Dems part with “Senator for Life” Tom Carper on Social Security benefit cuts

Filed in National by on February 17, 2015

While Tom Carper favors cutting social security benefits, (because jobs…(?)) he probably will not bother opposing this common sense proposal to eliminate the cap on taxable social security income. It isn’t going anywhere in a GOP controlled congress, so Carper can sit back and let Mitch McConnell do his dirty work.

Josh Marshall at TPM puts this on the lowest possible shelf for anyone who still doesn’t get it. *cough* Tom Carper *cough*

…if you make $30,000 a year you pay an effective 15% tax in payroll taxes, with no deductions at all – 7.5% that you pay directly out of your paycheck and 7.5% which your employer pays on your before, something which economists judge as effectively you paying it. But if you make millions of dollars a year your payroll tax rate can go down under 1%. Limiting or ditching that benefit could eliminate any longterm Social Security budget problems basically forever.

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Jason330 is a deep cover double agent working for the GOP. Don't tell anybody.

Comments (38)

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  1. donviti says:

    You can blame Obama for this one too, he had his chance to get this done I believe when the ridiculous tax break sunsetted or whatever bullshit stimulus they say they gave us when they eliminated it for a few years. Further screwing the benefits.

    but yes…jobs…Merika! and Terra!

  2. Jason330 says:

    Yep. Obama de-electirfied the “third rail” by putting benefits cuts on the table during the grand bargain negotiations. Naturally GOP-light Dems like Carper rushed in behind him.

  3. Anonymous says:

    Why don’t they cut their own salary!!!

  4. Geezer says:

    Because it wouldn’t make any practical difference!!!

  5. Jason330 says:

    That makes it the kind of empty gesture you’d think the TeaParty types would love.

  6. Wait a minute... says:

    Uhhh, guys, aren’t you forgetting something about Social Security? It’s not really a traditional “tax,” it’s more of a forced retirement account. The story you link to includes this point:

    “The cap does exist for a good reason, policy experts told TPM. Social Security benefits are paid in part based on how much people pay into the system. Without a cap, it’s possible that multi-millionaires and billionaires would accrue huge Social Security benefits by the time they retire. The cap also arguably helps politically by keeping Social Security as a social insurance program instead of welfare where the rich pay in to help the poor.”

    Now, if you want to make Social Security into a redistributionist system, and say to those who make more money that not only are you paying into a system to help support your own retirement, but we’re now also going to take money from you to fund the retirement of others, than by all means go ahead; but that’s what lifting the cap would do…

    Rather than force employees to pay into a system with a lousy rate of return, what if we had everyone pay into their own private 401(k) account instead? That way, folks could get a higher rate of return, and, if they died before reaching the age for social security, their heirs could benefit? I know, I know, sometimes 401(k)’s can go down in value, so what about that risk; but, long-term, a well-invested 401(k) is going to easily outperform social security.

    Let’s see what happens if I am 25, have no savings, make $30k/year and invest 15% of my income in a 401(k) until I retire at age 67 and start pulling money out of my 401(k).

    If you go to https://myretirementplan.wellsfargo.com and use their retirement calculator, it tells you that assuming an “average” rate of return for the market, you would have an account worth $1.864 million dollars — enough to provide a monthly benefit of $8,873/month (representing 80% of pre-retirement income). (that is assuming no social security benefits)

    Of course, that assumes you only make $30k/year (or its inflation-adjusted equivalent) for your entire 42-year working career, and you continue to contribute 7.5% per month and your employer also contributes 7.5% per month. If you start at $30k and get raises as you progress (thereby contributing more), you would save even more.

    However, if you and your employer made those same contributions to social security, social security benefits would be substantially less. According to the Social Security website, if you are 25, making $30,000/year and plan to retire at age 67, your monthly benefit when you retire would be only $5,960 — only two-thirds of the 401(k) estimate. (go to: http://www.socialsecurity.gov/oact/quickcalc/)

    This is why social security is, ultimately, not efficient and a bad deal for workers. You pay into a system where you may never collect (if you die early) and you pay into a system with a lousy rate of return. The government, though, has no real incentive to try and make the program more efficient and suffers from inertia and all the other problems trying to reform a government program.

    The best way to fix social security isn’t to raise taxes, which just sucks money out of the economy and is recessionary, no, the best way to fix social security is to create a system that provides more for workers and — best of all — doesn’t depend on a giant ponzi scheme and a constant need to raise taxes even more to avoid going broke.

    Now, certainly we can’t just switch over to a different system tomorrow, there would need to be a transition period and what not, but, if the goal is to create a truly sustainable system, we can’t keep down the path we’re on. So, while I expect nay-sayers to preach doom and gloom, I would hope that they would see there is merit to real reform to the system, rather than the typical knee-jerk reaction of let’s increase taxes…

  7. cassandra_m says:

    Good grief.

    First off, you can comment here under one name. So pick one — Wait a Minute, BeCareful, Really?, Really?????, Richard Forsten or mathcheck– otherwise you are done.

    Second, Social Security is meant to be social insurance program– one whose benefits increase as costs do, so the contributions have to increase to meet those promises. It is not meant to be a 401(k) program. The cap on Social Security was raised once during the Reagan Administration in order to head off a massive shortfall in the program, and we have exactly the same situation. It isn’t meant to be a retirement investment fund and it is pretty stupid to pretend it is.

  8. Jason330 says:

    “Security benefits are paid in part based on how much people pay into the system.”

    …in part… You must have missed that. Don’t beat yourself up over it.

  9. Another Mike says:

    Those who can afford to defer 15% of their income likely are already doing so, investing it in the stock market, real estate, etc. Many more income earners, i.e., most of us, have to decide whether to keep our contributions at 4% or lower it to 3 as our employers inform us that they will no longer match dollar for dollar.

  10. SussexAnon says:

    Because pulling money out of your 401k for retirement during a stock market adjustment/crash/recession is…..winning!

    Pires is looking better all the time. Wacky hair/baseball cap and all.

  11. Geezer says:

    Richard Forsten, eh? More like Richard Foreskin. Better name for this congealed GOP horseshit peddler.

  12. Geezer says:

    The problem with Mr. Foreskin’s comment is that Social Security was never intended as a “good deal for workers.” It’s security for society, not individuals. Republicans’ inability to think communally is why they should be beaten to death with their golf clubs.

    Also, taxes do not “suck money out of the economy.” Government spending is part of the economy, too. Seriously, you people are hemorrhoid-ridden assholes.

  13. Forsten was and, for all I know, may still be, legal counsel to the State GOP.

    Staunchly defending the greed of the 1%’ers.

  14. Wait a minute... says:

    I see you all are in rare form today. Can’t argue the facts so just hurl insults.

    All I did was run the numbers from the initial post, where it was claimed that the 7.5% from a person making $30k and 7.5% was matched by the employer. If, instead of putting that money in social security it was put in a 401(k), the employee would be better and the social security system would be better off. It is a better deal all around.

    And, how can anyone believe that social security was not intended as a good deal for workers. The whole point was to provide security in retirement through, essentially, forced savings. If we can make the program stronger and better, how would anyone be against that? Oh, wait a minute, I’m at Delaware Liberal.

    Sadly, folks here would rather cast aspersions that have serious discussions on the merits. And folks here seem to think they’re funny or scoring points when they insult others. Sadly, your so-called humor betrays your closemindedness and the emptiness of your position.

  15. cassandra m says:

    Can’t argue the facts so just hurl insults.

    We’re mostly in the habit of arguing facts with folks with experience in recognizing them in the wild. We’ll let you know when you’ve arrived.

  16. Geezer says:

    No, it reveals that I have no interest in “debating” these points with an asshole. You came here peddling propaganda. You apparently missed the “no soliciting” sign at the entrance to the neighborhood.

  17. Wait a minute... says:

    Oh good, more insults and arrogance rather than debate on the merits. For the record, look at my post, I explained how someone paying their and their employer’s social security contribution into a 401(k) would result in greater benefits at retirement than under the current system. I also included how the numbers were calculated and provided the website addresses so folks could double check things on their own.

    I also included the omitted quote from the original story that if you have people contribute more to the system, they will get more benefits on the back end — and that could be a problem.

    All I argued was that there is a better way to fix the system, that actually would benefit workers more. Think about it for a moment — a system where folks get more in benefits and no need to raise taxes. Sounds like a win/win.

    But folks here are so conditioned to insult those with whom they disagree, and are so close-minded, that they would just rather hurl insults than try to debate on the merits. So much for civility.

  18. cassandra m says:

    There’s plenty of civility. You just don’t have any merits.

  19. pandora says:

    Uh oh, I think we have a Sea Lion. 😉

  20. Jason330 says:

    In case it comes up…”debating” man made climate change and biological evolution are also areas where Republican “facts” don’t matter. I am chagrined to think that I ever spent any time trying to discuss reality, economic or scientific, with brainwashed idiots like this one.

  21. Jason330 says:

    Lol. Pandora that is brilliant.

  22. Geezer says:

    No, no, no, Richard. What I was trying to explain is that you’re looking at this, in typical Republican fashion, selfishly. Putting the money in anything riskier is, obviously, riskier. Ask around about how your friends’ 401ks did in 2008-09.

    Furthermore, this issue isn’t going to be hashed out at Delaware Politics. This is a national issue that has been studied to death. All of us are well aware of your argument. It’s been considered and dismissed by liberals years ago, and nobody owes you an explanation for why your argument is unpersuasive.

    “Winning” a “debate” about this is what Republicans like you do when you’re bored. Cursing you out is what we do when we’re angry about people bringing that weak shit in here.

    @Pandora: Brilliant!

  23. pandora says:

    Aw shucks! It is perfect, tho.

  24. Dave says:

    @Wait A Minute – or whatever name you are going to use

    First, Social Security was intended to provide for the general welfare by establishing a system of Federal old-age benefits, and to make “adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment compensation laws” It is a basic benefit that was not intended to provide fully for a person’s retirement. There are those such as the disabled, who would have no means in their old age. So a one-to-one comparison with a 401K at the individual level does nothing to account for this particular feature of Social Security.

    Second First, the average 401K match is 5%, not 7.5%. So the hypothetical return is considerably less.

    Third, 401K based system would offer no protection from catastrophic failure of the financial system and markets (see Too Big To Fail).

    Fourth, I’m not sure who is in your social and financial circles, but I can assure you, that there are no “multi-millionaires and billionaires” accruing or collecting huge Social Security benefits by the time they retire.” This does not happen because of two reasons. The first is that they do not ordinarily contribute to Social Security in the same form as you do, since most of their income is not ordinary income. Second, they don’t collect SS because it is pointless and tantamount to chump change for them.

    Your more egregious logic flaw shows up when you propose to replace SS with mandatory 401Ks, effectively conceding that most people are not wise enough to do it on their own, but then figuring they will be smart enough to manage the 401K and end up with a million or more. How many people do you personally know with that amount? How many do you know that took such a large hit during the recession that they can no longer retire?

    Is SS redistributionist? To some extent, I suppose it is, but what would you suggest we do with a disabled person who has no ability to work and consequently will have no means of support after their parents or caregivers have passed away? Now if you want to institute an old age program for which euthanasia is a component, well that might make your idea more feasible.

    I am not a fan of Social Security. I pay in, but am unable to collect because of federal laws (long story). But to suggest that we can replace SS with 401K is ludicrous at best and demonstrates a lack of understanding of the Social Security program.

    As far as the cap on Social Security income goes, I’m generally opposed because it’s nibbling at the margins. If you want to get at the 1%, you have redefine Social Security income. I keep harping on this hoping someone will have an Aha! moment – The 1% do not collect paychecks! They collect interest on state and local bonds, carried interest, stock options, and capital gains, no-additional-cost services, none of which is subject to FICA. Any proposal that impacts wages does not affect the 1%. Mitt Romney could care less about the SS cap, except whether it would cost him votes (if he were running).

  25. Geezer says:

    @Dave: Actually, if you get rid of the earnings cap but leave the benefits cap in place, it has the effect of means-testing the rich out of higher benefits. The analyses I’ve seen say that one change would eliminate shortfalls in perpetuity.

    Of course, that’s just a fix to SS, not the entire economy.

  26. Dave says:

    @Geezer

    True, but it doesn’t really touch the 1%, who already have the means not even bother with social security and whose “income” may not even be subject to FICA taxes. I suppose that depends on how you define “rich” though, which probably depends very heavily on where you are on the economic scale.

  27. Geezer says:

    You’re right, but I was responding to this guy on the SS question alone.

  28. mouse says:

    Someone making 30K barely has enough to keep the lights on and food on the table let alone invest 4500.00 a year out of it

  29. mouse says:

    If SS funds were put into the stock market, the sociopathic parasites on Wall street would find a way to steal it or gamble it away unless it was severely regulated.

  30. Wait a minute... says:

    Guys,

    If you’re going to criticize, at least pay attention to some details. I put up all my assumptions and explained them, and you are complaining about things that aren’t true.

    Mouse — you’re right, someone making $30k/year can’t be expected to put $4500/year into a 401k; BUT, half of that money is coming from the employer (the matching FICA payment), and the other half is the FICA already being paid. So, the employee is already paying $2250/year into social security and employer is paying the rest. My example did not call for any more money to be paid than is already being paid.

    –as to the notion that folks on Wall Street would steal invested funds, I think most folks with 401ks are doing okay and I don’t see a lot of theft or hear reports of any; in fact there already is a lot of regulation; incidentally, I’m not suggesting that the 401ks which would replace social security wouldn’t be regulated or not subject to any oversight

    Dave — similarly, when you point out that the “average” 401k contribution is 5%, you again are ignoring the point I was making — under social security, employers pay 7.5% (actually a tad higher) and so do employees. So, the fact that the “average” 401k distribution may only be 5% has no bearing on this discussion.

    — also, to the extent you (and others) point out that social security is also supposed to provide for the disabled, etc., that’s fine, we can tweak the numbers and do more refined calculations, and provide for some small portion of the contribution to go to that part of the program, but, the bottom line is that we can still make the overall program stronger and better and provide more for everyone

    –you also claim that there are no millionaires and billionaires collecting big social security benefits; at least in the case of billionaires, I have no doubt that’s true, but all I was doing was including an omitted quote from the story that started this whole post, it was the story making the point, not me; by the way, if someone making $150k or $200k was required to make additional contributions, they would earn higher benefits under the current formulas and I’m pretty sure they’d want those higher benefits

    –as to the notion that I am somehow implying or conceding “that most people are not wise enough to do it on their own, but then figuring they will be smart enough to manage the 401K and end up with a million or more” you again miss the point; it’s not that most people aren’t wise enough, it’s that, as mouse pointed out, those with low incomes can’t afford to pay social security AND a 401k; but, give them a chance to put all or some of their social security in a 401k, and I suspect that many would jump at the chance; and I have faith that with a good program that offers the right options, most people would do just fine and have more smarts than you apparently think they do

    –in fact, you also asked: “How many do you know that took such a large hit during the recession that they can no longer retire?” and the answer is none; if you left all, or almost all of your money in a 401k during the recession, it would have recovered from any hit during the recession and be higher today that it was at the start; such is the power of long-term investing; and, as one gets older, one should slowly shift from equity to more stable investments; there are mutual funds which do this already (you can invest in a fund “target 2025” or “target 2035”) which does this automatically

    Look, the bottom line is that we, as a nation, can do better than the current social security system. I was trying to make that point. If you all want to engage in insults and snarky comments in some desperate effort to disparage anything “republican,” indeed, if your worldview is that anything “republican” is bad and must be attacked, then is it any wonder that our politics have become so poisonous? And I don’t mean to suggest that only folks here are guilty of that, there are folks on both sides who are, but don’t expect to make any progress on the great problems of the day if you’re going to be so closed-minded and rude to those on the other side of the aisle.

    In any event, I’ve learned my lesson. Folks here aren’t interested in anything that doesn’t conform to their group think. What a shame.

  31. cassandra_m says:

    Awesome — an accusation of groupthink from someone who has done nothing but post his own groupthink the entire time he’s been here.

  32. SussexAnon says:

    ” also, to the extent you (and others) point out that social security is also supposed to provide for the disabled, etc., that’s fine, we can tweak the numbers and do more refined calculations, and provide for some small portion of the contribution to go to that part of the program, but, the bottom line is that we can still make the overall program stronger and better and provide more for everyone.”

    This paragraph makes no sense. Tweak the numbers? What is that? And a small portion of the contribution to go to that part of the program? 401ks are a private, not collective thing. Are you proposing (dare I say) a tax on 401ks to create a…..safety net?

    “Look, the bottom line is that we, as a nation, can do better than the current social security system.” And raising the cap fixed our system the last time. If you thought Obamacare was cumbersome, scary and confusing to the masses, try telling them their SS money is gone to Wall St. And if there is a problem, talk to your banker.

  33. Dave says:

    “Look, the bottom line is that we, as a nation, can do better than the current social security system.”

    I agree we could do better.

    “If you all want to engage in insults and snarky comments”

    I’m pretty sure I was not insulting or snarky. Regardless, I think you either glossed over or missed the main point.

    Social Security takes care of everyone. Does it do a good job? Yeah it does, as far as it goes. However, the fallacy you and others often make (including SS recipients), is that SS is not intended to be a complete retirement solution. Which is why we have 401Ks, defined benefit pension plans, etc. You see, Social Security has always been and is only a safety net for everyone. Nothing more, nothing less. So suggesting that SS is not a solution and that things like 401Ks are a better solution misses the objective of the safety net. Theoretically, you could make poor decisions regarding your 401K and be left with nothing, but you will always have Social Security.

    Now you can structure a complete retirement solution that either includes or excludes Social Security, as long as you create and sustain a safety net that does what it is intended to do. Even some of the most ardent anti-government, far right wingers in Delaware have children who are collecting SSI because those children cannot ever hope to earn a living on their own. So if you want to offer up ideas about how to save, restructure, or eliminate Social Security, I highly recommend that you examine the entirety of what the program does and who it does it for and then determine what you would institute to eliminate the program in order to create a better outcome. The simplistic idea that we can just take what we invest in Social Security and put it in a 401K is exactly what some Congressional leaders are gurgitating which means their followers are regurgitating, without knowledge of or appreciation for what the Social Security Act was all about (and still is all about).

    P.S. I dislike Social Security as a program, but I haven’t figured out how to eliminate it without causing havoc and suffering.

  34. Geezer says:

    The reality is that 58% of SS recipients have no other income.

  35. Rufus Y. Kneedog says:

    I think Social security is 6.1%, the other 1.45% is Medicare to get to Wait a Minutes 7.5.

  36. cassandra m says:

    The reality is that 58% of SS recipients have no other income.

    And lots of folks who are trying to responsibly plan for a retirement via 401(k)s are routinely told that they should save for the difference between what SS will pay them and what they need to have the retirement lifestyle they want. With the demise of pensions, SS as a baseline income has been crucial.

  37. Geezer says:

    @Cassandra: What’s seldom remembered is that 401k plans were designed to supplement SS income, not replace it. Those who call for them now to replace SS are illustrating the action of the slippery slope.