Wealth Transfers

[vnatale]

When government facilitates and sometimes directly performs wealth transfers, it causes massive shifts in motivation to act in certain ways by individuals which can transform a nation.

Here’s some wealth transfers I’ve see:

Social security. Tax the young to fund the old. Reduces the young’s ability to save for retirement, due to 12% higher tax rate that could otherwise have been saved for retirement. Shifts responsibility for retirement to the government, now making the individual less self-reliant and more a slave of the state.

I track my SS levels and due to bend points, once you’ve earned a certain amount of money, each marginal dollar you pay in SS taxes results in less payout. Thus, these bend points encourage people to stop paying SS taxes behind a certain point which ultimately means to stop producing for society. So we all have less stuff.

Obamacare. Insurance was too expensive for sick people. So Obama said let’s cost shift to the healthy so insurance can’t charge more than a small multiple higher for sick people than healthy. But why would healthy keep buying insurance that was now significantly higher? Because it was required by law at gunpoint. Wealth transfer from healthy to sick.

If this was purely based on genetics, I’d say okay. But most sick people are sick because they eat poorly or smoke cigarettes. So we are actually wealth transferring from the responsible to the irresponsible.

I want to retire early, but health insurance costs are a concern. They’ve gone up 5x for me since Obama care passed due to me subsidizing others who are irresponsible. This means in order for me to retire, if I want health insurance I’ll need a larger portfolio first, which means working extra years, which means added stress on my body, which means less health.

Thus, it becomes an actual transfer of health from the responsible to irresponsible because in order for me to pay the higher health insurance costs, I must reduce my health by working more years. And anyone who says they can be just as healthy working a 40+ hour a week job as they can be if retired is being disingenuous. Retired means more time to choose healthier foods rather than a vending machine snack to get you through a work crisis that popped out of nowhere.

The housing market. Has been going up 10% annualized since the boomers bought houses. Great for them, especially since many bought multiple houses as investments to rent out, but not so good for younger people who are only seeing 3% annualized wage growth, making housing cost more and more of their take home income each year.

Probably for the best because we don’t want the young to retire early en masse, or the aforementioned social security ponzi scheme would topple.

Covid 19. Even though virtually everyone with an IQ over 60 agrees it only is devastating to the elderly, like 70+ year old population, we shut the entire country down. 20 year olds, who statistically are likely to experience a mild flu for a few days, are told they can’t work, can’t see friends, must wear face coverings, can’t go to bars, can’t go to gyms, must do shitty virtual school.

Why?

To protect the elderly they might come in contact with and transmit it to.

But why can’t the at-risk elderly population stay home and thus not come in contact with the 20 year olds who go bar hopping?

Because 70 year olds want to be able to go out for occasional things. Like grocery shopping. We can’t ask them to stay home for 2 years to get food delivered.

Instead, let’s demand all young people destroy their lives for 2 years to reduce the limitations that 70+ year olds must face. So the young won’t give it to the old going to the grocery store or wal mart.

Covid 19 has been the most massive wealth transfer of our lifetime from the young to the old. Tens of thousands of additional suicides from young people will be reported when this is tallied. Countless productivity lost due to mandated remote working and remote education.

The ability of the government to wealth transfer from one group to another gives them the power to shape nations in certain images. I’m a libertarian who believes in small government and opposes mask mandates and opposes covid lockdowns because I’m terrified of what the new shape of our nation will look like in 10 to 20 years.

In the past, government wealth transfers were limited to things like farmer subsidies so city workers had to work maybe one extra hour per week to pay extra taxes to support farmer subsidies. Now in 2020 we are asking young people to put their entire lives on hold for 2 years as a transfer to the elderly. The same elderly stealing from them via social security taxes and housing price increases. Because the elderly vote.

And because we have to do something.

Social Security. "now making the individual less self-reliant and more a slave of the state."

No. Sad to sad but for far too many in our country if there was not Social Security for them...they would not have not become self-reliant....they would have spent it all on something else so that when they reached 62, 65, 70....they'd have nothing.

Plus, social security is similar to a pension. One of the best pensions that increases each year according to the change in the CPI (or, something similar).

"Thus, these bend points encourage people to stop paying SS taxes behind a certain point which ultimately means to stop producing for society. So we all have less stuff."

A favorite conservative talking point! But just another one of those Republican taking points that have no basis in reality.

I have been self-employed in some way since 1994. Therefore, I pay both sides of social security plus relatively high federal and state taxes due to my income level. I also decided long ago that due to me being blessed with the income I am able to produce a certain amount of that income should be donated to charities. When you add up the charities and all the taxes it means that I get to keep less than 50 cents of every dollar I earn as a self-employed person. Has that ever affected how much I decide to earn via self-employment? Never.

Yet in spite of all those taxes and charitable donations being a super saver I have a nice portfolio. If you as accomplished as you keep leading us to believe then I have full confidence that you can also do the same.

I have no sympathy for anyone subject to the bend points who get less payout. If that describes you you've been blessed to have the genes that allowed you to be in that position. You did nothing to acquire those genes.

"If this was purely based on genetics, I’d say okay. But most sick people are sick because they eat poorly or smoke cigarettes. So we are actually wealth transferring from the responsible to the irresponsible."

I agree with a lot of what you say here. Question is your word "most". Do we have any hard data that says what this "most" precisely it? "Most" has to be greater than 50%, correct?

But part of being a community of anything (we are all citizens of this nation) is sharing some of your wealth for those less fortunate.

I've owned my house for 38 years and have never had any children in the school system yet I pay for it. I know what your answer will be to that.

"I want to retire early, but health insurance costs are a concern. They’ve gone up 5x for me since Obama care passed due to me subsidizing others who are irresponsible. This means in order for me to retire, if I want health insurance I’ll need a larger portfolio first, which means working extra years, which means added stress on my body, which means less health."

This does across to me as classic conservative, Trump-like whining.

"Thus, it becomes an actual transfer of health from the responsible to irresponsible because in order for me to pay the higher health insurance costs, I must reduce my health by working more years. And anyone who says they can be just as healthy working a 40+ hour a week job as they can be if retired is being disingenuous. Retired means more time to choose healthier foods rather than a vending machine snack to get you through a work crisis that popped out of nowhere."

Until I read what you wrote the thought had never crossed my mind that the retired were automatically more healthy than the working person. I kept working long after I needed the money because I enjoyed the challenge and the sense of accomplishment. Those were healthily positive. Finally, if you cannot manage bringing your own healthy foods to eat at your workplace....then you are a lot less accomplished then you have been leading us to believe.

"The housing market. Has been going up 10% annualized since the boomers bought houses"

I bought my house for $31,000 in 1982. Now it is worth about $160,000. Not close to 10%!

Also, the 2007 to 2009 period represented a golden opportunity for people to buy houses. Those times will come again.

I do not believe you lived through the inflationary times starting from the 60s through the 80s.

I can already hear the whine from you now if you during one of those years the only mortgages available had rates near 20%.

You are also completely leaving out of this equation that while housing prices may be near their all-time highs, the mortgage rates may be their all-time lows. We all know that it the amount of the total mortgage payment that most matters.

Did I somehow miss in your one, long whine how for the Baby Boomers and the retired....since about 2008....a full 10 years now...there have been no fixed investments with low, low risk that pay any appreciable interest rates?

"Great for them, especially since many bought multiple houses as investments to rent out,"

"Many"? A vague word. Please more specific by naming a number. I really do not know that many of my peer Baby Boomers who own even one rental property.

"but not so good for younger people who are only seeing 3% annualized wage growth, making housing cost more and more of their take home income each year."

How does that wage growth compare to inflation? See above regarding the mortgage interest rates the poor young people have to pay. Close to 20%?

"Covid 19 has been the most massive wealth transfer of our lifetime from the young to the old."

Somehow I missed any support for this statement? Where was it in the big whine?

"In the past, government wealth transfers were limited to things like farmer subsidies so city workers had to work maybe one extra hour per week to pay extra taxes to support farmer subsidies. Now in 2020 we are asking young people to put their entire lives on hold for 2 years as a transfer to the elderly. The same elderly stealing from them via social security taxes and housing price increases. Because the elderly vote."

The concluding whine.

I can only imagine how you would have reacted or behaved during our nearly four years of World War II when there was so much rationed in this country. When life was also not usual. When those young people were subject to heinous death and severe injury from having to participate in a war.

I can hear you saying, "Well that was different."

Somehow I think I would still be reading great lamentations and whining from you....

Vinny

[SomeDude]

So we have a whole country doing wild and ridiculous bullshit from the day laborer who spends his entire paycheck on beer and whores at the saloon because the government will bail out his retirement.....

This is a very poor conclusion TF. Not because it's inaccurate, it's dead on. It's because the people who think the wealth redistribution schemes work also believe wasteful spending grows the economy. They think responsible saving wrecks it.

Another disincentive to saving is the government created negative interest rates. If our money grew in value or paid high enough interest we'd have more savings.

How about welfare and unemployment? Paying people to not work. I'm sure that helps.

[SomeDude]

How about welfare and unemployment? Paying people to not work. I'm sure that helps.

Isn’t the main economic problem of our times the issue of low demand? And doesn’t welfare and enhanced unemployment help increase demand at times when we need it most?

Yup. Just need to stimulate that demand.

[vnatale]

Plus, social security is similar to a pension. One of the best pensions that increases each year according to the change in the CPI (or, something similar).

Yes and it’s a wealth transfer because the pensions aren’t sustainable and by the time young people who are paying current retirees CPI-U adjustments hit the point of their retirement, the payouts will be significantly less, if anything at all. Because we;ve wealth transferred from the young to the old. The old took far more than was “fair” leaving the young with less to zero. Social security is going to be unsustainable at current payouts in the next decade.

[font=][font=]Would any of what you wrote above NOT apply to Social Security since the day of its inception? Republicans / conservatives been bleating this forever, from before it even was enacted? It is still paying out today because since its inception adjustments have been made along the way. The rates have been increase. The upper limit has been increased. The retirement ages for collecting have bee increased.
[/font][/font]

"Thus, these bend points encourage people to stop paying SS taxes behind a certain point which ultimately means to stop producing for society. So we all have less stuff."

A favorite conservative talking point! But just another one of those Republican taking points that have no basis in reality.

I have been self-employed in some way since 1994. Therefore, I pay both sides of social security plus relatively high federal and state taxes due to my income level. I also decided long ago that due to me being blessed with the income I am able to produce a certain amount of that income should be donated to charities. When you add up the charities and all the taxes it means that I get to keep less than 50 cents of every dollar I earn as a self-employed person. Has that ever affected how much I decide to earn via self-employment? Never.

Just because you never decided to stop working earlier because you hit a bend point doesn’t mean everyone else follows your lead. I have a spreadsheet that has been closely tracking my future SS monthly benefits and once I hit the end of the second bend point, my justification to continue working will be significantly reduced.

It is NOT just me. Why have Bill Gates, Jeff Bezos, Warren Buffet continued to work? What did they not stop when they hit their "bend points"? Same for tons of other people who continue to work and earn money way past their "bend points". I am definitely not in the minority who pay no attention to their "bend points". Because by continuing to work I (and they) greatly increase my (their) net worth.

I won’t feel blessed to have to pay extra tax. If that were true, then people living under socialism should feel the most blessed being under 100% tax rate.

I'll give you a choice. Which blessing would you have? Born with the genes to that you are only able to earn $10,000 a year, pay minimum taxes, and get the maximum social security benefits from what you put into it. Or. Born with the genes so that you earn $200,000 a year, pay tons of taxes, and get burnt by the "bend point". I know which one I'd choose and at least 99% of other people would choose. You?

Social Security. "now making the individual less self-reliant and more a slave of the state."

No. Sad to sad but for far too many in our country if there was not Social Security for them...they would not have not become self -reliant....they would have spent it all on something else so that when they reached 62, 65, 70....they'd have nothing.

And why would they have spent it all on something else and not saved for retirement? Because the government will bail them out.

You are completely leaving out that this was a prime reason why Social Security was created. It is basic human nature what I describe. Prior to Social Security where was the government in bailing out people in their retirement years? No where? Yet did that mean people were providing for their own retirements in the way they were later forced to via Social Security? Were employers doing this for all their employees? Can you document how people were better preparing for their won retirements prior to the inception of Social Security than people now do?

Why did airliners have no cash reserves before COVID and need a massive bailout? Why did banks in 2009 make risky bets that would result in either massive profits or a government bailout?

In neither case were their any guarantees that the government would do what they eventually ended up doing. Therefore you'd be derelict in your obligations to your shareholders if you made decisions banking upon these type actions by the government. Why was Lehmen Brothers not bailed out in 2008 but allowed to go bankrupt?

Thank you, Vinny, for pointing out the exact reason for my post. This stuff shapes nations. We either let people and businesses who make poor life decisions suffer the consequences of those decisions and serve as a bad example for others not to follow in their footsteps. Or we bailout everyone in need, which incentivizes risky behaviors.

So we have a whole country doing wild and ridiculous bullshit from the day laborer who spends his entire paycheck on beer and whores at the saloon because the government will bail out his retirement to the CEO who engages in operational decisions that result in massive profits or massive losses for which will be wealth transferred back to him from the taxpayer.

[vnatale]

I do not believe you lived through the inflationary times starting from the 60s through the 80s.

I can already hear the whine from you now if you during one of those years the only mortgages available had rates near 20%.

You are also completely leaving out of this equation that while housing prices may be near their all-time highs, the mortgage rates may be their all-time lows. We all know that it the amount of the total mortgage payment that most matters.

I want to buy a house in full in cash, so 20% mortgage rates sound incredible to me. Make them 50%. Have the fed stop buying MBS.

Total mortgage payment matters not at all if you’re paying cash or if you’re getting a mortgage you plan to pay down aggressively and early.

Yet another nation-shifting phenomenon, getting people into a lifetime of debt they can never get out if so the system has a stranglehold over their lives.

Sorry. You are STILL not getting any sympathy from me.

For over 11 years now you've had the opportunity to participate in an unbelievable bull market. I believe that bull market has had a greater return on an average annual basis than has the housing market? Therefore you can take some of those bull market gains to buy your house in cash.

You just cannot have it in ALL ways.

Vinny

[vnatale]

I can only imagine how you would have reacted or behaved during our nearly four years of World War II when there was so much rationed in this country. When life was also not usual. When those young people were subject to heinous death and severe injury from having to participate in a war.

I can hear you saying, "Well that was different."

Somehow I think I would still be reading great lamentations and whining from you....

You don’t have to imagine. I’ll tell you. Same as I feel about the war in the Middle East and the Vietnam war and every war on foreign soil.

It’s a travesty, it’s a massive wealth transfer from the families who send their children off to die to protect someone else’s children in a country far away. And a wealth transfer to the military industrial complex.

While I am no fan of Hitler, if I had a son I’m the 1940s, I selfishly would not want to trade his lives for 1000 Jews in Europe he might have saved. Because he’s my son. And he would mean more to me than something going on overseas.

You conveniently left out the fact that we were attached by Japan and they declared war on us. Then Hitler declared war on us. Finally, none of our World War II efforts were in any way aimed toward saving one Jewish life.

Vinny

[vnatale]

Vinny, the problem with your argument above, just like the Subway debate in the other thread, is that you base your arguments on the assumption that everyone thinks like you do. Except they don't. In fact, the majority of folks in this country are nearly the opposite of you. They are married (or at least involved in serial dating or a long term relationship), they are not content living in the boonies in a tiny house, they are not happy leaving said house as little as possible, they are not happy eating your diet and they don't exercise. And most of all, they aren't super-savers like you, and hate paying taxes that contribute to government pork.

This is not to say there is anything wrong with your choices; I exercise and am a super-saver (although you would consider me a relative spendthrift) and I eat healthy (although, again, not by your extreme definition). So your argument may be entirely valid for someone exactly like you, but for others, maybe not so much?

First of all, in the Subway debate, it was you who insisted that everyone view it the way you do. Somehow you kept missing that I was stating my opinion was strictly for me, for my particular needs, and was in no way implying it applied to anyone else.

My arguments in this topic have been strictly aimed at Tom, one person. A person who has led us to believe he gets paid well. Significantly above the average person in our country.

Vinny

[sophie]

So I have another argument for Social Security not necessarily being a wealth transfer.

It's effectively a government-run pension plan that you are obliged to join. So the young are paying not just to support the old/retired, but for their own future retirement. It's just that Social Security was set up differently from a standard pension fund. SS is more like a Ponzi scheme, but because everyone is a participant it works as long as the support from those early in their career plus the savings in the "lockbox" balances payments to those in retirement.

So SS by itself is not necessarily a bad thing. The problem is that SS is being drained to provide outsized benefits to the low end of the income scale (i.e. more than they paid in) and also disability payments to people who may never have paid in. These are the wealth transfers. You can argue about whether the first is a good idea or not, but the second (disability) is seriously beyond the bounds of Social Security's intended purpose. Social Security is not supposed to be a welfare program. If the government wants a welfare program to support people who are certified as disabled, that should have been created separately.

Harry Browne of course had a simpler solution: abolish SS and let everyone sign up with a private pension plan. Much more efficient, and no money being drained off for unrelated welfare goals.

[sophie]

Testing to see if I'm on Xan's 4-hour ban list.

--- NIce, it appears I'm not!

[vnatale]

So I have another argument for Social Security not necessarily being a wealth transfer.

It's effectively a government-run pension plan that you are obliged to join. So the young are paying not just to support the old/retired, but for their own future retirement. It's just that Social Security was set up differently from a standard pension fund. SS is more like a Ponzi scheme, but because everyone is a participant it works as long as the support from those early in their career plus the savings in the "lockbox" balances payments to those in retirement.

So SS by itself is not necessarily a bad thing. The problem is that SS is being drained to provide outsized benefits to the low end of the income scale (i.e. more than they paid in) and also disability payments to people who may never have paid in. These are the wealth transfers. You can argue about whether the first is a good idea or not, but the second (disability) is seriously beyond the bounds of Social Security's intended purpose. Social Security is not supposed to be a welfare program. If the government wants a welfare program to support people who are certified as disabled, that should have been created separately.

Harry Browne of course had a simpler solution: abolish SS and let everyone sign up with a private pension plan. Much more efficient, and no money being drained off for unrelated welfare goals.

Social Security can definitely be viewed as a Ponzi scheme since so much of the money that has been withheld for it has since been "borrowed" by the government.

I don't have a problem with the outsized benefits to those on the lower end as this parallels our progressive tax system, which I do agree with.

The disability payments may be problematic, though. As you point out, that was not the original intention of Social Security and it seems that a higher and higher percentage of people are getting it and, perhaps, unwarranted for a not insignificant percentage of them?

I'm forgetting all the details for what Harry Browne suggested. Was it still to have the same amount of money withheld and matched by the government but that the individual invests it with private companies?

If so, this brings on its own set of problem. The private companies and all their predatory fees plus what percentage of the population really does know how to invest appropriately for their particular circumstances? Do you know agree that most of them are financial illiterates? How many of them would ever discover the Permanent Portfolio??!!!

Vinny

[D1984]

I'm forgetting all the details for what Harry Browne suggested. Was it still to have the same amount of money withheld and matched by the government but that the individual invests it with private companies?

If so, this brings on its own set of problem. The private companies and all their predatory fees plus what percentage of the population really does know how to invest appropriately for their particular circumstances? Do you know agree that most of them are financial illiterates? How many of them would ever discover the Permanent Portfolio??!!!

Vinny

A large proportion of the population being financially illiterate is indeed an issue. Predatory fees by private investment management companies is an issue as well (Social Security is very efficient in terms of overhead costs as a percent of the total amount of money it handles....on par with some of the mid-range cheap index funds IIRC). The biggest issue, though--the giant elephant in the room that none of the Social Security privatization types want to even seriously consider and that they presumably hope that people will just forget to think about--is that SS is not a funded system. Being a (mostly...there is the SS Trust Fund...but that is being spent down as we speak) PAYGO type of system, the first generation of retirees got far hugely more than they paid in and didn't have to pay for anyone else; the second generation of retirees paid for the first generation, the third generation paid for the second generation, and so on and so on. If you want to convert SS to a private fully funded system (or for that matter a public fully funded system) then someone (some generation/s) has to get screwed by either:

A. Having to pay FICA taxes to cover the current generation of retirees' benefits plus put aside another 12% or so into their own private accounts in order to cover their own (fully funded) retirement pensions; this is if the current generation of workers wants a retirement equal to or better than what they'd get under the current PAYGO system. In this case they are essentially "taxed" twice (once via FICA and again via having to fund their own pension plans) whereas every preceding generation (who because of PAYGO had the next generation pay for their retirement and then their own FICA taxes only had to be paid once to pay for the older generation before them) and succeeding generation (who under a fully funded privatized system would not be paying any FICA taxes whatsoever but only private account contributions) only had/has to be taxed once.

B. Having to pay FICA taxes (in order to cover the previous generation's SS) but then not having any money (assuming they didn't want to and/or couldn't afford to) to pay anything extra beyond that into a private account; this means they would've paid FICA taxes but got no SS to show for it.

C. Having everyone in the taxpaying public at large over the next 50-100 years amortize the cost of paying off retirees' SS benefits out of regular general revenues (in other words, raise taxes across the board on almost all incomes) and freeze benefit accruals for anyone not currently getting SS. Everyone who isn't yet old enough to receive SS would get a choice of either a lump sum equal to the accrued value with interest of their contributions or could choose to keep their current benefit amount when they hit retirement age but it would no longer grow with contributions because any further contributions would be to a private account instead of as FICA taxes.

Harry Browne's "solution" (if one could call it that) was to do C. as above but instead of using tax increases fund current retirees' SS benefits by having the US Government sell off pretty much everything it owned besides military bases; if the Constitution didn't allow the Federal government the authority to own an asset then they had to sell it off; the money would be used to buy private annuities for anyone currently receiving SS and anyone close to retirement (who obviously wouldn't have time to start over with a private account). Sounds good on the surface but upon in-the-weeds detailed examinations of this plan there were several flaws but the biggest was that even if the Feds sold off almost everything they owned it wouldn't equal to much more than around 22 or 23% of what was needed in order to buy the private annuities needed to totally replace SS for all current retirees and near retirees...and this was in mid-2000 when interest rates were much higher so annuity payouts were higher as well...and let's not even consider that these annuities typically aren't inflation-adjusted like SS is, or what would happen to the unfortunate "sandwich generation" who was stuck in the middle so they would get no SS but also wouldn't have time enough to fully fund a private account and let it compound (to explain this further: Someone who was say, 21, would have decades to fully fund a private account and would be OK; someone who was 64 would at least in theory get an annuity funded by the proceeds of government asset sales and would at least get something; someone who was, say, 47 would get no SS unlike the 64 year old but also wouldn't have the 40+ years that the 21 year old would have of contributions and compounding; ergo this person was being squeezed both ways like the meat in a sandwich).

The bottom line is, if you want to convert a PAYGO system of any kind to a funded system of any kind, someone, somewhere is going to have to pay more to get the funded system funded to start out with; that's just the nature of switching from an unfunded system to a funded one. Anybody telling you otherwise is either ignorant of basic math or is lying to you and making promises they can't keep.

[vnatale]

I'm forgetting all the details for what Harry Browne suggested. Was it still to have the same amount of money withheld and matched by the government but that the individual invests it with private companies?

If so, this brings on its own set of problem. The private companies and all their predatory fees plus what percentage of the population really does know how to invest appropriately for their particular circumstances? Do you know agree that most of them are financial illiterates? How many of them would ever discover the Permanent Portfolio??!!!

Vinny

A large proportion of the population being financially illiterate is indeed an issue. Predatory fees by private investment management companies is an issue as well (Social Security is very efficient in terms of overhead costs as a percent of the total amount of money it handles....on par with some of the mid-range cheap index funds IIRC). The biggest issue, though--the giant elephant in the room that none of the Social Security privatization types want to even seriously consider and that they presumably hope that people will just forget to think about--is that SS is not a funded system. Being a (mostly...there is the SS Trust Fund...but that is being spent down as we speak) PAYGO type of system, the first generation of retirees got far hugely than they paid in and didn't have to pay for anyone else; the second generation of retirees paid for the first generation, the third generation paid for the second generation, and so on and so on. If you want to convert SS to a private fully funded system (or for that matter a public fully funded system) then someone (some generation/s) has to get screwed by either:

A. Having to pay FICA taxes to cover the current generation of retirees' benefits plus put aside another 12% or so into their own private accounts in order to cover their own (fully funded) retirement pensions; this is if the current generation of workers wants a retirement equal to or better than what they'd get under the current PAYGO system. In this case they are essentially "taxed" twice (once via FICA and again via having to fund their own pension plans) whereas every preceding generation (who because of PAYGO had the next generation pay for their retirement and then their own FICA taxes only had to be paid once to pay for the older generation before them) and succeeding generation (who under a fully funded privatized system would not be paying any FICA taxes whatsoever but only private account contributions) only had/has to be taxed once.

B. Having to pay FICA taxes (in order to cover the previous generation's SS) but then not having any money (assuming they didn't want to and/or couldn't afford to) to pay anything extra beyond that into a private account; this means they would've paid FICA taxes but got no SS to show for it.

C. Having everyone in the taxpaying public at large over the next 50-100 years amortize the cost of paying off retirees' SS benefits out of regular general revenues (in other words, raise taxes across the board on almost all incomes) and freeze benefit accruals for anyone not currently getting SS. Everyone who isn't yet old enough to receive SS would get a choice of either a lump sum equal to the accrued value with interest of their contributions or could choose to keep their current benefit amount when they hit retirement age but it would no longer grow with contributions because any further contributions would be to a private account instead of as FICA taxes.

Harry Browne's "solution" (if one could call it that) was to do C. as above but instead of using tax increases fund current retirees' SS benefits by having the US Government sell off pretty much everything it owned besides military bases; if the Constitution didn't allow the Federal government the authority to own an asset then they had to sell it off; the money would be used to buy private annuities for anyone currently receiving SS and anyone close to retirement (who obviously wouldn't have time to start over with a private account). Sounds good on the surface but upon in-the-weeds detailed examinations of this plan there were several flaws but the biggest was that even if the Feds sold off almost everything they owned it wouldn't equal to much more than around 22 or 23% of what was needed in order to buy the private annuities needed to totally replace SS for all current retirees and near retirees...and this was in mid-2000 when interest rates were much higher so annuity payouts were higher as well...and let's not even consider that these annuities typically aren't inflation-adjusted like SS is, or what would happen to the unfortunate "sandwich generation" who was stuck in the middle so they would get no SS but also wouldn't have time enough to fully fund a private account and let it compound (to explain this further: Someone who was say, 21, would have decades to fully fund a private account and would be OK; someone who was 64 would at least in theory get an annuity funded by the proceeds of government asset sales and would at least get something; someone who was, say, 47 would get no SS unlike the 64 year old but also wouldn't have the 40+ years that the 21 year old would have of contributions and compounding; ergo this person was being squeezed both ways like the meat in a sandwich).

The bottom line is, if you want to convert a PAYGO system of any kind to a funded system of any kind, someone, somewhere is going to have to pay more to get the funded system funded to start out with; that's just the nature of switching from an unfunded system to a funded one. Anybody telling you otherwise is either ignorant of basic math or is lying to you and making promises they can't keep.

TREMENDOUS elucidation of all the possible solutions....and the pitfalls with each one of them! As usual, NO easy solutions!

Vinny

[doodle]

Pugchief said:

And most of all, they aren't super-savers like you, and hate paying taxes that contribute to government pork.

Just so we are clear, the government by no means needs your tax money in order to spend. Government spending is only limited by inflation which is a byproduct of resource constraints within the economy. Your taxes are essentially an inflation drain...that is all.

[doodle]

Pugchief said:

And most of all, they aren't super-savers like you, and hate paying taxes that contribute to government pork.

Just so we are clear, the government by no means needs your tax money in order to spend. Government spending is only limited by inflation which is a byproduct of resource constraints within the economy. Your taxes are essentially an inflation drain...that is all.

That's besides the point.
1. Normal people hate paying taxes. The lower, the better.
2. Taxes become even more irritating when the govt spends $ on stupid things, regardless if they could just print more or inflate.
3. Most people in this country are incompetent at saving/investing.

1. Yeah. Probably even more annoying once you realize government doesn't even need that money to spend. Functionally it's just providing an inflation pressure release valve...so you get the simultaneous nonsensical taxation and Uber loose stimulative monetary and fiscal policy headsratcher..

2. Ideally resources would be funneled to productive uses. However, it's tough to say the private sector does a much better job based on the absolute mountains of bullshit we spend fortunes on....planned obsolescence, constantantly accelerating replacement cycles, manipulation of demand by ever changing fashion trends.

3. Yes, but if they were then the government would have to increase debt even more as private sector savings equals government debt. On top of that, as I mentioned before if everyone started saving like me GDP would be a quarter of what it currently is and unemployment would be north of 50%.

[glennds]

Taxes become even more irritating when the govt spends $ on stupid things, regardless if they could just print more or inflate.

Are you suggesting that the $900B Stimulus bill just passed that allocated $10M for "Gender Studies" in Pakistan is stupid?

Because when COVID hit, my personal concerns, speaking from a position of cis white male American privilege were primarily around gender issues in Pakistan.

It didn't. The Pakistan aid line item was part of the larger $2.3 Trillion overall government funding bill of which the COVID stimulus bill was just a $900B part.
Our President took selections from thousands of line items in the larger bill and implied that they were part of the COVID relief bill when they were not. You can find fact check reports on this and confirm for yourself.
This parlor trick served his purposes by galvanizing his supporters and perpetuating the idea that he and only he is the advocate of the American people. Political theater, don't take the bait.

[vnatale]

Taxes become even more irritating when the govt spends $ on stupid things, regardless if they could just print more or inflate.

Are you suggesting that the $900B Stimulus bill just passed that allocated $10M for "Gender Studies" in Pakistan is stupid?

Because when COVID hit, my personal concerns, speaking from a position of cis white male American privilege were primarily around gender issues in Pakistan.

It didn't. The Pakistan aid line item was part of the larger $2.3 Trillion overall government funding bill of which the COVID stimulus bill was just a $900B part.
Our President took selections from thousands of line items in the larger bill and implied that they were part of the COVID relief bill when they were not. You can find fact check reports on this and confirm for yourself.
This parlor trick served his purposes by galvanizing his supporters and perpetuating the idea that he and only he is the advocate of the American people. Political theater, don't take the bait.

Was this a sly attempt on your part to be clever? But I caught you??!!

https://parler.com/auth/access

Vinny

[doodle]

Taxes become even more irritating when the govt spends $ on stupid things, regardless if they could just print more or inflate.

Are you suggesting that the $900B Stimulus bill just passed that allocated $10M for "Gender Studies" in Pakistan is stupid?

Because when COVID hit, my personal concerns, speaking from a position of cis white male American privilege were primarily around gender issues in Pakistan.

It didn't. The Pakistan aid line item was part of the larger $2.3 Trillion overall government funding bill of which the COVID stimulus bill was just a $900B part.
Our President took selections from thousands of line items in the larger bill and implied that they were part of the COVID relief bill when they were not. You can find fact check reports on this and confirm for yourself.
This parlor trick served his purposes by galvanizing his supporters and perpetuating the idea that he and only he is the advocate of the American people. Political theater, don't take the bait.

Money is fungible. Every dollar spent on building transgender bathrooms in Sub-saharan Africa is one less dollar able to go into something else in the budget.

This is where things get a little unclear for me. I'm not sure how building transgender bathrooms in africa has any impact on what we are able to accomplish here. I'm assuming these projects are using african resources and african labor so it's not constraining us in any way. The government isn't budget constrained in terms of money, it's a resource and labor issue that ultimately constrains their spending in that a shortage of either of those would drive inflation.

[Tortoise]

In that case, why doesn’t the U.S. just print money to fund 100% of every foreign country’s expenses? As long as those countries are using their own resources and their own labor, our sending them money isn’t a drain on our wealth, right?

Tortoise

[doodle]

In that case, why doesn’t the U.S. just print money to fund 100% of every foreign country’s expenses? As long as those countries are using their own resources and their own labor, our sending them money isn’t a drain on our wealth, right?

Tortoise

As long as the money we printed circulated within those economies I don't see what the issue with that would be. In some sense because the dollar is still the international reserve currency and there is a huge demand for it overseas we need to print more and distribute it. If we didn't it would drive up the value of the dollar relative to other international currencies and undermine American companies ability to compete in the international marketplace...especially if we repatriated all our manufacturing.

If all those additional dollars came back and put a demand on a static quantity of productive resources and capacity within our country then I could see it leading to inflation. On the other hand if they flooded back and demanded goods and services and we had excess productive capacity available to fufill those demands then it would be very stimulative to our economy.

I'm not an expert by any means on how all of this works, but a fiat debt based monetary system is a strange animal. After all, credit is essentially money creation and no one talks about that very much. Every time a bank creates a loan it is in essence printing dollars. When credit contracts it conversely shrinks the supply of dollars in the system.

Modern Monetary Realism discussions were very popular on this forum during the last crisis. It's been over ten years since I've discussed this stuff so it's buried under a lot of cobwebs. MMR is purely descriptive in nature and it's only goal is to describe how a modern debt based fist monetary system functions. MMT Modern Monetary Theory is the theoretical arm that then advocates policy prescriptions based on that reality. One can take issue with the policy ideas coming out of MMT, but there isn't really room to argue with MMR as it's merely trying to understand and describe the mechanics of our system.

Fodder for discussion: https://www.japantimes.co.jp/opinion/20 ... -realism/

[SomeDude]

In that case, why doesn’t the U.S. just print money to fund 100% of every foreign country’s expenses? As long as those countries are using their own resources and their own labor, our sending them money isn’t a drain on our wealth, right?

Tortoise

I know you know this Tortise but for the good of everyone else......

Dollars are not wealth. Our property, capital goods, consumable goods, homes etc. are wealth. Our time is what we use to create more wealth.

By giving other people dollars, the government gives them a claim on our wealth. They can buy it out from under us. They can buy our services which is our time to create more wealth. Even if all the foreigners did was buy services from us, the service workers would get the dollars and use them to bid stuff away from the other Americans, and the other Americans wouldn't be getting services in exchange. The foreigners could use the time they saved by getting the services, to create more wealth for themselves.

In the end, giving dollars away to foreigners results in Americans having less wealth. It is a redistribution of wealth to the people getting dollars for nothing. This is the same when the government gives out SS payments, welfare, unemployment, 90% of government "workers" that are doing "jobs" no one wants done. It's all a big wealth transfer going on non-stop.

Last point, as the reserve currency, foreigners can use dollars on the international stage to bid for oil and other things. That raises the price in dollars, making it harder for us to buy that stuff, making us poorer.

[doodle]

In that case, why doesn’t the U.S. just print money to fund 100% of every foreign country’s expenses? As long as those countries are using their own resources and their own labor, our sending them money isn’t a drain on our wealth, right?

Tortoise

I know you know this Tortise but for the good of everyone else......

Dollars are not wealth. Our property, capital goods, consumable goods, homes etc. are wealth. Our time is what we use to create more wealth.

By giving other people dollars, the government gives them a claim on our wealth. They can buy it out from under us. They can buy our services which is our time to create more wealth. Even if all the foreigners did was buy services from us, the service workers would get the dollars and use them to bid stuff away from the other Americans, and the other Americans wouldn't be getting services in exchange. The foreigners could use the time they saved by getting the services, to create more wealth for themselves.

In the end, giving dollars away to foreigners results in Americans having less wealth. It is a redistribution of wealth to the people getting dollars for nothing. This is the same when the government gives out SS payments, welfare, unemployment, 90% of government "workers" that are doing "jobs" no one wants done. It's all a big wealth transfer going on non-stop.

Last point, as the reserve currency, foreigners can use dollars on the international stage to bid for oil and other things. That raises the price in dollars, making it harder for us to buy that stuff, making us poorer.

So how does credit factor into that? When someone gets a loan for a home haven't they essentially devalued the dollars in existence? They have made a claim on the wealth of the country with dollars that weren't in existence until they were conjured up through the extension of credit. And conversely, when that loan is paid off they extinguish dollars in existence and increase the value of the currency.

My mind is very far from made up on this topic. I came into this forum very much with the mindset you express above. Through literally hundreds of pages of debates with forum OGs like Stone, Gumby, MachineGhost, and the legendary MediumTex, I learned to open my mind up regarding those beliefs. Unfortunately, many if not all of those individuals have moved on. Perhaps though we can try to emulate some of the debate and discussion that made this gyro forum such a mind expanding place in the early years.

Rather than immediately jump into this dialectical conversation perhaps it would be better to start with a debate between proponents of MMT vs Austrian economics to establish where these two schools of thought differ. Warren Mosler is always a popular name to start with.


https://youtu.be/cUTLCDBONok

[glennds]

In that case, why doesn’t the U.S. just print money to fund 100% of every foreign country’s expenses? As long as those countries are using their own resources and their own labor, our sending them money isn’t a drain on our wealth, right?

Tortoise

It depends on whether we are getting something in return as part of a negotiation. Directly or indirectly.

Giving the government the benefit of the doubt, I think there are a great many line items that look absurd in a vacuum, but perhaps make sense in the context of a larger negotiation. Our country has done lots of stupid things and made bad bets in the area of foreign relations and global politics. But history says we've suffered more when we withdraw and let the rest of the world do what it will.
This idea has been the cornerstone of our State department policy since WWII, but New Republican Populism has been challenging the ideology and seems to advocate a return to isolationism.

there is a significant difference between isolationism and non interventionist, i suspect the new populism leans toward the later not the former, which is a bit of a loaded description implying alack of caring and selfishness that non interventionist does not have..

[Hal]

Dollars are not wealth. Our property, capital goods, consumable goods, homes etc. are wealth. Our time is what we use to create more wealth.

By giving other people dollars, the government gives them a claim on our wealth.

Hmmm...

On giving that some thought, I would suggest the dollar gives a claim, albeit irredeemable, on the Treasuries wealth (eg Gold or Silver certificates). There is no obligation to give someone your house if they present you with dollars....

Interested in peoples thoughts on this.

https://www.youtube.com/watch?v=Cgyf9BtKaVo

[SomeDude]

“The government's War on Poverty has transformed poverty from a short-term misfortune into a career choice.” - Harry Browne

[Libertarian666]

Dollars are not wealth. Our property, capital goods, consumable goods, homes etc. are wealth. Our time is what we use to create more wealth.

By giving other people dollars, the government gives them a claim on our wealth.

Hmmm...

On giving that some thought, I would suggest the dollar gives a claim, albeit irredeemable, on the Treasuries wealth (eg Gold or Silver certificates). There is no obligation to give someone your house if they present you with dollars....

Interested in peoples thoughts on this.

https://www.youtube.com/watch?v=Cgyf9BtKaVo

An irredeemable claim is not a claim at all, because a claim implies that someone is obligated to do something at some point in the future.

A "US Dollar", on the other hand, has no obligor and no payee. It is a green piece of paper that can be used to pay US taxes.

That's about it.