My druthers

by Russ Roberts on September 6, 2011

in Politics

In this earlier post about the upcoming speech of President Obama, I wrote:

What I’d like him to say is the same thing I wanted him to say in January of 2009. My druthers haven’t moved at all.

What I wrote in January of 2009 was this piece. The gist of the piece was: Don’t increase federal spending, it’ll be wasted on cronies, make our deficit worse and have little lasting effect on reaching recovery. Instead, better to make the tax system more transparent and fix the demographic train wreck of Social Security and Medicare now rather than later. Send a signal to the world that we can live within our means and act like adults rather than teenagers. I still believe that approach would have been the right one.

When I said “my druthers haven’t moved at all” I didn’t mean that it captured all my policy preferences. I meant that I still think fiscal stimulus is wasteful, that our deficit is a problem, that the current structure of the tax system has bad economic and political consequences, and that our demographic challenges would best be fixed sooner than later.

A number of commenters objected to my suggestion for the President to turn Social Security and Medicare into means-tested programs. That is not my preferred policy. My preferred policy is to eliminate both of them and treat adults like adults. Let us make our own choices and let private charity help those who are either unfortunate or irresponsible. Let charities compete in doing dealing with those challenges.

But if we end up keeping some form of Social Security and Medicare, means-testing is the right way to go. Making that transition would reduce the size of government enormously and make the real impact of each program more transparent. It is what I believe will happen. And if the President were to give the speech I suggested, I would be extremely pleased.

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Chris O'Leary September 6, 2011 at 10:16 am

Means testing is a good first step toward scaling it back and then phasing out. Which I assume is why people who you would think would be behind the idea (e.g. libs) are so opposed to it.

rbd September 6, 2011 at 10:30 am

Means test social security and FICA becomes a tax, and would further cement my belief that this boondoggle of a program was (is) nothing more than massive redistribution.

And who does the means-testing and what kind of standard will they employ? Sounds like more welfare for the poor.

I have been forced to pay into this ponzi scheme my whole life and now at the end of the game you want to change the rule to exclude me?

Let the gnashing of teeth begin.

Andrew_M_Garland September 6, 2011 at 7:26 pm

rbd,

The rules are not the problem. Past theft by politicians and the coming reality are going to exclude you, at least in part.

People have paid payroll taxes for thirty years to support retirees. People were told that they were contributing to their own retirement fund. They paid in more than was needed. The government did not invest the extra cash; it spent it on government salaries and projects.

Ponzy Schemes Like Social Security

Here is an XTraNormal video (2:12) which presents the facts about the Social Security Trust Fund:
Government Accounting

There is nothing real in the Social Security “trust fund” (or in any US government “trust fund”). There is only a political promise to find the money somewhere that was paid in and already spent. The shortfall in Social Security is about $15 trillion in today’s dollars, about equal to the entire yearly income of everyone in the US. That promise is much more than what is recorded in the trust fund, which is itself only an unfunded promise.

US Treasury Trust Funds are only a record of what was collected and then immediately spent for things other than Social Security.

kyle8 September 6, 2011 at 7:45 pm

Yes, it seems like a big rip off to you (and me) but then again, did you ever actually believe the bozos when they said there would be something there for you ? I did not. It is a check kiting scheme, no more no less, so it has to collapse some time or another.

Richard Stands September 6, 2011 at 11:51 pm

Many of Madoff’s investors lost money too, and while it’s true that he didn’t use hired thugs with guns to collect, what’s gone is gone.

Even though I’m just about to start collecting from the imaginary lockbox, I don’t feel I can ethically support stealing more from those not yet involved.

Without changing the nature of the transfer, isn’t this a sunk cost fallacy?

Andrew_M_Garland September 7, 2011 at 5:49 pm

The rules are not the problem. Past theft by politicians and the coming reality are going to affect you.

People have paid payroll taxes for sixty years to support retirees. People were told that they were contributing to their own retirement fund. They paid in more than was needed. The government did not invest the extra cash; it spent it on government salaries and projects.

Ponzy Schemes Like Social Security
easyopinions.blogspot.com/2009/01/ponzi-schemes-like-social-security.html

Here is an XTraNormal video (2:12) which presents the facts about the Social Security Trust Fund:
http://www.xtranormal.com/watch/11226537/?listid=18148621
Government Accounting

There is nothing real in the Social Security “trust fund” (or in any US government “trust fund”). There is only a political promise to find the money somewhere that was paid in and already spent. The shortfall in Social Security is about $15 trillion in today’s dollars, about equal to the entire yearly income of everyone in the US. That promise is much more than what is recorded in the trust fund, which is itself only an unfunded promise.

US Treasury Trust Funds are only a record of what was collected and then immediately spent for things other than Social Security.

Chucklehead September 6, 2011 at 10:31 am

My approach would be to raise the retirement age two months a year, and every five years cancel any COLAs. Let people opt out of their individual 6+% with a IRA type investment with diversification provisions.
You are correct in that SS and medicare are sold as prepaid insurance, so people feel entitled not to a freebie, but something they have already purchased.
I have a 95 year old father who paid the maximum as a self employed. from the program inception to his retirement at 85. He receives over $49,000 a year in just Social Security checks.

John Dewey September 6, 2011 at 11:02 am

russ roberts: “if we end up keeping some form of Social Security and Medicare, means-testing is the right way to go. Making that transition would reduce the size of government enormously and make the real impact of each program more transparent.”

What do you mean by right way to go? Why penalize those who saved during their earning years?

We can also reduce the size of government enormously by reducing all social security benefits proportionately. Or we could reduce the size of government by giving each beneficiary the same benefit regardless of contribution. Why is means-testing right and those alternatives not right?

What you propose is pure injustice. First, the voters took 15% of earned income from all U.S. residents throughout their lifetime, promising to provide some return when they reach their non-productive years. Now that the 15% is gone forever, you are proposing that voters penalize further the frugal members of the population who saved part of the 85% they were allowed to keep. Why? Why are my profligate brethren entitled to any retirement benefits but I am not? Do you propose this, Russ, because you believe this is the only way to split the voting block of senior citizens?

vikingvista September 6, 2011 at 12:30 pm

He did say that his preferred policy is to immediately end both programs and let private charities deal with the victims of the state. THAT is the right way to go.

Everything else is unjust. Your asking why one unjust solution should be preferred to another is reasonable. The answer is in reference to the one just solution above.

Victimization of innocents cannot be justified, not even to relieve past victims. Everyone forced into SS is a victim. Those who paid in the most are the greatest victims. The money stolen from them is almost all gone. It can’t be returned–justice cannot be served–because it has been spent and no longer exists. A person’s victimization is complete once he is no longer forced to pay into SS. Since his SS benefits now come almost exclusively by the victimization of others, no loss of benefits can be a form of victimization. Seeking to steal from others to relieve that victimhood is immoral. Victimhood is not a licence to victimize.

So, for an unjust solution to be considered an improvement, it must at least reduce the trend for further injustice. That means first and foremost, NOT increasing SS confiscations. And that necessarily means reducing benefits.

Methinks1776 September 6, 2011 at 1:59 pm

Unfortunately, socialism relies on victimization.

Since pleasing your fellow man does not pay, robbing him is the only way to get ahead. Instead of appealing to the best in humanity, it calls out the worst.

As John Dewey has said before, he and his generation will use political means to secure transfer payments from you to him. It’s not his preference. He’s simply responding to incentives and, although I agree with you, I can fully understand why he’s upset and why he’ll take the action he will.

vikingvista September 6, 2011 at 2:13 pm

I can understand why he’s upset. But I can no more respect his desire to take it out on innocent parties than I can the violent actions of any common criminal.

John Dewey September 6, 2011 at 2:34 pm

As I said before, I could care less what you think about the motivation for my votes. My generation will respond the same way to the same incentives my parents responded to. I’m not sure how old you are, but I’d wager your generation will vote to retain SS when you are nearing retirement age. The arguments you are making now were made by many of my generation 25 years ago.

If you believe so strongly in your libertarian philosophy, then please refuse to accept SS and Medicare benefits once you retire. Very few people with your beliefs will be able to afford to do so.

Of course, you may continue to argue that SS and Medicare are unsustainable. I disagreee. SS law includes a mechanism to eventually limit benefits to tax receipt levels.

Medicare will be eliminated when medical care is nationalized. I do not wish for that to happen, but I believe it will. Too many people from all generations refuse to save, and our nation will have little choice but to make medical care a public service, IMO.

vikingvista September 6, 2011 at 3:01 pm

“I could care less what you think”

Yeah, I know. That is your usual enigmatic disclaimer before taking the time to respond to what I think. I’ve never understood how it bolsters your arguments. I suppose it satisfies some psychological uneasiness.

Unlike you, I don’t claim to speak for my generation. Nor do I consider them culpable for my decisions, or myself for theirs. Many of us, irrespective of generation, like to consider ourselves above the “everyone is doing it” excuse for abusing others, given the tragic consequences such thinking has had in the past. I’m sorry to see such enlightenment has escaped you. It is an individual choice, as are all ethical choices. But immorality has comfort in numbers.

John Dewey September 6, 2011 at 4:31 pm

vikingvista: “I’ve never understood how it bolsters your arguments. I suppose it satisfies some psychological uneasiness.”

No, I’m actually trying to get younger people to understand that such arguments about the morality of taxation will not be accepted by people my age. What you have proposed is the end of the SS program which can – if unchanged – still provide 70 million Boomers with annuities worth trillions of dollars. You don’t have the votes to end that program and I don’t believe you ever will.

I’m not responding to your comments because I care what you think or because I hope to change your mind. I’m simply trying to get other folks to remember that incentives matter. And that all the moral arguments may be nice to hear, but they won’t change the votes of 70 million Boomers or their parents who are reacting to trillions of dollars in incentives.

Polls I’ve seen show that two or three generations of Americans overwhlemingly support continuation of Social Security. Equating two or three generations of Americans to common criminals isn’t going to win you enough votes to change Social Security laws..

Methinks1776 September 6, 2011 at 4:45 pm

Viking,

You don’t have to respect it, you just have to accept it as a reality. Nobody of his generation has any incentive to do otherwise and they have the political clout to rob younger generations. Russ’ solution of means testing does not eliminate violence against innocents either. It just determines which former victims can avenge their victimhood by victimizing other innocents which will will be denied that right.

As long as SS will be paid (even if a smaller amount than was promised), he’s saying he’d prefer everyone take the same hit rather than allow some to have every promised benefit and others to be completely denied. If I can’t have my preference of phasing out SS, then I’d prefer for it not to be means tested. Although, I’d like to see why Russ does prefer means testing.

Methinks1776 September 6, 2011 at 5:00 pm

John Dewey,

Medicare will be eliminated when medical care is nationalized. I do not wish for that to happen, but I believe it will. Too many people from all generations refuse to save,

Two things:

I don’t think nationalizing medical care is the only option or even the most obvious one. Cutting medicare benefits is, IMO, more likely. Like all socialized medical systems, waiting lists will develop and refusal of procedures will increase (already Medicare and Medicaid lead the nation in denial of claims). Seniors will continue to be covered by medicare, but, as in Europe, if you want real medical care, you’ll have to pay out of pocket. Whether socialized medicine continues to be offered only to seniors and people cut out of the private market by overractive state regulators or for everyone, seniors are toast. They and the ordinary person with no connections in the medical industry or politics will be at the back of the line for care.

Yes, I know you don’t favour socialized medicine.

As for saving…I have a hard time blaming people for not saving as Uncle Ben of the Fed is enriching his buddies in the financial sector at the expense of savers. There is every incentive not to save.

vikingvista September 6, 2011 at 7:22 pm

“You don’t have to respect it, you just have to accept it as a reality.”

I’m not sure what purpose this would serve. Of course, I accept the reality of murder, war, fraud, lying, assault, genocide, bad pizza, calumny, and country music. Does that mean I should not argue against any of it? If we are arguing anything, is it not principles? Shall I ask you to simply accept as a reality the arbitrariness of government regulators? Perhaps you should realize that they exist, and so stop commenting about them.

“Nobody of his generation has any incentive to do otherwise and they have the political clout to rob younger generations.”

“Nobody” is too exclusive a term. I think it would only take a little introspection to realize that some people do act on principle, even when it denies them some immediate reward. In fact, I know a great many people like that. I know few people like JD, who clearly understand and oppose an offense committed against them, and simultaneously declare their intent to try to commit that very same offense against others. Or at least, if many people believe it, they have too much shame to admit it.

“Russ’ solution of means testing does not eliminate violence against innocents either. It just determines which former victims can avenge their victimhood by victimizing other innocents which will will be denied that right.”

Only Russ’s preferred solution–immediately ending SS/MC–eliminates the violence, and is just. However, less violence is preferable to more. It is, in fact, the trajectory toward achieving its elimination. Means testing does not itself accomplish that change for the better, but a moratorium on any further increases in funding actually does, compared to the increases that we can otherwise expect. Such a moratorium would require a cut in benefits, *such as* means testing.

But EVERY type of benefit cut is more just than no benefit cut. There is no fairness in collecting any SS benefit. Every SS benefit is an involuntary claim against another, and therefore, regardless of the law, no SS benefit can be a right, and no SS benefit can be rightfully demanded. The victimization is in the taking, not in the cessation of giving.

So if a means testing bill is brought to the floor, it is simply wrong to oppose it. To oppose it would be to oppose the only available option for reducing the violence.

The only other method of benefits reduction that is up for consideration is to raise the retirement age. But that isn’t JUST a reduction in benefits. Assuming the SS taxable years will also be increased, raising the retirement age is an extension of the abuse, by increasing in years and dollars the amount of theft committed against people. To raise the retirement age is literally a fresh act of violence against innocents.

“As long as SS will be paid (even if a smaller amount than was promised), he’s saying he’d prefer everyone take the same hit rather than allow some to have every promised benefit and others to be completely denied.”

Well then I have seriously misread his many posts on the matter. My understanding, is that he is going to personally actively seek to increase the burden on innocent strangers so that his net financial loss due to state violence will be minimized. He has no compunction against the state finding fresh innocent victims, if it will benefit him. I think he was pretty clear on this.

vikingvista September 6, 2011 at 7:45 pm

“I’m simply trying to get other folks to remember that incentives matter. And that all the moral arguments may be nice to hear, but they won’t change the votes of 70 million Boomers or their parents who are reacting to trillions of dollars in incentives.”

It is as though you are referring to yourself in the third person–as one of those baby boomers. But you are, in fact, saying something about yourself. You can come to your own conclusions about right and wrong without taking a poll, if you ever choose to do so. You can be, at your discretion, in charge of your own faculties.

Some people, like myself, judge a situation rationally on its merits. Then it is actually possible for us to determine if there is a situation where many or even most people are simply wrong and contradictory. People like you, whose judgments on a situation are a function of what you suppose most people think, simply refuse to exercise that capacity as you immerse yourself in an argumentum ad populum metaphysics. Of course you don’t care specifically what *I* think. Because all that matters to you is what most others think.

In the meantime, among all the incentives people face, I will not ignore the incentive people have to achieve consistency in their ideas. One thing that your self-denial of individual judgment will prevent you from ever understanding, is that widespread beliefs do from time to time change to ideas previously held by only a few.

And I sure as hell will never become an advocate for what is clearly wrong–no matter how many others are doing it.

Methinks1776 September 6, 2011 at 9:15 pm

Does that mean I should not argue against any of it?

No.

Well then I have seriously misread his many posts on the matter. My understanding, is that he is going to personally actively seek to increase the burden on innocent strangers so that his net financial loss due to state violence will be minimized.

John has said many times before that if there are cuts to SS, he will support cuts for everyone over means testing. I agree that as long as some SS is paid and cuts are made, everyone should suffer the cuts. That I prefer eliminating it entirely for everyone is irrelevant. John points out that this won’t happen. Some people may stand on principle, but they will be in the extreme minority.

Again – socialism incentivizes victimization of each other. Ask your mother-in-law. Those who knew how to work the system lived okay. Everyone else lived “v zhope”. Popular sayings included “not stealing from the government is stealing from your family” and “a decent Soviet citizen is one who steals, but doesn’t feel good about it.”

No, I don’t like it, but I’m not surprised by it and I expect it to get much worse. Just like I expect regulation and the plight of the ordinary American to get much worse.

Dan J September 7, 2011 at 12:29 am

Medicare will be eliminated when medical care is nationalized…..

Eh… If you have read any of Mr. Daschles excerpts from his book or Dr. Emanuels publishings in JAMA, coupled with Obama’s own choice of words or Ms. Sebellius comments, one might be concerned that the intent is to shift money away from seniors by virtue of their medical ‘needs’ being costly and having little positive effect on society as a whole since they are no longer productively the industrial sense.

Warning…. Govt website and info

Older People Are Much More Likely To Be Among the Top-spending Percentiles
The elderly (age 65 and over) made up around 13 percent of the U.S. population in 2002, but they consumed 36 percent of total U.S. personal health care expenses. The average health care expense in 2002 was $11,089 per year for elderly people but only $3,352 per year for working-age people (ages 19-64).5 Similar differences among age groups are reflected in the data on the top 5 percent of health care spenders. People 65-79 (9 percent of the total population) represented 29 percent of the top 5 percent of spenders. Similarly, people 80 years and older (about 3 percent of the population) accounted for 14 percent of the top 5 percent of spenders (Chart 2, 40 KB).2 However, within age groups, spending is less concentrated among those age 65 and over than for the under-65 population. The top 5 percent of elderly spenders accounted for 34 percent of all expenses by the elderly in 2002, while the top 5 percent of non-elderly spenders accounted for 49 percent of expenses by the non-elderly.4

A principal reason why health care spending is spread out more evenly among the elderly is that a much higher proportion of the elderly than the non-elderly have expensive chronic conditions.
he study used insurance company data on 3.75 million enrollees and data from the Medicare Current Beneficiary Survey.a It found that 8 percent of health care expenses occurred during childhood (under age 20), 13 percent during young adulthood (20-39 years), 31 percent during middle age (40-64 years), and nearly half (49 percent) occurred after 65 years of age. Among people age 65 and older, three-quarters of expenses (or 37 percent of the lifetime total) occurred among individuals 65-84 and the rest (12 percent of the lifetime total) among people 85 and over. The total per capita lifetime expense was calculated to be $316,600.

Me thinks that elderly expenditures are the focus of the all-knowing progressives who loves themselves an expert panel on all things.

Dan J September 7, 2011 at 12:30 am
vikingvista September 7, 2011 at 1:36 am

“I agree that as long as some SS is paid and cuts are made, everyone should suffer the cuts.”

This was never the issue. If I misunderstood John, and I really don’t see how I could have, then I owe him an apology. But the issue I had with him was not about who suffers cuts in benefits. it was entirely about who will be victimized to prevent people from suffering cuts in benefits. This is quite a different matter. He was explicit in saying that he doesn’t know if it is unfair to attack young Americans to pay for his personal loss, and that he intends to seek out politicians who will see to it. Calling a spade a spade, this position, regardless of popularity, is sociopathic.

And it is reasonable, whether the world is dominated by sinners or saints, to make a judgement call on whether any particular individual action is right or wrong. It is unreasonable to believe right or wrong is a matter of what most people believe, or of what is most likely to happen.

John Dewey September 6, 2011 at 3:15 pm

Methinks,

In 1985, when I was 34, I wanted to end FICA taxation and invest the 14% of my income on my own. I was in the minority. Most of the Boomers I worked with said they were not counting on Social Security and Medicare for retirement years. But enough of my generation, and almost all of the two generations before us, supported Ronald Reagan’s efforts to save Social Security.

Today, most of the commentors on this blog are probably younger than 45. They probably say they are not counting on Social Security and Medicare for retirement years. When they reach retirement age, however, most will not have enough savings to fund retirement and mediacl care.

You, methinks, will certainly have saved enough. If means-testing has not already been implemented, I predict that you will oppose such a measure. You will feel the injustice of having a lifetime of taxes removed from your income, just as I have. It will anger you that others your age had the same opportunity to save, but did not, and that such persons will support means testing. They will want you to continue paying FICA taxes in retirement, yet receive no benefits in return. I predict you will feel exactly what I feel today, and that, if given the chance, will vote to receive benefits equal to what your profligate peers will receive.

Methinks1776 September 6, 2011 at 4:35 pm

John Dewey,

Assuming no major tragedies or economic collapse in this country, I will have saved enough to maintain my lifestyle if I should decide to ever retire. Regardless, I am not a fan of means testing. Like you, I prefer a cut in “benefits” across the board, but not out of a sense of injustice. Whenever I deal with government, my sense of injustice becomes overworked as it is. At the very least, means testing encourages people to not acquire means! It corrodes people and the culture.

As for paying FICA in retirement….there are many ways around that if you are not earning a wage. Even if you are, if it’s a small portion of your total income, it won’t matter that much. Investment income is not subject to FICA . There are ways to structure your investment to maximize income while minimizing cash flow and I assure you that if I ever retire, this will become my new hobby.

I do not think in terms of my profligate peers and what they might be getting. I think only in terms of maximizing my own life.

You realize, of course, that you are basically saying that if you were robbed, you should be able to rob your children and grandchildren. Although I agree with Viking, I also understand that socialism incentivizes people to rob each other. A fact that I think is not lost on you. I see you as merely pointing out the reality – just as you do with rent seeking by CEOs.

Methinks1776 September 6, 2011 at 4:37 pm

“There are ways to structure your investment to maximize income while minimizing cash flow”

Should obviously read “while minimizing taxes” . Bang up editing job there, eh?

John Dewey September 6, 2011 at 6:44 pm

methinks: “You realize, of course, that you are basically saying that if you were robbed, you should be able to rob your children and grandchildren.”

Sorry, but I don’t agree that’s what I am saying. I do not consider taxation to be robbery. I do think Social Security and Medicare provide a very poor return for most taxpayers over their lifetimes. But, at age 60, I consider that very poor return to still be more valuable than zero return.

Methinks1776 September 6, 2011 at 6:59 pm

John Dewey,

A poor return? What return should I expect on the money forcibly taken from me and given to someone who didn’t care to put in the work and risk to earn a living?

I’m curious why you think the government putting a gun to your head and confiscating your money or your freedom is different from a street thug doing the same. I realize government launders its activity through the sham of the legislative process, but other than that technicality, what’s the difference? And if you’re okay with politicians using you for their own purposes, then what differentiates you from a serf?

Dan J September 7, 2011 at 12:36 am

John is correct that SS will not be eliminated. Talk all day about whether it should be, or not be. But, it will not be eliminated. And, if the program is still around in 30 to 40 yrs, your damn right I’m takin what I can grab…. I will encourage others to do so…. Break the damn bank….. Force restructure and or elimination by bankrupting the damn thing. As soon as you are eligible, take it… Use it….. Break the politicians backs with busting the SS system.

vikingvista September 7, 2011 at 5:19 am

Dan J,

That is all well and good, but how you treat people is always relevant. Take what you can get, but always oppose the abuse of innocents. That is, always oppose any effort to increase SS tax collections. Believing an action is/was bad against you, but good against others is hypocrisy.

John Dewey September 7, 2011 at 9:46 am

vikingvista: “always oppose any effort to increase SS tax collections”

On this, we agree.

Social Security law states that benefits will be reduced to levels of tax receipts – but only after the Social Security fund bonds are “redeemed”. I would favor the first half of that sentence but not the last half. In other words, I support reducing Social Security benefits to the level of tax receipts right now, today.

Where I differ with Russ’s suggestion above is that I believe the reduction in benefits should be across the board – not through means-testing.

kyle8 September 6, 2011 at 7:48 pm

Actually it would be possible to have justice and restitution, But that would require extra constitutional means. Like making all of the known members of the democratic party, and especially their leaders pay some extra taxes. Since they are primarily responsible for stealing the money in the first place.

Ameet September 6, 2011 at 11:08 am

I would only accept the Chilean approach if I had a choice.

I would be required to make a contribution via my taxes, but instead of going into a government slush fund, the taxes are instead contributions to an actual account where investments can be made. For the U.S., ideally this would mean a selection of mutual funds, ability to do hedge funds if you’re accredited, and self selecting stocks if you pass a test (i.e. if you’re a CFA candidate, you can run your own portfolio rather than choosing from a pre-selected list of investments).

So really, the only differences between such an account and an IRA is less freedom of choice unless qualified to do so, and mandatory contributions (something the “nudge” people in behavioral economics could accept). I’d also love to add the proviso that funds in these accounts can not be lent to any government whatsoever, but that would infringe on the liberty of participants.

Not that I think that would ever happen, but I think that is the only truly equitable option out there for my generation (young people 30 and under). And it’s worked for Chile.

And it obviates one of the concern about people who are irresponsible and don’t save enough for retirement. If you’re also concerned about their intelligence in investing, make the default option an index fund (terrible though I think they are) and only let them direct if they pass a test like the CFA exam, or since that is a three year self study course, something a little less arduous.

John Dewey September 6, 2011 at 11:17 am

Just so we’re clear, Social Security has not been an equitable option for my generation of Boomers. Most of us would have been far better off if we had been allowed to invest our 15% FICA taxes throughout our working years, Now that we’re moving beyond our productive years, younger folks seem to be suggesting that we should now be penalized so that you can have the option we were denied.

I do not believe the enlightened voters of your generation will be any more successful at ending Social Security than I was when I was your age. But you might be successful in reducing the burden if you can split the voting block of Boomers – if you can turn the profligate Boomers against the frugal Boomers.

Methinks1776 September 6, 2011 at 12:15 pm

JD,

Isn’t FICA 17.5%?

vikingvista September 6, 2011 at 12:36 pm

15.3% for those earning the SS wage base or less. And for baby boomers, is was less than that for much of their working lives.

John Dewey September 6, 2011 at 2:27 pm

Well, I have been working for the past 47 years, since I was 13. The FICA tax was less than 15% for 23 of those years. But I’m hardly the typical Boomer. Most Boomers were born from 1955 to 1964, and entered the workforce from 1975 to 1987. Their peak earnings year were post-1988.

FICA tax rates were 8% in 1975, 14% by 1984, and 15% by 1988.

Not sure why you want to point out differences between generations. But since you do, it is worth noting that generations before Boomers are the only ones who received anywhere near a decent return on their FICA “investment”.

vikingvista September 6, 2011 at 2:41 pm

You don’t know why I’d want to give a correct answer? A correct answer to the question of the cost of SS/MC requires noting that it has been a moving target over the time that people have been paying into it. This then anticipates that the target will likely continue to move in the future. Just giving today’s rates doesn’t cut it.

John Dewey September 6, 2011 at 3:24 pm

“Just giving today’s rates doesn’t cut it”

The FICA burden has been 14% or higher for 27 years. I’m not “just giving today’s rates”. Furthermore, voters would be stupid beyond belief to raise FICA rates again.

As I see it, keeping FICA rates at todays levels and reducing benefits accordingly is a viable option. Eliminating Social Security is not going to happen. Three generations of Americans will vote to keep it. You’re not going to win your thievery argument at the ballot box.

Medicare is a train wreck. I do not believe Americans will ever accept the Libertarian reforms which would prevent that train wreck. So I believe that nationalization of medical care is the likely alternative. I do not want that alternative, but I think enough people eventually will.

vikingvista September 6, 2011 at 3:42 pm

I’m not accusing you, obviously, of just giving today’s rates. I’m adressing your stated lack of understanding for why I didn’t merely do so.

Since you are so certain that the thievery will not end, then you can comfortably feign the high road knowing that your secret desire for mass looting will continue. And yet, you don’t. Honesty is admirable, but having a personal preference for looting innocents for your personal benefit certainly is not. And attempting to corrupt others through argument is the offense that encourages me to even spend time on one so apparently unrehabilitatable.

John Dewey September 6, 2011 at 4:10 pm

vikingvista: “Since you are so certain that the thievery will not end”

Actually, I don’t view taxation as thievery. Our constitution had provisions which allowed us to get to this point, including provisions which apparently enabled the Supreme Court to rule these various forms of taxation as legal. We choose to live under this constitution. As I see it, that means we can either accept the laws or change them.

As I see it, only a fool would, at age 60, vote to end Social Security and Medicare without receiving some benefit, after being forced to fund it for 40 or more years. I am no such fool, and neither are the 70 million people known collectively as Boomers.

vikingvista: “Honesty is admirable, but having a personal preference for looting innocents for your personal benefit certainly is not.”

Like me, I doubt that many Boomers or their parents care what you believe to be admirable.

Dan H September 6, 2011 at 4:33 pm

John,

I have great respect for your opinions, but I think you’re slightly misguided on this one. You say that you don’t consider taxation as thievery. As your reason, you state that it is legal under the Constitution. That’s not a good answer to why you do not believe it is thievery. Whether or not it is justified thievery is another issue worthy of debate. But it is, by definition, theft. Just because it is legal does not make it moral.

Methinks1776 September 6, 2011 at 5:03 pm

Dan H has a great point. Legislated theft is still theft. If the government passed a law making murder legal, would you stop considering it murder?

John Dewey September 6, 2011 at 6:29 pm

methinks: ” If the government passed a law making murder legal, would you stop considering it murder?”

The word “murder” implies it is not legal (unlawful). What I think makes more sense is:

“If the government passed a law making it legal to kill another person, would you consider it murder?

My answer is ‘No, I would not consider it murder”.

When a person kills another person in self-defense, that act is not murder. When a police officer kills a person in defense of others, that act is not murder. When a soldier kills an enemy in combat, that act is not generally murder.

I have argued that abortion is murder, but I was wrong. I still believe that taking the life of the unborn is very wrong, and I will continue to argue that. But it is no longer legally murder, just as taxation is not legally thievery.

Taxation at the levels we currently see in the U.S. is very unwise, IMO. Progressive taxation is unjust, IMO. But I do not believe taxation is thievery.

John Dewey September 6, 2011 at 6:39 pm

Dan H: “I have great respect for your opinions, but I think you’re slightly misguided on this one.”

I would consider you more respectful if you had written:

“but i disagree with you on this one.”

I do not appreciate being told that I am “misguided”. I’m pretty sure that no one “guided” me to my opinion about Social Security. I do not feel that my opinions on taxation are “poorly conceived: or “not well thought out”.

Dan H: “But it is, by definition, theft.”

Most dictionaries I’ve read are very clear that the taking of property must be unlawful in order for the act to be considered theft. Perhaps you are using a dictionary with which I am unfamiliar.

Methinks1776 September 6, 2011 at 7:10 pm

John Dewey,

When a person kills another person in self-defense, that act is not murder.

Believe it or not, I already knew that. You’re changing the argument. Murder is not self defense and if I meant to say “If the government passed a law making it legal to kill another person, would you consider it murder?”, that’s what I would have written.

I meant murder. A killing with the characteristics of murder, not any old killing.

If government decides that it is no longer illegal to break into your house and mow down your family with an AK47, would you no longer consider that act to be murder? I doubt it.

Similarly, if a thug broke into your house and robbed you at gunpoint, I doubt you would not consider that theft. But, when that thug is the government, it suddenly isn’t? Why?

Also, just as wage rate does not determine slavery, taxation rate does not determine thievery. If the thug only stole $0.50 from you, would you not consider it theft? You may be less upset about a small theft than you would be about a big one, but you would certainly consider it theft. The level of taxation has nothing to do with the fundamental character of the act.

vikingvista September 6, 2011 at 8:07 pm

“Actually, I don’t view taxation as thievery. Our constitution had provisions which allowed us to get to this point, including provisions which apparently enabled the Supreme Court to rule these various forms of taxation as legal. We choose to live under this constitution.”

Except for the simple fact that we don’t choose to live under the constitution, we merely choose to live, and the constitution is there regardless of what we want.

“As I see it, that means we can either accept the laws or change them.”

But wait. Did you not previously say that you at one time wanted to change the SS system? Why didn’t you?

Two major problems with your thinking:

1. We are not a collective entity with a single mind and a single voice. The Borg does not really exist.

2. Using the law as a moral standard is no standard at all. The only standard that matters is the standard by which we judge laws and make laws. One day hopefully you will realize that laws don’t define right–they can be wrong.

“As I see it, only a fool would, at age 60, vote to end Social Security and Medicare without receiving some benefit, after being forced to fund it for 40 or more years.”

I’m not saying that I don’t know your type. You’d be a fool if you picked up wallet full of money to return it to its rightful owner too. I know. I get it.

“I am no such fool, and neither are the 70 million people known collectively as Boomers.”

You sure do speak for a lot of people. Please leave my parents out of your tribe. It is offensive to me that you attribute your ethics to them.

”Like me, I doubt that many Boomers or their parents care what you believe to be admirable.”

If the reason you feel compelled to repeatedly tell me this is that I never seem to grasp your point in it, then you are right. I still have no idea what point you are trying to make. Are you saying that the deliberately unethical are self-selected as resilient against ethical arguments? Okay. I agree with that. But not all of those taking those unethical stances have thought through it the way you have to realize both that it was wrong when it happened to them, but right when they do it to others.

Dan H September 6, 2011 at 8:28 pm

JD,

I don’t need a lecture on how to address my feelings regarding your opinion. I used the term “misguided” for a reason. The citizens of the US have had an uncanny ability to rationalize their own subsidies, and you’re echoing that sentiment. Hence why I said “misguided”.

Taxation is theft. It is a violation of the law…. Natural Law.

This is why Jefferson called for “sunset provisions”. No generation should be bound by the misguided (yeah I said it) deeds of past generations.

Herman September 6, 2011 at 11:57 pm

John, would you be satisfied if my generation simply refunded the money you paid in?

I’d be ok with just getting my money back, no interest or inflation.

John Dewey September 7, 2011 at 9:49 am

Dan H: “I don’t need a lecture on how to address my feelings regarding your opinion.”

I apologize. I didn’t realize my comment would be interpreted as a lecture. I was merely telling you that I didn’t appreciate your wording. I still don’t.

Dan H September 7, 2011 at 9:54 am

JD,

Apology accepted. No hard feelings here.

John Dewey September 7, 2011 at 10:00 am

methinks: “If government decides that it is no longer illegal to break into your house and mow down your family with an AK47, would you no longer consider that act to be murder?”

I’m confident this will not happen in my lifetime, methinks. So I really do not see what point you are trying to make.

Again, I do not believe government transfers to be thievery. I do believe such transfers to be unwise. But I’m not going to vote to end Social Security at exactly the point when I move from one side of the half million dollar transfer to the other. If you want to agree with vikingvista that such an attitude makes me a thief, fine. It won’t change my attitude, and that’s the point vikingvista seems to not understand. He can argue morals all day long, but Boomers are not going to vote – and influence Congress – in a way which is not in their economic self-interest.

John Dewey September 7, 2011 at 10:16 am

methinks: “But, when that thug is the government, it suddenly isn’t? Why?”

I disagree with your characterization of government as “thug” – at least when the government is clearly following the will of the people. The elected officials who voted to transfer money from one generation to another – in order to ensure a minimum standard of living for those beyond working age – clearly had the approval of the overewhelming majority of the population. I believe they still do.

Make no mistake about this: in hindsight, I completely agree that Social Security is a very poor means for funding retirement. We probably disagree on one point. I believe it is a sustainable program. I would prefer that it be phased out, but not if my generation has to bear the full cost of ending it.

vikingvista September 7, 2011 at 5:08 pm

FACT: The people don’t have a will.

The collective fallacy is strong in you.

Surfisto September 6, 2011 at 12:14 pm

Ameet,
I have been working in Chile since 2008 and I pay into the system. There are 6 private companies running 5 funds each, depending on your risk appetite. As a extrajero I can leave the funds when I leave or take it in one lump sum. The money is there and mine. I think people in the US believe the money is there, waiting like a savings account. Another thing about the 6 companies is the returns are more or less the same, so they compete on other services. Mine offers to do my taxes, has a great office with very fast service and they send me christmas emails. I think the choice is obvious.

vikingvista September 6, 2011 at 12:55 pm

You are right that some people falsely envision SS as savings accounts with their names on them. What is disturbing, however, is that some people who understand that their benefits come only at another’s involuntary expense, openly demand the fleecing of their neighbors. They incorporate theft and extortion into their personal ethos. It is truly the decivilizing of our society.

vikingvista September 6, 2011 at 12:47 pm

Ameet,

A system of forced individualized accounts would at least allow for considerably improved restitution of the injustice by merely freeing people’s funds from those accounts. With the intergenerational transfer that the US uses, merely returning the current contents of the SS trust fund to its rightful owners would reveal a relatively higher loss.

Individual accounts would also reduce the ugly effects that collectivization has on the characters of individuals. Collectivization, we see with SS, turns otherwise decent people into corrupt hooligans openly salivating at the prospect of savaging their innocent countrymen. That is, forced collectivization turns people into collectivists.

Herman September 7, 2011 at 12:00 am

I think the SS supporters would not allow private accounts, on the premise that the owner could lose the money with bad investments and wind up a poor, old burden nonetheless.

Methinks1776 September 7, 2011 at 12:18 am

Right, Herman. Better to let the government piss away all the taxes collected for SS than suffer the small chance that some people might lose money. 100% probability of loss is far better than some probability of loss much lower than 100%.

I do hope you don’t make personal investment decisions this way. You’ll be broke in no time.

Dan J September 7, 2011 at 12:59 am

Geez…. I think everyone is on board with SS being a sham. They only seem to be pointing out how you nonvoters give no voice that counts to politicians so they will never heed your advice nor consider them. Seniors vote in large quantities. The politicians will heed their warnings of voting for another. Govt entitlements stay.
Libertarians and reforming Conservatives/nonProgressives lose the battle of sound bites and explanation on this one. If it takes longer than 30secs, you lose.

Methinks1776 September 7, 2011 at 5:58 am

I vote, Dan J. I participate in the sham.

You’re right, of course. Very little can compete with “If I’m elected, I promise free candy for everyone”. At least the retarded leftists like Nancy Pelosi are honest that it’s not free. They announce loudly and proudly that they stand ready to club anyone who dared become wealthy by the sweat of their brow and who now dare to fund their own private jets instead of flying around on PJs at the taxpayers’ expense like the political class. Taxpayers who are overwhelmingly those people who the lefties don’t believe should have enough money after taxes to fund their own private jets because they should be funding the politicians’ rides. God forbid our public servants should be forced to fly commercial.

John Dewey September 7, 2011 at 10:03 am

methinks: “Very little can compete with “If I’m elected, I promise free candy for everyone”

It’s not free candy. I’ve been paying those FICA taxes for 47 years. I know I am getting an extremely poor return for all those years of taxation. But, at this point in my life, very expensive candy is much better than no candy.

John Dewey September 6, 2011 at 11:11 am

What’s particularly galling about your proposal, Russ, is that Social Security is effectively means-tested already, A senior who owns a business and earns $150K income is now simultaneously paying the highest level of social security taxes and receiving social security benefits. You would chop off the offsetting benenfit yet force him to continue paying the FICA tax. Why is that the right thing to do?

I respect your arguments, Russ, but I do not understand why you ignore the injustice in this proposal.

Russ Roberts September 6, 2011 at 12:01 pm

We have a very different perception of what Social Security is. I will try to blog on it soon. You seem to think someone made you a promise. I don’t. More to come.

vikingvista September 6, 2011 at 1:06 pm

1. I am a completely passive party in the matter. The state can promise or not promise anything they want, and since it can have impact on my choices, it is meaningless.

2. A promise to mistreat others is not a promise that any decent civilized person would want fulfilled.

3. If the benefits imparted in law were a promise, then so were the costs. An impossible promise is not a meaningful promise. A promise that has already been repeatedly broken is not a meaningful promise.

4. The court has already ruled, essentially, that there is no promise, only what legislators decide to do in any given Congressional session.

vikingvista September 6, 2011 at 1:07 pm

…since it can have NO impact on my choices…

Chucklehead September 6, 2011 at 1:16 pm

Promises and assurances were repeated over and over by politicians, many of whom are long gone. When someone would bring up the ponzi nature of the programs, they were shut down as scaring the elderly.
The fair thing to do is to stick it to those who voted for the politicians who forced these programs on us, but these are the very people who enjoy the benefits now, most of whom who would not means test out.
Phasing out the program should be the long term goal. Removing the monies from the grasp of the political class is a must. How you do that in a equitable fashion is a challenge.
Because you are smarter than most, if not all, you saw the plan for what it is, rather than what it pretended to be. It does not change the fact that many took the government at its word, and will try to hold it accountable.

vikingvista September 6, 2011 at 2:07 pm

The government was doing many things. People can’t vote specifically for each state action. Often, there is not even an available choice to vote for the right thing. Also, no candidate ever received 100% of the vote, with a 100% voter turnout.

Democracy does not impart culpability for state offenses on all of the elligible voters, and perhaps on none of them. In addition to the collectivist fallacy, it is a misunderstanding of the mechanism of state democratic decision making to blame an entire population of voters.

Chucklehead September 6, 2011 at 6:30 pm

Your point about a pre-selected shopping cart is a good one. I was not claiming culpability of all voters however, just those for FDR & LBJ.

muirgeo September 6, 2011 at 1:07 pm

John you are right in that as soon as you means test these programs they change from an insurance program to a welfare program.

At the very least we can argue that every one is paying their own way with regards to Medicare and Social Security.

vikingvista September 6, 2011 at 1:11 pm

They are not, and have not been paying their own way.

John Papola September 6, 2011 at 4:05 pm

They’ve never been insurance. Insurance calculates risk. Insurance covers that which is rare or unforeseeable. There shouldn’t even be any debate about what Social Security and Medicare are. They’re welfare/redistribution programs. Period. We can debate about their merit, but to argue the they are “insurance” or “investment” is just fraudulent.

veritasrex September 6, 2011 at 5:14 pm

But…but…but, SSA tells me that it’s insurance…

vikingvista September 6, 2011 at 8:10 pm

Amen to that! As though slapping the title “insurance” on it makes it so.

muirgeo September 7, 2011 at 10:25 am

John,

The risk WAS calculated. Elders dying of starvation and freezing in their homes were now offered insurance of the basic necessities of life in their retirement. The program has been a huge success and has not added one penny to the debt… it’s likely had a long term stimulatory effect on our economy.

I guess you wold take this away and decrease the economic demand it creates even further so the top 400 trillion dollar owning people could have more while old people go back to starving.

Wow what a great guy you are John.

cthorm September 6, 2011 at 11:26 am

Not to jump on the means testing bandwagon (the truth is I don’t feel that strongly about social security in general, but I’m 25.), but why of all things is means testing your choice for reform within the context of the status quo? If means testing is introduced, the formula and levels that dictate who gets what payment becomes a perennial budget bargaining chip, much like the top income tax brackets today. Moreover, means testing changes the nominal nature of the program from one of directed retirement savings to one of national pension (i.e. from an individual to a social basis). If there must be a system, it seems much more preferable to me to roll in social security into the 401k or IRA umbrella, allowing for much more intelligent allocation of capital.

John Dewey September 6, 2011 at 11:38 am

Means testing Social Security is a disincentive for working during retirement. Why is such a disincentive the right thing to do?

rbd September 6, 2011 at 12:38 pm

I doubt means testing would discourage any measurable amount of people from working. It would be just another tax and burden upon society.

John Dewey September 6, 2011 at 2:37 pm

At the margin, every increase in taxes and every decrease in benefits will have some impact on output. Do you disagree?

muirgeo September 6, 2011 at 1:05 pm

Again, you still offer no solution to the policies that have lead to massive income and wealth inequities. Maybe because you still doubt they exist. But the rumblings of social unrest and even worst should not go unheeded. You offer no solution to the 50,000 manufacturing firms that have moved off shore, or to corporate policies that reward short term gains to the CEO and board members and share holders over improving the long range outlook of the firm. You offer no solution to other aspects of our trade policy that create huge trade deficits. You offer no solutions to accumulated wealth over powering political office holders and seeking rent at the huge huge cost to all others. You offer no solutions to the tax policies that create greater and greater inequality.

The biggest problems lie not with the economy but with how our government functions. To not address those problems from lobbying for hire to billion dollar endless campaigning is to not even scratch the surface.

What you have effectively offered is more tax cuts and fewer government jobs… the austerirty “fix” that will ultimately further the economic inequities and despair to the point of increased social unrest. Its no solution and in fact a very very dangerous path to take. We are on such a tipping point and history should have taught us better. You put the civil society that we grew up comfortably and un-appreiativly in at risk.

So when the mobs take to the street in despair do you support the use of force to subdue them or do they have a right to crash gates public and private?

Russ Roberts September 6, 2011 at 1:45 pm

Hey, it was a short speech. I have many ideas for good policies that would reduce inequality:

Stop bailing out the large creditors of financial institutions. This has allowed massive leverage which has allowed large increases in compensation in the financial sector.

Get the government out of the schooling business. Government schools do a poor job educating children, particularly children of poor parents. Government schools increase inequality.

Eliminate the minimum wage. This handicaps low-skilled people and makes them more vulnerable.

You seem to think tax policy increases inequality. Evidence?

Dan H September 6, 2011 at 2:25 pm

“We are on such a tipping point and history should have taught us better. You put the civil society that we grew up comfortably and un-appreiativly in at risk.

So when the mobs take to the street in despair do you support the use of force to subdue them or do they have a right to crash gates public and private?”

Muir,
Are you suggesting that we give into the demands of mob rule simply because not doing so could cause us harm? I should give up more of my paycheck because there may be riots in the street if I don’t? So now I’m held hostage to mob rule…. and that’s what democracy always leads to.

Dan H September 6, 2011 at 2:29 pm

Perhaps better stated, you’re saying I need to pay a tribute to the mob in order for them to leave me alone.

Seriously, think about what you just said, and ask yourself if that’s any way to govern a society.

I have more faith in people. I believe if it’s explained to them in clear terms, they’ll understand. Unfortunately, we first have to undue years of failed public education/indoctrination to get the message through.

Chucklehead September 6, 2011 at 6:20 pm

I fail to see why wealth inequality is a problem. My concern is my wealth. I don’t see how my neighbor being 10 times richer effects me negatively, except for the useless emotion of envy. Should I dwell on it, it is my problem, not his.
What about that billionaire that I don’t even know exists? How does his wealth effect me negatively?

Dan J September 6, 2011 at 11:45 pm

The ‘mobs’ are progressives and union members incited by the likes of filth like James Hoffa, who if he met the same fate as his relative I would not shed a tear over, is the likely source of any mob. All the while, progressive demoncrats will turn a blind eye publicly to such outrageous behavior while showing their support and encouragement behind closed doors. Demoncrats know the pillars of deceit are baring too much weight and are crumbling, so they will move on to desperation tactics that unions have employed for decades of threats, coercion, and violence.

Stephan September 6, 2011 at 2:47 pm

>”My preferred policy is to eliminate both of them and treat adults like adults. Let us make our own choices and let private charity help those who are either unfortunate or irresponsible. Let charities compete in doing dealing with those challenges.”

Good. I was already worried. But the modern-day radical Austrian misanthropes are well and alive. Although I’m not sure whether godfather Hayek would underwrite such crazy policies. Let charity sort out societies problems and if charity has no answer let them starve or die in the gutter in front of the hospital.

vikingvista September 6, 2011 at 3:16 pm

Yeah. It’s nice to have an assault rifle to fall back on in case your neighbors don’t take the actions you demand of them.

veritasrex September 6, 2011 at 4:59 pm

Yeah, because that’s exactly what happened before these programs existed. Either that or I missed out on those stories from my great grandparents of when they had to step over famished, dead people in the streets on their way to work.

vikingvista September 6, 2011 at 8:13 pm

No, its true. Neither cemeteries nor asphalt existed prior the New Deal, because all of the dead were used to pave the streets. True history. Look it up.

John Papola September 6, 2011 at 5:12 pm

Which group of people are you relying on to run for office as enlightened lords on high, sir? Surely they are not from the same wretched lot which you believe is apparently incapable of providing social services within civil society (as has been the American tradition via such long-since crowded out organizations as private “mutual aid societies”).

Seriously. If you believe that people at large, by way of democratic vote, can create a government which serves the interests of the least of us, you are inherently saying that the majority of people believe in helping the least of us, which necessarily leaves open, at the very least, the possibility that these very same people will help their fellow man in need. In fact, they may do an even better job of teaching their fellow man to fish instead of bureaucratically giving him a fish, because it’s their neighbor and they have other social tools at their disposal to prevent shirking and free riding.

Or, you can leave it to the gang in DC which systematically rewards failure with ever larger budgets even as poor kids get some of the worst education in the industrialized world while taxpayers are tapped for up to $35k per failed student per year (see New Jersey).

People are being failed by the state today. They have been failed by states of every size throughout all of time. It is demagogic nonsense to compare free society to a utopia where nobody goes without. There is no such system.

But if you place yourself behind the veil of ignorance and force yourself to choose which country would be the best place to be born, not knowing what capabilities you will have or luck you’ll get, it’s pretty indisputably clear that the more economically free countries are the place to be born if you’re going to be in the bottom 10%.

Chucklehead September 6, 2011 at 6:23 pm

There you go again, using logic and reason.

Dan J September 6, 2011 at 11:35 pm

Won’t happen. Utter nonsense. Maybe, because you don’t ever help people or make regular contributions to charities, your perspective is skewed. I can see how someone who does not contribute would see how US citizenry are unable to meet the basic needs of those incapable of securing their own needs. And, I do not accept the extension of the previous statement to encompass 30 and 40 yr olds with an encyclopedia of excuses for being unproductive.
Overall, less govt. Imposed costs on businesses via regulations, taxation, govt mandated compensations, govt. Encouraged rent-seeking, etc.,… Means more dollars in individual pockets, increased economic activity, higher employment, greater prosperity, and less people standing at mailbox waiting for their handout. Aaaand, the high likely hood from previous decades that shows the more prosperous people are with less threat of a radically changing political environment means more charitable donations.

musickcd September 6, 2011 at 4:50 pm

You have two employees (Jim Bob and Bubba) who start to work at the same company on the same day doing the same job.  Jim Bob works overtime whenever he gets the chance, drives a used car, deposits money into his 401K and pays off his mortgage over time.  Bubba doesn’t like to work overtime, instead he prefers to fish.  He buys a new truck regularly and never seems to have money to deposit into his 401K.  He withdraws equity from his house regularly to buy big screen TV’s and take nice vacations.  At the end of their career, they retire on the same day.  Jim Bob has a lot of money, Bubba has a lot of debt.  When you say we need to means test entitlements like SS and Medicare, you are saying we need to take the money that Jim Bob paid into the system and give it to Bubba because Jim Bob makes a lot more than Bubba in retirement and Bubba has a greater need.  You need a good slogan for means testing.  May I suggest: ‘From each according to his ability, to each according to his need.’

Methinks1776 September 6, 2011 at 5:13 pm

Well said. And how well we will all live when everyone turns into Bubba and Jim Bob becomes extinct.

Underwriterguy September 6, 2011 at 6:31 pm

As one who starting paying FICA at age 16 (at least I think that’s what the deductions were) and now collects SS, I support means testing for one reason and one reason only: it will reveal SS for what it is, an income distribution scheme, not insurance. With means testing there may come the political will to abolish SS.
Medicare is different for a person of years only because there exits no market for private insurance that allows funding over a life time for expenditures late in life (plus catastrophe insurance at all ages). A medical product funded like whole life insurance is one solution; I believe the market would create more.

John Dewey September 6, 2011 at 6:53 pm

Underwriterguy,

I agree that Medicare is very different than Social Security. If you are truly knowledgeable about health insurance, perhaps you can enlighten me:

Would health insurance even exist if insurance companies had not found a means to overcome adverse selection? Isn’t that why the health insurance industry barely existed prior to Blue Cross and Blue Shield demonstrating that employer-based insurance could overcome adverse selection?

Was the problem of adverse selection the reason why health insurance for retirees was almost non-existent prior to Medicare? I think Medicare solves that problem because the government forces Social Security beneficiaries to enroll in Medicare.

Jim September 6, 2011 at 9:35 pm

I do not understand your reasoning here. How will bashing the ‘rich’ develop any will to stop the lunacy of SS?

On the contrary, means testing SS will guarantee its continued existence without ‘fixing’ it. Taxing the ‘rich’ at higher rates is like taxes on booze and cigarettes; it is stupid, but no one will ever speak against it.

John Dewey September 6, 2011 at 6:54 pm

** Like **

vikingvista September 6, 2011 at 8:17 pm

“When you say we need to means test entitlements like SS and Medicare, you are saying we need to take the money that Jim Bob paid into the system and give it to Bubba because Jim Bob makes a lot more than Bubba in retirement and Bubba has a greater need.”

Clearly you don’t understand how SS works. Almost all the money that Jim Bob paid into the system has already been spent, is forever gone, and is not available to Jim Bob, Bubba, or anyone else.

jorod September 6, 2011 at 8:11 pm

In the short term, how about raising Medicare age to 70 and Social Security pensions to 70.
Then gradually phase out Social Security and Medicare for anyone over 35. Under 35 would join voluntary pension program to put 12% of income (no employer share) into a standard savings account and receive a voucher for an annuity at retirement.

Keep survivors and disability as is.

Dan J September 6, 2011 at 11:09 pm

There is no political will to eliminate senior entitlements and it cannot be done on people who have lived their lives based on the lie…. Ahem.. Er… Expectation and promise of what was to be delivered once entering that age. Right or wrong people lived their lives based on this fallacy of security. It must be wound down and should be based on voluntary contributions and/or moved into a privately managed account that cannot be raided in exchange for IOU’s. This in lieu of the more dramatic elimination which will not happen. Seniors and leftists as a team outnumber the groups who recognize the Ponzi scheme of SS and it’s continued growth of expenses which exceed revenues. It is an insolvent program as it is and is not conducive to a free society allowed to make one’s own choices. As I would prefer to have all monies into my own account.

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