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Savings rate lowest since depression - Negative (again)


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#11 ...

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Posted 03 February 2007 - 08:33 PM

what about millions on welfare and medicaid


Government transfer payments are part of NIPA Personal Income, so, yes, it's counted.

The real eye opener is that theyt don't count social security taxes as savings! That is roughly 15% of your earnings (you +employer).


The 500 billion I mentioned was based on only the 6.2% for SS (of 7.65% total, the rest is Medicare) employee portion of FICA. The employer portion isn't part of NIPA Personal Income although it probably should be. If the employer half of the tax didn't exist, most of the funds would be paid as gross compensation in cash instead of being paid as a hidden (from the generally unaware and uninformed public) tax. The exception to this are the self-employed who pay the entire 12.4% for SS, so in their case both halves aren't being counted as savings.

In a world without SS and FICA taxes or in a world with a mandatory 6.2% contribution to a private account, most people would save 6.2% or more and it would all be counted as saving.

Because it is all called "taxes" and disappears into the black hole that is the current federal budget and it is all spent in the current budget year, none of it is counted.

Which is ridiculous, but all the BEA NIPA-based "savings" numbers are just the leftovers from accounting identities designed to measure other things and have never provided realistic information on savings and investment.

#12 Net

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Posted 03 February 2007 - 10:50 PM

The real eye opener is that theyt don't count social security taxes as savings! That is roughly 15% of your earnings (you +employer).


I'm looking forward to cashing out on my government collected SS savings at age 65 in a lump sum, and should I not make it to age 66, that lump sum will be a nice nest egg to for the daughters to inherit and split.

Of course, then there's the imported worker who arrives in his/her mid fifties, does work the required 40 quarters (10 years) at a minimal income, qualifies for SS, retires, and lives to a hundred and two....

I can't agree that SS is savings. It's a tax that pays for an entitlement. It's not transferrable accumilated wealth (i.e., savings).

#13 ...

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Posted 04 February 2007 - 12:10 AM

It's quite true that SS isn't technically savings. There is no vested benefit at any time prior to retirement other than the $255 death benefit, and any Congress at any time could scrap the entire thing and pay nothing to anyone. Which, of course, won't happen for political reasons, and the tax does earn some level of future retirement benefit, but it isn't counted in any way in the "savings" number. At the same time, many, if not most people think that the money they pay in goes into their SS "account" when in fact it all gets spent and all they really have is more quarters of coverage in a program which can be changed at any time and there is no actual pot of SS money held by anyone. Also, at the same time, the 6.2% they think they're being forced by law to "save" could have gone into actual savings, but didn't because of current law. The economically illiterate media then uses the resulting false, low "savings" figures to make it appear that the average U.S. consumer is profligrate and saves less than nothing, which simply isn't true. They usually also cite the much higher bogus savings percentage from 25 years ago when the highest income earners were doing more actual saving in the conventional sense. The last 25 years has seen the advent of much more performance-based stock option compensation and less payroll cash. The huge option gains are capital gains, quite real and not counted in "savings" at all. At the same time, the substantial taxes paid on those gains are subtracted from "savings." A double whammy to the "savings rate."

#14 dcengr

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Posted 04 February 2007 - 01:01 AM

There's a problem with SS and savings.. people are living FAR longer than expected. I've said this before, but its a true medical problem. The medical science to rejuvenate the body is pretty darn good, but the science to rejuvenate the mind is not. What you eventually get is a lot of long living people with deteriorating mental facilities. Until this is fixed, you get a lot of "vulnerable" people with voting powers in a democracy. Eh what can you do?
Qui custodiet ipsos custodes?

#15 pdx5

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Posted 04 February 2007 - 04:00 AM

Social security has turned out to be better than savings for me. To earn my monthly benefits ADJUSTED FOR INFLATION YEAR AFTER YEAR would have required a substantial personal savings program during my 35 years of employment. I bought a fixed annuity with my personal savings which pays a monthly amount. BUT IT IS FIXED. Every year I get less purchasing power from it. So, I am thrilled at the prospect of ever increasing social security checks from all the younger people's "savings" taxes.. :D Even the medicare taxes I paid have turned out to be a bonanza. For around $90 a month, medicare covers my hospitalization AND doctors bills. And the real hoot is that medicare fixes their charges way lower than what others are billed. To earn this kind of lifelong benefit, I would have to had saved a very substantial amount of additional "personal savings".
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#16 ...

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Posted 04 February 2007 - 05:22 AM

There's a problem with SS and savings.. people are living FAR longer than expected.


That's been a problem for SS since day 1. At the time, life expectancy for a newborn was about 61 years and for a 65 year-old about 12 years.

Increases in expectancy have been remorseless ever since and will probably become exponential, further aggravating the financing problem at an increasing rate. Today the respective numbers are about 78 years and 18.5 years.

It's really too bad that individual private accounts weren't required from day 1 with taxpayers as a whole picking up 100% of the tab for the initial retirees who never had an account and proportionally supplementing those with accounts with less than 30 years of contributions at retirement.

Government would have been completely out of the retirement business over 40 years ago and everyone now working would have an account with real assets in it earning a market rate of return. And be looking forward to benefits which would dwarf anything SS will ever actually pay. But, such were the politics of the time. Unfortunately, we're all still paying the price and it's only getting bigger each year with no solution in sight.

Even the medicare taxes I paid have turned out to be a bonanza.


And we all know that neither program can continue as presently constituted. Medicare is in even worse financial shape than SS.

#17 pdx5

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Posted 04 February 2007 - 01:11 PM

There is no question that SS & MC are on an unsustainable course. But I thought this thread was about "savings rate". On that subject matter to me it is certainly acting as an excellent equivalent of personal savings. As for privatizing social security, if it was done 25 years ago, we would not have the problem facing us in near future. The sooner it is done, the better off all those under 55 years age will be. But I don't see how that is in the cards when there is opposition to it in the congress.
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#18 OEXCHAOS

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Posted 04 February 2007 - 04:42 PM

There's a problem with SS and savings.. people are living FAR longer than expected.

I've said this before, but its a true medical problem. The medical science to rejuvenate the body is pretty darn good, but the science to rejuvenate the mind is not. What you eventually get is a lot of long living people with deteriorating mental facilities.

Until this is fixed, you get a lot of "vulnerable" people with voting powers in a democracy. Eh what can you do?





Is THIS what they meant by "Soylent *Green*"?

:lol:
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