Hacker's lounge: People Making Money Net

Jed's concern about the payroll tax trap set by the GOP in this deal is echoed by Nancy Altman, co-director of Social Security Works and Social Security historian and expert. She warns of the time-bomb for Social Security in Obama's proposed tax cut deal framework.

The innocent-sounding payroll tax holiday, on the other hand, will lead inexorably to killing Social Security. Let me explain:

Sixty members of the Senate are unwilling to raise taxes by 3 percent on the $250,000 and first dollar (and all those dollars earned above $250.001) of those making over $250,000 and by 1.6 percent more (for a total of 4.6 percent) on the $384,860 and first dollar {and all those dollars earned above $384,861) of those making over $384,860. They are even unwilling to spare everyone making less that one million dollars any increased taxes and simply raise taxes by 4.6 percent on the $1 million and first dollar (and all those dollars earned above $1,000,001 of the nation’s multimillionaires and billionaires. (I say multimillionaires because anyone with a net worth of a few million dollars is not making an annual income of over one million dollars.)

Given that unwillingness to raise taxes by less than a nickel on every dollar earned over $1 million, I find it unfathomable that a more conservative Congress, in two years, in an election year, will increase the payroll tax by 2 percent on the very first dollar, and every other dollar up to the cap, earned by virtually every single worker in the country. Consequently, I think we have to assume that the payroll tax holiday will be extended beyond the two years the president is proposing and quite likely could become permanent....

A permanent two percent cut in Social Security contributions doubles the 75 year projected shortfall.... The pressure to cut Social Security in a slow, gradual way for younger workers will be enormous. Progressives will not want to cut benefits for the low-income – and they shouldn’t be cut; they should be increased. Despite the fact that there are few beneficiaries who do not desperately need their Social Security – 2/3rds of the elderly and 70 percent of people receiving disability benefits rely on Social Security for half or more of their income and most people think even more people will be dependent on it in the future – nonetheless, means-testing Social Security will become a viable option.... Changing the benefit formula in the manner proposed by a majority of the Catfood Commission, will appear attractive, even though it would gradually and inexorably eviscerate the benefits of the middle class, and with it, their support for the program.

When creating Social Security, FDR knew about the political danger of creating a program just for the poor, and absolute necessity of making it an insurance program into which everyone paid. Altman:

FDR recognized that a visible dedicated contribution makes it both politically and morally difficult for future politicians to cut Social Security. When pressed about the impact of payroll taxes on the economy, FDR said:

“I guess you’re right on the economics. They are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”

That lesson seems to be going by the wayside with our current crop of elected Dems. And it's going to get worse. What are we going to be hearing for the next two years? Republicans demanding more and more spending cuts because of our ballooning deficits (made far larger by extending huge tax cuts to the wealthy). Those demands will be focused on entitlement programs, with Social Security the number one target. That will be made easier because Social Security will be in competition with other programs for general fund money because of the payroll tax holiday.

When you add on top of that talk from supposedly liberal Democrats about Social Security being sacrified on the altar of bipartisanship, the long run prospects for Social Security look grim. If it dies on the Democrats' watch, the prospects for the Democratic Party will be just as bleak.

The New Rich: How Much Money Does It Take?

Home - by Mr.Pinko - December 5, 2010 - 15:24 UTC - 12 Comments

According to Obama if you’re making over $250,000 a year you’re rich.

Investopedia says different:

by Amy Fontinelle

Sunday, December 5, 2010

What does it take to be considered rich in 2010? The old million-dollar standard seems defunct now that this amount is often touted as a minimum that should be saved for a comfortable retirement. Let’s look at some recent attempts to pinpoint the new standard of wealth.

Movies

In the movie “Austin Powers,” Dr. Evil, the villain frozen in the 60s and thawed in modern times, tries to extort the world’s leaders. He demands $1 million, and they all laugh at him. Dr. Evil later figures out that he needs to ask for much more money — $1 million just isn’t a significant sum. The bad doctor later ups his demand to a suitably sinister $100 billion.

Books

A 2008 book titled “The Middle Class Millionaire” states that 8.4 million Americans have a net worth between $1 million and $10 million, including home equity. We can assume that many people have fallen out of this category with the decline in home values since the time the book was written, but the idea that you can be a millionaire, or even a multimillionaire, and still be middle class shows how times have changed.

Music

Travie McCoy’s hit song, “Billionaire,” describes what the singer would do if he had a billion dollars — adopt lots of children, give away several Mercedes, revitalize New Orleans, and fix the recession, among other feats. The song spent 20 weeks on Billboard’s Hot 100 chart, peaking at No. 4. Setting aside the fact that a billion dollars wouldn’t come close to cleaning up after a natural disaster or ending a recession, the song sends the message that it takes a billion dollars if you really want to make a big difference.

Housing

A million dollars might not even buy you a house in one of America’s top 10 most expensive cities for real estate, according to a September 22, 2010, MarketWatch article. The most expensive city on the list, Newport Beach, Calif., had an average list price of $1.83 million, while the least expensive on the list, Santa Barbara, Calif., had an average list price of $1.02 million for the period February to August 2010. And some surveys of wealth don’t even include home equity in assessing people’s net worth. The annual World Wealth Report defines high net worth individuals as “those having investable assets of U.S. $1 million or more, excluding primary residence, collectibles, consumables and consumer durables.”

READ THE WHOLE ARTICLE HERE

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Wednesday, December 8, 2010

People Making Money Net

The New Rich: How Much Money Does It Take?

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