Look at this from Associated Press about the Fiscal Cliff negotiations:
WASHINGTON (AP) — President Barack Obama's offer to slow the growth of Social Security benefits would force fellow Democrats in Congress to abandon promises to shield the massive retirement and disability program from cuts as part of negotiations to avoid the year-end fiscal cliff.
Both Senate Majority Leader Harry Reid, D-Nev., and House Minority Leader Nancy Pelosi, D-Calif., pledged not to touch Social Security as part of deficit reduction talks. Now that Obama and House Speaker John Boehner, R-Ohio, have agreed to a new measure of inflation that would reduce annual Cost-Of-Living Adjustments, or COLAs, for Social Security and other government programs, Democrats are reluctant to call it a deal-breaker.
OK, friends, just remember this: Obama will never allow any real reforms to Social Security. This COLA proposal is just a ploy. Because it is crucial to remember one thing:
Social Security is not a retirement system. It is a wealth redistribution system. Because low-income people pay in little or nothing and get out a lot proportionally, while most other people pay in a lot and get out less and less.
And that is what Democrats do not want you to know.
Obama’s proposal would only be a small reduction in the automatic COLA increase every year from 1.7% per year increase for each check issued to 1.4%.
Big deal. That could easily be changed in future legislation. And rest assured that, if passed, the Democrats would negate that reduction in other ways, making it up with food stamps, housing subsidies etc. for anyone who wants them.
Actually, every SS check (not the COLA increases but the check itself) needs to be cut by 25% to produce any significant savings. And the retirement age needs to be raised to 70. Because the system is broke. Today most people who are middle-class or higher are already getting much less out of Social Security than they paid in. And it is getting worse as time passes.
Think about it this way – if Social Security took $10 from you in 1980 and gives you back $9 today you might throw up your hands and say, “Oh, well, I am taking a 10% loss. But SS has ‘helped’ so many people that that is OK. I wasn’t going to rely on Social Security anyway.”
This is the way that most Americans think. They have no idea how they have been conned.
Because you actually are taking a huge loss that the Democrats don’t want you to know about. Because that $10 would have bought 10 gallons of gasoline in 1980. Your $9 today will buy 2.5 gallons, or would buy much less of everything because of inflation.
In other words you have lost up to 75% of your wealth through Social Security.
Meanwhile just a private bank savings account since 1980 would have given you a big increase on interest alone. That $10 could have tripled or better by now.
It is important to remember that Social Security and Medicare are functionally bankrupt in the first place because Democrats have been orchestrating generous increases in payouts every year at the same time that tax revenue coming into the system has plummeted relative to payouts. Here is why:
*The original SS tax was 1% of your paycheck. Today it is 6.2 times as much, or 6.2%. That is a huge increase and that is not because of inflation – it is after inflation.
And actually the tax is twice as much, or 12.4%. If you want to see an explanation of why this is true click here for a Nikitas3.com commentary about how Social Security really works.
Most Americans don’t even know how much in taxes they pay to SS. That is a travesty. They are in the dark because nobody bothers to learn about it. They just accept it even though it is a lot of money.
*Even despite the much higher taxes, the system has been worsening. Because over the decades the population has been aging and we have more and more people collecting from SS as fewer and fewer people pay in. Soon there will be only about 2 workers paying in for every person collecting an SS check. This compares to 42 workers paying in when the system issued its first check in 1940.
In other words Social Security is like a chain letter. The people at the top of the list – the recipients in the early years – did great and people further down do worse and worse as time goes on.
The first person in America to receive a Social Security check got out 1,000 times more than she paid in, but that was an unusual set of circumstances. Still, by 1960 the average person was getting out 7 times what he/she paid in. Today the payout is negative for most people. See the trend?
No wonder the system is failing. Chain letters are against the law. They are also known as Ponzi schemes.
*It gets even worse, and for good reason. The official retirement age in 1940 was 65, which it still is today while the average lifespan in 1940 was 63.6 years.
That would be like setting the official retirement age today at 80 because that is slightly more than the average lifespan, which is about 78.5 years today.
If the retirement age today were 80, all the problems of SS would be solved overnight. But you can rest assured that Democrats will fight any increase in the retirement age from 65 as a big public relations stunt. Yet every realistic person knows it must be raised. It is being suggested that it be raised just to 67. But even that will do little to help the system.
No, Obama is proposing only small reductions in the COLA to divert us from the fact that he is making no serious reform proposals like raising the retirement age substantially or reducing payouts significantly. These are the types of major reforms that are needed to prevent Social Security from going further over its own Fiscal Cliff, which it went off years ago.
What are Democrats really planning to do?
They are going to propose to solve the Social Security mess that they themselves created by pushing for massive tax increases for SS. They will seek to double SS taxes from 12.4% to 25% on every paycheck. Watch for this proposal over the next five years.
Then you, your children and grandchildren will have most of your income confiscated in taxes after all taxes are added up including 25% SS and all the other coming taxes including huge tax increases to cover our skyrocketing national debt and to pay for ObamaCare.
*Another Obama trick is the Social Security ‘tax holiday’ that has been in effect for almost 2 years. That is going to expire soon.
This allowed wage earners to keep 16% of the money that they normally would have paid in SS taxes (2% out of the 12.4%) This was a big boost to worker paychecks and to the economy, about $100 billion per year in workers’ pockets instead of going into SS.
But here is what really happened: The federal government borrowed that $100 billion and sent it into the SS system and out to SS recipients. There was, in effect, no ‘tax holiday’.
The SS ‘tax holiday’ was a terrible idea to begin with. Because it is playing politics with Social Security when the system is supposed to fund itself.
All people should pay full SS taxes and also should be told exactly how the system works and be given the option to leave the system. Then those who wish to opt out should be allowed to do so.
Democrats do not want anyone to have any options, however. Because they know that most people would quit if they could, including most Democrats.
That is why public school teacher unions – all controlled by committed Democrats – in more than a dozen US states have voluntarily opted out of SS. This was a “gift” from the Democrats in Washington to their union friends, to give them better retirements.
Because these unions know what a terrible system SS is. That is why these unions are keeping their money in private accounts while they, as Democrats, scream loudest about how wonderful Social Security is and how it should not be changed at all. For everyone else, that is.
Because remember the most salient point:
Social Security is not a retirement system. It is a wealth redistribution system. Because ‘poor people’ pay in little or nothing and get out a lot proportionally, while everyone else pays in a lot and gets out less and less.
That is the reality that Democrats do not want you to know.
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