27, 2011#39

GasBandit

Krisken said:
Yes, exactly how I feel on it. Once it starts going to Wall Street, you can start kissing that all goodbye. 401K's used to be pensions.

Funny how that hasn't borne out in the example cases of it being privatized, but it HAS been EXACTLY what has happened with the nationalized version.

Oct 27, 2011#40

Krisken

GasBandit said:
Funny how that hasn't borne out in the example cases of it being privatized, but it HAS been EXACTLY what has happened with the nationalized version.

Can you explain what this means? I'm not sure I follow.

Oct 27, 2011#41

GasBandit

Krisken said:
Can you explain what this means? I'm not sure I follow.

The experiments in "privatized" social security have not resulted in disappearing money.
The "de riguer" operation of nationalized social security has.

Oct 27, 2011#42

strawman

Krisken said:
Can you explain what this means? I'm not sure I follow.

The funds in national social security have been raped and pillaged. The private social security example provided has not.

Your earlier post claimed that privatized versions would go down the pooper.

Yet, currently, the two examples that exist show the opposite - the private version is sane and stable, while the national version isn't.

Therefore your claim, "Yes, exactly how I feel on it. Once it starts going to Wall Street, you can start kissing that all goodbye." might be in error.

Oct 27, 2011#43

Krisken

Of course not. They never do in the "experiments". As soon as people start investing their privatized social security (which is stupid, since it's no longer social security at this point) in stocks, it's no longer secure. That's the whole point of the program.

It's not a get rich idea, it's a preparation for the future. The people in power who push for privatization are doing so at the behest of Wall Street because they'd love the influx of money, just as they did when employers stopped doing pensions and started doing 401K's. Tell me, how are those 401k's doing lately?
Added at: 16:52

stienman said:
The funds in national social security have been raped and pillaged. The private social security example provided has not.

Your earlier post claimed that privatized versions would go down the pooper.

Yet, currently, the two examples that exist show the opposite - the private version is sane and stable, while the national version isn't.

Therefore your claim, "Yes, exactly how I feel on it. Once it starts going to Wall Street, you can start kissing that all goodbye." might be in error.

And it might not since you've shown NOTHING to prove your position. Nothing is sane and stable about investing in the market. Again, how are those 401K's doing?

Oct 27, 2011#44

GasBandit

I don't have a 401k, but my HSA is doing way better than ObamaCare, financially

Oct 27, 2011#45

Krisken

Wow, I'm convinced. :rolleyes:

Oct 27, 2011#46

GasBandit

Krisken said:
Wow, I'm convinced.

I know, faint praise. The account could be *empty* and it would be doing better.

Which is kind of the point.

Oct 27, 2011#47

Krisken

GasBandit said:
I know, faint praise. The account could be *empty* and it would be doing better.

Which is kind of the point.

No no, the sarcasm was because the comparison makes no sense.

Oct 27, 2011#48

GasBandit

Krisken said:
No no, the sarcasm was because the comparison makes no sense.

I'm sorry, I thought we were comparing government provided services with their private alternatives?

Oct 27, 2011#49

Tress

Are you ignorant of the fact that a small scale experiment will not properly compare to the same type of arrangement on a huge national scale, or are you deliberately distorting the facts to support your argument (as usual)?

Oct 27, 2011#50

Biannoshufu

stienman said:
Lots of democrats support tax plans that don't tax investment income. Beyond that, how is a flat tax "vastly favoring" the wealthy? Again, assuming that there are no taxes for those below a certain income level (or rebates, or whatever mechanism you want).

how many is lots?

Oct 27, 2011#51

Chibibar

The problem I see with privatize things on national level is that company that runs it do it to make a profit. That is their goal. But what happen when those investment folds? money is gone. That is what investment happens. A lot of people who are retiring NOW (baby boomers) can't cause their 401k are mostly gone. They have some backup but generally it doesn't look good.

While the government level, they still pay out cause it is their duty. Government is losing money now out of the SS fund cause well..... that is the government's fault, but unlike 401k, you still get your payments.

It is a failsafe system created to make sure the elderly have an income when they can't work anymore (retired)

Oct 27, 2011#52

GasBandit

Tress said:
Are you ignorant of the fact that a small scale experiment will not properly compare to the same type of arrangement on a huge national scale, or are you deliberately distorting the facts to support your argument (as usual)?

So are you saying that using european nations with populations smaller than most US cities as examples that socialism can work is invalid?
Added at: 17:38

Chibibar said:
The problem I see with privatize things on national level is that company that runs it do it to make a profit. That is their goal. But what happen when those investment folds? money is gone. That is what investment happens. A lot of people who are retiring NOW (baby boomers) can't cause their 401k are mostly gone. They have some backup but generally it doesn't look good.

While the government level, they still pay out cause it is their duty. Government is losing money now out of the SS fund cause well..... that is the government's fault, but unlike 401k, you still get your payments.

It is a failsafe system created to make sure the elderly have an income when they can't work anymore (retired)

The problem is, that exact line of thought has led to our government being in excess of 14 trillion dollars in debt with no sign of slowing down.

Oct 27, 2011#53

Covar

Oct 27, 2011#54

Krisken

Social Security, and why you are always wrong in saying it is costing us more money.

Every time I see someone say Social Security is in debt, I shake my head and worry that the person saying it is doing what Covar's picture is doing.

That brings us back to this supposed $41-billion "shortfall," which exists only if you decide not to count interest due of about $118 billion.
And that, in turn, leads us to the convoluted subject of the trust fund, which for some two decades has been the prime target of the crowd trying to bamboozle Americans into thinking Social Security is insolvent, bankrupt, broke — pick any term you wish, because they're all wrong. The trust fund is the mechanism by which baby boomers have pre-funded their own (OK, our own) retirements. When tax receipts fall short, its bonds are redeemed by the government to cover the gap.
Despite what Social Security's enemies love to claim, the trust fund is not a myth, it's not mere paper. It's real money, and it represents the savings of every worker paying into the system today. So I'm going to train a microscope on it.

Oct 27, 2011#55

strawman

Krisken said:
The people...who push for privatization are doing so

Because if I invested the same money myself and managed it myself I'd be doing much better - even with the economic downturn - than I will when I collect my social security.

And yet, by law, I'm required to feed into this form of retirement savings.

It's my money, let me decide how to invest it.

Oh, right, you believe the government does a better job of taking care of my needs than myself. I forgot that gov't knows best.

Or are you willing to admit that it's a government mandated form of welfare - today's working class gets to support today's retirement class.

The facade that it's a "retirement program" is thin at best, and those who choose to believe it's a retirement program rather than the mandated welfare program that it actually is will be doing us all a disservice when they vote to allow politicians into the office that see it as a savings account to be raided at will.

You've blustered a lot about how one example doesn't prove my point. Fine. Show me the counter example - and don't pretend that pension --> 401k is analogous. The pension is a benefit the employer pays, the 401k is an option the employee pays.

Oct 27, 2011#56

Norris

Yeah, if we'd invested the social security fund into the market when George Bush suggested it we'd be so much better off! It's not like there was a massive stock market downturn that cost people tens of thousands of dollars!

I have death benefits from Social Security. They went into a trust fund and were invested in the market. I lost money. It was still there and still sizable, but it took it right on the chin. So I am highly dubious that "privatize" would work better than "lock box".

Oct 27, 2011#57

Krisken

Stienman, I think the majority of America would lose their money if they were allowed to invest it. Maybe you, too. The stock market is a fucking gamble, and a lot of people are losing.

Oct 27, 2011#58

Necronic

There are a lot of examples of places where states or cities have used private investment firms to manage employee pensions. There are a lot of examples of those where it went *really* bad.

There are also a lot of examples where the city completely bankrupted itself entirely on its own management.

.....also Steinman the EmployER also pays into any 401k that is worth mentioning. A 401k without matching is called an IRA (ok there are actually 401ks without matching but it makes no sense.)

Oct 27, 2011#59

GasBandit

Krisken said:
Social Security, and why you are always wrong in saying it is costing us more money.

Every time I see someone say Social Security is in debt, I shake my head and worry that the person saying it is doing what Covar's picture is doing.

That article insists that social security's "trust fund" has been invested in US Treasury Bonds. This article insists it hasn't.

For the past 25 years, the government has led the public to believe that the surplus Social Security money was actually being invested in government bonds, as it was supposed to be, when, in actuality, the money was spent as general revenue and was, therefore, not invested in anything.

The official Social Security website, which used to boldly state that all surplus Social Security revenue was invested in government securities, has been softening its language to more accurately reflect the truth. However, their words continue to be misleading. The current statement on the official website, with regard to what happens to Social Security taxes, states the following:

“Tax income is deposited on a daily basis and is invested in ‘special-issue’ securities. The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.”

The Social Security Administration has come a long way from their earlier statements, which were extremely misleading. In the second part of the above statement, they admit that, the Social Security cash, “goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.” This part of the statement is true. It describes what has happened to every dollar of the $2.6 trillion in Social Security surplus.

The first part of the statement, “Tax income…is invested in ‘special-issue’ securities” is not true. If the money all goes into “the general fund of the Treasury,” it is all spent for general government operations. Thus, none of the money was saved or invested in anything. The government “borrowed” the surplus money and issued “special issue” IOUs to account for the spent money. The only ways that the government can redeem these IOUs are by 1) raising taxes, 2) decreasing other spending, or 3) borrowing the money.

In the Summary of the 2009 Social Security Trustees Report, a single sentence, buried deeply within the report, spills the truth about the so-called “trust fund bonds.” That sentence reads:

“Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”

The above official declaration by the Social Security Trustees, that the IOUs provide no income to the Treasury, should make it clear that Social Security does not have any surplus money with which to pay benefits. The government had to borrow $41 billion in 2010 so that full benefits could be paid, and it will have to borrow again this year, and in all future years. Social Security continues to have the incoming flow of payroll tax revenue, but it is insufficient to pay full benefits. All of the talk about Social Security being able to pay full benefits until 2036 is based on the myth that the Social Security surpluses were saved and invested as was the intent of the 1983 legislation.

Added at: 18:46
And you know who else said there was nothing in the trust fund? Obama.

Treasury Secretary Timothy Geithner echoed the president on CBS’s Face the Nation Sunday implying that if a budget deal isn’t reached by August 2, seniors might not get their Social Security checks.
Well, either Obama and Geithner are lying to us now, or they and all defenders of the Social Security status quo have been lying to us for decades. It must be one or the other.
Here’s why: Social Security has a trust fund, and that trust fund is supposed to have $2.6 trillion in it, according to the Social Security trustees. If there are real assets in the trust fund, then Social Security can mail the checks, regardless of what Congress does about the debt limit.

Oct 27, 2011#60

strawman

Krisken said:
Stienman, I think the majority of America would lose their money if they were allowed to invest it. Maybe you, too. The stock market is a fucking gamble, and a lot of people are losing.

Life's risky - lets remove people's ability to choose how to allocate their resources. It's too risky to eat without getting fat - we should mandate their food consumption. It's too risky to drive safely - we should eliminate personal conveyance in favor of public transportation. Raising children is a gamble - we should train and license caregivers and remove children from homes where they don't have a full time licensed caregiver. There's too much risk in allowing them to care for their health - we should mandate health care and force them to eliminate harmful substances from their life and get regular physicals. It's too risky to buy stuff that doesn't impart good value - they should simply hand their paycheck over to the government, and they will receive those things they actually need.

From each according to his ability, to each according to his need.

----------

Look, I'm fine with welfare programs. Call them welfare programs. Force people to pay into them as part of taxes. They are a cost to our society. But don't pretend that social security is anything other than a welfare program, and roll it into normal taxes not as a separate line item, but simply as part of taxes. Let people know that they are living on the public dole when they choose not to save for their retirement, or they choose to invest poorly.

But don't spit shine it and pretend that the government is doing me a favor. There are other first world countries that practice socialism if I were interested in that. We don't need to move closer to socialism just because life is "risky".

Choose a different excuse if you want to support social security.

Oct 27, 2011#61

Norris

It sounds like you would love Somalia.

Oct 27, 2011#62

AshburnerX

stienman said:
But don't spit shine it and pretend that the government is doing me a favor. There are other first world countries that practice socialism if I were interested in that. We don't need to move closer to socialism just because life is "risky".

Move closer to socialism? If your not 75+, you have NEVER known a United States without Social Security. Don't act like this is something that was snuck in the backdoor while you weren't looking. It's likely been around longer than you've been alive.

Oct 27, 2011#63

Krisken

I didn't realize I was having a discussion with NRO. Holy crap on a cracker, this thread got nutty.

Oct 27, 2011#64

Covar

Norris said:
Yeah, if we'd invested the social security fund into the market when George Bush suggested it we'd be so much better off! It's not like there was a massive stock market downturn that cost people tens of thousands of dollars!

I have death benefits from Social Security. They went into a trust fund and were invested in the market. I lost money. It was still there and still sizable, but it took it right on the chin. So I am highly dubious that "privatize" would work better than "lock box".

You realize the fact that the Social Security fund earns interest means it money in it gets invested right? Same with your savings account. But hey, why bother with little things like that and lets just assume that privatizing social security means close your eyes, throw a dart at a list of stocks and buy as many shares as you can.

Oct 27, 2011#65

strawman

I'm just here to amuse you. If you're not amused, you're doing it wrong.

Oct 28, 2011#66

Necronic

Covar, of course it's invested in something if it earns interest. But there are different kinds of investments out there. I don't agree with the argument that stock investment is gambling. It's a zero sum game in the short term, but if you're smart you can come out of that on top.

But I don't think it's right for this kind of savings. Think of it this way. Most personal financial advisors will agree that for a 55+ year old the majority of their retirement savings should be in very low risk investments. Well, that's kind of what the SS Fund is, an ongoing fund for people that are perpetually 55+, or those about to loose their jobs etc.

I'll agree that the method of investing in government securities means that the trust fund effectively loans money to the government, and that is a bit weird, but ignoring that for a moment it is the case that US Treasury Bonds are still the safest investment out there.

But that last point deserves a little scrutiny. If the boomers ever start collecting benefits at a rate high enough to require the SS fund to call in large amounts of that debt....what's going to happen? This is why the whole "ponzi scheme" concept keeps getting mentioned. The current setup is fine as long as no one trys to withdraw, or as the case may be, stops lending. I'll be honest it's a bit frightening.

However there is a solution: Liquidate all people 50+ years old (except my parents and their friends of course). And I mean liquidate. Like turn them into a creamy protein rich liquid.

Edit: And Gas, that article is pretty bad. It's like he just ignores the entire concept of what a bond is.

Like this statement "Every dollar of the $2.6 trillion in surplus Social Security revenue went into the general fund and was spent on general government operations. None of it was saved or invested in anything" Right. Because that's exactly what a bond does. What did he expect: The treasury borrows money from people/SS through bonds and then invests it in a mutual fund? No, the treasury borrows money and the government spends it.

Frankly the guy who wrote that article is.....well....this is his car (seriously)

Oct 28, 2011#67

Adammon

Sosme devunt I'm thinking more ling but.

Oct 28, 2011#68

GasBandit

Adammon said:
Sosme devunt I'm thinking more ling but.

Ok, I need some help with this one.
Added at: 11:03

Necronic said:
Edit: And Gas, that article is pretty bad. It's like he just ignores the entire concept of what a bond is.

Like this statement "Every dollar of the $2.6 trillion in surplus Social Security revenue went into the general fund and was spent on general government operations. None of it was saved or invested in anything" Right. Because that's exactly what a bond does. What did he expect: The treasury borrows money from people/SS through bonds and then invests it in a mutual fund? No, the treasury borrows money and the government spends it.

Frankly the guy who wrote that article is.....well....this is his car (seriously)

The guy's apparently a professor of economics in Illinois. Your response is to belittle his decal job?

"No, the treasury borrows money and the government spends it."

Borrows it from social security?

Oct 28, 2011#69

Chibibar

GasBandit said:
"No, the treasury borrows money and the government spends it."

Borrows it from social security?

that is how I understand it. It was suppose to be low low risk bonds (which would be Government bonds and such) but that huge pot o money was hard to ignore by congress. I read congress HAVE been dipping into it and pay for projects and HOPE to pay it back (almost like borrowing) but alas, the project fails and money is gone. It wasn't suppose to be like that. too many hands in the cookie jars and taking the cookies without replacing it.

Oct 28, 2011#70

GasBandit

Chibibar said:
that is how I understand it. It was suppose to be low low risk bonds (which would be Government bonds and such) but that huge pot o money was hard to ignore by congress. I read congress HAVE been dipping into it and pay for projects and HOPE to pay it back (almost like borrowing) but alas, the project fails and money is gone. It wasn't suppose to be like that. too many hands in the cookie jars and taking the cookies without replacing it.

My question was a little more rhetorical. In theory, the money is "borrowed" via bond - which is supposed to be very secure investment. But I'm not as confident in the government's repayment as I might once have been. Granted, they've not failed to repay a bond yet, but the debt train is an absolute runaway, and in my opinion it's just a matter of time. As my Obama link above showed, apparently the social security "fund" is now entirely bonds with no liquid assets whatsoever. That doesn't strike me as a good thing.

Oct 28, 2011#71

Chibibar

GasBandit said:
My question was a little more rhetorical. In theory, the money is "borrowed" via bond - which is supposed to be very secure investment. But I'm not as confident in the government's repayment as I might once have been. Granted, they've not failed to repay a bond yet, but the debt train is an absolute runaway, and in my opinion it's just a matter of time. As my Obama link above showed, apparently the social security "fund" is now entirely bonds with no liquid assets whatsoever. That doesn't strike me as a good thing.

It is looking bad. sometimes I wonder if WE will ever see it (I got at least 25 years to go) some economic analyst said SS will run out of money before then (prediction varied).

but what are our alternatives?
Privatization - if SS WAS privatize say, 10-20 years ago, it will still be in a slump now since many 401K are hurting (generally suppose to be safer to low level risk and can get REALLY high if you want to)
granted my 403B is hurting now, but I won't be touching it until 20-30 years from now, so it have a chance to recover/grow. they are form of stocks anyways so I won't be losing money until I cash out. BUT people who are retiring NOW is suffering bad. The cash out is poor than it suppose to be. Now of course not everyone is in bad shape. There are some savvy people who cash out earlier before the crash and make it out ok and now invest in something else that is stable, but not everyone is that lucky (hence the major slump)

Oct 28, 2011#72

Necronic

GasBandit said:
Ok, I need some help with this one.
Added at: 11:03

The guy's apparently a professor of economics in Illinois. Your response is to belittle his decal job?

My response is to point out that there is nothing shocking about his point. It's just a matter of perspective:

-The SS fund invests its money in government bonds
or
-The government borrows money from the SS fund.

He looks at it from the second perspective and then he blares klaxon's because everyone thinks it's the first. Guess what, it's both. I don't disagree that there are serious problems with the long term survivability of the SS fund (since government borrows a LOT from it, and it won't be able to do that in the future.) But that guy doesn't talk like a professor. He talks like a whackjob. And, frankly, it's not surprising he talks like a whackjob when you look at his car.

I will admit that I'm attacking the arguer here, which is a bit lame. But I'm also attacking the argument, which is crap.

My question was a little more rhetorical. In theory, the money is "borrowed" via bond - which is supposed to be very secure investment. But I'm not as confident in the government's repayment as I might once have been. Granted, they've not failed to repay a bond yet, but the debt train is an absolute runaway, and in my opinion it's just a matter of time. As my Obama link above showed, apparently the social security "fund" is now entirely bonds with no liquid assets whatsoever. That doesn't strike me as a good thing.

I agree with all of that and it's an infinitely more valid/usefull statement than the 2 page article of the other dudes.

Oct 28, 2011#73

GasBandit

Necronic said:
I agree with all of that

Dammit, Necronic.

Oct 28, 2011#74

Necronic

Heh.

Also, here's a pretty good article on the debate. Basically the guy says "yeah basically SS is a pay as you go system, and the whole 'Trust' concept just deludes people from thinking its pay as you go, but none of that really matters, and the whole SS fund debate really just boils down to government spending vs taxation, where are the reasonable limits?"

http://moneywatch.bnet.com/retireme...ife/the-social-security-trust-fund-myth/2944/

Which is followed by 10 1k word comments from a poster called "AllenWSmithPhD" where he copypastas one of his own article into the comments......

Oct 28, 2011#75

drifter

GasBandit said:
Ok, I need some help with this one.

https://www.halforums.com/threads/n...-rant-ii-redemption.22969/page-97#post-877006

Oct 28, 2011#76

Chibibar

http://www.dailykos.com/story/2011/...structive-Economic-Parasites-See-for-Yourself

The rich people are killing us!! tax them!

Oct 28, 2011#77

Covar

GasBandit said:
As my Obama link above showed, apparently the social security "fund" is now entirely bonds with no liquid assets whatsoever. That doesn't strike me as a good thing.

If true someones head should roll. That's just plumb illegal (at least if it was a bank anyway).

Oct 28, 2011#78

GasBandit

Covar said:
If true someones head should roll. That's just plumb illegal (at least if it was a bank anyway).

Don't even get me started on things the government does that it would be illegal for any private entity to do.

Oct 28, 2011#79

strawman

Our bonds were recently downgraded by the major financial advisers anyway. I don't think the SS administration should trust US bonds as highly as they do.

Oct 28, 2011#80

Krisken

GasBandit said:
Don't even get me started on things the government does that it would be illegal for any private entity to do.

Don't get me started on things private entities do that they don't get prosecuted for because they make huge donations to government.

Oct 28, 2011#81

GasBandit

Krisken said:
Don't get me started on things private entities do that they don't get prosecuted for because they make huge donations to government.

It's a fair cop.

Oct 28, 2011#82

Necronic

This has no real bearing on the conversation anymore, but I kept looking into the Allen W Smith guy. Here's what I have found so far:

1) Claims to be Professor of Economics (emeritus) at East Illinois University, retired in 98 after teaching 30 years.

This may be true, but I can't find any record anywhere at that university that includes his name.....which is a bit odd, I would think that, even from the late 90s there would be some internet records. However, on that note, I can't find his name alongside any university (like, referenced on a classes webpage for instance.)

2) I can't find a single journal article by him, but there's a good chance I missed one. Still though, I google-scholared my great uncles name and found the one paper he wrote in the 50s. For 30 years in academia you should be able to find something.

3) Touts his 4 published books. Now....this is the company that published them: http://www.ironwoodpublications.com/ . As far as I can tell this is a publishing company that he set up to publish his own books....For an academic, this is pretty embarassing. Any professor that did this (for subjects within their fields) would be a laughing stock.

Like I said, I realize this has no bearing on the conversation, but I find it *really* interesting......more to come

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