Mitch McConnell Is Right About Social Security

Truth is something that we are not used to hearing in the current political climate so it can come as a bit of a shock when a politician blurts out a harsh dose of reality. That was the case yesterday when Mitch McConnell confronted the American people with the bitter fact that the deficit is too large and the only way to cut it is by slashing the sacred cows of Social Security, Medicare and Medicaid.

“It’s disappointing but it’s not a Republican problem, McConnell told Bloomberg. “It’s a bipartisan problem. Unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.”

While it is not solely a Republican problem, the GOP has done little in the way of deficit reduction recently. This week the Treasury Department revealed that the deficit grew to $779 billion, its highest level since shortly after the Tea Party revolution. After trimming budgets during the Obama Administration, the Republican Congress enacted tax reform that stimulated the economy but slashed corporate tax revenues. At the same time, spending increased due to a larger military budget as well as increased interest payments on the national debt and increased Social Security spending.

The four percent increase in Social Security spending represents a major part of America’s debt problem. While it is tempting to blame foreign aid, military waste, welfare or a number of other programs for America’s mounting debt, the big three entitlement programs (Social Security, Medicare and Medicaid) together make up a whopping 46 percent of the federal budget per the CBO. The biggest of the big three is Social Security at 23 percent of federal spending.

The entitlement problem is so big that it really doesn’t matter how much cutting we do in other parts of the budget if we don’t reform entitlements. For example, the entire defense budget is only 14 percent of federal spending. The sum total of all foreign aid is only 1.2 percent of the federal budget.

The entitlement programs are at a crisis stage. The Social Security trustee report predicts that in only four years Social Security will begin to pay out more than it takes in. If nothing is done, only 16 years from now in 2034 the Social Security trust fund will be bankrupt.

While McConnell’s truth-telling is a rare act of political courage, it is unlikely that Social Security and other entitlements will be reformed soon. The majority leader’s timing in his truth-telling is less than opportune. Midterm elections are only three weeks away and the Democrats undoubtedly have a pushing-granny-off-the-cliff ad ready to go, just waiting to insert the name of anyone who touches the third rail of American politics.

The truth is that not even conservative voters really want to reform Social Security. Many conservatives have bought into the lie that the Social Security tax that comes out of their paychecks is a contribution that goes into their account. In reality, involuntary Social Security “contributions” go into a trust fund, per the Social Security Administration, from which benefits are paid from the trust fund and the excess “must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government.” This is another way of saying that the Social Security benefits are paid from current contributions. Any funds left over are loaned to the federal government, which must pay them back with interest.

The plan of using current Social Security taxes to pay current retirees worked well at first. But the architects of Social Security did not foresee the Baby Boom. Now, as Baby Boomers retire in droves, fewer workers are being asked to support more and more retirees. There are only two options to save Social Security: Cut benefits or increase taxes.

Voters seem to be of two minds about Social Security. On one hand, many believe that Social Security is a socialist Ponzi scheme, redistributing wealth from workers to retirees. Nevertheless, the voters also become militant at the very suggestion that benefits might be cut and that they could lose some of their “contributions.”

Even though there is no individual account containing their Social Security savings, American workers have been promised that their taxes will go to fund their retirement. It would be unconscionable for the government to break this promise to those in or near retirement. That is why Republican plans to reform the entitlements would preserve the status quo for retirees and older workers while giving younger workers the option to take part in a plan that has a better chance of being there when they retire.

Mitch McConnell gets credit for facing the tough problem that is America’s entitlement crisis. The majority leader realizes that the deficit crisis cannot be solved without reforming the sacred cow entitlement programs. Unfortunately, admitting that there is a problem is not the same as being able to solve it.

Originally published on The Resurgent

A battle over spending is shaping up between President Trump and congressional Republicans. Many of Trump’s campaign promises involved spending large amounts of tax money on items from the military to infrastructure. Now budget hawks in Congress are gearing up to try to prevent the deficit from exploding over the next four years.

The Wall Street Journal reports that the tensions surfaced in the confirmation hearing of Mick Mulvaney, a South Carolina congressman who has been nominated by Mr. Trump to head the White House Office of Management and Budget. Mulvaney faced sharp questions from two different camps in the GOP. On one side were defense hawks who were concerned about Rep. Mulvaney’s past votes to cut military spending. On the other were those at odds with Mr. Trump’s campaign promise not to cut Social Security or Medicare.

While the Trump Administration has indicated that it plans some cuts in government spending, the elephant in the room is that programs like the National Endowment for the Arts and the Center for Public Broadcasting aren’t what’s busting the federal budget. Even foreign aid only represents about one percent of federal spending.

Let’s face it, America. We have an entitlement problem.

Entitlements make up about half of the federal budget. The largest entitlement of all is a program that many don’t even think of as an entitlement. Social Security accounts for 24 percent of the federal budget and is the largest single budget item. Health spending in the form of Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and Obamacare subsidies account for another 25 percent. Defense spending is a distant third at 16 percent. Entitlement spending is expected to rise even further as Baby Boomers age and leave the workforce.

“I’m not looking to pick a fight with the president of the United States, but if his goal is to put the country on a fiscally sound course, he’s going to have to address entitlement reform,” Rep. Tom Cole (R., Okla.) told the Journal. “Anybody who is going to balance the budget on discretionary spending [cuts] is on a fool’s errand.”

A fight that is likely to come before entitlement reform is Mr. Trump’s plan for an infrastructure stimulus. Rep. Mulvaney and many Republicans were critical of the infrastructure spending plan before the election, but a separate Journal article noted that Democrats were embracing the $1 trillion proposal.

“We’re challenging him to join us even if his Republican colleagues in the House and Senate aren’t for it,” Sen. Chuck Schumer (D-N.Y.) said. This raises the possibility that President Trump could form a bipartisan alliance with congressional Democrats to enact his spending proposals as well as block conservative attempts at entitlement reform.

The Republican budget hawks will have allies in the Trump Administration. Mr. Mulvaney, a proponent of entitlement reform during his four terms in Congress, said, “I haven’t been quiet and shy since I’ve been here. The president knew what he was getting when he asked me to fill this role.”

Likewise, the fiscally conservative Heritage Foundation was influential in the Trump transition team. Since the group holds President Trump’s ear, reports like the one that advise him to “not be taken in by hyperbolic rhetoric about the state of the nation’s infrastructure or lured by false promises of stimulus-induced job creation” may prove influential in the long term.

The Trump campaign has led to a Trump Administration that is filled with contradictions. Trump’s promises of spending, some made as recently as last week, conflict with his appointment of fiscal conservatives like Mulvaney. Other appointees, such as Steven Mnuchin, seem to be more squishy on deficit spending.

Will Trump follow his advisors or his instincts? Will Republicans back him if Trump follows his liberal inclinations on spending? Stay tuned and find out.

Originally published on The Resurgent

Why you should vote for Mitt Romney

Recently Examiner made the case against Barack Obama’s reelection. There are a multitude of reasons to vote against Obama, but that is only half of the equation. There are many reasons to make a positive choice to vote for Mitt Romney.

First, when it comes to the economy, Mitt Romney is the anti-Obama. Obama’s plan, only unveiled on October 23, is to raise taxes, increase regulation and spend even more. On the other hand, Mitt Romney wants to reform the tax system by lowering rates and eliminating loopholes that favor the wealthy. He wants to replace burdensome regulations like those in Obamacare and the Dodd-Frank finance law with rules that reflect market realities and common sense. Romney would immediately reduce spending to 2008 levels. Romney proposes to cut spending back to 20 percent of GDP (from its high last year of 24.3 percent) by the end of his first term. In spite of Obama’s claims in the debates and on the campaign trail, Romney does provide specifics. You can find the details of his plan on his website.

Romney’s economic plan is based on history. Tax rate cuts have led to economic growth at several points in U.S. history, most famously under John F. Kennedy and Ronald Reagan. Higher taxes and higher government spending has the opposite effect. These policies led to the Great Depression and the stagflation of the 1970s. The same is true in other countries as well. When Ireland cut its taxes and government, it went from one of the poorest nations in Europe to one of the most successful. When Japan tried to stimulate its way out of a recession it led to a “Lost Decade.”

Romney is also the anti-Obama on many social issues. Where President Obama negotiated a UN small arms treaty that threatens American Second Amendment rights, Mitt Romney promises to respect the rights of gun owners and is endorsed by the National Rifle Association. Where Obama presided over the erosion of religious freedom, Romney has a long record of supporting religious liberty. Where President Obama is out of the closet as a supporter of same-sex marriage, Romney favors an amendment to the Constitution defining marriage as being between one man and one woman. Noted evangelist Billy Graham told Mitt Romney, “I’ll do all I can to help you. And you can quote me on that” according to the Washington Post. Graham also took out several full page newspaper ads urging voters “to vote for those who protect the sanctity of life and support the Biblical definition of marriage….”“

The second reason to vote for Mitt Romney is his choice of running mate. Paul Ryan is the most serious reformer in Congress. Ryan is the only person of either party to put forth a credible plan for saving Medicare and balancing the budget. Ryan’s plan, the “Roadmap for America’s Future,” preserves Medicare and Social Security in their current form for seniors while giving younger Americans more choice in their health care and retirement planning. Ryan’s plan also does not raise taxes. By choosing Paul Ryan to be his vice president, Mitt Romney showed that he is serious about reforming the federal government.

Third, a recent Pew poll profiled in the Los Angeles Times indicates that a majority of Americans feel that Iran is a major threat and want the United States to take a “firm stand.” President Obama and Vice President Biden don’t seem to take the threat seriously. In the vice presidential debate, Biden said that he wasn’t worried about an Iranian nuclear weapon because “they have to be able to have something to put it in. There is no weapon that the Iranians have at this point.” The Wall Street Journal points out that building a weapon is the easy part. Iran is currently working on the hard part: amassing enough enriched uranium to explode one or several nuclear bombs. The Obama Administration resisted sanctions and issued waivers to Iran’s largest trading partners including China. Under Obama’s watch, Iran’s rate of enrichment has tripled according to the Washington Post.

As he made clear in the foreign policy debate, Mitt Romney wants peace not war, but realizes the danger to the United States that a nuclear Iran poses. Romney would make the sanctions even tougher, although time for sanctions to work is rapidly slipping away. Romney also pledges to support the Iranian opposition, noting on his website that President Obama missed the opportunity to support Iran’s Green Revolution in 2009. Romney says on his website, “Only if Iran understands that the United States is utterly determined when we say that their nuclear weapons program is unacceptable is there a possibility that they will give up their nuclear aspirations peacefully.”

Fourth, voters should not be concerned about the fictitious war on women that the Democrats allege that Mitt Romney and the Republicans are engaged in. In reality, the president does not have the power to end abortion, no matter how much he opposes it. In reality, no one has proposed banning contraception. In reality, the Democratic position is that taxpayers and employers should be forced to pay for contraceptive and abortifacient drugs, regardless of whether they want them or not. The issue isn’t the freedom to use contraceptives; the issue is the freedom to not purchase them.

The fifth reason to vote for Mitt Romney is because he isn’t a wild eyed, out-of-touch radical as the Democrats have led voters to believe. As Americans saw in the three debates, he is an intelligent, personable man with a command of the facts and issues that confront the United States. He is generous, having donated nearly 30 percent of his income to charity in 2011 according to the Wall Street Journal. His record in business and as governor of Massachusetts is one of building teams and getting things done.

When Americans go the polls on Nov. 6, they have a real choice. The two candidates differ on almost every issue. Americans must choose between a return to the policies that made the United States an economic powerhouse and the envy of the world or a continuation of the Obama Administration policies of the past four years. Choosing President Obama might very well lead to an American Lost Decade and a loss of liberty as well.

See reasons to NOT vote for Barack Obama

Originally published on Examiner.com:

http://www.examiner.com/article/why-you-should-vote-for-mitt-romney

Democrats must love the poor, they make so many of them

As American voters move steadily toward the presidential election, the fundamental question that they must answer is whether Barack Obama deserves a second term as president. To answer this question, voters must look at the state of the nation as well as their own lives.

One of the most obvious statistics to examine is the unemployment rate. Although nationwide unemployment is down from its October 2009 high of ten percent, Politifact acknowledged earlier this month that under President Obama the unemployment rate has remained above eight percent for 43 consecutive months. This is the longest sustained period of high unemployment since the Great Depression.

The numbers behind the unemployment rate are even worse. The economy is creating jobs, but not enough to keep pace with the growing labor pool and population. According to the Bureau of Labor Statistics, the percentage of Americans employed has fallen from 65.7 percent in January 2009 to 63.5 percent in August 2012. This means that in spite of President Obama’s claims that he has created jobs, the actual number of Americans working has decreased sharply since he took office.

According to the U.S. Census Bureau, the U.S. population in August 2012 was 314 million. In January 2009 when President Obama took office the population was 305 million, an increase of more than 8 million people. According to the BLS figures, this means that 206 million people were working in 2009. There are currently only 194 million Americans working. In spite of an increase in the population of more than 8 million people during President Obama’s tenure, there are 12 million fewer Americans working.

The situation is not good for Americans who have not lost their jobs either. According to the Financial Times, the U.S. median income has fallen to 1995 levels. The decline started with the onset of the recession in 2008, but has continued to decline throughout Obama’s presidency, long after the recession officially ended and the recovery began.

The problems of unemployment and income have led to an increase in poverty. A year ago the New York Times reported that the U.S. poverty rate was at its highest level since 1993. In raw numbers, more Americans are living in poverty that at any time in the more than half century that the U.S. Census Bureau has been publishing figures on poverty.

The increase in poverty means that the government is spending more money on social safety net programs. Bloomberg notes that food stamp use is at an all time high. Spending on food stamps has more than doubled during Obama’s tenure with more than 46 million Americans now receiving the entitlement.

The increase in safety net spending is straining popular programs such as Medicare and Social Security. According to the Medicare Trustees report, Medicare’s hospital fund has been spending more than it takes in since the onset of the recession. The trust fund will be depleted by 2024. The situation is similar for Social Security. According to the trustees report, Social Security is also spending more than it takes in, a problem made worse by President Obama’s payroll tax holiday. The Social Security trust fund is estimated to run out in 2035. The insolvency of both programs has been accelerated by the recession and slow recovery.

The result of Obama’s spending binge is that the United States has run deficits of more than a trillion dollars in each year of his administration. These deficits have increased the federal debt by 40 percent according to the New York Times. The massive federal debt and the prospect of tax increases to pay for it have contributed to the slow recovery.

Perhaps what is most disturbing about these statistics is that even though President Obama often cites the economic difficulties that he inherited as an excuse for his administration’s difficulties, the Great Recession officially ended in June 2009, less than six months into President Obama’s term. Even though he has annually proclaimed “summers of recovery” since then most Americans are not feeling that the economic situation is improving. The Obama recovery has been in full swing for three years. It doesn’t get any better under the current policies.

The Democrats claim to love the poor and it must be so. Their policies have created millions more poor people. The choice that voters have this fall is between more of these policies that provide the poor with subsistence but little else or pro-growth policies that will revive the economy through freer markets and trimming government.

Originally published on Examiner.com

The Bible and taxes

In recent years, a recurring theme among progressives and liberals is that Christians have a duty to pay taxes and not resist tax increases because of Jesus’ instruction in Matthew 22:21 to “render therefore unto Caesar the things that are Caesar's” when asked by the Pharisees if Jews should pay tribute or taxes to the Roman government. According to this line of reasoning, modern Americans should happily pay ever-increasing taxes because Jesus said that the Roman coins belonged to Caesar.

Progressives also point out that Jesus, on numerous occasions instructed his followers to help the poor. His instruction to the rich, young ruler in Matthew 19:21 was to sell everything he had and give it to the poor. In Luke 6:20, he said that the poor were blessed and would inherit the kingdom of God. In Matthew 25:40, Jesus equates helping the poor with aiding Jesus himself. In one famous passage, Jesus says that “it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God” (Matthew 19:24).

There is no dispute that Christians are instructed to help the poor (Luke 12:33, 2 Corinthians 8:7). The question then is how best to help the poor. Is it more efficient to send more tax money to the government which can then make transfer payments to the poor or is it better to donate to private charities?

Government social programs are notoriously inefficient and costly. The big three entitlements, Medicare, Medicaid, and Social Security, now make up forty-one percent of the federal budget according to the Center for Budget and Policy Priorities. This percentage will go higher in coming years as more Baby Boomers retire. Social Security is scheduled to be bankrupt by 2036 and Medicare by 2024 according the Trustee’s Report. As the trust funds are depleted, even more tax money will be needed to meet obligations to retirees.

In part government social programs are so costly because they are universal. Rather than be a safety net for the poor, the government forces all retirees into Medicare and Social Security. This means that even the wealthy are required to accept government benefits, whether they need or want them or not.

Government programs are also costly because they are administered by bureaucracies filled with civil service workers. Where most charities rely heavily on volunteers, government workers that administer social programs often have salary and benefit packages that are valued at more than six figures annually. In effect, the government is taking a cut of the tax money before it is distributed to the poor. This expensive overhead adds significantly to the cost of government programs.

Finally, bureaucracies and rigid rules breed fraud. As the government tries to sign up as many people as possible to collect benefits, it becomes increasingly difficult to weed out those who are gaming the system. Caseworkers have less time to examine their clients, most of whom they do not know personally. With private charities, local volunteers get to know the need on a personal basis and can determine who needs aid and who does not. For bureaucrats, charity is a job; for volunteers, it is a passion.

A clue as to what Jesus would do with respect to entitlements in 2 Thessalonians 3:10 where the Apostle Paul wrote, “For even when we were with you, we commanded you this: If anyone will not work, neither shall he eat.” Paul doesn’t say that those who cannot work should not be fed. He does say that people who can work but choose not to, those who are gaming the system, should not live off the sweat of others. The book of Proverbs, especially in chapter 24, extols the virtues of work and is critical of the “hater of work.”

Even while the Bible encourages people to give to charity, it also teaches people to be smart with their money (Proverbs 6:6-8, 21:5, Luke 14:28-30) . The Bible also stresses that the accumulation of wealth should not be an end in itself (Psalms 15:5, Titus 1:7). Money and material wealth should not be accumulated dishonestly (Exodus 20:15, Titus 2:9-10).

Not only is it expensive and inefficient to filter funds to help the poor through government bureaucracies, it is counter to God’s instruction to believers in Proverbs 3:9-10 in which the people are told to give the first part of their income to God. Part of this money would be used to maintain the house of worship and part of it would be used to help the poor. When people give large portions of their income to the government, it naturally discourages them from giving a percentage of the remainder to charity because they need money to support their own families as well. Nevertheless, taxes and government social programs do no relieve believers of the duty to give to charity (James 2:15-16).

There are more benefits to charitable giving than tax deductions. There are studies that link altruism to mental and physical health benefits. Givers tend to be happier than those who are not so generous. Research shows that giving stimulates the same pleasure centers of the brain as eating and sex, resulting in a joyful feeling. When government programs and taxes take the place of charities, taxpayers are cheated out of the benefits of voluntary giving.

According to the Center for Philanthropy at Indiana University’s report “Georgia Gives 2008,” more than 77 percent of Georgia households give to charity. Individuals accounted for 83 percent of Georgia’s charitable giving which is comparable to national averages. Eighty percent of respondents indicate that they would give more if they were more financially secure. It can be reasonably assumed that if individuals had a lower tax burden, they would give more money to charity.

The progressive argument also fails to make a distinction between the Roman Empire and American democracy. Where Jews and Christians in Jesus’ day had no say in how Rome used their taxes or at what rate they were taxed, believers today have the right and duty to see that their taxes are not wasted.

 

Read this article on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/the-bible-and-taxes

Why the Republicans are considering a tax increase

Recently the story that Republicans are in favor of allowing the payroll tax to increase over President Obama’s opposition has been making the rounds on the internet. The story, presented as evidence of Republican hypocrisy on taxes, is more complex than it seems.

The cut in the payroll tax stems from last year’s compromise to extend the low, Bush-era tax rates for all Americans. A provision of the compromise deal lowered the Social Security payroll tax from 6.2 percent to 4.2 percent for employees during 2011. Employers were still required to pay the full 6.2 percent for their portion of the payroll tax. The self-employment tax was also cut by two percent. If not extended, the payroll tax will return to 6.2 percent for employees at the end of the year. The employer portion will remain the same.

The tax cut obviously did not stimulate economic growth. Economic indicators have trended negative over the past few months leading many economists to predict that a second recession is increasingly likely.

Speaking to the Associated Press, Rep. Jeb Hensarling (R-TX) said, “It's always a net positive to let taxpayers keep more of what they earn, but not all tax relief is created equal for the purposes of helping to get the economy moving again."

The payroll tax cut is an example of the most ineffective type of tax cut, one that is temporary, targeted, and tiny. From the beginning, the payroll tax cut was only meant to last for a year, which means that it would not affect long term economic decisions. It was targeted to employees, and did not apply to the employer match, where it would have had a greater impact.

Perhaps most important, the payroll tax cut was tiny. For a worker earning $50,000 the two percent tax cut is worth $1,000 for the year. However, the taxpayer does not get this savings all at once. It is prorated throughout the year in each paycheck. This means that the true savings is only $83 per month. If a worker is paid weekly, it amounts to only $20 per paycheck. This is not even enough to buy a tank of gas and is barely noticeable to most workers.

Social Security payroll taxes only apply to the first $106,800 of income. Therefore, the largest savings that any worker would realize from the tax cut, no matter how much they earn, would be $2,136. This translates to $178 per month or $41 per week.

Conversely, the payroll tax is used to fund Social Security which, under current estimates, will go bankrupt by 2036. That year the trust fund will be exhausted and Social Security will no longer be able to pay benefits without using current taxes. In 2010, Social Security expenditures exceeded revenues. Social Security is already operating in the red.

For 2010, Social Security tax receipts were $865 billion according to the Congressional Budget Office. Half of this money was paid by employers and half, $432.5 billion, was paid by workers. The two percent tax cut would be equivalent to $8.65 billion. This figure is slightly more than one percent of Social Security’s 2010 expenditures of $700 billion.

Since the payroll tax cut was too small to produce economic growth, it follows that allowing it to expire would have a minimal impact on the economy. Even a small impact might tip the scales toward recession though. On the other hand, the increased revenue might be able to buy a little more time to reform Social Security before the entitlement program goes bankrupt. The money in question is a tiny part of Social Security’s annual expenditures. Neither option is likely to be palatable for Republicans.

Nevertheless, it is likely that Republicans will agree to extend the payroll tax cut. Former house speaker and current presidential candidate Newt Gingrich was quoted by Talking Points Memo as saying, “I think it's very hard not to keep the payroll tax cut in this economy. I don't know what Republicans are going to say but I think it's very hard to say 'no.' We're going to end up in a position where we're gonna raise taxes on the lowest income Americans the day they go to work and make life harder for small businesses.”

Read this article on Examiner.com

http://www.examiner.com/conservative-in-atlanta/why-the-republicans-are-considering-a-tax-increase

 

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Social Security and the debt limit

Ida May Fuller (Public Domain)

President Obama’s warning that a failure to increase the debt limit may mean that there is not enough money in the federal treasury to send out Social Security checks should put a stake through the heart of the myth that there is a Social Security trust fund. In an interview with CBS News, President Obama said, “I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it.”

For decades now, Social Security has been sold to the American public as a retirement plan. Many Americans believe that their Social Security taxes go into an account that is held for them until they retire. In reality, Social Security is a pay-as-you-go program in which current tax receipts are used to pay the benefits for current retirees.







Social Security was enacted into law in 1935. According to the Social Security Administration, the first Social Security beneficiary was Ida May Fuller of Ludlow, Vt. Fuller began collecting benefits in 1939 after paying into Social Security for less than three years. Her contributions (taxes) totaled $24.75. Fuller lived until 1975 and collected a total of $22,888.92 in Social Security benefits. This is equivalent to a return on her “investment” of over 900 percent. Current Social Security returns are approximately two percent.







If Social Security were a true retirement plan, Fuller’s benefits would never have lasted for 36 years. Fuller’s benefits were being paid by the Social Security taxes of current workers rather than Fuller’s own contributions and interest.







According to the Social Security Administration’s website, the 1935 Social Security Act established a trust fund for Social Security benefits. On one part of its website, the SSA calls it a myth that the Social Security funds have been placed into the general fund of the federal government. However, on another page, the SSA admits that Social Security taxes are invested in securities and that “the cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.”




In other words, money in the Social Security Trust Fund is given to the general fund of the federal government in exchange for “special-issue” securities. The trust fund is filled only with s to repay the funds borrowed by the federal government. Thus far, the federal government has always repaid the funds with interest, but if the federal government is in default then it might not be able to do so.







The AARP notes that fourteen percent of Georgians, primarily seniors, receive Social Security benefits. For more than thirty percent of these seniors, Social Security is the only source of income.







If the Social Security Trust Fund were a true retirement plan in the form of a privately administered investment plan, it would be required to maintain a certain ratio of liquidity to invested assets. Instead, Social Security relies on current tax receipts and the repayment of funds borrowed from the trust fund by the federal government. Since current taxes cannot pay current benefits, if the government cannot repay its borrowed funds (with more borrowing), then it might well not be able to pay benefits to current retirees.







It is likely that Congress and the president will come to an agreement that will continue to fund the federal government, but taxpayers should remember the summer of 2011 as the time when the myth of the financial security of Social Security was deflated.







Continue reading on Examiner.com Social Security and the Debt Limit - Atlanta Conservative
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How a government shutdown might affect you

The government may shut down Friday night. (Diliff/Wikimedia Commons)

As the debate over control of the federal budget speeds the government toward a shutdown, many Georgians are likely wondering what effect a shutdown would have on local services provided by the federal government.  The federal government pervades American life at all levels from mail delivery by the postal service to government checks for Social Security recipients and, most obviously and importantly, protection by the U.S. military and federal law enforcement agencies. 

A government shutdown is not a disaster and is not unprecedented.  In fact, there have been five government shutdowns since 1981.  The most famous was the last series of shutdowns in 1995 and 1996 when President Bill Clinton sparred with Speaker of the House and Georgia native Newt Gingrich.  The Republicans actually won a balanced-budget agreement in the confrontation, but suffered politically.  The balanced budget of the late 1990s is remembered as Clinton’s achievement and helped him to win re-election.

The debate is similar to that of the 1990s.  The current problem stems from the fact that Democrats did not pass a federal budget for 2011 while they held large majorities in both houses of Congress prior to the last elections.  According to federal law, a budget should have been passed by October 1 of last year.  Instead, Congress has passed a series of temporary spending measures.

According to the Wall St. Journal, the Obama Administration will have borrowed approximately $3.7 trillion in its first three years, “more than the entire accumulated national debt for the first 225 years of U.S. history.”  The Democratic budget proposal cuts a meager $6.5 billion from the federal budget for 2011.  The Republicans, responding to voter anger over increasing deficits and spending, want $61 billion in cuts for 2011 and are ultimately eyeing $6.2 trillion in cuts over ten years as a part of Paul Ryan’s “Path to Prosperity.”

If the two parties cannot reach agreement and pass a budget, parts of the federal government will cease operations until an agreement is reached.  Essential services of the government, as well as parts of the government that are funded by other means, such as user fees, would remain in operation.  Some of the areas that are deemed essential services are military operations, border security and air traffic control.  Federal courts and the justice system would also remain open.  These areas of government were unaffected by previous shutdowns.

Mail deliveries by the Post Office would likely continue.  The Post Office gets some federal funds, but much of its operation is funded by the sale of stamps and delivery fees on packages.  The Federal Reserve would also remain open.

Recipients of entitlement checks such as Social Security and Welfare can also rest easy.  The government would continue to send out checks to existing recipients, but applications for new benefits would not be processed.  Medicare would also continue to be funded.

The main affect of the shutdown would likely be on administrative workers.  In addition to entitlement applications, other applications, such as those for firearms and explosive permits from the BATF or visas and passports from the State Department, would not be processed.  In the past, health care for veterans and clinical trials at the National Institutes of Health have also been delayed, along with work on bankruptcy and delinquent child-support cases.  Tracking of diseases by the CDC, headquartered in Atlanta, might also be interrupted.  Processing of farm credit, small business loans and government-backed mortgages would also cease.  Toxic waste cleanup at EPA Superfund sites was also stopped in previous shutdowns.  It is also possible that some tax refunds would be delayed, but audits would also be suspended.

Georgia’s many national parks and historic sites might well be affected since admission is free.  Georgia has eleven national parks that would almost certainly be closed in a government shutdown.  National museums such as the Smithsonian Institute in Washington, D.C. would also close.  Of course, Georgia’s state parks and historic sites would remain unaffected.

Perhaps most disturbing is the possibility that soldiers and military retirees would not be paid during a government shutdown.  Military personnel would continue to accrue pay, but may not receive pay checks until a new budget is passed.

Ironically, a government shutdown will probably not save the government money.  Government shutdowns actually cost more than normal operations because the government loses revenue when it is not in operation.  Current estimates are that a shutdown might cost taxpayers more than $100 million per day.  Depending on the length of the shutdown and the success of the Republicans at getting their desired cuts, taxpayers might end up saving money with a short shutdown rather than having billions more dollars in deficit spending enacted into law under the Democratic plan.

http://www.examiner.com/conservative-in-atlanta/how-a-government-shutdown-might-affect-you"> 

Election myth: Does the GOP want to privatize Social Security?

A second myth being propagated by Democrats this election season is that Republicans want to privatize Social Security. The basis for this rumor is Rep. Paul Ryan’s Roadmap for America’s Future, although it can probably be traced back to President Bush’s attempt to reform Social Security in 2005. Neither plan involves the privatization of Social Security.

The root of the problem is that Social Security is broke. The Social Security trust fund into which Social Security (FICA) taxes are paid into is filled with federal bonds, essentially promises to repay or IOUs. Social Security taxes are not invested on the worker’s behalf by the government. Instead, current FICA revenues are used to pay current benefits.

As Baby Boomers retire in large numbers while the numbers of working Americans dwindles, the Social Security program is headed for a meltdown. In fact, this year Social Security will begin paying out more in benefits than it collects in taxes. The program is forecast to run out of money in about 2035. Clearly, doing nothing is not an option.

Under Rep. Ryan’s plan, Americans age 55 and older will not have any changes to their Social Security in any way. Younger workers (under 55) will be given the choice of remaining in the current plan or investing a portion of their FICA withholding into a private plan similar to the Thrift Savings Plans that federal employees already enjoy. The plan would also not affect people receiving survivor and disability benefits.

For those who choose to invest in the private plan, the government will guarantee their contributions in a manner similar to deposit insurance. The government will also approve investment choices. When fully phased in, contributions to the private plan will only average 5 points of the current 12.4 percent FICA tax. In other words, even if you choose the private plan, most of your money will still be going to the traditional plan. The government will also guarantee benefits at a minimum of 120% of the poverty level for the traditional plan and 150% of the poverty level for private plans. Finally, people in the private plans get ownership of their accounts. If they die prior to retiring, they can pass the money to their heirs. In the traditional plan, your Social Security “contributions” are lost except for a death benefit if you do not live to retirement age.

In summary, the Republican plan gives people choice, a right to keep their money, and most likely a better rate of return than traditional Social Security. Stock market investments almost always make money over the long run, even accounting for market crashes like the one in 2008. In contrast, Social Security pays a very low rate of return – often negative. This means that your “investment” in Social Security is probably not even keeping pace with inflation. Under Ryan’s plan, a person who chose a personal plan would likely earn a much higher rate of return and the government would guarantee his account in the event of a market crash.

The most important points to remember are:
1. No one over 55 would be affected by any changes.
2. Workers under 55 would get to choose their plan.
3. Private accounts would likely earn more, but would be guaranteed by the government at a higher level than traditional Social Security.
4. The only way to lose your Social Security money is to do nothing and let the plan go broke.