Senators eye Social Security reforms as some in House GOP consider cuts

[LMAO]

The arguments you are making are not based on facts and economics, but emotions

[LMAO]

I disagree with @Hoodat on what to ultimately do with the Social Security program altogether, but he is not wrong on the numbers and he does make some very powerful points to back up his position

Here is a good article I found

https://www.heritage.org/social-security/commentary/social-securitys-unfunded-obligations-getting-worse

[Hoodat]

BS. The employee hired on for the wage they hired on for.

The employer paid out what the job is worth.  Which in this case is $16,147.50.

There is no guarantee they'd make a dime more if that matching money didn't go to the government.

Just as there is no guarantee that they wouldn't make a dime less than $16,147.50.

That tidbit of altruistic theory can be laid to rest. It's fiction.

No, it is set by the market.  If the employer thinks he can get away with it, he will pocket the money.  But there are other employers that will be content with breaking even (i.e. giving the employee the full amount) because they value the profit that the employee provides.

Here's another example.  Let's say the government puts an indirect tax of $1/pack on cigarettes which drives the retail price up to $3/pack.  This high price causes some smokers to quit, while other smokers become accustomed to paying the $3 price.  Then one day, the government decides to drop it's $1 tax.  By your reasoning, every retailer will choose to keep the prices at $3 and pocket the difference.  But that premise is false.  There will be a retailer who will choose to drop his price back down to $2, keeping the same profit per pack, but hoping to increase sales.  So where will the consumers go?  Will they keep paying $3 per pack even though they know a retailer selling cigarettes at $2?  Of course not.  Likewise, the minimum wage worker won't keep the $15K job because he will find an employer willing to give him the $16k+ he has been willing to pay the entire time.

The invisible hand always wins out.  People will do what is in their best interest.  And for the employer, that means maintaining the status quo by continuing to pay out $16k+.

[Bigun]

The arguments you are making are not based on facts and economics, but emotions

Seems to be a lot of that going on on this thread.

[Hoodat]

@Hoodat

Just out of curiosity,ever heard of a little thing called "inflation"?

Yes, which is why I like to talk in terms of real dollars rather than nominal dollars.  If you reread the post, you will see that both the 1970 and 2010 figures are in terms of 2010 dollars.

[Idiot]

Directly, it is 7.65%, the employer does the rest. If the person is making 15K a year, that's what they get paid, before taxes. You can argue that they 'pay' the rest but it isn't taken out of the 15K.

Luckily since I'm self employed I get to pay double that...ugh!  All I can say about all of this is that if it weren't for SS my 92 yr old mom would be basically on the street.  Soooo...I'm grateful for SS.

[Hoodat]

That's probably right. And as a long time employer, removing matching finds (and all other responsibilities foisted on employers) would only likely allow me to hire more people, and would do little to the prevailing wage or likely, what I would charge.

If I was your competitor, I would steal all your workers by offering them 7% more than you are paying.

[Fishrrman]

Bigun wrote:
"Seems to be a lot of that going on on this thread."

Once again, Fishrrman's credo:
Reality is what it is. It is not what we believe it to be.

Social Security is not going away.
And any political party that tries to make it go away (or is even perceived as trying to do so) is not going to be in power for very long.

In time, the payroll tax will have to go up, by a small percentage.
Benefits may have to be reduced across-the-board, by a small percentage.
Perhaps "the earnings cap" (above which is exempt from the payroll tax) will have to be raised.

I don't foresee the retirement age being raised any higher than it is now. Trying to do so will immediately doom any chance for strengthening the system.

A personal observation.
I stopped paying Social Security in 1979, almost 44 years ago.
I paid into RR Retirement instead. About 67k over the course of 32 years.
Been retired for 11 years this month. And since retirement day, I've been paid back about 7.4 times my 32-year "investment".

All in all, I'd consider that to be a fairly good return. Probably far better than I could have made on my own. You'll get no complaints from me.

[Hoodat]

Luckily since I'm self employed I get to pay double that...ugh!

We all pay double that.

All I can say about all of this is that if it weren't for SS my 92 yr old mom would be basically on the street.  Soooo...I'm grateful for SS.

It it weren't for Social Security, my mom would have received payments 50% higher than what Social Security paid.  And when she died, I would have inherited what was left over.

[Hoodat]

The arguments you are making are not based on facts and economics, but emotions

For anyone out there having difficulty with emotions on this, let me ask this question.  Why do you oppose someone like me having the choice to opt out even if you are still able to collect your social security checks every month?

[roamer_1]

If I was your competitor, I would steal all your workers by offering them 7% more than you are paying.

I doubt it... But I would then have to counter. Like I said, I doubt it would effect prevailing wage at all.

[Hoodat]

Here is a good article I found

https://www.heritage.org/social-security/commentary/social-securitys-unfunded-obligations-getting-worse

Thanks for posting, @LMAO

Here's the first sentence of paragraph 3:

The Social Security Board of Trustees reports that the program will run out of money in 2034.

The Social Security Board of Trustees is lying their asses off.  Social Security is already out of money.  We are now paying out more than we are bringing in.  It has been that way for almost a decade.  The "money" the board claims to have that will cover them through 2034 is nothing more than IOUs for the money they spent on the general fund during those years of surplus.  In other words, those IOUs only get covered one of two ways - another tax source such as income tax, or by printing money.  The whole 2034 solvency schtick is complete bullshit.  There are no stock funds.  There are no real estate investments.  No precious metals.  No bit coin.  No money market accounts.  Nothing but an IOU saying that the Social Security Administration will have to come up with the money somehow when the time arises.

Social Security is a ponzi scheme.  This cannot be emphasized enough.   It is NOT a good program.  It is a very very bad program that needs to be ended and replaced with one where each person has individual investments holding real value instead of a government IOU backed by an empty promise.

[Hoodat]

I doubt it... But I would then have to counter. Like I said, I doubt it would effect prevailing wage at all.

You would counter with your own additional 7%.  At the end of the day, you would be paying the exact same amount as before, but your employee would be better off.

[roamer_1]

You would counter with your own additional 7%.  At the end of the day, you would be paying the exact same amount as before, but your employee would be better off.

Like I said, I doubt it.

Everybody is employee poor - Always needing more than they can afford. with the weight of uncle nanny coming off, it would be the difference between 9 or 10 workers (roughly speaking)... I would suppose the businesses would opt to hire. I surely would.

[Smokin Joe]

The employer paid out what the job is worth.  Which in this case is $16,147.50.


Just as there is no guarantee that they wouldn't make a dime less than $16,147.50.


No, it is set by the market.  If the employer thinks he can get away with it, he will pocket the money.  But there are other employers that will be content with breaking even (i.e. giving the employee the full amount) because they value the profit that the employee provides.

Here's another example.  Let's say the government puts an indirect tax of $1/pack on cigarettes which drives the retail price up to $3/pack.  This high price causes some smokers to quit, while other smokers become accustomed to paying the $3 price.  Then one day, the government decides to drop it's $1 tax.  By your reasoning, every retailer will choose to keep the prices at $3 and pocket the difference.  But that premise is false.  There will be a retailer who will choose to drop his price back down to $2, keeping the same profit per pack, but hoping to increase sales.  So where will the consumers go?  Will they keep paying $3 per pack even though they know a retailer selling cigarettes at $2?  Of course not.  Likewise, the minimum wage worker won't keep the $15K job because he will find an employer willing to give him the $16k+ he has been willing to pay the entire time.

The invisible hand always wins out.  People will do what is in their best interest.  And for the employer, that means maintaining the status quo by continuing to pay out $16k+.

Take a deep breath and pull your head out.

The prosepctive employee says "what does it pay"?  They are told "X" dollars an hour. That is what the paycheck they see is based on.

They don't give a damn about the employer cost of matching Social Security.
They don't give a rat's ass about worker's comp as long as it is there if they need it.
They didn't consider payments into unemployment funds.
They didn't ask how much insurance cost the employer, just if they had it, and what their share was, if any.
They didn't ask what PPE would cost the employer, nor safety training, nor fleet vehicle insurance.
it just comes with the job.

See where this is going?

Those are EMPLOYER COSTS of hiring someone.

The employee is often unaware of them, and didn't add them in when considering their wages, which is what ends up on their table, after taxes. To the employee, that bottom line is what counts. Their wage is what shows up on their check times the hours worked.

Any reduction in EMPLOYER COSTS might be shared with the workforce, but there is ABSOLUTELY NO GUARANTEE that is going to happen.

Considering any increase beyond the wages proffered only incurs additional expense for the employer and leaves less wiggle room to give raises if there are market slumps, cutting employer expenses might not be so robustly passed on as you seem to think.

But in all my years in the workforce (going on 53, now) I hired on for the wage, the day rate, and whatever was added in (per diem, expenses, insurance, etc.), but never considered the Employer's costs in that, because the employer had those factored in when they made the offer.

The only time I would have received that difference was when I worked for myself.

[cato potatoe]

Once again, Fishrrman's credo:
Reality is what it is. It is not what we believe it to be.

Social Security is not going away.
And any political party that tries to make it go away (or is even perceived as trying to do so) is not going to be in power for very long.

In time, the payroll tax will have to go up, by a small percentage.
Benefits may have to be reduced across-the-board, by a small percentage.
Perhaps "the earnings cap" (above which is exempt from the payroll tax) will have to be raised.

I don't foresee the retirement age being raised any higher than it is now. Trying to do so will immediately doom any chance for strengthening the system.

A personal observation.
I stopped paying Social Security in 1979, almost 44 years ago.
I paid into RR Retirement instead. About 67k over the course of 32 years.
Been retired for 11 years this month. And since retirement day, I've been paid back about 7.4 times my 32-year "investment".

All in all, I'd consider that to be a fairly good return. Probably far better than I could have made on my own. You'll get no complaints from me.

The default position should not be "automatic tax increase."  That's how property taxes in New Jersey became $20k per year.  I think once the situation is explained, you will find support for other solutions.  The program is unpopular with people who are not eligible (which is 75% of us).

[Hoodat]

Like I said, I doubt it.

Everybody is employee poor - Always needing more than they can afford. with the weight of uncle nanny coming off, it would be the difference between 9 or 10 workers (roughly speaking)... I would suppose the businesses would opt to hire. I surely would.

The weight of uncle nanny coming off would result in an upward shift in the supply curve, thus driving up price.

[Kamaji]

The employer paid out what the job is worth.  Which in this case is $16,147.50.


Just as there is no guarantee that they wouldn't make a dime less than $16,147.50.


No, it is set by the market.  If the employer thinks he can get away with it, he will pocket the money.  But there are other employers that will be content with breaking even (i.e. giving the employee the full amount) because they value the profit that the employee provides.

Here's another example.  Let's say the government puts an indirect tax of $1/pack on cigarettes which drives the retail price up to $3/pack.  This high price causes some smokers to quit, while other smokers become accustomed to paying the $3 price.  Then one day, the government decides to drop it's $1 tax.  By your reasoning, every retailer will choose to keep the prices at $3 and pocket the difference.  But that premise is false.  There will be a retailer who will choose to drop his price back down to $2, keeping the same profit per pack, but hoping to increase sales.  So where will the consumers go?  Will they keep paying $3 per pack even though they know a retailer selling cigarettes at $2?  Of course not.  Likewise, the minimum wage worker won't keep the $15K job because he will find an employer willing to give him the $16k+ he has been willing to pay the entire time.

The invisible hand always wins out.  People will do what is in their best interest.  And for the employer, that means maintaining the status quo by continuing to pay out $16k+.

Only if the relevant market universe consists of two participants - employers and employees.  However, the relevant market universe is not that limited.  At a minimum, it includes the employer's customers - both intermediaries (e.g., wholesale customers of a manufacturer) as well as ultimate end-customers (i.e., consumers).  Which means that, if an external cost is alleviated from one of the players - in this case, employer costs of labor - then it may just as likely - on an a priori basis - be shared with the employer's customers as it would be shared with the employees.

One also has to look at the relative elasticities of supply and demand - and in that respect, employers are typically more elastic than employees when it comes to changing wages, which generally means that when a new quantum of economic value enters the equation, on average the employee gets a smaller share of it than either the employer, or the employer's customers, depending, of course, on the relevant local market, the type of goods/services being provided, and the relative elasticity of the employer's customers.

So, no, it is not the case that if the employer-level wage taxes were reduced, that the lion's share of the additional economic benefit would go to the employees and not to either the employer or the employer's customers.

[Hoodat]

Take a deep breath and pull your head out.

The prosepctive employee says "what does it pay"?  They are told "X" dollars an hour. That is what the paycheck they see is based on.

They don't give a damn about the employer cost of matching Social Security.
They don't give a rat's ass about worker's comp as long as it is there if they need it.
They didn't consider payments into unemployment funds.
They didn't ask how much insurance cost the employer, just if they had it, and what their share was, if any.
They didn't ask what PPE would cost the employer, nor safety training, nor fleet vehicle insurance.
it just comes with the job.

See where this is going?

Those are EMPLOYER COSTS of hiring someone.

I'm glad to see you understand how it works.  It is the employer cost that dictates whether a job exists.  What the employer offers the employee on paper is only a portion of that cost.

Take the $15K job.  Ignoring all other factors, the cost of this job consists of salary and payroll taxes.  So for the employer, the job costs $16,150 - not $15,000.  The job will exist as long as the employer is able to derive more than $16,150 in value from that job.

Let's simplify it.  Consider a job where an employer is willing to pay out a total of $20/hr, but the extra taxes/costs come to $10/hr.  So the employer offers the worker $10/hr and another $10/hr to cover the costs the employee doesn't see.  So far, so good.  But suddenly, an even occurs which eliminates the hidden $10 extra cost for every employer.  So what happens?  Well, there's an employer who is facing a labor shortage, so he begins offering employees $12/hr instead of $10.  This works, and workers begin leaving other employers to collect the extra $2.  So other employers begin doing the same, paying their workers more.  This continues until an equilibrium is reached.

In an advanced micro class, you will learn that there are equations that determine the demand curve.  In the instance above, the supply curve remains constant, but the demand curve has now shifted.  Once equilibrium is reached, you will find that the new wage falls somewhere between $10 and $20, but it will be much closer to $20.  The employer will enjoy a slight gain in profit, but the employee will enjoy a much larger windfall.

Any reduction in EMPLOYER COSTS might be shared with the workforce, but there is ABSOLUTELY NO GUARANTEE that is going to happen.

AGAIN, there is no guarantee that it won't either.  An employer won't have any employees if he is the only one stubbornly pocketing all of the windfall.  Workers will do what is best for them, which means that if one employer out there is willing to give them that extra 7%, they are going to take it.  Supply and demand.

But in all my years in the workforce (going on 53, now) I hired on for the wage, the day rate, and whatever was added in (per diem, expenses, insurance, etc.), but never considered the Employer's costs in that, because the employer had those factored in when they made the offer.

Again, it comes down to what the employer is willing to pay to have a job filled.  Some of that cost is hidden.  Some is not.  Doesn't really matter whether an employee sees it or not.

[Hoodat]

One also has to look at the relative elasticities of supply and demand - and in that respect, employers are typically more elastic than employees when it comes to changing wages, which generally means that when a new quantum of economic value enters the equation, on average the employee gets a smaller share of it than either the employer, or the employer's customers, depending, of course, on the relevant local market, the type of goods/services being provided, and the relative elasticity of the employer's customers.

Are you seriously suggesting that an employer cutting wages will result in more people applying for work there?

[Hoodat]

Let's say you have five different drug kingpins selling cocaine in Santa Fe.  They pay their suppliers $30k per kilo and then sell 8-balls at $250.  Now let's say one kingpin finds a new supplier who is selling keys for $20k, a 33% savings.  Do you really think that kingpin will continue selling 8-balls for $250, or do you think maybe, just maybe he might drop the price to $200 in order to bring in more business?

This same principle applies with wages.  The shift in the curve results in a new equilibrium affecting both parties.

[Bigun]

Again, it comes down to what the employer is willing to pay to have a job filled.  Some of that cost is hidden.  Some is not.  Doesn't really matter whether an employee sees it or not.

  And those costs are not limited to just payouts to the government and employees. ALL the costs of compliance are in there as well.

[Hoodat]

And those costs are not limited to just payouts to the government and employees. ALL the costs of compliance are in there as well.

Some people here seem to be of the opinion that it is OK for the government to take it if it keeps it out of the hands of the greedy employer.

[catfish1957]

I've purposely have stayed out of the fray, but here is another perspective that angers me to my core......

My contribution to SS 1975- 2012- $161,131.  This doesn't even include employer contribution

My personal average investment rate of return 1975-2022- 12.2%

Taking midpoints and at said rate of return, you know what I would be able to invest right now additonally if that same money would have been left to me?  And this doesn't even include my wife's.

$1,603,358 additonal investable money......  That at my investable (even a decently safe amount of return) safe side of portfolio would be an addtional $96K a year income

Yeah, anyone else thinking the government isn't screwing us?

[Kamaji]

Are you seriously suggesting that an employer cutting wages will result in more people applying for work there?

No, I'm not.  But neither am I suggesting that the employer is going to cut wages.  That is the problem with things like taxes - they are a wedge cost, which only one side generally "sees".  In the case of payroll taxes imposed on the employer, the employer certainly sees that cost, but the employee does not.  This would include, for example, the employer portion of the payroll taxes.

As far as the employee portion of the payroll tax goes, I would agree that, in general, there will not be a reduction in wages in most cases and that the employee portion of the payroll tax will simply revert to the employee.  This is simply because, as currently enacted, the employee portion of the payroll taxes is imposed on the employee, and then enforced through ex ante collection from the employer through withholding.  Repeal the employee portion of the payroll taxes, and there is no longer any obligation to withhold any amount in that respect from the employee's pay, and the employee will receive the gross amount.