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Monday, July 3, 2017

How America Co-opted the Future of Generation X and Y and How We Can Fix It-An Examination of Social Security

Bernie Sanders was no fluke, his appeal to the youth of Generation Y and to some extent Gen Xers is marked by real evidence showing how their futures have been muted by financial decisions made by Congress. The President of the nation, theoretically, is elected by us, although recent elections have shown the arcane electoral vote, meant to secure the democracy when many voters were illiterate, has called this into question. It turns out the electoral college is just another version of the “old boys club”. This article examines the contract for Social Security which the United States has made with its working class and what that means for the future of your children and grandchildren, in other words, those whom will be paying the tab.

Social Security
Social Security Taxes Paid by your Grandparents versus Workers of Today

Year
1940
1977
2017
Payroll tax rate is based on wage income and is split evenly between the employer and the employee
1% capped at $3,000; Medicare did not exist then
5.85% of wages, capped at $16,500; Does not include the Medicare tax
12.4% of wages, capped at $127,200; Does not include the Medicare tax, which is separate

When Social Security was enacted, it was meant as a pension for those whom would otherwise be destitute. Retirement age, at which a beneficiary could start to draw benefits was age 65, when the law was enacted on August 14, 1935, by President Franklin Roosevelt. [2] Life expectancy at the time was 62.9 years, so as you can see, only the lucky ones received any benefit. Fast forward to 2017 and life expectancy is dependent on where you live, and other factors, some women will live past 86. But the mean life expectancy for all people living in the U.S. is 79 years.[3] This ranks the U.S. 49th in the world, below all countries with national health plans and at the bottom of all industrialized countries.  South Korea, Jordan, and Hong King residents all live longer than Americans living in the U.S.

Currently, residents whom have met the minimal ten years of contributions under include-able wages are eligible to start drawing Social Security benefits as early as 62, with a reduction, or age 66 ½, depending on their birthdate. The government has an incentive, of 8% per year in increased benefits to delay until age 70.

Income Comparison
Year
1940
1977
2017
Mean income is the earnings amount by which an equal number of workers are above and below this value
$1,368, with an unemployment rate of 18.26% and no unemployment benefits[4]
$12,224, with an unemployment rate of 7.5%, with unemployment benefits
$44,980, [5] with an unemployment rate of 4.3% as of May [6]
Though the unemployment rate is certainly low in 2017, it was just a few years ago when the nation’s banking system collapsed due to junk bond deals packaging subpar mortgages as investments, and provided to people who could not afford them. This fraud was conducted by all levels of banks (Lehman Brothers) and the insurance industry (AIG), many of whom went bankrupt, but not until thousands of American homeowners lost everything first.

Real Purchasing Power Adjusted for Inflation
Year
1940
1977
2017
Purchasing Power-to maintain the same value this is how much you would need
$1
$4.33
$17.47
Earnings needed to maintain equivalent value of mean wage in 1940
$1,368
$5,921.49
$23,893.49

Though gross wages have increased over the years, real purchasing power has not kept up, as this table shows. Americans are only making a little over twice the 1940 per worker mean wage, when you adjust for inflation. The mean wage for all working Americans, which isn’t the average, but the midpoint, with an equal number of workers falling below the standard and above it, is currently $44,980 annually. So, for 77 years, this is not a lot of progress for workers, mainly because they have fallen behind since the 1970’s. Rising productivity of American workers has not resulted in a commensurate rise in wages for most workers, so the Republican trickle-down theory hasn’t worked. Real rise in wages, adjusted for inflation has been stagnant since 1980, the Reagan era.

Change Social Security to a Fairer More Secure System
Currently, a worker in the United States must accumulate forty quarters or ten years with earnings of at least $1,260 a quarter or $420 a month, to be eligible to apply for full social security benefits, depending on their age. Wow, what a deal, all you must do is work for a week each quarter, based on the current U.S. wage and you will have a pension! We can all think of our aunties and grandmas who took advantage of this benefit, by working part-time low-wage jobs, not because they needed to, but for spending money. I can’t think of any other part-time low wage job that comes with a lifetime pension.
Change #1 Social Security Benefits should be based on fulltime earnings for at least 10 years, not part-time. Working part-time does not guarantee you a pension.
Change #2 Social Security should pay more to workers who work longer, for example, workers who work unceasingly for 40 or 50 years, should get a larger benefit than those who work only 10 or 20 years, it is the time value of money. This would change the incentive from “do your bit to get minimum benefits’, to contributing longer for a proportionally greater earned reward.  Though currently, Social Security offers a sizeable benefit increase to those who wait until maximum retirement age of 70, it does not look at the length of service.

Spousal benefit provisions under Social Security allow full benefits to inure to persons who marry multiple times, ala Donald Trump. Though the worker’s tax contribution to the social security fund was capped, apparently the benefits which may be paid out are not. For example, a spouse, either male or female can elect to claim 50% of the partner’s social security benefits. Essentially, this means the value of the Social Security payout has increased by 50%, without paying additional taxes. And here is the real pot sweetener, anyone who has been married for ten years and has not remarried before age 60, gets this extra windfall election. The ex-wife can claim a benefit of 50% of her husband’s social security benefits, years after the divorce, but this doesn’t reduce his take, it is just a bonus to her from the federal government. And, the current wife (male or female) is still eligible to claim her share of the spouse’s social security pay out as well.
Change #3 You are welcome to marry as many times as you can stand, but the government is under no obligation to support your multiple wives/husbands. The total spousal benefit needs to be revised and social security benefits paid to ex-betrotheds should come out of a limited benefit based on the working spouse’s contributions. In other words, if $300,000 is allocated for spousal benefits, that amount must be allocated between all the former “love-of-my-life’s,” not increased exponentially because of salacious decisions.

Survivor benefits can be collected by widows or widowers as early as age 60 and this means, if your spouse has died and was collecting Social Security or was eligible to collect, you can elect to collect full benefits, based on your spouse’s social security. Later, you can decide to switch to your own benefit, if it would pay more money.
Change #4 This seems like gambling against the house and holding the aces; once you start drawing your social security benefits, you don’t get a do-over. If you select your half of his benefits at age 60, that is what you get.

Survivor benefits for children, are only payable for unmarried children until age 18 or 19, if they are still in high school. Children of a disabled or deceased social security participant are eligible to receive benefits if the parent had paid enough into the system, which we discussed, is a mere ten years of earnings. Since it sucks to lose a parent, or to have a disabled one, let’s leave this as is.

Social security taxes have doubled in the last forty years and are not keeping up with the benefits which will be paid out to baby boomers, whom are now starting to enjoy their unreduced benefits. Since the younger generation will most assuredly be expected to pay higher taxes for Social Security and of course, Medicare, we need to shore up their future. It is time to have a national pension or Individual retirement account for those under age 45. Designate part of what they contribute to Social Security to their own private account, ideally 50%, but I will leave that up to U.S. Treasury and Social Security Administration to discern.  The money contributed to Social Security, would not be able to be borrowed against and hence, safe from creditors, could not be used for medical care, and would not be accessible until age 62.
Change #5 Let Gen Xers and Generation Y start their own government protected individual retirement accounts. At least they will have some money for their future and they won’t have to feel so bad about paying those extra taxes for boomer benefits.

It is time for older Americans to wake up to the debt we have left our youth, who will be paying for our bad decisions for a lifetime. If I hear one more senior citizen, enjoying their social security checks and Medicare complain we can’t have socialism, I am going to remove your dentures. And this is the healthpolicymaven signing off encouraging you not to sign blanket releases when you are admitted to a hospital, please add the line, “I agree to pay for services of in-network providers,” as recommended by Dr. Elizabeth Rosenthal in her book, How Healthcare Became Big Business and How We Can Take It Back.”[7]

This article was written by Roberta E. Winter, a freelance journalist and author of https://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972

1 comment:

HealthCare Sol2016 said...
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