Social Security was the top question during tonight’s CNN/Tea Party Debate.   Everyone admits that there are serious problems with Social Security and that the program, as it exists, it not sustainable for those young people who are now paying in to it.

At least one  of the candidates has called it a ponzi scheme.  Others would give young people the option of putting their funds into private accounts.  There are many fixes out there being discussed.  However, none of the answers address how you fund for the people still in the program.  What needs to happen to Social Security and how can any candidate who wants to tweak Social Security get elected?  The baby boomers are going to be a serious force to be reckoned with. 

Anyone 50 to 65 is a baby boomer.  That is a rather huge voting  block.  I simply don’t think anyone who seriously challenges the Social Security is going to be elected.  There are too many boomers and seniors.  The boomers aren’t nuts and they will turn up the heat on this issue.   They have the numbers.  They have been paying in to a system for a life time and it is going to be pay back time.

What would you do if you were running for president?  How would you do the impossible?

24 Thoughts to “The Republican Debate: The Social Security Question and the Baby Boomers”

  1. Slowpoke Rodriguez

    I ‘m not too fond of raising the retirement age (but that opinion will change with some of the latest advances in medicine). I like to idea of means-testing for all social programs. I do agree that congressmen who vote to use funds from social security (past and present) should be tried as criminals with Texas-Style punishments. Can’t figure out what part of “any change would not affect anyone still in the system” people can’t seem to get through their heads. That’s not rocket science. I don’t know….back to sleep.

    1. @Pokie

      What I can’t get through my head is how to make changes for young people and still pay for the people still IN the system. I think that changing it is the hype. Perry is playing to his base and he won’t be able to do it.

      I have heard him time and time sneak in some comment to young people. Not sure what he is trying to do. He doesn’t seem like the young person’s candidate to me.

  2. Raymond Beverage

    Moon…a small tweak, and it is still a BIG voting block. The Boomers are 1946 – 1964, so age range is 65 (first Boomers crossed the “magic line” to 65 this year) to 47 years. And it is a big demographic.

    The age-range breakouts are now available from the 2010 Census, and I just did up some comparisions for the Prince William Commission on Aging. Needless to say, across the Prince William Area of the County and two Cities, we had a big jump since 2000. And intersting to note in the numbers, our population of the 85+ years is not declining as some had predicted – it basically doubled. One of those signs people are living longer.

    1. Thanks Raymond. Scooping up 3 more years of boomers is fine by me. It makes the blog even huger. I didn’t realize that it stretched to include 1964.

      My parents sure were inclusive to make sure they covered their bases with only having 3 kids. They got boomers.

  3. Raymond Beverage

    Ok, so what part of Social Security do all these folks want to fix? The part(s) a worker pays into to? Ooops..watch out…that major fund paid into is also tied to other programs. Keep in mind it was under President LBJ in 1968 when the USA adopted the Unifed Budget where it resulted in one fiscal status measure for the Fed, and the surplus in the Social Security Trust Fund (created in 1939) offset the total debt (so politicos could at one time trumpet how the USA had such small debt).

    The best known programs among the many tied to the original 1935 Actare:

    1. Old Age, Survivors, and Disability Insurance (the original 1935 Act)
    2. Unemployment Insurance (the original 1935 Act)
    3. Temporary Assistance to Needy Families (TANF) created in 1997 and tied in.
    4. Health Insurance for Aged & Disabled aka Medicare created in 1965 and tied in.
    5. Grants to States for Medical Assistance Programs aka Medicaid also created in 1965 and tied in.
    6. State Children’s Health Insurance Program aka SCHIP or SHIP (created w/TANF in 1997)
    7. Supplemental Security Income aka SSI (created in 1974) to support the over 65, blind & disabled. NOTE: this is paid of Treasury General Funds, not SS Trust Fund, but tied to the Act.
    8. Patient Protection & Affordable Care Act created in 2010.

    And that is just the list of the major programs bundled in the Act. Although SSI is not part of the Trust Fund, that Fund has been used to offset shortages in the GF account for SSI.

    Ok, so after wallowing the program, are the Feds also going to create a fund to encourage women to stay home and have more babies to produce more workers so more is paid in to “fund people still in the program and for the boomers”?

    My statement above is “shades” of 1936 after the SS Act was created to have more family protection. Those amendments to the Act showed up in 1939 with the Aid to Dependent Children so that widows and dependent survivors of male workers could receive benefits (reflected today in the Social Security Statement received @90 days before your birthday where it says how much a dependent child or the widow will receive if worker deceased). It took from 1939 to 1962 for an amendment to include when the “worker” is female, and the kids could receive the benefits.

    To fix it, you have to break it apart and move a lot of the funding of programs OUT of the Trust Fund to the GF. I don’t see that happening.

  4. Pat.Herve

    Here goes the rhetoric… just like in 2000, and then, they did nothing to shore up SS over the years. Now, Perry wants to dismantle SS, and send it back to the states – creating a never ending bureaucracy. The only thing I keep hearing in private accounts – but that does not solve the SS woes – sure, it will give me an account, but what about the other benefits of SS – like disability insurance, or the survivors benefit – do they just go away? No, the American people are like sheep – tell them a sound bite, and they will march to that drummer, never asking what is the plan.

    Do we need SS reform – yes, but Congress has pushed that off too. Under Reagan, it was given a life line (by extending ages) – and since, Congress has done nothing.

    Slow – I am against the means testing. If you and I pay the same amount of money into SS, why should we not get the same amount of money out of it? If you saved in your 401k, and I spent my money frivolously, I would end up with more SS funds than you – is that fair? If a wealthy person shields their funds behind a trust, they will get more money than me – fair? Means testing on SS means that the responsible person, who saved and planned gets screwed.

  5. Elena

    Ezra Klein had a geat article in the Wash Post about some pretty easy ways to reform SS. Romney was the only one that defended SS as a 70 year program that should be kept solvent for future generations, not just the people using it today or in the next ten years.

    http://www.washingtonpost.com/blogs/ezra-klein/post/the-boring-truth-about-social-security/2011/09/08/gIQAp9oaCK_blog.html

    There was a long and mostly confused conversation about Social Security during Wednesday night’s GOP debate. But rather than get sidetracked over whether the pension program is a “monstrous lie” (Perry), “a Ponzi scheme” (Perry again), “tyranny” (yep, Perry), “broken” (Cain), or a great system that Americans are being “defrauded out of” (Romney), let’s just go to the numbers.

    Over the next 75 years, Social Security’s shortfall is equal to about 0.7 percent of GDP (pdf). If we increase its revenues by that amount — which could be accomplished by lifting the cap on payroll taxes — or reduce its benefits by that amount or do some combination of the two, Social Security is back in the black. Here are 30 policy tweaks that could get us there.

    Why does Social Security show a shortfall? As Stephen C. Goss, the system’s chief actuary, has written, Social Security projects an imbalance “because birth rates dropped from three to two children per woman.” That means there are relatively fewer young people paying for the old people. “Importantly,” Goss continues, “this shortfall is basically stable after 2035.” In other words, we only have to fix Social Security once. After we reform it to take account of modern demographics, the system is set for the foreseeable future.

  6. Elena

    I have a crazy idea! How about pass the DREAM act and get all these motivated young people to start participating for the common good of SS.

  7. @Elena, there aren’t enough kids interested in the Dream Act which is too bad. On the other hand, perhaps more would be interested if it were available.

    I have an even crazier idea but I wont even say it…how about all those people out there without documentation. Would getting them on the books legally impact social security?

    @Pat, I agree with you about means testing. We aren’t talking about huge sums of money. Social security is already capped on the giving and on the receiving end.

  8. Pat.Herve

    How about employers actually paying employees – many employers, such as home builders, ‘sub’ out the work to contractors (who can be an individual), and 1099 them, hence the SS does not get paid, ie the contractor never pays the taxes that are owed.

    Or, how about the cash paying employer, such as (many) landscapers, construction contractors and day laborers – if they paid the taxes that were actually owed, we would be in a different situation.

  9. Cato the Elder

    Pat.Herve :
    How about employers actually paying employees – many employers, such as home builders, ‘sub’ out the work to contractors (who can be an individual), and 1099 them, hence the SS does not get paid, ie the contractor never pays the taxes that are owed.
    Or, how about the cash paying employer, such as (many) landscapers, construction contractors and day laborers – if they paid the taxes that were actually owed, we would be in a different situation.

    The individual getting the 1099 is responsible for all 15%, it’s called a self-employment tax (Schedule SE) and you get to deduct half from your gross. The cash only employer is a different matter entirely.

  10. George S. Harris

    @Elena
    I have been saying for some long time now that removing the wage ceiling, now set at $106,800 would do a lot to improve the health of Social Security; however, this does not give politicians a great sound bite issue to keep flopping out in every debate. But what have we done? We have LOWERED the tax rate from 6.5% to 4.5% while at the same time we are being told the system is broke. What is wrong with this picture? Well, as I see it, people will get a few more dollars in their pocket on which they will pay income tax and employers will reap a big benefit depending on how many employees they have. The employers will redistribute this winfall to share holders if they have them or them may just sit on the money, but they won’t hire anyone unless there is a demand for their goods and services.

  11. Elena

    Great points George! People want solutions but aren’t willing to do the hard work in order to accomplish the task. Did you read Ezra Kleins article?

  12. I don’t understand why the ss payroll tax is being cut. That makes no sense to me.

  13. marinm

    “I like Freeman’s idea of providing each individual with a trust fund when young rather than retirement benefits when old, but we had better realize that this is a significant change in the character of the social insurance system. Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).”

    Nobel laureate Paul Krugman

  14. Raymond Beverage

    WaPo Ezra and Glenn do a nice job of talking points….

    Glenn did touch a bit about the Treasury Bonds….

    All nice ideas….BUT NOT ONE MENTION of the major root cause – the 1968 Act making the Unified Budget in the Fed. Congress can dump dollars in, tweak tax rates, etc, etc, etc…and because of 1968, that Trust Fund can still get raided.

    Oh wait, not raided…given Treasury Bonds! Silly me. Until Congress includes in the fixes breaking the Trust Fund out as a sacred entity in the greater budget, and amending the 1968 actions so trading can’t occur, I see it as continuing even for next generations.

    1. I wish I understood what you were saying enough to comment intelligently, but I don’t. @Raymond

  15. George S. Harris

    @Elena
    Yes, I read the Klein article and others that have suggested removing the cap. Some take it further and include means testing and/or raising the age limit. I have also thought that consideration should be given to doing away with the age 62 “retirement” I don’t know how many people take that option but I suspect it creates a large drain and it denies SS three years of tax receipts from those individuals who do chose the age 62 option.

    @Moon-howler
    Well Moon, the reason for reducing the tax rate is twofold:

    A. Giving the employee more money is supposed to encourage them to go out an spend their new found largesse thus creating more demand for goods and services, which will then create a requirement for more jobs.

    B. Giving the employer more money is supposed to encourage them to hire more people despite the fact that many employers are saying the don’t hire people just to hire people. They hire them when the demand for goods and services require an increase in output.

    @Raymond Beverage
    I think most people think about Old Age, Survivors, and Disability Insurance (the original 1935 Act) then the hear politicians talk about “fixing Social Security.” I think this is so because unless you receive or are involved in the other items in the Trust Fund, they rarely come to mind. Making the Trust Fund sacrosanct would be helpful but have you ever met a politician who couldn’t fabricate a key to any “locked box?” Especially if it helps them to not blatantly raise taxes.

  16. Raymond Beverage

    @George S. Harris
    “Lock box”…just flashed on Al Gore and his frequent use of the term. And agree with you…I don’t think a single politico could make it happen. Only time you really see it is when it is set up as a tax account like our local Gas Tax which funds public transportation. Calling Social Security deductions a tax would not be a smart move – of course, that is how a lot of folks think about the payroll deductions.

    @Moon-howler
    Let me see if I can simplify it a bit…what they did back in 1968 with that “Unified Budget” was implement something like a Consolidated Statement of Operations & Net Worth and a standard General Ledger for the US – before it was a jumple of reports based on the entity, although there were common features among the reports. Plus, implement more standard business operations. This way, there was a standard method of reporting across all Federal Entities, and also as a way to rebalance various departments who had funds with cash-on-hand against other departments who were short cash-on-hand but still had obligations.

    For the cash-on-hand funds, the “cold hard cash” was removed and substituted with T-Bonds. For the Social Security Trust Fund, the big impact was this reduced the amount of cash it could turn around and invest with. Yes, a T-Bill is an investment (although debate by some on the rate of return), but has the bump it could not be used by the Trust Fund as collateral to make investments which have a higher rate of return which would have furthered over the years the balance available in the Trust Fund.

    So the point I was making as long as there is this “revolving door” (as I call it), you can keep dumping in cash to the Trust Fund, but it won’t be available to make investments. If you think about it in terms of how you manage your own investments, maybe that will help in understanding what I am expressing in my postings 🙂 I cannot image you or Big Dog not pursing what gives you the most bang for the buck!

    1. Thanks Raymond. I decided years ago I was just a financial ass. There are just some things I have a blind spot about. Once money gets into government budgets, I drool.

  17. Raymond Beverage

    Moon-howler :Thanks Raymond. I decided years ago I was just a financial ass. There are just some things I have a blind spot about. Once money gets into government budgets, I drool.

    LOL! Well, it was your tax dollars through the years that the Army spent sending me to schools to learn how to play with the big money. I can remember a time at one Budget Markup, I was told I was getting a one million bucks cut out of my $18million budget request. My response was something like “Only a million?”

    Never drooled when I looked at my budget sheets…only used to grin and rub my hands together like I was getting ready to dive into a dutch apple pie all by my lonesome!

    1. I am glad I invested in the right person at least! @ Raymond.

  18. Raymond Beverage

    Man oh man! I ain’t looked at T-Bill Rate Yield Curve in a long time and just went for a peek at them….geez.

    http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

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