S&P warning is a shot across the bow.

[originalpckelly]

Basically, the government is going to be blackmailed into ending SS as we know it. Medicare too.

And let me tell you why. I know less, admittedly, about Medicare, but Social Security, I know that enough to speak on it.

By law, the two "Trust Funds" run by Social Security must give their surpluses to the federal government, in exchange for securities. The securities are pieces of paper that represent work to be done, while the money given to the government is really backed up by actual work being done by people in the economy. If you just hand out SS money that was poof, created out of nothing, you will trigger massive inflation, because it would not be backed up by real work/goods. That money, you remember, went to pay for the government.

Basically, the Social Security taxes have become a way for the rich to get out of paying, and divert the bill to the middle class, who by law, pay a larger percentage of their income in these taxes than do the rich.

President Obama is no billionaire, but he paid less a percentage of these taxes as a part of his income than would a middle class family. This is because the taxes are regressive after the upper limit of about $110,000. All income after that from a conventional payroll is not taxed anymore than the income below it. So, in other words, if you make $500,000 you pay the same absolute dollar amount as someone who makes $110,000.

And more importantly, these taxes do not apply AT ALL to anyone who makes their money off of capital gains, which is what a vast majority of the wealthy appear to do. If they hold their assets for longer than a year, then they only have to pay 15% of it in taxes, where if they don't, the tax rate is above 30%. Of course, this law was specifically designed to help out those who invest in the longer term, and because the taxes from social security have in the past gone to pay for the federal budget, the FICA taxes effectively act as a way to regressively tax the middle class and poor.

As Warren Buffet pointed out, it is not uncommon for the assistants in an office of a wealthy individual to pay a higher percentage of their income in taxes than do the wealthy folks for whom they work.

The argument that would support this practice, is of course, that a lot of their tax burden comes from the FICA taxes, and they'll get that money back some day.

Well, I guess not, right?

And since these taxes have in many years gone to pay for the deficit caused by not taxing the rich at a high enough level or inefficient government spending (which I guarantee you is not the problem in most places), you aren't capable of making that argument any longer.

And especially, when it turns out, that in reality one could not pay back these taxes collected on people, without fucking over the rest of us.

[kentuck]

1. kick

and rec

[mmonk]

2. You're getting a handle on the game being played.

[Sirveri]

3. The payroll tax to support OASDI is an insurance premium, and nothing more.

It's not regressive because the payout for the insurance policy is progressive. You will only receive funds based on the amount you pay into the system, and that amount is capped (which means benefits are also capped). The bottom line is that the SS trust fund has enough cash to last until at least 2037 using conservative estimates, and the US government is not permitted to default on its bills and interest payments. OASDI is safe and secure for the foreseeable future, the only fix it might need is to adjust the cap to recapture the 90% of earnings it used to capture back in the 1980's.

[originalpckelly]

8. Insurance programs have to be able to pay out...

this one simply won't. It's a fraud. It's almost identical to a ponzi scheme, they take money, pay it out to those who "invested" in the program, and claim pieces of paper that are only backed up by even more money from tax payers or plain old thin air, as an asset.

In an insurance company, you have to keep the money in some kind of real asset. For example, you could take the float, which is the amount of money you have on hand from insurance premiums, and invest it in a company. Berkshire Hathaway does just this.

But the companies are usually solid companies everyone needs in daily life. They ain't goin' anywhere.

If the insurance company needs more money in the float, they can always sell off some stock in those highly reliable companies, and get their money back.

But the federal government cannot do this. The money that disappears into the black hole of the government is really gone. The government cannot sell off it's assets without compromising the delivery of services. It's back door taxation, because the rich haven't been paying up.

The problem is that you cannot institute a robinhood tax on the rich, and an income tax alone won't help, because the rich and the rest of the economy have become dependent upon the surpluses reducing the deficit and letting more money exist in the private sector.

What we have to do is grow our asses. We need a big fucking growth spurt right now. That's the only way to solve it. That way, we can stimulate demand and tax the new growth at such a rate to really pay out the promised SS benefits.

We can grow out of this, by increasing the size of the economy so much, that the old debt looks insignificant, or at least it is something that we can tax away.

Because cutting social security is not an option for our seniors. We simply cannot get out of this like that.

But if you look up on a clear sunny day, there is our national hope. It's a huge fucking reserve of energy, just radiating out into space. We need to tap that shit and fast, or some other nation will beat us to it. We can become the central player in solar energy if we act fast and don't fuck it up.

We can build a distribution network around the world, and we can beam power to other nations, charging them for it. It would be like selling oil, only in this case we wouldn't have to worry about oil spills fucking up the environment.

[Sirveri]

12. The government can't default on debt, so it will print money to cover it.

If that means mass inflation, so be it. But they will pay out on SS so long as the SS trust fund has T-bills in it. Plus with the yearly COLA that money will track with inflation, so they might be going to the store with wheelbarrows to buy bread, but so be it. But this idea that it's a ponzi scheme is just a right wing meme. It's not a ponzi scheme anymore than every other insurance plan is a ponzi scheme. OASDI takes the money, and invests it in T-bills (which is how the surplus returns to the government). Last I checked, that was still considered to be an asset.

OASDI does not need a major fix, it needs some minor tinkering, mainly with the income cap because upper level incomes have expanded much more quickly than inflation.

All of this is why 2037 is an important date. That said, if we manage to actually get the economy to turn around most of this likely won't matter as it will fix itself. If we don't get the economy to turn around then this also won't matter, because we'll probably devolve into domestic violence once society wakes up and gets pissed off and decides to rip itself apart.

[originalpckelly]

13. Yes, that's my point.

There will be massive inflation, or they will have to raise taxes, but either way we will lose out.

The only solution that's actually palatable is to grow our way out of this.

[SoCalDem]

4. S & P and Moodys? aren't these the same outfits that thought the pre-crash shenanigans were ok?

If I recall, they were slapping AAA ratings on just about anything presented to them, and the pushed them out onto the rest of the unsuspecting world banking/saving/investing systems..

were they lying then, and not now? or both?

[malaise]

5. DIng ding we have a winner

posted the same on another thread

[originalpckelly]

6. No, they know the dirty little secret...

It's the same one Obama knows too.

The only real solution to this problem is not to cut social security, it's to grow our way out of the problem. Basically, we have to become the Saudi Arabia of green energy.

[liberalla]

7. K&R

Damn.

[butterfly77]

9. K&R..

[AngryOldDem]

10. As much as I detest Erin Burnett...

...I think she made a good point when asked about this on the Today show this morning. She says she wishes a "disinterested third party" would enter the budget negotiations and make suggestions on what can be cut, etc. I think that's where we're headed, with S&P being the opening salvo.

When that happens, all entitlements will be gone and the elite will have truly taken over.

[JoePhilly]

11. More likely a shot over the bow of the Tea Party in the GOP.

The business wing of the GOP is letting the Tea Party know that not raising the debt ceiling would hurt business.