Looting Social Security, Part 2

[SMR 368]

You're an engineer, right? The math is pretty straight forward. The poverty level for one person is just over $10,000. The minimum wage is $7.25/hr. Do you know how much a person who earns that much is paying per year? Here's a tax withholding calculator to help you see it for yourself:

http://www.wsu.edu/payroll/cgi-bin/withhold2009.cgi

What you seem to overlook is that median SSI withholdings means that people who are above poverty level paying into social security while those below pay little or nothing.

Show me a private investment that allows those who make less to contribute less while still being able to collect a minimum amount back for disability or at retirement age?

You see, this system is partly what the Right Wingers helped create. You push unions aside and blue collar workers have no negotiating tools for higher wages where they would actually be contributing more. And thanks to Bush and his big tax cut for the wealthy, the tax burden has now been shifted even more to the Middle Class. While FDR's intention wasn't too keep poor people down or dependent on government, but to provide a social safety net for those who fall through the cracks. Combine that with the weakening of the unions and tax policies of the Right, and you can see why we are the ONLY industrialized nation who has seen the income gap grow exponentially over the last 30 some years.

So it's kind of a bite in the ####### to the poor to now say to them, you can just go out and invest in your own retirement program. They're looking right back at you and asking you with what income.

You clearly don't understand the social security tax system, judging from the fact that you have given a link to a federal income tax withholding calculator. Federal income tax is actually completely separate from social security. Everybody pays social security tax. It's a flat tax. Actually, it's slightly regressive since you pay it only on the first $106,800 of income.

You can read about it here:

http://www.toolkit.com/small_business_guid...px?nid=P07_1284

If you want to talk about a minimum wage worker, lets go for it. Working 40 hours a week, 52 weeks a year, at $7.25 an hour, you make $15080 a year. SS tax liability is $1870 annually. If you work from the time you are 18 (you didn't go to college if you are earning minimum wage your whole life) to 67, you would retire with about $211,000 if you invest at 3% compounded annually. If you live until you are 90, you would be able to spend about $13,000 a year, assuming you continue to invest your remaining savings at 3%. Now, I admit that is difficult to live on, but so is minimum wage. And SS wouldn't do that well for you.

No matter how much you make, investing your SS tax is better than what Social Security will do for you.

[mawilson 2,133]

No matter how much you make, investing your SS tax is better than what Social Security will do for you.

True, but a poor person earning minimum wage would never "invest" the extra money -

he would spend it and retire with a bag of crisps.

[one...two...tree 2,762]

I'm not sure what you mean here, Steve.

SSI and Medicare withholdings are the same (percentage-wise), regardless of income.

I agree that some will probably collect more from SSI than they paid in, though they'd

have to be perpetually poor, surviving on less than $10k/year for 30-40 years.

Yeah, the calculator was not reflecting any withholding when I entered the gross wages at poverty level. It is 6.2%, which for a person making minimum wage ($7.25/hr) for 34 hours would pay about $15, or just under $800 per year. That's less than 1/5 of the median withholding that SMR posted.

[alienlovechild 75]

Yeah, the calculator was not reflecting any withholding when I entered the gross wages at poverty level. It is 6.2%, which for a person making minimum wage ($7.25/hr) for 34 hours would pay about $15, or just under $800 per year. That's less than 1/5 of the median withholding that SMR posted.

Is there any point in defending a program that's mandatory for nearly everyone and no way to voluntarily drop out?

BTW, one the rationales used at the beginning of Social Security was the poverty amongest the elderly. Now, those old folks on SS have higher incomes than those paying and people are living far longer than was envisioned. Retirement didn't exist for most people and extended families were the rule not the exception. I'm counting on getting little to nothing from SS so I won't be disappointed as it withers away.

[SMR 368]

Yeah, the calculator was not reflecting any withholding when I entered the gross wages at poverty level. It is 6.2%, which for a person making minimum wage ($7.25/hr) for 34 hours would pay about $15, or just under $800 per year. That's less than 1/5 of the median withholding that SMR posted.

First, I don't know why you expect sympathy for someone who works 34 hours a week. Most people work 40 hours a week. I'd love to go home at 10 on Fridays.

But more importantly, you ignored the link I posted or didn't fully comprehend it. Your employer is required by law to match social security withholdings. So, social security withholdings are about $935 as listed on your paycheck (800 if you go home at 10 on Fridays). However, the amount of money paid into social security because you are working is double that ($1870) as I listed. I already did the math to show that if someone invested this much annually for his entire working life, he would be able to retire with retirement income near his annual income while working, which is something SS doesn't come close to doing.

I am well aware that if the social security system were simply abolished, we could little expect employers to add the matching withholdings instead of simply pocketing it. Requiring employers to make a reasonable contribution to the retirement of their employees is not unreasonable. All I am trying to show is that SS is far less efficient at providing a reasonable retirement income than private investment of wages would be. If the employer were simply required to invest this $1870 in a government (FDIC) insured CD, and allow the employee to have this money upon retirement, the working poor and working professionals alike could expect a higher standard of living upon retirement.

[one...two...tree 2,762]

First, I don't know why you expect sympathy for someone who works 34 hours a week. Most people work 40 hours a week. I'd love to go home at 10 on Fridays.

But more importantly, you ignored the link I posted or didn't fully comprehend it. Your employer is required by law to match social security withholdings. So, social security withholdings are about $935 as listed on your paycheck (800 if you go home at 10 on Fridays). However, the amount of money paid into social security because you are working is double that ($1870) as I listed. I already did the math to show that if someone invested this much annually for his entire working life, he would be able to retire with retirement income near his annual income while working, which is something SS doesn't come close to doing.

I am well aware that if the social security system were simply abolished, we could little expect employers to add the matching withholdings instead of simply pocketing it. Requiring employers to make a reasonable contribution to the retirement of their employees is not unreasonable. All I am trying to show is that SS is far less efficient at providing a reasonable retirement income than private investment of wages would be. If the employer were simply required to invest this $1870 in a government (FDIC) insured CD, and allow the employee to have this money upon retirement, the working poor and working professionals alike could expect a higher standard of living upon retirement.

34 hours is the typical weekly amount a full time worker is given in service sector jobs that have no union representation. Keep in mind, that's full time. Most employees are hired as part-time. So at the federal minimum wage, that's $246.50 a week. But let's say they get a full 40 hpw, that bumps it up to $290. Thet's just under $18/week for a total of about $935. That's no where near your $5,000 a year investment for retirement idea, even with the federally required match from the employer.

Also, In 2007, the wage threshold was 241% of the national average wage. So those employees are not paying into SSI.

As for the efficiency of SSI, you won't find any private investment or insurance that even comes close to it's performance historically.

[Danno 1,228]

34 hours is the typical weekly amount a full time worker is given in service sector jobs that have no union representation. Keep in mind, that's full time. Most employees are hired as part-time. So at the federal minimum wage, that's $246.50 a week. But let's say they get a full 40 hpw, that bumps it up to $290. Thet's just under $18/week for a total of about $935. That's no where near your $5,000 a year investment for retirement idea, even with the federally required match from the employer.

Also, In 2007, the wage threshold was 241% of the national average wage. So those employees are not paying into SSI.

As for the efficiency of SSI, you won't find any private investment or insurance that even comes close to it's performance historically.

People who spend their entire life achieving no more education or skills to earn more than the minimum wage deserve to be in poverty and publicly suffer... as a lesson for young folks.

I say we bring back poor-houses, large communal homes where people can have a warm bed and sustaining services.

These should almost never be run by the Fed as they are way to inefficient and even at great expense often fail to provide the service expected.

[one...two...tree 2,762]

People who spend their entire life achieving no more education or skills to earn more than the minimum wage deserve to be in poverty and publicly suffer... as a lesson for young folks.

I say we bring back poor-houses, large communal homes where people can have a warm bed and sustaining services.

These should almost never be run by the Fed as they are way to inefficient and even at great expense often fail to provide the service expected.

Ding-ding-ding! We have a winner! That sums up the attitude of the Right Wing towards the working poor. Let them eat cake! Bravo, Danno! This is how the Right Wing will get back in power.

[Dan J 277]

People who spend their entire life achieving no more education or skills to earn more than the minimum wage deserve to be in poverty and publicly suffer... as a lesson for young folks.

I say we bring back poor-houses, large communal homes where people can have a warm bed and sustaining services.

These should almost never be run by the Fed as they are way to inefficient and even at great expense often fail to provide the service expected.

Your first statement is ignorant of economics. No capitalist type economy can ever provide a living wage to all its participants. We will always have people who are poor, no matter how much education they have. How many doctors, lawyers and engineers can our economy really support?

Charities used to provide those kinds of services, but were overwhelmed during the great depression (25% unemployment) and which is why Social Security was created.

[one...two...tree 2,762]

Your first statement is ignorant of economics. No capitalist type economy can ever provide a living wage to all its participants. We will always have people who are poor, no matter how much education they have. How many doctors, lawyers and engineers can our economy really support?

Charities used to provide those kinds of services, but were overwhelmed during the great depression (25% unemployment) and which is why Social Security was created.

I think we can have living wages for the majority of Americans though, even if a large portion of the job market are service sector jobs, provided those workers have bargaining power in negotiating for fair wages.

[Dan J 277]

I think we can have living wages for the majority of Americans though, even if a large portion of the job market are service sector jobs, provided those workers have bargaining power in negotiating for fair wages.

Unfortunately we really can't. Its the dirty secret of capitalism. To have winners, you have to have losers.

All you do when you pay everyone a living wage, is raise the floor to which a person must pass in order to escape poverty. If you are forcing companies to pay a living wage, products and services will get more expensive which will significantly drive inflation. And in the end, most people would not be better off than where they started.

We can create education oppotunities and invest in creating better paying jobs to reduce the number of people below the poverty level. But for everyone else, we can help provide for their needs, housing, food, health care and other essentials.

[SMR 368]

34 hours is the typical weekly amount a full time worker is given in service sector jobs that have no union representation. Keep in mind, that's full time. Most employees are hired as part-time. So at the federal minimum wage, that's $246.50 a week. But let's say they get a full 40 hpw, that bumps it up to $290. Thet's just under $18/week for a total of about $935. That's no where near your $5,000 a year investment for retirement idea, even with the federally required match from the employer.

Also, In 2007, the wage threshold was 241% of the national average wage. So those employees are not paying into SSI.

As for the efficiency of SSI, you won't find any private investment or insurance that even comes close to it's performance historically.

You're not listening. First, everyone who works pays social security tax. It's a flat tax. Second, $935 a year which is matched by your employer for a total of $1870/year. In an earlier post, I did the math for that total.

"If you want to talk about a minimum wage worker, lets go for it. Working 40 hours a week, 52 weeks a year, at $7.25 an hour, you make $15080 a year. SS tax liability is $1870 annually. If you work from the time you are 18 (you didn't go to college if you are earning minimum wage your whole life) to 67, you would retire with about $211,000 if you invest at 3% compounded annually. If you live until you are 90, you would be able to spend about $13,000 a year, assuming you continue to invest your remaining savings at 3%. Now, I admit that is difficult to live on, but so is minimum wage. And SS wouldn't do that well for you."

But beyond this, if you work for 45 years in any industry and never make more than minimum wage, you are probably retarded (literally, as in mentally disabled). Honestly, in every industry I have experienced, minimum wage has never come into play, even for unskilled labor. I work in a facility with over a thousand workers, many of whom finished only high school. Everybody makes more than minimum wage. Even if you work at a grocery store or fast food restaurant, you will make more than minimum wage after a few months. I'm not saying that you'll be pulling down six figures, but just pointing out that someone who works all their life and never makes more than minimum wage is somewhat of a ridiculous worst case scenario. And even then, they do better with private investment instead of social security.

But that is obvious. The point is not that private investment will always provide you a reasonable retirement income. The point is that if a person was allowed to spend the amount of money on private investment that he spends on Social security taxes, he would have more money when he retired than he would get through SS. It doesn't matter how much you make.

You keep bringing up SSI. SSI is needs based and really a separate program. It is also paid for by general treasury funds. Thus, allowing private investment of social security taxes would not affect SSI.

[Danno 1,228]

Ding-ding-ding! We have a winner! That sums up the attitude of the Right Wing towards the working poor. Let them eat cake! Bravo, Danno! This is how the Right Wing will get back in power.

"Working Poor"

Wow, you have a pretty low opinion of the working poor.

Tell me steve, do you know of one person who has worked all their life only making minimum wage?

The very first job I had at like 16 started out at over 10 cents above the minimum.

Why use "Life long minimum wage earners" as a base to build the Social security program around?

[one...two...tree 2,762]

You're not listening. First, everyone who works pays social security tax. It's a flat tax. Second, $935 a year which is matched by your employer for a total of $1870/year. In an earlier post, I did the math for that total.

"If you want to talk about a minimum wage worker, lets go for it. Working 40 hours a week, 52 weeks a year, at $7.25 an hour, you make $15080 a year. SS tax liability is $1870 annually. If you work from the time you are 18 (you didn't go to college if you are earning minimum wage your whole life) to 67, you would retire with about $211,000 if you invest at 3% compounded annually. If you live until you are 90, you would be able to spend about $13,000 a year, assuming you continue to invest your remaining savings at 3%. Now, I admit that is difficult to live on, but so is minimum wage. And SS wouldn't do that well for you."

But beyond this, if you work for 45 years in any industry and never make more than minimum wage, you are probably retarded (literally, as in mentally disabled). Honestly, in every industry I have experienced, minimum wage has never come into play, even for unskilled labor. I work in a facility with over a thousand workers, many of whom finished only high school. Everybody makes more than minimum wage. Even if you work at a grocery store or fast food restaurant, you will make more than minimum wage after a few months. I'm not saying that you'll be pulling down six figures, but just pointing out that someone who works all their life and never makes more than minimum wage is somewhat of a ridiculous worst case scenario. And even then, they do better with private investment instead of social security.

But that is obvious. The point is not that private investment will always provide you a reasonable retirement income. The point is that if a person was allowed to spend the amount of money on private investment that he spends on Social security taxes, he would have more money when he retired than he would get through SS. It doesn't matter how much you make.

You keep bringing up SSI. SSI is needs based and really a separate program. It is also paid for by general treasury funds. Thus, allowing private investment of social security taxes would not affect SSI.

As I stated earlier, 34 hours is the average number of hours a full timer gets for service sector jobs. Thanks to the lobbying by corporations and their Right Wing politicians, companies can schedule them as little as 32 hours while still classifying them full time. They do this to save money and it is rare that you will find retail workers being scheduled 40 hours per week. Why? Because retail chains HATE having to pay overtime. You should read up or better yet, get to know some people working service sector jobs...ask them about hours. I've worked in retail for many years before I went to college. And I said goodbye to many good, intelligent people, some even college graduates, still working in retail and plan to do so until retirement. They work there because they've benefited from having a union represent them. But I digress.

There could never be a private investment that could match all that SS can and does for so many people, at the level of efficiency that it does. When I worked in retail, I worked alongside many retirement aged people. One guy in particular had been an accountant all his life. The company he worked for some 30 odd years, squandered his pension and he couldn't live just on SS, so he bagged groceries in his late 60's...and for minimum wage. Your naive and/or callous to think that only someone who mentally handicapped would be making minimum wage throughout their life. Guess what happens when you work at a place like Best Buy as a retail clerk and decide to go work at Target? Your pay will start at the bottom. They could of course pay you for your experience, but most often you will be told that when it comes to unskilled labor, experience means little in terms of pay rate.

So it doesn't take a stretch of the imagination to understand that many people will go from service sector job to job without progressing up much beyond minimum wage. This was well understood when I worked retail - that if you quit your current employer, you'll start at the bottom going somewhere else, which goes against the Right Wing argument that the market works in favor of the worker where you can simply go work where the pay is better. If you've never worked these kinds of jobs, you really have no idea how the workers get screwed, thanks to fights against unions, minimum wages, minimum hours, overtime, health benefits, etc.

[one...two...tree 2,762]

Unfortunately we really can't. Its the dirty secret of capitalism. To have winners, you have to have losers.

All you do when you pay everyone a living wage, is raise the floor to which a person must pass in order to escape poverty. If you are forcing companies to pay a living wage, products and services will get more expensive which will significantly drive inflation. And in the end, most people would not be better off than where they started.

We can create education oppotunities and invest in creating better paying jobs to reduce the number of people below the poverty level. But for everyone else, we can help provide for their needs, housing, food, health care and other essentials.

Not necessarily, Dan. If you look at the income gap over the last 30 years, you'll see where that extra money from stagnant wages have gone to - executive pay and to the shareholders. There is plenty of play in that gap to lift all boats where the companies who remain the most competitive will keep the costs as low as possible.