Greenspan Urges Cuts to Social Security to Rein In Deficit

[zimv20]

link (http://www.nytimes.com/aponline/business/AP-Greenspan-Budget.html?hp)


Federal Reserve Chairman Alan Greenspan urged Congress on Wednesday to deal with the country's escalating budget deficit by cutting benefits for future Social Security retirees. Without action, he warned, long-term interest rates would rise, seriously harming the economy.

In testimony before the House Budget Committee, Greenspan said the current deficit situation, with a projected record red ink of $521 billion this year, will worsen dramatically once the baby boom generation starts becoming eligible for Social Security benefits in just four years.


Greenspan did not rule out using tax increases to deal with the looming crisis in Social Security, but he said that tax hikes should only be considered after every effort had been made to trim benefits.


looks like the gutting of social services may continue. balls. i've been paying into SS for over 20 years, many of those at the max contribution. my retirement plan includes payments from SS.

i just LOVE it when the rules change during the game.

[numediaman]

Greenspan should be put out to pasture. His handling of the economy since the boom has been criminal. By raising interest rates so quickly, he caused a bad situation (over valuation of the market) to get worse. We are still recovering from that mistake.

Then, he sits by and supports the administration's tax policies that have led to the current deficit.

Now, he promotes stealing from future retirees? he's a nut case -- but you know what, Congress will probably go along. They aren't concerned with SS -- they get government pentions. And the wealthy are hardly concerned -- SS benefits will make up only a small percentage of their retirement funds. It's everyone else that gets screwed.

If he is so damned concerned with the deficit why did he sit back and watch the Bush adminstration create them? He should have been up in Congress screaming for them to not approve these tax cuts without also cutting expenses.

[Desertrat]

numediaman, rather than "By raising interest rates so quickly, he caused a bad situation (over valuation of the market) to get worse." aren't you actually referring to the lowering of the discount rate during the 1990s that led to the stock market bubble which broke in 2000?

Anyway, I rather doubt Greenie would be real popular at a gathering of AARP types. :D

There's no doubt that the SS is in deep doodoo. They've already mumbled about raising the age for eligibility for payments; I'd not be surprised if some sort of means testing didn't come up for consideration...

'Rat

[Dont Hurt Me]

a better idea would be to get a hold of the Pentagons spending and all those fancy new toys they want. do we need to build a missle defense system? did we need that new helicopter that they wasted 8 billion on only to cancel it this week? 8 billion thrown away! did we need to give all those millionaires a tax break? did we need to spend 100 billion in Iraq to get rid of a gang of thugs?

[wwworry]

Why does any of this surprise us? It was clear at the beginning that SS would have to be cut to pay for these tax cuts that go primarily to the top 1%. Personnally I'm glad he said it and raised the alarm.

To defend him, he did want to tie the tax cuts to the deficit, ending the cuts if the deficit got to high and refering to triggers. Bush and the other neo-cons would have none of it. Bush's exact words were "I do not bargain with myself.". (yes he just gambles with our future)

You all really should read "The Price of Loyalty" by Suskind. It's all there.

[Sparky's]

I think the Social Security set should suggest cuts on Greensapn to rein in Sanity:p

[bousozoku]

Originally posted by wwworry
Why does any of this surprise us? It was clear at the beginning that SS would have to be cut to pay for these tax cuts that go primarily to the top 1%. Personnally I'm glad he said it and raised the alarm.

To defend him, he did want to tie the tax cuts to the deficit, ending the cuts if the deficit got to high and refering to triggers. Bush and the other neo-cons would have none of it. Bush's exact words were "I do not bargain with myself.". (yes he just gambles with our future)

You all really should read "The Price of Loyalty" by Suskind. It's all there.

Exactly, Greenspan has been fairly conservative with the spendthrift group in charge.

Perhaps, if the congress and the president would join an HMO and pay for their own flights to political and holiday destinations, Social Security would be more secure. Automatic raises should be a thing of the past.

Oh well, it's going to be a while.

[pseudobrit]

This is Bush's plan coming full circle. Give him 4 more years and there will be no Social Security left as we know it today.

He's making the cash situation so dire that there will be no choice to get rid of it; rather, we will be forced to throw it off to survive no matter who is in office.

Clever little bastards running the show. They know no one will voluntarily allow them to kill SS, so they circumvent the whole thing.

[mactastic]

Same strategy is being used against the Dept. of Education.

[3rdpath]

i'll gladly give up my SS benefits if i don't have to continue to pay into SS...

what a friggin joke.

[zimv20]

Originally posted by 3rdpath
i'll gladly give up my SS benefits if i don't have to continue to pay into SS...


i'll give up mine if i can get back 1/2 of what i paid in.

[Sayhey]

As much as he may want to, Bush will not endorse Greenspan's proposal or even get close to it until after the election. Of course, he will continue with his privitization scheme to dismantle SS, but that will provide enough cover. The idea of campaigning with this proposal to reduce SS benefits is political suicide. I wish Bush would sign on to it, but Rove is smart enough to stop that.

[Ugg]

Hmmm, wasn't there a huge budget surplus that Clinton was trying to get Congress to use to shore up SS? What did gw do with it? Gave it to his rich buddies. The situation needn't be so dire if there was only a commitment to SS but that is obviously not the case.

[wordmunger]

I am a liberal. I am as liberal as they come, but the Social Security tax (payroll tax) is the worst tax imaginable. It taxes you from dollar one of your income, so even the lowest wagearners pay it (though tax-savvy poor people can get some of it back with the EIC). At 14 percent (counting the employer's contribution), it's a HUGE burden, especially on the people who can afford it the least.

Why should these people be paying money directly into the wealthiest segment of American society--the elderly?

Granted, Social Security is necessary, but the system is in dire straits. There are two ways of fixing it: increase taxes or decrease benefits. I vote for decreasing benefits for the wealthiest Americans, rather than increasing taxes on the poorest ones. The least painful way to decrease benefits is to roll back the retirement age.

The retirement age should be rolled back to at least 70, if not older. If people want to save up enough on their own to retire at 65, that's fine with me, but I don't want to be paying for millions of baby boomers' luxury golf retirements when the system will collapse by the time I have any hope of collecting my share.

[Sayhey]

Originally posted by Ugg
Hmmm, wasn't there a huge budget surplus that Clinton was trying to get Congress to use to shore up SS? What did gw do with it? Gave it to his rich buddies. The situation needn't be so dire if there was only a commitment to SS but that is obviously not the case.

Bush's deficits certainly make it a much more difficult situation to deal with. It would seem that the Republican strategy is to refuse to adequately fund SS until the crisis hits and then we can dismantle it under the guise of reform. I think Democrats need to be upfront about an increase in the payroll tax on SS in order to meet the needs of the fund.

By the way, welcome back Ugg!

[mactastic]

Is it true that FICA is only taken out of your first $85,000 of income?

[IJ Reilly]

Originally posted by mactastic
Is it true that FICA is only taken out of your first $85,000 of income?
I thought the cutoff was $60k of earned income, but the limit might have been raised. If you're asking if this is a regressive tax, then the answer is yes, it is.

[zimv20]

Originally posted by IJ Reilly
I thought the cutoff was $60k of earned income, but the limit might have been raised.

back in the days when i made enough to hit the limit, it was $62,500, iirc. that's as late as '99, for those keeping track.

[Desertrat]

There is no correlation whatsoever between Social Security and the various pieces of the federal budget! It doesn't matter what the military spends, or the Dept/Ed or whatever!

The "tax cuts for the rich"--which is total BS anyway--have zilch, zip, nada to do with the problems of Social Security. None.

There are too many benefits at too high a level of payment for the income from FICA to meet when the Baby Boomers hit age 62 or wait until 65. Plus Medicare, of course. That's all there is too it.

Now, the income from the FICA has been used to hide the true budget deficits which if openly admitted to would have given the lie to the idea of the "Clinton Surplus". Because the FICA funds are put into the General Fund as ordinary income, the feds appeared to have that "surplus". More of the ongoing fiscal BS out of the Beltway.

All of the above has been public knowledge and has been publicly discussed for over twenty years...

Social Security began as an old-age assistance program. Some survivor benefits, but not many. Various things have been added and added and added and today there are just too many types of benefits. Check into how many foreign nationals get SSI, for instance--and even felons in penitentiaries; it's mind-boggling.

It began as a Trust Fund but the Democrats changed that in 1976, to the present format. Thus the artificially-low interest accumulation which once existed doesn't actually happen anymore, and outgo is entirely from income.

Insofar as a partial solution if means-testing is brought about, my own suggestion is that those with an after-tax income of $50K or more not be eligible for benefits, and they take the screwing of the theft of their money...

Anyhow, if you haven't already figured out what you're gonna do after age 62 or so, shame on your non-forethinking tail! Uncle Sugar ain't gonna do much.

'Rat

[2jaded2care]

Lockbox! Lockbox! A word no one in the federal gov't wants to hear.

Social Security funds should be untouchable for anything other than Social Security.

Might not fix everything, but this sure ain't working.

I don't like Social Security, I'd give up any claim to future benefits if I could get out now, because I don't think there'll be much there for me anyway when the time comes. And I don't like the thought of future generations having to supplement my retirement any more than I want them to be saddled with the crushing effects of our current out-of-control deficit. But gov't also shouldn't renege on past promises.

[wordmunger]

According to the TurboTax help system, the ceiling for the Payroll tax in 2003 is $87,000. I think this amount is adjusted for inflation every year.

So basically, only the rich get out of it.

[IJ Reilly]

Social Security is not a retirement program. It never was intended as one, and never will be one. It's a red herring to even bring up the "uncle sugar" argument where Social Security is concerned, because it was always designed as a supplement to pensions. Sadly, with fewer companies offering decent pensions and benefits, and more companies reneging on retirement benefits already promised, along with the stagnation of wages, Social Security will in the future be more relied upon then it was ever meant to be, even as the funding dries up. It's a gathering crisis, just as Greenspan says -- but the solution has to be a comprehensive rethinking of the program, not just a relocation of the goal posts further down the field.

[Savage Henry]

Originally posted by wordmunger
According to the TurboTax help system, the ceiling for the Payroll tax in 2003 is $87,000. I think this amount is adjusted for inflation every year.

So basically, only the rich get out of it.

I doubt you'll find many modern state economies where that isn't the case.

And that makes me a Saaaad Panda:(

[zimv20]

Originally posted by wordmunger
According to the TurboTax help system, the ceiling for the Payroll tax in 2003 is $87,000. I think this amount is adjusted for inflation every year.

So basically, only the rich get out of it.

no one gets out of it*. everyone pays FICA on their first $87k. earned income > $87k is FICA-free.

to be clear -- if someone earned $100k in 2003, they would pay FICA on $87k and $13k would be FICA-tax free.

*if someone does, it's those who earn so little that they pay no fed income tax. can anyone confirm?

[Ugg]

Originally posted by IJ Reilly
Sadly, with fewer companies offering decent pensions and benefits, and more companies reneging on retirement benefits already promised, along with the stagnation of wages, Social Security will in the future be more relied upon then it was ever meant to be, even as the funding dries up. It's a gathering crisis, just as Greenspan says -- but the solution has to be a comprehensive rethinking of the program, not just a relocation of the goal posts further down the field.

Welcome to the walmartization of America. It's pretty sad when one of the largest companies in the US actively encourages its low wage employees to apply for government benefits to make up the difference between the low wages it pays and the actual cost of living.

We can debate endlessly about what the program was set up to be but in the end none of us would like to go back to the pre SS days. A fix needs to be found and as such it won't be some grand plan but will be a matter of tweaking it. Increasing the level of contributions by high wage earners, limiting benefits to those few who do have healthy pensions or investment income are both a place to start. Raising the retirement age anymore is probably unrealistic given the unhealthy state of most Americans' health.

gw isn't going to win any friends or more importantly, votes by backing Greenspan's suggestions, of course any fix is going to upset people but while nero is fiddling....

[IJ Reilly]

I think we're going to need a comprehensive revision to Social Security. Congress has been talking about this for decades now, but hasn't made any progress that I can detect. All of these cobbled together retirement-orient programs should be restructured into one "thing" (whether it's called Social Security when it's done doesn't much matter to me) that would include the retirement floor provided by Social Security today, as well as incentives for individual saving towards retirement covered by IRA and 401k programs. I don't hold out any hope of this happening, though. Congress has trouble enough coping with the small matters, and this one is huge.

[wordmunger]

Originally posted by zimv20
no one gets out of it*. everyone pays FICA on their first $87k. earned income > $87k is FICA-free.

to be clear -- if someone earned $100k in 2003, they would pay FICA on $87k and $13k would be FICA-tax free.
And someone who makes $1million or $1billion pays exactly the same amount as someone who makes $87K. It's a trivial amount compared to their income, so yes, the wealthy do get out of it.

*if someone does, it's those who earn so little that they pay no fed income tax. can anyone confirm?

No, this is not true. Payroll tax is deducted automatically out of a paycheck, starting at dollar one. There is something called the Earned Income Credit, by which people who are sufficiently poor can get reimbursed for some of this amount when they file their tax return, but for someone living a hand-to-mouth existence, this is little consolation.

Payroll tax is exactly the reverse of a progressive tax, where the wealthy pay a larger share. Instead, the wealthy pay very little, and there is essentially no tax break for having even a subsistence-level income.

[wwworry]

Originally posted by Ugg
Welcome to the walmartization of America. It's pretty sad when one of the largest companies in the US actively encourages its low wage employees to apply for government benefits to make up the difference between the low wages it pays and the actual cost of living.

We can debate endlessly about what the program was set up to be but in the end none of us would like to go back to the pre SS days. A fix needs to be found and as such it won't be some grand plan but will be a matter of tweaking it. Increasing the level of contributions by high wage earners, limiting benefits to those few who do have healthy pensions or investment income are both a place to start. Raising the retirement age anymore is probably unrealistic given the unhealthy state of most Americans' health.

gw isn't going to win any friends or more importantly, votes by backing Greenspan's suggestions, of course any fix is going to upset people but while nero is fiddling....

ISn't it odd that 5 out of the ten richest people in America are Waltons (of Walmart) and some of the poorest working people in America work at Walmart. But God forbid if the Waltons don't have their billions or the price of my twinkie goes up.

[Neserk]

I never expected to receive Social Security benefits. I figured I was just paying it so my Grandmother could get it, now.

Instead of cutting SS benefits now why not just cut Bush?


Who ever said they wouldn't mind not paying into SS? You'll stil pay it. They will have to raise income taxes in order to get us out of this mess.

Bush is evil.

[Desertrat]

Neserk, 'scuse me, but just what does Bush have to do with the problems of Social Security? There's a lot of stuff to gripe about, with respect to Bush and his policies and suchlike, but getting rid of him won't help SS one iota. His re-election won't hurt SS one iota.

Privatization: While there has been discussion of the pros and cons, there are a bunch of problems even the proponents worry about. For instance, if some of the money were invested in the stock market, who decides on what stocks? And, given the incredibly large amounts of money, the effect of the buy-ins on the various stocks could create artificial rises in prices. Yeah, there could be larger SS payments were the system set up within private sector investing, but there are a ton of problems in designing a system that would not skew the various markets.

However, most of the suggestions of which I've read have the majority of the present FICA monies continuing as at present, with maybe 1/6th or 1/10th actually being invested in private instruments. That would have less negative impact on the markets. And, each individual could select some sector into which to put the money. The actual investment would then be automatic, each month. Over the years, the fraction put into the private sector investments would increase.

I don't think anybody really believes it would be a Good Thing to dump the entire system into the private sector in one swell foop.

'Rat