Saturday, April 16, 2011

A Modest Proposal - Social Security Reform

In the first installment, I took a chainsaw to the military budget.  Now that I've cut my own favorite programs, let's douse ourselves in salt water and jump on that third rail - entitlement programs.  Specifically, we'll talk about Social Security in this installment.  Other programs such as Medicarewill be covered in the next installment.

Social Security

Here are some ground rules on my changes to Social Security:
  1. If you're receiving it now, no changes to your benefits.  
  2. If you were born before January 1, 1950, you're grandfathered in on the existing benefits plan
  3. If you were born between January 1, 1950 and January 1, 1965, you will receive benefits, but there are changes.
  4. If you were born on or after January 1, 1965, take a few minutes and pick out a nice lubricant, because this might be a little uncomfortable.

Current Recipients and citizens born before January 1, 1950:
  • Like I said, no changes to your benefits.  You have lived your entire lives paying into the system, and it's not your fault you were hoodwinked by FDR and every president since then.  Plus, there isn't enough time to build up your personal savings so that we can just dump the program entirely without pushing all of you onto an ice flow.
  • Seriously, we're not going to rip the rug out from under the generation that survived the Great Depression, fought World War II and Korea, and made this country as rich as it is.
  • Heck, for putting up with the Baby Boomer's and Generation X for the past 60 years or so after going through all that, you deserve better than you're getting.  But the best we can do for you is to keep things going for you.
Citizens born between January1, 1950 and January 1, 1965
  • Anyone born between January 1, 1950, and January 1, 1965 will have their retirement age raised to 75, with no benefits for early retirement. Feel free to stop working any time you want.  You just don't get a monthly check from the government until you're 75.
  • When this age group reaches 65, the current retirement age, they stop paying Social Security taxes.  They also have no cap on the amount of money they can dump into IRA and 401x savings programs.  Between the two, hopefully the BabyBoomers can, as a group, make up for not making the hard choices in the 1970's and 1980's.
  • A couple of means tests will be applied to this age group.  First, if your average yearly income in the last 10 years of employment, age 65 to 75, is more than 200% of the poverty line, your benefits are reduced on a sliding scale.  For example, if the poverty line in the year you retire is $30,000, and you made on average more than $60,000 a year before taxes and pre-tax expenses between your 65th and 75th birthdays, your monthly benefit will be reduced on a sliding scale.
  • In addition to the test of income, if your household assets are worth more than 200% of the amount of benefits you would receive over the first 10 years after retirement, then your benefits are reduced on a sliding scale.     For the second test, let's say you're going to get $30,000 a year from Social Security, you would receive $300,000 in benefits in the first 10 years after retirement.  If your household assets are worth more than $600,000, your benefits will be reduced on a sliding scale.
  • It is quite possible that between these two means tests, a good percentage of this age group will receive no Social Security benefits at all.  Yeah, that sucks.  Sorry.
Citizens Born on or after January 1, 1965, (Which includes me and Irish Woman)
  • This generation will never get Social Security benefits for retirement
  • This generation will continue to pay into Social Security until all people born before January 1, 1965 have stopped receiving benefits.  As that population segment dwindles over the next few decades, the amount of tax paid into Social Security will decline.
  • To make up for the injustice of paying into a ponzi scheme that you know will leave you with nothing, the yearly cap on the amount of money that can be put into IRA's and 401x retirement accounts will be removed.  You want to dump 75% of your income into a tax deferred account so that we don't have to worry about feeding you when you want to stop working?  Have at it.
  • When this generation reaches 75, they may start taking money out of their private retirement accounts without penalty, but will pay taxes on it.  If that's enough to stop working, congratulations.  Otherwise, we get to work until we can't do it anymore.  
One exception to these rules is the Social Security benefits given out to people who are disabled to the point that they cannot work, regardless of age. This one is thornier.  The hard hearted part of me says that those who do not work, do not eat, but I know that there are members of our society who deserve to live, but are unable to provide for themselves.  I can honestly say that I don't see this segment ever being moved completely off of government benefits, including Social Security.  A residual tax on the working portion of society will probably continue ad infinitum to pay for this.  But the criteria for being declared disabled to the point that you need government funding needs to be tightened, and a yearly evaluation of what someone on disability can and can't do needs to be done.  For example, someone I know was in a horrific car accident several years ago.  To be honest, if she'd had the accident 10 years ago, she would have died.  Thanks to the miracle of modern medicine, and the fact that the ambulance took her to the hospital that's used to treat injured drivers from the Indianapolis 500, she made it, but is physically and mentally impaired to the point that she's on 100% disability.  In the intervening years, she's continued to improve in both realms, but as far as I can tell, no evaluation of her abilities has been done, and no pressure is being put on her to find employment.  Situations such as this need to change.  Americans are an overwhelmingly charitable people, and we are more than willing to provide for those who are truly disabled.  But as someone's situation improves, they should be motivated to find employment that meets their abilities.   I don't have a good solution for this one.  But if we reform the retirement side of Social Security, I think the hard decisions on who is or isn't disabled, and to what degree, can be answered by those who know more about medicine and employing the disabled and still come out ahead fiscally.

A few more thoughts before I end this too-long-already post. 
  1. You'll notice I always say "Citizen" when I'm discussing these changes.  I sincerely believe that if you're not a citizen of our country, or at least a legal immigrant who is working towards citizenship, then you shouldn't be eating from the communal trough.  Is this unfair to illegal immigrants who work under assumed names and Social Security numbers and therefore pay into Social Security?  Probably.  But if you want to stop being a sucker and paying into someone else's retirement plan, become a legal immigrant and start paying into your own.  Otherwise, feel free to return to the country of your birth, work hard there, and retire using their social safety net.
  2. For those using Social Security in order to survive while disabled, a regular, but randomly timed and selected, test of recipients for nicotine, alcohol, and other intoxicants needs to be done.  We'll talk about ending the "War on Drugs" later, but if you're asking the rest of us to make sure you have a roof over your head and food in your belly because you can't work, you have no business buying drugs, booze, or smokes.
  3. I also believe that if someone who is receiving Social Security benefits, either for old age retirement or disability, is convicted of a felony, they need to stop getting money from the rest of us.  Yes, I know it's easy to commit a felony these days, but we'll talk about trimming a few of the more BS sets of laws later.  If you want to get a check from the rest of us, you've got no business breaking the law.
Now that I've pissed off the VFW and the AARP, I'll get the AMA all riled up next time when I discuss healthcare spending.


Old NFO said...

Sadly, I don't think you are too far from what is going to end up happening... When you add in the cuts that will come to Medicare/Medicaid, if you get sick, and are elderly, you might as well take a gun and shoot yourself.

DaddyBear said...

That's one of the reasons I take away the cap on contributions to tax deferred funds. For people who are close to retirement, the extension to 75 gives them a few more years to sock away everything they can while they can. For us who will pay in and not get anything else, we at least can put away a steady amount over the next few decades so we're not absolutely destitute when we want/have to stop working.

Of course, this is assuming that the government doesn't look at all that nice juicy fundage and snatch it all up.

Honestly, if the Congress and the electorate had made the hard choices back in the 1960's and 1970's when the Baby Boomers were becoming a large percentage of the work force, we would be in much better shape. As it stands now, I don't see any good choices anymore. It's going to break, the question is do we have the guts to break it in a way that we can control?

perlhaqr said...

it's not your fault you were hoodwinked by FDR and every president since then.

Yes, it is.


As a post-'66er, I want a reduction in the SocSec tax rate. God doesn't demand more than 10%. The FedGov shouldn't be able to. I'm talking combined contributions, of course.

DaddyBear said...

The law that reforms the programs would have to have language in it that reduces the tax rates over time as the pool of pre-66 retirees dwindles. However, knowing how our government never met a tax it didn't like, that language would have to be defended like it was the last bottle of rum at Ted Kennedy's wake.

The cap on pre-tax 401x and IRA money would be lifted, so that would lower your taxable income, and therefore your tax.

But yeah, those of us born after the Kennedy administration are going to take it in the shorts no matter what.

DaddyBear said...

perlhaqr, do you have a blog? I'd like to check it out. I like to add people who read my blog to the blogroll. google search is less than useful.

perlhaqr said...

I just started one recently, but I haven't actually posted anything there yet, and may decide to do something else entirely.

So, you can find my blankness at for the nonce. For all the good it'll do ya. ;)

perlhaqr said...

And I'm certainly fine with the rate being lowered over time, I just want FICA capped at 10%, to start with. I mean, if they are going to get to write me off the rolls entirely, that should bring about a huge reduction in the "future liabilities" column for those programs.

Creative Commons License
DaddyBear's Den by DaddyBear is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 United States License.
Based on a work at