Obama proposes cuts to social security and medicare

[quannum]

It effects them in the way that the Dollar will be seen as a less secure place to put your money, and the US Government will have to spend a higher % to borrow the same amount of money.

the bolded part is understated yes? aren't t-bonds THE secure investment bond? and rich people won't want to invest more for the same roi (same as previous rates) will they?

[quannum]

the bolded part is understated yes? aren't t-bonds THE secure investment bond? and rich people won't want to invest more for the same roi (same as previous rates) will they?

so this is all a charade, koch et al are just seeing how many social services they can cut before they actually raise the debt limit. the republican donors really want it raised, just acting like they don't to get more of what else they want.

[Pirian]

the bolded part is understated yes? aren't t-bonds THE secure investment bond? and rich people won't want to invest more for the same roi (same as previous rates) will they?

They have a triple-A rating, if that's what you mean? Rated by the same people that gave the failed banks their great ratings, so there's that. To be honest, T-bonds are more bought by other countries/mutual funds/other traders, and not so much as investment by richies. It IS a safe and essentially guaranteed place to put your money, but the yield isn't high enough for a lot of rich people BECAUSE it is so safe.

http://www.bloomberg.com/markets/rat...ment-bonds/us/

You can see that the yield is very low =p

[archibaldcrane]

preach. also, that's completely incorrect archi. someone breaking into the next tax bracket is paying significantly more on the dollar than anyone below. just because those basis points aren't going to social security doesn't mean we aren't being raped with taxes in every other way.

Let me break it down for you (this is for California btw, states will vary slightly but not enough to affect the overall outcome):

Single person:

For the $35,001st dollar:

Federal Income Tax: 25%
Social Security Tax: 6.2%
Medicare Tax: 1.45%
State Income Tax (CA): 6.25%
State Disability Insurance (SDI) Tax (CA): 1.25%

Total tax rate for the $35,001st dollar: 40.05%

For the $170,001st dollar:

Federal Income Tax: 28%
Social Security Tax: 0%
Medicare Tax: 1.45%
State Income Tax (CA): 9.55%
State Disability Insurance (SDI) Tax (CA): 0%

Total tax rate for the $170,001st dollar: 39%


A person making 35k is taxed higher on their next dollar earned than a person making 170k.

[archibaldcrane]

Also, I'd love it if someone who isn't at work could fact-check this for me:

According to the CBO, in 2008, individual federal income tax accounted for 45% of the government's income. Payroll taxes accounted for 36%. (Excise taxes and corporate taxes account for another 15%) So that "36% of all IRS revenue paid by the top 1%" is actually only about 16.2% of all the federal revenue. Including their share of payroll taxes, the top 1% probably pay about 18% of all federal tax revenue. The top 1%'s share of the earnings is about 22%. Ergo, the super-rich pay less of a share of taxes that the share of the pie they are earning.

[Olo401]

Federal Income Tax: 28%
Social Security Tax: 0%
Medicare Tax: 1.45%
State Income Tax (CA): 9.55%
State Disability Insurance (SDI) Tax (CA): 0%

Total tax rate for the $170,001st dollar: 39%

Actually they would still pay 6.2% into Social Security on the first $107K of income and 0% after that. The overall rate would be lower - about 3.9% @ $170k and that percentage would go down as income rises. A person who makes $1 million effectively pays 0.66% in Social Security tax each year.

If anyone was serious about fixing all the problems we have with the budget, the answer is very simple - Remove the cap on Social Security tax so that it affects all income. Only one person in Congress (Al Franken) has ever publicly mentioned this idea, and it was before he had even publicly considered his run for the Senate.

[Alarial]

Am I the only one concerned that democrats are now using the catchphrase "entitlement spending"?

[Kuya]

No, you're not the only one. They're sounding exactly like republicans.

[Kurokikaze]

http://www.nytimes.com/2011/07/08/bu...gy-environment

[Kuya]

I mentioned before with an article that Obama probably does not intend to cut social security or even medicare because he is also asking for 1 trillion in tax increases (though supposedly it won't happen via direct increase in tax rates) and the republicans apparently will never agree to that, but Obama has been an advocate for entitlement cuts long before this debt ceiling debate:

President Obama has packed the Debt Commission (also known as the cat food commission) with members who have an overwhelming history of support for both benefit cuts and privatization of Social Security.

http://fdlaction.firedoglake.com/201...privatization/

Spoiler: show

Consider — in December, Cooper said a report which showed "that the governments unfunded liabilities are roughly $56 trillion" was "shocking." He called for a commission to address it, which Hoyer endorsed but Pelosi opposed. The White House agreed to it in January:

Obama said that he has made clear to his advisers that some of the difficult choices–particularly in regards to entitlement programs like Social Security and Medicare – should be made on his watch. "We’ve kicked this can down the road and now we are at the end of the road," he said.

Now as Ben rightly notes, during the campaign the only time Obama discussed revamping Social Security was raising the cap on Social Security taxes. But that’s hardly what Jim Cooper and the Blue Dogs are looking for. Nor, does it seem, that folks inside the Obama team think that this will be sufficient. The framework they are evidently looking at is outlined in a 2005 Brookings Institute paper called the Diamond-Orszag Plan, co-written by…yes, Obama’s budget director, Peter Orszag.

You can find the plan here, but this should give you a hint:

Since Painful Choices Must Be Made, a Key Question Is, Which Ones?

The Social Security deficit can be eliminated only through different combinations of politically painful choices: tax increases and benefit reductions. Unfortunately, too many analysts and politicians have ignored this reality, responding to the painful alternatives by embracing "free lunch" approaches.

Workers who are 55 or older will experience no change in their benefits from those scheduled under current law. For younger workers with average earnings, our proposal involves a gradual reduction in benefits from those scheduled under current law. For example, the reduction in benefits for a 45-year old average earner is less than 1 percent; for a 35-year-old, less than 5 percent; and for a 25-year-old, less than 9 percent. Reductions are smaller for lower earners, and larger for higher ones.

http://firedoglake.com/2009/02/12/ob...d-orszag-plan/

The problem with entitlement reform is that it can mean a lot of things. It could mean raising taxes to increase money supply or it can mean cutting benefits for raising retirement ages, etc. As mentioned before, one thing they could do is leave older people to enjoy benefits right now, while lowering benefits for other age cohorts in the future. But that puts into question whether people can actually manage to push back retirement (not to mention handle lower benefits):

Spoiler: show

But lately I’ve been wondering whether all of us have done ourselves an injustice by dreaming of idyllic retirements that require much more money than we could possibly ever save or invest. Is the financial pressure too great?

Maybe we shouldn’t be aiming so hard to retire in our mid-60s (or even earlier). Maybe we should embrace the fact many of us will have to work well into our 70s.

Seventy-six percent who haven’t retired yet said they are likely to consider working at least part time when they do retire. Many said they planned to work longer because they need the income. Some who said they have sufficient savings wanted to keep working so they could delay pulling from their retirement nest egg for an idle period that could last 30 years or more.

So there you have it. If you want to be secure for retirement and your savings are nonexistent or going slow, just work longer into your senior years, right?

Not necessarily so, says the nonpartisan Employee Benefit Research Institute (EBRI). Many baby boomers who delay their retirement past age 65 still won’t have enough income to cover their basic retirement expenses and uninsured health-care costs.

Recent research by EBRI found that even if workers delay retirement into their 80s, there is still a chance they will not have enough money in retirement.

In 2003, EBRI created a retirement security projection model to assess people’s retirement income prospects. The 2011 version added a new feature, which allows households to see whether delaying retirement past 65 could help meet their income needs. The model found that 84 is the age at which 90 percent of low-income households would have a 50 percent probability of having enough retirement income.

What’s the takeaway from these surveys?

If working well into your golden years is your Plan B, think again.

That’s a lot of hoping and rolling the dice. You’re relying too heavily that you will still be employable.

These surveys should make you paranoid, VanDerhei says, and I agree.

So folks (old and young), it always comes back to the same tired, but always prudent, advice. Save as soon as you can and as much as you can if you want to retire with enough resources to meet your basic needs and then some.

http://www.washingtonpost.com/busine...F1H_story.html

The article doesn't mention the kinds of strains that more people seeking jobs because they delay retirement will have on the job market in the future. It's already hard enough for recent college graduates to find jobs, particularly in this economy, given that there are alot of people in the market with far more experience than they have. Like solanis said, saving and planning as early as possible seems to be the only way to actually avoid some major pain later on, but reducing entitlements such as social security (and medicare) doesn't seem like something that will help an already grim looking situation, and i have a pessimistic outlook on people being able to plan early for their retirements.

[solanis]

The article doesn't mention the kinds of strains that more people seeking jobs because they delay retirement will have on the job market in the future. It's already hard enough for recent college graduates to find jobs, particularly in this economy, given that there are alot of people in the market with far more experience than they have. Like solanis said, saving and planning as early as possible seems to be the only way to actually avoid some major pain later on, but reducing entitlements such as social security (and medicare) doesn't seem like something that will help an already grim looking situation, and i have a pessimistic outlook on people being able to plan early for their retirements.

for people in our age group, which I'll call 18-30 (seems about accurate for bg users) I can't stress the importance of taking matters into your own hands enough. you are never too young to start planning for retirement. for our age demographic, I would say the most significant (relatively) small thing you can do is to save as much as you can, and invest that money. I'm not advocating jumping into the market rashly if you have no experience, but simply getting your overflow into money market accounts is better than letting it sit doing absolutely nothing in a savings account. the cardinal sin of savings is not making your money work, and doing the bank equivalent of sticking it in a shoebox under your bed.

for us as individuals, a college education is necessary in high-salary industries. if you want to go an entrepreneurial route, or a trade skill route, then the importance of college is unclear (though I can link a few articles that break down the cost efficiency of different kinds of universities). for my industry, you simply can't get in if you don't have a college degree. having only a college degree is considered under-educated here. this means that we all need to examine what our goals and actual desires are career-wise.

[Kuya]

And not that you guys are surprised because you're already cynical enough as it is, but if cuts to social security do happen, i wouldn't count on the progressives in the democratic party to hold firm agaisnt Obama and the blue dogs:

WASHINGTON -- Progressives in Congress are largely holding their fire at the White House over reports that President Obama is considering deep Social Security and Medicare cuts as part of a debt ceiling deal. Cuts to entitlement programs have been floating for several weeks around the edges of the conversation, but moved to the center of the debate Thursday morning, when a report that Obama would offer to "tackle the rising cost of Social Security" appeared on the front page of the Washington Post. Liberals outside of Congress, however, are wasting no time trying to pop that trial balloon.

Politico had reported that the progressive members of Congress were "furious" at President Obama, but none of that fury was evident either in their press conference or their letter to the White House.

Jackson Lee said the heat should remain on Republicans who want to take down Social Security, Medicare and Medicaid -- not on the president, because they are still unsure of what changes he will propose.

"We should not let them define the agenda," she told HuffPost. "The president has done something heroic to convene everybody. ... We don't want to get into a mish-mash with the president of the United States when he is clearly on the side of the most vulnerable."

Lee said the president's heart is with the poor, basing that judgment on Obama's background as a community organizer in Chicago before he became a state politician.

http://www.huffingtonpost.com/2011/0..._n_892210.html

Progressive democrats are expressing a belief that Obama wouldn't cut benefits on beneficiaries because 'he is clearly on the side of the most vulnerable'. But even if Obama did go that far, progressive democrats have yet to show they have the capacity to oppose the president.

[Alarial]

I thought everyone realized how stupid Social Security privatization was after the wall street crash, or are we getting back to gambling with that money being ok again?

Surely we're not that short sighted..

[solanis]

I thought everyone realized how stupid Social Security privatization was after the wall street crash, or are we getting back to gambling with that money being ok again?

Surely we're not that short sighted..

gambling with what money? do you realize that the company you work for is financed by people "gambling with money" and your mortgage comes from people "gambling with money"? how about the bank you keep your money at, or the credit card you buy things with? the supermarket you buy food at, the company that makes your car or bike? they're all financed by people "gambling with money." I get the feeling you don't understand what happened during the crisis, and that you're confusing the concept of investing with the options/futures trade.

[Kuya]

He has a point and i believe he's referring to 401ks taking a hit during the financial crisis.

[Alarial]

gambling with what money? do you realize that the company you work for is financed by people "gambling with money" and your mortgage comes from people "gambling with money"? how about the bank you keep your money at, or the credit card you buy things with? the supermarket you buy food at, the company that makes your car or bike? they're all financed by people "gambling with money." I get the feeling you don't understand what happened during the crisis, and that you're confusing the concept of investing with the options/futures trade.

You're right, investing the money we have in social programs into the stock market has no possible down sides at all and is exactly the same as privatized commercial business which provides goods and services for that money.

And it's She Kuya, not He.

[Kuya]

(though I can link a few articles that break down the cost efficiency of different kinds of universities

I would like to see that actually.

[solanis]

He has a point and i believe he's referring to 401ks taking a hit during the financial crisis.

401k fluctuation was incredibly variable depending on account balance, age, tenure, and term duration. if he's referring to the attitude of "trees grow to the stars" that caused the crisis then yes, that was bad but there is no indication that the market's attitude has returned to that place.

You're right, investing the money we have in social programs into the stock market has no possible down sides at all and is exactly the same as privatized commercial business which provides goods and services for that money.

And it's She Kuya, not He.

all investment strategies have possible drawdown. sitting the money in a box and doing nothing with it is even worse, ESPECIALLY at the scale of social accounts.

[Alarial]

Social security accounts still draw interest, it's not just sitting there. Also, had we invested that money in the stock markets like people wanted to 10 years ago, we'd be in even worse conditions currently (especially if we did it with more than just the SS money, which we've already leant out to other programs).

It's not really up for debate: Recent history has shown us that it would have been disasterous for us to have taken that path. It's like you're asking people to bet on black in roulette, after you just watched your best friend lose his life savings on black.

There are very good ways to profit and use the stock market and invest in our economy, however specific aspects of our government need to be safeguarded and kept in the low yield, high security area of finance (similar to your personal finances, some is high risk, high yield, other is low risk, low yield).

[solanis]

I would like to see that actually.

you got it boo. for some initial reading, scan through this: http://dukespace.lib.duke.edu/dspace...pdf?sequence=1 it's a study from 1970 but it laid the groundwork for determining economic efficiency of education.

for more recent theory, we'll turn to the economist here: http://www.economist.com/blogs/freee...01/education_0
some numbers on the shameful behavior of colleges: http://nplusonemag.com/bad-education
and actual data and specific arguments about it: http://www.nytimes.com/2010/05/16/we...steinberg.html

Perhaps no more than half of those who began a four-year bachelor’s degree program in the fall of 2006 will get that degree within six years, according to the latest projections from the Department of Education. (The figures don’t include transfer students, who aren’t tracked.)

For college students who ranked among the bottom quarter of their high school classes, the numbers are even more stark: 80 percent will probably never get a bachelor’s degree or even a two-year associate’s degree.

That can be a lot of tuition to pay, without a degree to show for it.

A small but influential group of economists and educators is pushing another pathway: for some students, no college at all. It’s time, they say, to develop credible alternatives for students unlikely to be successful pursuing a higher degree, or who may not be ready to do so.

Whether everyone in college needs to be there is not a new question; the subject has been hashed out in books and dissertations for years. But the economic crisis has sharpened that focus, as financially struggling states cut aid to higher education.

Among those calling for such alternatives are the economists Richard K. Vedder of Ohio University and Robert I. Lerman of American University, the political scientist Charles Murray, and James E. Rosenbaum, an education professor at Northwestern. They would steer some students toward intensive, short-term vocational and career training, through expanded high school programs and corporate apprenticeships.

“It is true that we need more nanosurgeons than we did 10 to 15 years ago,” said Professor Vedder, founder of the Center for College Affordability and Productivity, a research nonprofit in Washington. “But the numbers are still relatively small compared to the numbers of nurses’ aides we’re going to need. We will need hundreds of thousands of them over the next decade.”

College degrees are simply not necessary for many jobs. Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics.

Among the top 10 growing job categories, two require college degrees: accounting (a bachelor’s) and postsecondary teachers (a doctorate). But this growth is expected to be dwarfed by the need for registered nurses, home health aides, customer service representatives and store clerks. None of those jobs require a bachelor’s degree.

Professor Vedder likes to ask why 15 percent of mail carriers have bachelor’s degrees, according to a 1999 federal study.

“Some of them could have bought a house for what they spent on their education,” he said.

Professor Lerman, the American University economist, said some high school graduates would be better served by being taught how to behave and communicate in the workplace.

in essence, if you need a college degree, you NEED a college degree. but if you don't need one, you're far better off not going to college, or postponing it or taking night/correspondance classes.