[shooz]

BTW
I believe if the cap is lifted, the next generation will have it even better.
Isn't that what it should be all about?

[skyredoubt]

Easiest way to cure this, is remove the cap on FICA.

I'm sure some here will argue against it, but it would work.

With more workers earning less real value, it's the only thing that will work.

If and when it is needed - in freaking 25 years! - then maybe. Actually, a much better idea would be to eliminate FICA altogether:

Cut the Payroll Tax to Save Social Security - New Deal 2.0

and

https://www.pentaxforums.com/forums/political-religious-discussion/125045-rea...-language.html

[shooz]

I agree with this.

In reality, the best way to “save” Social Security would be to adopt policy prescriptions that would make sense even if our society were not aging. That is, adopt those policies that would increase our capacity to produce in the future: 1) more human capital: more years of schooling, fewer dropouts, higher quality schooling, and enhanced apprenticeship and training programs; 2) more public investment: new and improved public infrastructure, better maintenance of existing infrastructure, and reduction of adverse environmental impacts; and 3) more private investment: new and improved private production facilities to enhance growth. The last item will almost certainly require maintenance of high aggregate demand today and over the near future.

Hence, true reform must be geared toward higher employment or increased productivity, which comes down to encouraging more capital formation. Further, the types of investments that can be made today to reduce burdens in the distant future are in human capital and public infrastructure. That is to say, the investments must be undertaken primarily by the government. Yet most self-styled reformers seek to reduce the role of government and increase reliance on the market, which by its very nature is focused on the here and now, not on infinite horizons.
Let us also be clear: the Social Security retirement benefit is not welfare. Retirees have earned their benefits. Not by paying taxes, but rather by working and contributing to the production of the goods and services needed by past and present generations of retirees. Those retiring today and tomorrow should be proud of the contributions they made. And those contributions take the form of the American workers’ accumulated annual produce. Many of their contributions are still in evidence and are still being enjoyed: our housing, our schools, our bridges, our educated population, our arts and literature, and our justice system.

How to do this is the root of our problem. Been argued even here ad infinitum.

So I still say the best way to solve all problems with SS , SSI, SSD, etc., is to remove the cap on FICA.

[skyredoubt]

So I still say the best way to solve all problems with SS , SSI, SSD, etc., is to remove the cap on FICA.

Except we are currently grossly overtaxed. Taxes permanently destroy net financial assets in the economy. Overtaxation results in private sector reducing demand and unemployment which results in permanent loss of economic potential and terrible costs to the society.

Read under "Unemployment":
The Center of the Universe Full Employment AND Price Stability

[shooz]

Yeah well, that's the rumor.
Lower taxes didn't fix a thing in Michigan.
In fact it set us up for a fall, when employment dropped.
Plus the guy that cut them, reduced State services, leaving us in even worse shape.


Lower taxes under Mr. Bush didn't stop Wallstreet from betting the farm. Seamed to encourage them.

In fact higher taxes in the 50s actually did the opposite. With a plus of steady, more sustainable growth.

So please, stop with the bs from blogs and think tanks.
I doubt we will ever halt the scams of the rich, but we can tax them.
I will explain the school yard lesson again. If you don't know who is doing it?
Or it costs too much to prove it?
You punish the whole class. Simple lesson, learned.
TAX THE GREEDY.

[skyredoubt]

Yeah well, that's the rumor.
Lower taxes didn't fix a thing in Michigan.
In fact it set us up for a fall, when employment dropped.
Plus the guy that cut them, reduced State services, leaving us in even worse shape.


Lower taxes under Mr. Bush didn't stop Wallstreet from betting the farm. Seamed to encourage them.

In fact higher taxes in the 50s actually did the opposite. With a plus of steady, more sustainable growth.

So please, stop with the bs from blogs and think tanks.
I doubt we will ever halt the scams of the rich, but we can tax them.
I will explain the school yard lesson again. If you don't know who is doing it?
Or it costs too much to prove it?
You punish the whole class. Simple lesson, learned.
TAX THE GREEDY.

First, don't confuse state taxes and federal taxes. States needs the taxes (as currency users) while the government doesn't (as a currency issuer).
Second, it is the middle class that is overtaxed.
Third, what Bush tax cuts did was actually to prevent recession following the misguided Clinton surpluses (see http://www.levyinstitute.org/pubs/ppb_111.pdf page 13, but read the whole thing by all means).
Forth, there might be many good reasons to tax the rich, but stimulating the economy is not one of those. I do agree that there is a need to reduce income inequality, but right now doing so by removing money from the economy, even if only at the expense of the rich, might be too dangerous, although I am not decided on this one.
FICA is a very regressive tax and thus progressives should support eliminating it right now. It does not hurt the rich, instead it hurts both the employers and the workers.

[shooz]

Taxes are taxes.
I asked you to stop quoting BS from think tanks and blogs.

Bush's cuts created the recession. I felt it. I know it.
STOP lying.

Cutting FICA is idiotic. It doesn't hurt the rich because they stop paying in their first fiscal week.
What do you think? IRAs for everyone?

You evaded the whole fact that high taxes on the rich in the 50s worked wonders. Even tended to keep Wallstreet in line. Of course that was before they owned most of the banks and healthcare corporations and controlled pretty much everything. I'm sure that helped too.
The way to add money to the economy is start making tangible goods in THIS country again.
The saddest thing is that the rich got that way on backs of the American consumer.
Now they turncoat on us and our country by taking production jobs overseas.
A bit overly amoral. Don't you think?

They made many TRILLIONS and keep the money overseas in offshore accounts too. Just because they don't want to pay their fare share. Never did.
So you see, it's the ultra rich that remove money from the economy. Not workers who spend it here. Nor companies that at least try and keep as many jobs here as Wallstreet will let them.

You do remember J. D. Rockerfeller? He created some of the original spin doctors, just to try and convince the public he wasn't the Asshat traitor he really was.
That kind of thing caught on. It's done today at a level at a level that J D could only imagine.
Can you imagine that?

As far as State taxes?
Know this. Those heavily unionized states with good paying jobs and a strong middle class pay the way for all those low paying States like Mississippi, Montana, the Dakotas, Alaska,etc.
They get an outsized return of federal taxes. Always did. Mississippi for one gets back $2 for every $1 they pay in. Those dollars are paid by States like California and New York.

It's not that the middle class is overtaxed. They are under paid.
Everything else is just spin.

---

Last edited by shooz; 02-02-2011 at 01:37 AM.

[jeffkrol]

Taxes are taxes.
I asked you to stop quoting BS from think tanks and blogs.

Thoeries that relate to facts and can actually "predict" an outcome ARE important

Bush's cuts created the recession. I felt it. I know it.
STOP lying.

Cutting FICA is idiotic. It doesn't hurt the rich because they stop paying in their first fiscal week.
What do you think? IRAs for everyone?

You evaded the whole fact that high taxes on the rich in the 50s worked wonders. Even tended to keep Wallstreet in line. Of course that was before they owned most of the banks and healthcare corporations and controlled pretty much everything. I'm sure that helped too.
The way to add money to the economy is start making tangible goods in THIS country again.
The saddest thing is that the rich got that way on backs of the American consumer.
Now they turncoat on us and our country by taking production jobs overseas.
A bit overly amoral. Don't you think?

They made many TRILLIONS and keep the money overseas in offshore accounts too. Just because they don't want to pay their fare share. Never did.
So you see, it's the ultra rich that remove money from the economy. Not workers who spend it here. Nor companies that at least try and keep as many jobs here as Wallstreet will let them.

You do remember J. D. Rockerfeller? He created some of the original spin doctors, just to try and convince the public he wasn't the Asshat traitor he really was.
That kind of thing caught on. It's done today at a level at a level that J D could only imagine.
Can you imagine that?

As far as State taxes?
Know this. Those heavily unionized states with good paying jobs and a strong middle class pay the way for all those low paying States like Mississippi, Montana, the Dakotas, Alaska,etc.
They get an outsized return of federal taxes. Always did. Mississippi for one gets back $2 for every $1 they pay in. Those dollars are paid by States like California and New York.

It's not that the middle class is overtaxed. They are under paid.
Everything else is just spin.

Business is amoral and agree taxes can be a moral checks and balances on society BUT some of your "feelings" are not quite correct.
IF there were no taxes the "cash oversees" may have stayed here and been used in the economy. Though that is a long shot...
Taxes on the rich are just to keep their savings down and to give the illusion of creating parody...
The gov never needed to rob from peter to pay paul so to speak when it comes to states but states DO have to play the balanced budget game......
It took me a lot of "blogs and think tanks" to sway from my "fair share" belief on tax for the rich but it makes sense when "deficits don't matter".... Bush's tax cuts didn't add "stimulus" to the economy but only allowed the money "collectors" to thrive. The Bush cuts would have been fine IF they would have stimulated higher worker pay (Across the board) and new innovation but they DIDN'T and never will. This to me is the problem. When individuals (or corps) collect more money then they need in 20 lifetimes (or distribute to a very small percent) then this is effectively removed from the economy and creates the need for more "money printing" from the fed. Though this could be sustainable it is not socially acceptable to many.
All this goes back to the "need" for a finite money supply based on a finite amount of gold. which NO LONGER exists BUT was not totally eliminated till the 70's (Because of the excess printed dollars, and the negative U.S. trade balance, other nations began demanding fulfillment of America’s “promise to pay” - that is, the redemption of their dollars for gold.http://en.wikipedia.org/wiki/Nixon_Shock)...and NO LONGER needs to be the main driving point of taxes.
Corporation are inherently "lazy" trying to make the most out of what they have.. taxes here can be looked at as "penalties" for this laziness...
The steel industry did not collapse because of "competition" but it's refusal to "work" or "spend" to stay competitive. Japan had new factories and less of a lazy money attitude.
so we need a lazy money tax and tax breaks.... to encourage them to retool/rebuild their infra structure. Same w/ the automobile industry... which has now been FINALLY "forced" upon the industry.......
Unfortunately we are still stuck in this attitude that "someone has to pay" when in reality we don't..... Industry works hard to NOT work hard.... which is the moral hazard taxes should address...
The past is the past and it is up to the "think tanks" to show the way forward.....
I agree w/ skyredoubt (begrudgingly at times) and also understand your frustration (seeing the gutting of my "hometown") and the lack of a "living wage" but can no longer base it on "taxes" per se.. just the lasse fair attitude of business towards it's lazy money collecting policy...... It wasn't the tax cut but the trickle down that's wrong. IF we have to force it w/ taxes so be it.
The tax stick has not been used when and where it should have been... Some now seem to think we don't need it at all. I haven't come to that conclusion.

sorry a bit of a ramble.........
Our new "ground rules" are only 40 years old....... and do need a rethink including looking at gov. not as a "nanny state" but a "nuturing state".....
Sam thing completely different psychology....
O/T paper on tax reform:
http://emlab.berkeley.edu/users/auerbach/ftp/taxreform/flatfinal.pdf

[jeffkrol]

if you read through the responses.......
The End of America? Not Quite - Seeking Alpha

I am sitting here shaking my head while reading yet another newsletter calling for the end of America due to massive money printing which will lead to massive inflation and blood in the streets. While I do agree that the government is currently meddling in the markets to lift asset prices the constant call for the end of America as we know it is getting tired.

Without picking on the newsletter writer individually, his position is pretty easy to learn just by spending time in the blog world. They are all calling for a collapse in the dollar, food and metal prices to soar, chaos, and blood shed in the streets.

It sure gets old.

[skyredoubt]

Taxes are taxes.
I asked you to stop quoting BS from think tanks and blogs.

Bush's cuts created the recession. I felt it. I know it.
STOP lying.

Sorry, cannot have a meaningful dialogue with this kind of attitude. If you "know" things and I "lie", then no point in talking.
If you are unwilling to question some of your "knowledge" and read beyond the scope of your usual reading, again, no point in any discussion.

[mikemike]

Mike, that is a load of nonsense because you have not done any analysis on what level of "means testing" would produce what result. Then there is the economic effect of taking the money out of circulation.

The details of who is affected and by how much by any particular proposal varies. According to analysis by the democratic ways and means committee of Paul Ryan's Roadmap for America proposals for SS reform (in sum, partial privatization with a means-test), the change in annual guaranteed benefits portion for a low wage earner, median wage earner, and high wage earner would be +80%, -10%, -50% respectively.

Setting aside radical theoretical remedies that might or might not work and that would only be available IF the nation made an earthshakingly radical economic policy shift and working within the confines of current economic policy which says that even the federal government does not have unlimited financial resources social security reform is needed.

Cuts will be made to government and everyone has there vested interest be it defense, social spending, entitlements, parochial subsidies, or a favorite tax loophole.

What does $15-20K SS benefit represent to a retired engineer, lawyer, or doctor? A first class plane ticket to Paris every year, gas money for the Winnebago, a boat payment, a timeshare in aspen, or a beach house in Florida.

What does it represent for other underfunded social programs? Rent for a homeless family, the annual premium for family health insurance coverage, or food for 5-6 people.

Is it fair to protect social security payments for the rich at the expense of the destitute young families and children?

Social Security has done a good job eliminating poverty among seniors but it could do a better job at that. Social Security's is most accomplished at transferring income from struggling workers to already wealthy retirees and that should be changed sooner rather than later.

[GeneV]

The details of who is affected and by how much by any particular proposal varies. According to analysis by the democratic ways and means committee of Paul Ryan's Roadmap for America proposals for SS reform (in sum, partial privatization with a means-test), the change in annual guaranteed benefits portion for a low wage earner, median wage earner, and high wage earner would be +80%, -10%, -50% respectively.

Setting aside radical theoretical remedies that might or might not work and that would only be available IF the nation made an earthshakingly radical economic policy shift and working within the confines of current economic policy which says that even the federal government does not have unlimited financial resources social security reform is needed.

Cuts will be made to government and everyone has there vested interest be it defense, social spending, entitlements, parochial subsidies, or a favorite tax loophole.

What does $15-20K SS benefit represent to a retired engineer, lawyer, or doctor? A first class plane ticket to Paris every year, gas money for the Winnebago, a boat payment, a timeshare in aspen, or a beach house in Florida.

What does it represent for other underfunded social programs? Rent for a homeless family, the annual premium for family health insurance coverage, or food for 5-6 people.

Is it fair to protect social security payments for the rich at the expense of the destitute young families and children?

Social Security has done a good job eliminating poverty among seniors but it could do a better job at that. Social Security's is most accomplished at transferring income from struggling workers to already wealthy retirees and that should be changed sooner rather than later.

Mike, again, at what income would one stop getting SS and how much would it save? Plans may vary, but the details are important in determining the cost-benefit.

Retirement is tough, expecially with what has happened to investments. 20-30k per year for a couple paid in hand is not a trip to Aspen or Paris, but an essential part of the retirement income for all but the richest retirees. Please go to a financial advisor and pretend you are in your 50s and want to retire, and see what you are told. Unless you are in the top 5% (maybe higher) that is probably close to half your retirement. By my estimation, I would need a 7 figure sum to replace SS in retirement. That is true because it must be replaced by a low-return, secure investment to replace the relatively secure portion of the retirement income theoretically represented by SS, and because of the tax treatment of SS. Soon to be retired professionals are planning retirement income pretty closely these days.

[shooz]

Sorry, cannot have a meaningful dialogue with this kind of attitude. If you "know" things and I "lie", then no point in talking.
If you are unwilling to question some of your "knowledge" and read beyond the scope of your usual reading, again, no point in any discussion.

I apologize for saying it that way.
It was rather late.
Your statement about Clinton is what set me off.
In reality, it was Reagans tax cuts that made the crash inevitable.

My statement on blogs and think tanks, has to do with the reality of multi-pronged marketing and PR. You don't know who backs them, or their purposes.

Read the book by Wendell Potter, titled Deadly Spin, to get an idea of why I feel this way.

[jeffkrol]

I apologize for saying it that way.
It was rather late.
Your statement about Clinton is what set me off.
In reality, it was Reagans tax cuts that made the crash inevitable.

My statement on blogs and think tanks, has to do with the reality of multi-pronged marketing and PR. You don't know who backs them, or their purposes.

Read the book by Wendell Potter, titled Deadly Spin, to get an idea of why I feel this way.

MMT blogs and think tanks have little to gain except to better the discourse...
You should read this:
PRAGMATIC CAPITALISM Understanding The Modern Monetary System

Why has this thinking never changed in the USA? Despite the dramatic changes in the monetary system after the Nixon shock neo-liberalism came to dominate economic theory in the 70′s and 80′s. After the economic successes of the Reagan and Clinton eras there was little doubt that such thinking was accurate. Of course, we all know what happened next and now many of these neo-liberal beliefs have been pointed to as causes of the recent crisis. I believe most people in power do not understand exactly how our monetary system works due to this fundamental flaw in our educational system – in fact, I believe 99% of the lawyers in Congress know far less than anyone thinks in terms of economics. The same can be said for many of the officials in Fed and Treasury.

If we review the past actions of Alan Greenspan (who has admitted to using a “flawed” model) and the actions of Ben Bernanke in response to the crisis we can see that they have substantially misinterpreted how a modern monetary system functions (if Mr. Bernanke actually understood how the system worked he would never have made all the policy mistakes I have been pointing out over the last few years). See here, here and here for more.

Why don’t more people understand how the system works? And more importantly, why don’t high ranking officials understand it? I believe these misconceptions persist due to several reasons:

* First of all, this is all highly complex.
* Second, this system in its current format is not very old and most of the people in power currently were educated by a generation in which this system was not largely applicable. Therefore, the theories of old run rampant in modern economic circles.
* Thirdly, politicians and ideologues have a vested interest in keeping the American public from understanding that the government is fundamentally different from a household, state or business.

All this is VERY important.......
For Mikemike..........

There is one important fact here that cannot be overlooked, however. In order for the citizenry to transact in my currency (and ultimately pay their taxes) I must spend some amount of currency into existence FIRST. This is important to understand because I must issue notes BEFORE I can tax. Therefore, you can see that I am not funding my spending by taxing. In fact, it is exactly the opposite. I am funding the private sector’s ability to pay their taxes when I spend money into existence.

So what’s the bogey here? What’s the catch? Because surely you must be asking yourself why this sounds like a free lunch. We can just spend to our hearts content, right? Absolutely not. The bogey here is inflation which is constantly moving up and down with the amount of money in the system based on my tax rate, spending, borrowing, etc. Thus, government cannot just spend and spend and spend or the extra dollars in the system will chase too few goods and drive up prices. It’s important to understand that government cannot just spend recklessly. This is important so I’ll say it again. This does not give the government the ability to spend and spend and spend. If they spend too much and tax too little they can create mal-investment and inflation. Likewise, if the government taxes too much and spends too little they create a government surplus and private sector deficit (by accounting identity). This can result in deflation and/or excess private sector debt levels.

Maintaining the correct level of deficit spending is, in many ways, a balancing act performed by the government. It is best to think of the government’s maintenance of the deficit like a thermostat for the economy. When the economy is running cold the deficit can afford to be higher. When it is hot the deficit should be lower. Because there is no solvency concern in the USA (as there is in the revenue constrained European nations) the only concern is inflation and with record low inflation rates there is no fear of the deficit resulting in hyperinflation which would be a pseudo form of default.

In terms of the bond market, the issuance of bonds does not serve the same purpose it did under the gold standard. We actually issued bonds because we were revenue constrained (not enough gold reserves at all times to fund spending without creating inflation). Today, we effectively control the value of money in the banking system via bond issuance (a pure monetary operation to control the Fed Funds Target Rate). It can also be thought of as another form of government spending because a treasury bond is basically a savings account. Contrary to popular opinion, Quantitative Easing is actually a deflationary event because it takes an interest bearing instrument out of the private sector’s hands and replaces it with a non-interest bearing deposit. QE is a term that is used by people who want to scare you into thinking that the government is being reckless with their money. The reality is that QE is just an asset swap. Nothing more. Debt monetization is another tool of the fear mongerers who don’t understand that debt monetization is actually impossible so long as the Fed has a target rate. Anyone who uses such terms to invoke inflationary fears simply does not understand how a modern monetary system works.

The US government is never revenue constrained. They are not like a household, business or state government. We don’t need China to buy our bonds in order to spend. China gets pieces of paper with old dead white men on them in exchange for real goods and services.

[skyredoubt]

if you read through the responses.......
The End of America? Not Quite - Seeking Alpha

Nice link, Jeff. Confirms my hunch that MMT will enter the mainstream thru industry sooner than thru the academia. The savvy traders with money on the line are much less prone to be ideologically blindsided. Mosler - the key MMT figure in the US - was a trader himself.
MMT is not ideological, it is rather descriptional. Just a coherent explanation of our current monetary system (minus the self-imposed constraints.) Now, the potential of the system becomes clearer and then and then ideology may come in (such as: what taxation should look like?)
Shooz, will reply to you a bit later, thanks!