I have been floundering around trying to figure out what the increase he was proposing to the payroll increase for SSI was about and what it really meant, not understanding enough about economics and tax policy I could not articulate it, but knew or suspected; a) it had to be a Liberal and all that entails= spending on entitlement prgms and the like b) it was all about income re-distribution c) this was not consistent with what SSI was created to do…..something kept nagging at me……then, viola’….see below…

The point is, its another money grab and another re-distribution project where in, MORE money is separated from its owner for down payments for future payouts, annuity like. BUT the gov. handles the money and of course makes not a dime on it and spends it as fast as it come in and of course he needs MORE money, the expiration of the tax cuts will not be enough you see.

IF this were going hand in hand with a revamp of the system i.e. beneifits pased on to your spouse IN FULL, prvt. accounts of a portion of the money etc. this would be different, but thats not what this is about.

Obama Turns FDR Upside Down
By LAWRENCE B. LINDSEY
June 20, 2008; Page A13

Sen. Barack Obama has a bad idea for "extending the life of Social Security." He has proposed applying the Social Security tax to incomes above $250,000, in addition to the current tax on incomes up to $102,000. It's unfair, he explained, for middle-class earners to pay Social Security tax on "every dime they make" while the very rich pay on "only a very small percentage of their income."

Reporters cited the Obama statement without asking for the logic behind having someone making $100,000 pay on every dime and someone making $250,000 pay on just 41% of income, while someone making $10,000,000 would pay on 98.5% of income. There is no economic principle or theory of tax law that would endorse such a result.



Sen. Obama's logic is fairly obvious, although it hardly makes him an exemplar of the "new politics." The $100,000 to $250,000 group is a targeted voter demographic, and he really didn't want to sock them with a 12.4 percentage point hike in their tax rate. But, as Sen. Obama himself noted in his June 13 announcement, just 3% of workers make more than a quarter-million.

Neither Franklin Roosevelt, who started Social Security, nor the intervening three dozen Congresses thought they were imposing an "unfair" system on the middle class. There is a very good and principled reason why Social Security taxes are paid on just $102,000 of income: Benefits are calculated based on that same $102,000 of income.

The fundamental principle of linking taxes and benefits was established when Roosevelt designed Social Security. He wanted to make sure that it was not a welfare system, calling Social Security "a base upon which each one of our citizens may build his individual security through his own individual efforts." His instincts have generally proved sound. Had Social Security been considered "welfare" rather than a return on taxes earned, it probably would never have had the popularity or the staying power that it has enjoyed for the last seven decades.

Although the formula connecting benefits to tax payments or "contributions" has evolved slightly over time, it still adheres to this basic message. Today, what Social Security terms a "low-wage" worker will pay (in present value terms) $77,197 over his or her lifetime and get $112,261 in benefits. A median-wage worker earning $42,000 will pay $171,550 and get back $187,085. A "high-wage" worker making $67,000 will pay $274,480 and get back $245,085.

Under the current formula, lower-wage workers get a slightly better deal than do higher-wage workers, assuming the same life expectancy. But the principle remains that as workers' wages rise so do the taxes they pay, and so do the benefits they will get from the system.

Sen. Obama would do away with this principle by requiring higher-end workers to pay taxes without getting any extra benefits linked to their higher contributions. This would be a big step toward turning Social Security from a contributory pension scheme into just another welfare program.

The economics of what Sen. Obama is proposing should be at least as troubling. A high-income entrepreneur would see his or her federal marginal tax rate rise to 53% from 37.7% under Sen. Obama's tax plan. He proposes a 4.6 percentage point hike in the personal income tax rate, a loss of some itemized deductions, and a 12.4 percentage point hike in the Social Security payroll tax. This would take a successful entrepreneur's effective marginal tax rate higher than what it was under Jimmy Carter or Richard Nixon, when the maximum tax on an entrepreneur was 50%.

One of the lessons from the disastrous economics of the 1970s and the subsequent Reagan tax cuts is that everyone – particularly entrepreneurs – responds to incentives. If you take away 10% of a high earner's after-tax income at the margin, he will cut his taxable income by at least 4%. At the margin, this taxpayer now takes home 62.3% of his earnings, a figure that will drop to 47% under the Obama plan. According to a widely accepted economics rule of thumb, the entrepreneur's taxable profit would drop by 11.2%.

Now consider how the Obama plan would affect the taxes paid by such an entrepreneur with a taxable profit from his business of $500,000. Under current law, he would pay $27,148 in Social Security and Medicare taxes, plus $142,969 in personal income taxes, for a total of $170,117. If the taxpayer did not change his behavior at all, under the Obama plan he would face a $31,000 Social Security tax hike and a $11,494 hike in his personal taxes – or a 25% tax hike. But, if the taxpayer responds as the economic models predict, his taxable profit would drop to $444,000. His Social Security and Medicare tax bill would still soar to $51,580. But his income taxes, even with a higher tax rate, would drop to $132,882 for a total of $184,462.

In other words, Sen. Obama is planning on a combined series of tax hikes to produce $42,000 in tax revenue, but consensus economic modeling suggests the government's net take would rise only $14,000.

We should also keep in mind that the economic well-being of the country is not measured by how much taxes the government can collect, or even the size of the deficit. Rather, it is measured by the country's productive capacity. Our theoretical entrepreneur's 11.2% decline in taxable income reflects both less effort on his part and a less efficient use of his income in order to avoid confiscatory tax rates. Or, to put it directly, Sen. Obama's plan would reduce an entrepreneur's after-tax profits by $70,000 – $56,000 in lost profits and $14,000 more in taxes – just to produce a net revenue gain to the government of $14,000.

It is shocking to think that we have a presidential candidate who would make the private sector $5 poorer in order to make the government $1 richer. More likely, given the calculated political design of the proposal, no one in the Obama campaign told the candidate about the economic, ethical or historical consequences of his suggestion.

This indicates that what is really on offer is not some postpartisan approach to politics, but a Democratic candidate far to the left of Bill Clinton.

Obama Turns FDR Upside Down - WSJ.com

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Obama-e fungis nati homines....

Interesting quote. I'm going to take issue with a couple of points raised but not with the general factual statement, which seems to be true unless I've misunderstood Obama's SS plan. He is indeed changing FDR's original idea radically. I would suggest, though, that some sort of major change is needed in order to make the program viable, not necessarily that change, but something.

Politically, Social Security was one of Roosevelt's best and cleverest moves. Economically, it was one of his stupidest. He knew that perfectly well, but he also knew that if he framed the program as he did, in terms of pay-ins and entitlements rather than government handouts, it would be much harder for a later and more conservative Congress to challenge. That's why he set it up that way. It's the only reason why he did. There were overwhelming reasons not to, but they were all economic rather than political.

It was economically stupid both short-term and long-term. Short-term, when workers (=consumers) were already not making enough money to keep the economy going well, it was a really bad idea to further reduce their spending money with a regressive tax. The recession-within-the-Depression of 1937-39 was the result. Long-term, the program has a very low payout in terms of pay-in, and depends for its stability on most workers never living to collect benefits, and on an ever-increasing pool of young workers contributing to the program to support retired people drawing from it.

In order to correct these long-term problems, we have to do one of two things. Either we turn Social Security into, as you put it, a welfare program, in which wealthy Americans pay to support elderly non-wealthy Americans, or else we change what is done with the money between the time it is paid in and the time it is paid out, i.e., rather than borrow it at no interest to help cover general government expenditures, invest it in profitable ventures (low-risk ones for the most part, I would imagine) so that it works more like a federal 401K. And even if we do the latter, we still need to do something short-term to cover those who have paid into the system during the time when we weren't doing that, so it will need to be a welfare program at least temporarily.

Indeed. And as I said, that's why FDR set it up that way. It was purely a political decision, not one based on principles. We should recall that Franklin Roosevelt was, very probably, the best politician in the entire 20th century in the entire world. Not everything he did made sense in terms of policy, but he rarely put a political foot wrong, and even when he did (such as with the court-packing scheme or the attempt to defeat conservative Democrats in the primaries) he usually managed to recover.

In terms of principle or policy, there is no reason why that method of enacting Social Security was the right way. Only in terms of politics does it make any sense.

No, that makes no sense at all. The only way that someone will cut his "taxable income" is if he can do that on paper without cutting his real income. And if the loopholes exist to let him do that, he's already doing that. (Or if not, he needs to get a new accountant.

The "disastrous economics of the 1970s" had nothing to do with tax rates and everything to do with the oil embargo that began in 1973 and ended in 1981. That temporary loss of cheap oil drove up the price of everything while simultaneously driving the economy into stagnation. When a combination of improved efficiency and new oil sources effectively ended the embargo in the early 1980s, the economy recovered. Reagan got credit for this, just as he did for the liberalization and ultimate fall of the Soviet Union, but he deserved credit neither for the one nor for the other, nor did Nixon, Ford, or Carter deserve the blame for what happened in the '70s.

The idea that tax increases reduce revenue and that tax cuts increase it has been well disproven. This part of the articles argument can and should be dismissed.

Oh, Obama certainly is that, but this is rather like saying that he is thinner than a circus fat man or darker than an albino. Bill Clinton was the most conservative Democratic president since Grover Cleveland. It's about friggin' time we had a Democratic candidate far to the left of Bill Clinton. That's what the Democrats are supposed to be. And this year, they are. Let's see how the country likes the idea.

I take issue with your remark regards the cold war, he was the beneficiary of a fairly constant practice, BUT he deserves credit for toughing it out when the politics were very much against him here and aboard and pushing them across the tipping point.


and far left will not get him elected, you know that, and I don't see democrats as the far lefty party either they just have an over abundance of influences due to money and press out of proportion to heir true electoral power. Democrats were the party of the people, moderates, and security minded folk etc. Blue collar, that’s is until mcgovern…


anyway sorry for the OT digression.

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Obama-e fungis nati homines....

Well, I'll say that he deserves this much credit for ending the Cold War. One, he didn't get us into a nuclear war (which is the only way we could have lost it). And two, when Gorbachev showed up, he was willing to negotiate with him and adopt a friendlier approach to the new Soviet regime, which showed that he wasn't quite the ignorant cowboy some people thought he was. Other than that, the Soviet Union was an unsustainable enterprise, an attempt to be a military superpower on an inadequate economic foundation. The cold war showed that a rigidly socialist economy underperforms a mixed or managed-market economy just as a laissez-faire economy does. The Soviet Union's failure was a given, sooner or later. You would think that those ideologically opposed to socialism would understand that.

I don't think Obama is "far left." He's just, as the article said, well to the left of Clinton. But there's a reason to that, Clinton took the party way to the right.

This is often misunderstood. One has to distinguish between the economic issues and the social issues. Blue collar workers tend to be pretty far left on economic issues, but not so much so on social issues or foreign policy. The problem for the Democrats was that in the '70s, social issues and foreign policy became the predominant ones and they were caught in the firestorm of the cultural upheaval that happened from the min-60s through the early '80s. And the economic problems that emerged were ones they didn't have a lot of control over (nor did the Republicans of course). So they weren't delivering on their economic promises (and couldn't), and they became, compared to the Republicans, social lefties and peaceniks. And so you got the Reagan Democrat phenomenon, voters who disagreed with Reagan on economic issues but voted for him anyway.

Nowadays, the country has evolved, the generations have aged and shifted, and the cultural divide isn't what it used to be, and it's time for the Democrats to return to their roots, which means being centrist socially and on foreign policy and to the left economically. I think that will play well right now.

Really wasn't OT, since the implications of Obama's SS plan are involved here. Anyway it's your thread.

the short answer is this:

you pay SS tax up to a given dollar amount, you also receive benefits based on a formula that involves the amount you pay in startign most recently and for some years prior to that.

what BHO is proposing is to disassociate the tie in between what you pay and what you draw. So where you pay only up to around 100K now and get benefits relative to that, he would have people pay the percentage against whatever they make but cut off the benefit relative to the pay in.

and if you think that "progressive" income tax was disproportionate, you aint seen NOTHING !

oh no, the already over privileged and spoiled wealthy Americans will have proportionately a little bit less money.The poorest Americans will have proportionately and relatively a lot more money.

oh no, what a travesty of justice.

whatever...

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Obama-e fungis nati homines....

Exactly.

Oh, and for the record, Imp, "SSI" is Supplemental Security Income, not Social Security Income...

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"Life should NOT be a journey to the grave with the intention of arriving safely in an attractive and well preserved body, but rather to skid in sideways - Chardonnay in one hand - chocolate in the other - body thoroughly used up, totally worn out, and screaming "WOO HOO, What a Ride!"

And many folks don't remember just hpw difficult it became to move against the tides of "just let it be"....he refused to get rolled in Finland, re; negotiations of a new salt treaty and gorby sensed he was dealing with someone who would go the distance. He deployed the mrbm Pershings in Europe against fierce resistance.
I'd say gorby and he came along at the right time. Plus of course the system wasn't viable and it was a matter of time yes, but how much time?

I think obama is starting from a place further left than clinton did. He had to contend with a rep. congress, an issue wholly of his own making and he there by moved to center to an extent. Obama is moving center and has a lot further to go becasue he knows he has not a shot in hell winning on a lib platform.

This raising of the ssi threshold will fade as well, its a loser for him and I would say, he,s foundering when it comes to discussing economics, McCain is no genius in that area but he appears to be making fewer policy gaffes like this one.


good luck with that, people have come to see blind entitlement spending as just a sop to buy votes absent methodology to ensure they are efficient and actually doing some good. Add to that the dems have no nor will have any truck with foreign policy that basically doesn't have us laying down in the road , socially the divide is been greater. They cannot even discuss these issues honestly, schip, abortion nor for that matter immigration, etc.

Itsa interesting to see the noise the blue dog dems are making in congress which may sppt some of your thesis ( they are by and large and have run on Con. Values). They basically forced pelosi to allow the vote on the new Fisa wire tapping issue etc. Plus of course the dems passing the funds for iraq last week sans any debate and the wire tap , in their minds gives them security credibility, in other words a pander, good luck to them. Next they’ll be saying we are making progress in Iraq because it has become so apparent only a fool even though they are partisan would still dispute the pubic is beginning to feel that way as well. This recognition will not save them in that arena. The baby alex d is a perfect display of that they have to grab onto, in 06 the ads were Iraqi streets blown up, loses of soldiers, the gritty life of living on the edge in sadr city et al…..

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Obama-e fungis nati homines....

This is why I avoid the WSJ editorial page.
The ideology over reality ratio is way too high.
It gives an example that shows that tax collections will fall if tax rates are raised. Based on "models".

Yet when taxes were actually raised, tax collections went up, and when taxes were cut, tax collections fell.
This has been demonstrated with the Reagan tax cuts, the Reagan Tax increases, the Bush tax increases, the Clinton tax Increases and the Bush tax cuts.
Yet, despite all this actual evidence, the WSJ editorial page still trots out it's long discredited theory and employs it like revealed wisdom to make it's point.

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“The thought of his being president sends a cold chill down my spine.”

Senator Thad Cochran, Mississippi (R)
on McCain

“I decided I didn’t want this guy anywhere near a trigger.”
Senator Pete Domenici, New Mexico (R)
on McCain

“My anger did not help my campaign ... People don’t like angry candidates very much.”

McCain on McCain

Goober, I 'd say you may want to rethink that, last I checked federal tax revenue was at all time highs ( probably dropping now as the economy is slowing)and yes bush , the war etc. blew money like an open spigot. SPENDING……

TaxProf Blog: Growth in Federal Tax Revenues Since 2003 Tax Act

Tax Cuts Increase Federal Revenues


Sure its in a sense ideological, those at that these levels don’t see why they should have to fund someone else’s retirement account as you didn't debate the crux of the matter regards the issue as in raising SS payroll levels, and hey, if the wall st. journal doesn't know shit about the economy etc what can I say. So obamas modeling is better? uhm okay. Whats a matter? The FDR quotations don’t mean anything now?

Attached Images

 

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Obama-e fungis nati homines....

And the ten trillion in debt is a result of the increased revenues?
Don't tell me, it's from spending too much.
That "little dip" in revenues added trillions to the deficit, and yeah, we take in more in taxes now, we would have taken in even more if we left the taxes in place, and we wouldn't have the huge debt we find ourselves burdened with today.
The fact is, revenues will always go up over time, because of growth and inflation. Tax Revenue went up when Reagan raised taxes, tax revenue went up when Papa Bush raised taxes, tax revenue went up when Clinton raised taxes.
Taxes don't really matter that much, that's what all this shows, the economy goes up and down, regardless of tax policy.

__________________
“The thought of his being president sends a cold chill down my spine.”

Senator Thad Cochran, Mississippi (R)
on McCain

“I decided I didn’t want this guy anywhere near a trigger.”
Senator Pete Domenici, New Mexico (R)
on McCain

“My anger did not help my campaign ... People don’t like angry candidates very much.”

McCain on McCain

The Middle-class usually bear the brunt of Democrat policies because they always end up paying higher prices for everything.

Pretty soon there will be two classes........the rich and the poor.

Actually much of the poor will be broke middle-class workers supporting everybody else.

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"These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis,"

"The more people exaggerate these problems, the more pressure there is on these companies,

the less we will see in terms of affordable housing." - Rep. Barney Frank (D)

Then you have a warped sense of "justice", because if YOU were to go take someone else's money that was rightfully theirs for no other purpose than to give it away to someone you felt was more deserving of it, you would be charged with a crime.

Morally, welfare and redistributionist policies are nothing more than legallized theft. But as slavery taught us (at least some of us anyway who don't suffer from moral tunnel vision) legality doesn't confer morality.

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"It's a good feeling to shoot a bad guy. Something you democrats would never understand. Americans are homesteaders, we want a safe home, keep the money we make, and shoot bad guys!"

----Denny Crane

Well, the upper class was seeing the percentage of the nation's assets it owned go down every year, and the middle class ended up with a bigger share of the pie every year from 1930 to 1981, then the Reagan tax cuts reversed that.
We are now back to the same distribution of wealth that existed in 1929.

And that's what it takes to wake up America, and deliver a solid Democratic majority across the board.
History repeats itself.

__________________
“The thought of his being president sends a cold chill down my spine.”

Senator Thad Cochran, Mississippi (R)
on McCain

“I decided I didn’t want this guy anywhere near a trigger.”
Senator Pete Domenici, New Mexico (R)
on McCain

“My anger did not help my campaign ... People don’t like angry candidates very much.”

McCain on McCain