Six years later and where are we?
Something I Wrote July 2016
We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions. Those who are financially prudent will most likely enjoy success, even if events don’t always go their way.
QUINNSCOMMENTARY 
“Subject it to a vote of taxpayers and see how they want to resolve this. That is my solution – give everyone a choice every year of how they want to fund the shortfall in how to close the funding gap on Social Security.”
Wow! What fantasy land do you live in if you think the majority of Americans will vote to pay more taxes & take less benefits themselves? For someone else to pay or someone else’s benefits get cut – sure. But not their own.
Also am tired of hearing of your and your generation’s perfection compared to the rest of us. You are not perfect, plenty of flaws. I believe Nancy Pelosi and Bernie Sanders are part of your generation.
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No, that’s exactly my point. Neither Congress nor individual Americans are willing to raise their own taxes or reduce their own benefits. People will continue to vote for members of Congress who raise their benefits and send the bill to generations too young to vote or to generations yet unborn.
Instead, a bipartisan, intergenerationally-savvy solution can only occur where Congress comes clean and admits that the benefits they promised are not sustainable. It will only occur where everyone has to participate in making the system sustainable. So, each person would get a choice of options, and would make an annual election to raise the taxes they pay, reduce the benefits they receive, etc. – they get to choose how they want to resolve the funding shortfall. Each person chooses their own poison. The pricetags are adjusted to maintain the “social” in Social Security. And, if they fail to make a choice, there has to be a default – likely, increased taxes. This would include both workers and beneficiaries.
Importantly, in terms of intergenerational issues, the “rates of return” are highest for the greatest generation, and the silent generation (of which Bernie (9/8/41) and Nancy (3/26/40) are members) – not the Baby Boomers. That is, the value of the benefits generally far, far exceed the taxes paid, even adjusted for the time value of money – for the Greatest Generation and the Silent Generation. See: https://crr.bc.edu/wp-content/uploads/2019/05/IB_19-9.pdf
Consider the first Social Security beneficiary – Ida Mae Fuller. She paid less than $25 in FICA taxes over three years (1936 – 1938)! Her initial monthly check was $22.54! So, she received benefits in her first month that were approximately equal to the taxes she paid. She lived to 100 and received $22,000+ in Social Security benefits! See: https://www.ssa.gov/history/idapayroll.html
A great example of how Congress improved benefits to buy votes (that would be Congresses in place prior to the 1983 reductions – when the oldest baby boomer was only 37 years old!). They raised benefits many times – to buy votes – especially the votes of individuals in the greatest generation (1901 – 1927) and the silents (1928 – 1945). And, yes, it was the Baby Boomers, (1946 – 1964) who have financed all of those vote-buying efforts – where we were born “just in time” to see taxes raised and benefits cut as part of the Social Security Amendments Act of 1983.
And, that’s not limited to Social Security. the maximum Medicare payroll tax was $21 in 1966. It increased steadily from then to 1990 ($743.85), when the cap was raised for HI, and in 1993, when President Clinton removed the wage base cap.
~75% of Medicare Part B and Part D were/are financed with general revenue taxes.
So, I’ve been paying FICA taxes for 28 years and income taxes for 53 years.
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FICA taxes and Medicare taxes for 48 years, not 28. Sorry for the typo
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Something I wrote in 2016 regarding expansion of Medicare and Social Security benefits – a clear cut case of vote buying:
You state: “The simple fact is that both the Social Security and Medicare trusts need an infusion of cash to remain solvent (or a cut in benefits, but who wants to do that?)”
If I were 30, instead of 64, I would vote to cut my benefit versus increase my taxes. If I had to do it over again, that would be my vote. Now that I have paid in far in excess of what I will receive in my retirement years (whenever they come), I am loathe to have paid in massive amounts of taxes only to vote for a cut in my benefits. But remember, more than half of all Americans who retire and collect Social Security are expected to have a positive rate of return on their taxes – to receive more in value than they paid in (both employee and employer contributions). But, as the Democrats make clear, the decision is not one of do I want them to raise my taxes or cut my benefits.
No, instead, they ask “SHOULD WE RAISE OTHER’S TAXES TO INCREASE YOUR BENEFITS”. That’s a winner in American politics any day of the week.
I’m reminded of Dire Straights – Money for Nothing:
Now that ain’t workin’ that’s the way you do it
You play the guitar on that MTV
That ain’t workin’ that’s the way you do it
Money for nothin’ and your chicks for free
Money for nothin’ and chicks for free
I want my, I want my, I want my MTV
I am coming to the realization that Congress doesn’t reflect Americans’ bad fiscal habits. Instead, I am slowly coming around to the belief that those habits are taught by Congress, taught by their actions, taught by others. Watch and learn from your betters, the elites.
See Trump, parrot Trump. Borrow, borrow, stiff the investor, stiff the future taxpayer. Did Congress learn that from Trump, or the other way around?
You state: ” Why should we be surprised? It’s that type of short-sighted rationalizing and imprudent financial decisions that get American families in fiscal trouble on a regular basis. It seems to be an affliction common with the baby boomer and following generations. “I just want it. We can have it all … if we can just find some way to defer paying or find someone else to do so.”
Boomers didn’t learn that at the knee of the greatest generation. I surely didn’t learn that from my lower middle class (financial status) parents – my father who never earned much more than $10,000 a year as a firefighter prior to his death in 1969.
Ask this question, where did you, your siblings, your neighbors, your children learn this financial behavior of all for today … on borrowed money to be repaid by others at some future date?
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If you go back and read prior Social Security posts, you will see that I have calculated my Social Security and Medicare taxes, assumed a 6% rate of return, and concluded that once I commence benefits, likely to occur sometime after I reach age 66 (with a goal of maximizing the payout to myself and my spouse), I will receive much less than I caused to be paid into the system over the past 48 years, with at least five to 10 years to go before I stop earning wages subject to FICA and FICA-Med.
There is no mistake in my calculation. The reasons why I don’t get back all of my contributions, plus imputed earnings are simple:
(1) The progressive Social Security benefit formula, with it’s bend points,
(2) My spouse’s retirement benefit which triggers the Government Pension Offset,
(3) The removal of the income cap on Medicare Part A – FICA-Med in 1993.
Similarly, my income taxes will more than pay the full cost of Medicare Part B and Part D – in that my income in retirement will also likely trigger the surcharges, and because I have been paying a significant portion of my income in taxes to the Federal Government – which they have used to fund most of the cost of Medicare Part B (physician) over the past 50+ years (45 years for me), and most of the cost of Medicare Part D (Rx) since 2006.
Social Security and Medicare shortfalls will never be resolved so long as politicians can promise/offer more benefits to be paid by others, including future generations. Subject it to a vote of taxpayers and see how they want to resolve this. That is my solution – give everyone a choice every year of how they want to fund the shortfall in how to close the funding gap on Social Security.
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(Remember) I paid the employer portion too … They reduced my wages accordingly ( I know because I was the benefits weenie at my firm).
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