Posts tagged ‘SS’

From My Vantage Point, Social Security Disability is Totally Corrupt

Nicole Kaeding of Cato has an article on the SSD system heading for bankruptcy.  I can tell you from my experience that a week does not go by when someone doesn't come to me looking for work and saying something like, "I am on full disability but I am fully able to work.  However, I can't take any pay because that would screw up my disability payments.  Can I work for you and have you write my payroll checks to my wife?"

The easy answer to that is "no".  With a backlog of 25000+ people who want a job, why am I going to help them cheat, particularly when it would be me taking the legal risk?

I once had an ex-employee who was applying for a SS disability.  You may not understand that for many folks, getting a Social Security lifetime disability is like hitting the lottery.  This employee knew that if asked, we would have to tell the SS investigator that she seemed fully able to do her job and never demonstrated any reduced functionality.  So to pre-empt that, she and her attorney sent me a letter saying that if we in any way testified to her being able to work and prevented her from getting her disability payment, she would tie me up in court for years, suing me for sexual harassment, discrimination, and everything else she could think of.

Worst Law That I Can Remember

This is simply an awful law.  If you had asked me ten years ago if we would see the President (a Democrat yet) claiming the right to assasinate Americans and the Congress threatening to pass a bill requiring the indefinite detention, without trial, of people within our borders, I would never have believed it.  At first I was excited to see that Obama was threatening a veto, but then I read that he was not upset about indefinite detention, but only that Congress was threatening to tie his hands and proscribe certain options.  Obama wants to have the choice of whether to offer certain individuals due process or indefinite decision.

For more, see Rand Paul v. John McCain

Postscript:  As usual, I am left flat by the debate over whether certain injustices, like indefinite detention, apply to all humanity or just foreigners.  I have yet to parse anything in our founder's national rights arguments behind the Declaration of Independence and the Constitution that justify why folks born outside our borders have fewer rights than those born inside them.

Update:  More here, including a lot from the ACLU.  We are supposed to feel better because John McCain says that this only applied to Al Qaeda.  But how in the hell do we know with any confidence that the folks the President locks up are Al Qaeda?  Its bad enough to declare a whole new crime, that of being a member of a certain organization.  The US, through its history, has been much better than most nations in avoiding banning certain parties and organizations.  But even if we accept this law, doesn't there need to be some due process?

I suppose I understand that if I captured a guy in an SS uniform in WWII who 10 seconds ago was shooting at me, locking him up as a POW might not require a ton of due process.  Last I checked, the AQ folks didn't have a uniform or anything.  And most of them are not routinely shooting at us.

We didn't even pass this kind of horrible law at the height of Cold War anti-communist hysteria.  Can you see Johnson or Nixon (or Hoover) being able to indefinitely detain anyone they thought was a member of the Communist Party?

Further Thoughts on Social Security

Given my emails, I don't think I explained my first point in this post on Social Security very well:

If you are below 50 and in the top 40% of earners, do NOT expect to get
any Social Security benefits.  Live with it.  Up until now, wealthy
people have received SS retirement benefits as an expensive PR campaign
to convince everyone that SS is an insurance program, not a welfare
program.  Well, I have run the numbers, and it is at least 83% welfare.
The only alternative to defending these benefits will be to suffer
through substantial tax increases which will be disproportionately paid
for by the same richest 40% who would lose their benefits.  Given the negative rates of return that SS pays
on your payroll taxes, each extra dollar that taxes are raised will
only yield well under a dollar (present value) in benefits. So give up
on the benefits, campaign to keep taxes down, and start saving on your
own.

Let me try again.  When the crunch comes in a decade or so, the first thing that is going to happen is that the wealthiest people are going to lose their benefits.  Yeah, I know, not fair, but does it surprise you?  For years, Social Security advocates have desperately clung to the argument that Social Security is not welfare, it's insurance.  That is why benefits for the wealthy still exist at all.  But when crunch time comes, the wealthy, as usual, are going to get thrown overboard first.

If you are in the wealthiest 40% or so, here is what it will take to save your Social Security benefits:  New taxes.  These taxes will either be additional payroll taxes or additional income taxes.  If they are payroll taxes, my guess is that the main tax increase will be eliminating the top cap on earnings subject to the tax;  in other words, most of the new payroll taxes will be on the highest earners.  If the new taxes are income taxes, then rest assured that they will be on the top 40% of earners, since it is the top 40% who pay virtually all of the income taxes in this country today.

So, to save your benefits, you are going to have your taxes increased.  And since Social Security, like every government program, is leaky, and since it pays a negative rate of return, you are going to have to pay present value of more than a dollar of taxes to save present value of a dollar of benefits.  That is a bad investment.  If you are still in your productive years, be ready to see your benefits go bye-bye and fight like hell to keep taxes down.  And save, save, save.

Social Security: Some Advice

MaxedOutMamma has a pretty good overview post on the economics of funding Social Security and Medicare over the next 30 years or so. 

So the real issue is not
those fictional bonds in the surreal trust fund. The real issue is
whether the American taxpayer will be able to pay for all its current
programs as well as Social Security and Medicare without paying double
or triple the percentage in income taxes the American taxpayer is
paying now. Because that is not going to happen. Forget all this
jibber-jabber about moral issues. That is not going to mean a thing to
the man earning the equivalent of $28,000 today in 2023 when he is
asked to pay much more of that money so that some 67 year old with
several millions of assets can get his or her scheduled Social Security
benefits.

Nothing really new here, but the picture is always worth reviewing (she has lots of nice graphs showing the coming spending overhang).  Politicians' ignorance of (and ignoring of) this problem would shock me if I had any regard left at all for politicians.   I wanted to offer some random observations:

  1. If you are below 50 and in the top 40% of earners, do NOT expect to get any Social Security benefits.  Live with it.  Up until now, wealthy people have received SS retirement benefits as an expensive PR campaign to convince everyone that SS is an insurance program, not a welfare program.  Well, I have run the numbers, and it is at least 83% welfare.  The only alternative to defending these benefits will be to suffer through substantial tax increases which will be disproportionately paid for by the same richest 40% who would lose their benefits.  Given the negative rates of return that SS pays on your payroll taxes, each extra dollar that taxes are raised will only yield well under a dollar (present value) in benefits. So give up on the benefits, campaign to keep taxes down, and start saving on your own.
  2. If you have some control of when you you earn your lifetime income, try to earn as much as you can in the next 10-15 years.  After that, taxes are almost sure to go up substantially.  It would not surprise me to see top marginal rates back well above 50% again.
  3. Democrats in Congress are pushing for new welfare programs, particularly socialized medicine, right now because they must understand that in 10 years, the window for major new spending programs will be closed.  The pressures in a decade will be for program cutbacks as costs really start to balloon, and I can't imagine that new transfer programs will be taken seriously as the old ones eat up a larger and larger part of GDP.  Of course, my point is that this is the last time that such a program would be politically feasible.  From a financial management point of view, we are past the point where adding major new social programs makes any sense.  In fact, adding such a program now would be like a guy who has gotten over his head and knows he can't pay his credit card bills taking his last money out of the bank and buying a plasma TV.

Social Security: 83% Welfare

In my post earlier today, I analyzed my recent social security statement and found that the government was giving me a -0.8% (yes, that is negative) rate of return on my forced savings.  You can read that post for the methodology, which I admit was simplistic (I have a day job, after all) but I still think is pretty accurate.  There is not getting around the fact that the government is forcing
a retirement program on you that is such a ripoff that a private company would likely get
prosecuted for offering it.

One of the arguments I have seen go back and forth, and that I refer to in that post, is whether Social Security is a retirement plan or a welfare program (its a floor wax and a desert topping!)  One of the reasons this argument comes up so much is that its defenders take both sides of the question, depending on whom they are arguing against.  If you argue that as a welfare program, Social Security is terribly inefficient and pays too many benefits to richer workers, they argue it is a retirement program with premiums and you can't cut benefits to anyone who has paid in.  Argue as I did in this post that it is the worst retirement program in all of America, and its defenders say that you can't analyze it that way because there are welfare benefits embedded.

So I wondered, could I solve this with numbers?  I stared at my belly button for a moment, and decided that 6.5% was a good conservative private return number that I would be willing to plan my retirement around.  I plugged this number into my spreadsheet (Download socialsecurity4.xls) and found that my social security premiums, invested privately, would yield an annuity at 67 of $11,699 per month, or an amount 5.89 times larger than social security is currently promising me for the same inputs.  This tells me that only about 17% (1/5.89) of my taxes in social security are going to my own retirement.  The other 83% are going to a huge welfare program, either directly, as payments for someone else's retirement, or indirectly, through the inherent government inefficiency you accept when you provide intellectual welfare  (I define "intellectual welfare" as the government doing something for you because it doesn't trust you not to screw the task up if you did it yourself -- in this case, the task is saving for retirement).

Postscript:  As pointed out in my postscripts and the comments to the original post, taxes, inflation, spouse survival, etc.  all complicate the analysis, but most of the effects work both ways.   For example, Social Security provides some benefits to surviving spouses I don't include.  That potentially understates the value of the SS package.  However, as pointed out in the comments, private savings would be inheritable by my family in the case of my early death, and would dwarf SS survivor benefits in most cases.  Ditto for disability benefits.

Politically Correct War Memorial

Until my visit to London, I would have said that a "politically correct war memorial" was an oxymoron, since political correctness nowadays seems to embrace a disdain for all things military.  However, I was proved wrong by this memorial:

Animals_in_war1

Yes, that is a memorial to all the fallen animals in British wars.  There are statues of dogs, donkeys, horses, and elephants.  Remember that the UK is a country that finds it politically uncorrect to build a holocaust memorial (though the Imperial War Museum has a holocaust exhibit) and may well abolish its annual holocaust remembrance day because its considered insulting to Muslims (my history here must be a bit rusty -- I don't remember many Muslims in the SS).  Well, never-the-less, we can all rest easier now that we know that the donkey's will be remembered.  I know this was supposed to be serious and solemn, but I must admit that the key "tag line" on the monument only got me laughing:

Animals_in_war2

Yeah, as if the human victims of Hitler, Stalin, Pol Pot, Mao, etc. did have a choice.

My Immigration Reform Plan

More than any subject on Coyote Blog, my immigration posts have engendered more disapproving comments than anything else I have written.  I won't repeat my position except to say that I don't care if immigration is currently illegal, because my point is that it should be legal.  In short, my stance has been that our rights do not flow from the government but from our basic humanity, and therefore activities like association, employment decision-making, and property purchase should not be contingent on citizenship.  Its one of those arguments where I wish many on my side of the argument would shut up -- If the best argument you can muster for immigration is 'who will pick the lettuce', you are not helping very much. 

For the first 150 years of this country's history, our country was basically wide-open to immigration.  Sure, there were those opposed (the riots in NYC in the 19th century come to mind) but the opposition was confined mainly to xenophobes and those whose job skills were so minimal that unskilled immigrants who could not speak English were perceived as a threat.   It was only the redistributionist socialism-lite of the New Deal and later the Great Society that began to make unfettered immigration unpopular with a majority of Americans, who rightly did not wish to see the world's poor migrate to the US seeking an indolent life of living off of government handouts.

But, as Congress debates a series of immigration plans that make not sense and don't seem internally consistent, I will propose my own.  I hope that this plan will appeal to those who to date have opposed immigration because of the government handout problem.  I am sure it will continue to be unappealing to those who fear competition in the job market or who don't like to be near people who don't speak English very well.  This is an elaboration of the plan from this post:

  1. Anyone may enter or reside in the US. The government may prevent entry of a very short list of terrorists and criminals at the border, but everyone else is welcome to come and stay as long as they want for whatever reason.  Anyone may buy property in the US, regardless or citizenship or residency.  Anyone in the US may trade with anyone in the world on the same terms they trade with their next door neighbor.
  2. The US government is obligated to protect the individual rights, particularly those in the Bill of Rights, of all people physically present in our borders, citizen or not.  Anyone, regardless of citizenship status, may buy property, own a business, or seek employment in the United States without any legal distinction vs. US "citizens"
  3. Certain government functions, including voting and holding office, may require formal "citizenship".  Citizenship should be easier to achieve, based mainly on some minimum residency period, and can be denied after this residency only for a few limited reasons (e.g. convicted of a felony).  The government may set no quotas or numerical limits on new citizenships.
  4. All people present in the US pay the same taxes in the same way.  A non-citizen or even a short term visitor pays sales taxes on purchases and income taxes on income earned while present in the US just like anyone else.  Immigrants will pay property taxes just like long-term residents, either directly or via their rent payments.
  5. Pure government handouts, like Welfare, food stamps, the EITC, farm subsidies, and public housing, will only be available to those with full US citizenship.  Vagrancy and squatting on public or private lands without permission will not be tolerated.
  6. Most government services and fee-based activities, including emergency services, public education, transportation, access to public recreation, etc. will be open to all people within the US borders, regardless of citizenship status, assuming relevant fees are paid.
  7. Social Security is a tough beast to classify - I would put it in the "Citizen" category as currently structured (but would gladly put it in the "available to everyone" category if SS could be restructured to better match contributions with benefits, as in a private account system).  But, as currently configured, I would propose that only citizens can accrue and receive SS benefits.  To equalize the system, the nearly 8% employee and 8% employer social security contributions will still be paid by non-citizens working in the US, but these funds can be distributed differently.  I would suggest the funds be split 50/50 between state and local governments to offset any disproportionate use of services by new immigrants.  The federal portion could go towards social security solvency, while the state and local portion to things like schools and medical programs.

With this plan, we return to the America of our founding fathers, welcoming all immigrants who are willing to take the risk of coming here.  We would end the failed experiment of turning citizenship from a voting right into a comprehensive license that is required to work, own property, or even associate and be present within the US border.  Since immigrants today who are "illegal" pay no income or social security taxes into the system today (they do pay sales and, via rent, property tax), this plan would increase tax revenues while reducing some welfare state burdens.

I think if you asked many prospective immigrants, they would agree to this deal - no handouts, just a fair chance to make a living and a life.  However, immigrant advocacy organizations are hugely unlikely to accept this plan, as most seem today to have been co-opted by various Marxist organizations who are opposed to anyone opting out of the welfare state (it is no coincidence that the recent immigration policy protests all occurred on May Day, the traditional Soviet-Marxist holiday).

Finally, I would like to offer one thought to all those who worry about "absorbing" ten or fifteen million new immigrants.  First, I would argue that we have adopted many more immigrants than this successfully in this country's history, including my grandparents and probably yours.  Second, I would observe that as recently as the last several decades, we managed to absorb 40 million new workers quite successfully, as I wrote here:

Check this data out, from the BLS:

  • In 1968, the unemployment rate was 3.8%.  22.9 million women were employed in non-farm jobs, accounting for 34% of the work force.
  • In 2000, the unemployment rate was 4.0%.  62.7 million women were employed in the work force, accounting for 48% of the total
  • In these years, the number of women employed increased every single year.  Even in the recession years of 1981-1983 when employment of men dropped by 2.5 million, women gained 400,000 jobs

This is phenomenal.  After years of being stay-at-home moms or whatever, women in America decided it was time to go to work.  This was roughly the equivalent of having 40,000,000 immigrants show up on our shores one day looking for work.  And you know what? The American economy found jobs for all of them, despite oil embargos and stagflation and wars and "outsourcing".