Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

Copyright Notice

Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Sunday, February 6, 2011

A Different Look at Social Security

All the talk you might hear about Social Security financial problems and federal budget busting is lies and drivel - aka, BULL SHIT.  Let's have a look at SS funding for a different reason.

Here is some detail on the SS premium withheld from pay, from Money Zine.

Generally, FICA taxes are collected at a rate of 7.65% on gross earnings - earnings before any deductions. The breakdown of FICA is 6.2% for Social Security (Old-Age, Survivors, and Disability Insurance or OASDI) and 1.45% for Medicare.  The following table shows the FICA limits for 2005 through 2011:

2011 FICA Tax and Social Security Limits

  • FICA Tax Rate = 7.65% (see note below)
  • Social Security Limit = $106,800 
  • Maximum Social Security Contribution = $6,621.60 (employer) / $4485.60 (employee)
Note:  In 2011, the FICA tax rate for employees was lowered to 5.65%.  The employer tax rate remained unchanged, while the Social Security rate for employees was lowered to 4.20%.

2010 FICA Tax and Social Security Limits

  • FICA Tax Rate = 7.65%
  • Social Security Limit = $106,800
  • Maximum Social Security Contribution = $6,621.60

2009 FICA Tax and Social Security Limits

  • FICA Tax Rate = 7.65%
  • Social Security Limit = $106,800
  • Maximum Social Security Contribution = $6,621.60

2008 FICA Tax and Social Security Limits

  • FICA Tax Rate = 7.65%
  • Social Security Limit = $102,000
  • Maximum Social Security Contribution = $6,324.00

2007 FICA Tax and Social Security Limits

  • * FICA Tax Rate = 7.65%
  • Social Security Limit = $97,500
  • Maximum Social Security Contribution = $6,045.00

2006 FICA Tax and Social Security Limits

  • FICA Tax Rate = 7.65%
  • Social Security Earnings Limit = $94,200
  • Maximum Social Security Contribution = $5,840.40

2005 FICA Tax and Social Security Limits

  • FICA Tax Rate = 7.65%
  • Social Security Earnings Limit = $90,000
  • Maximum Social Security Contribution = $5,580.00

 At first, I wasn't going to pull such a long quote, but the information illustrates how the funding base increased through 2009, leveled, and now has been cut.  Many economists are enthused by the extra $2146 this will put into the pocket of whoever is making $106,800, and up - proportionally less for those who make less.  Again, I call BULL SHIT!  This will cause underfunding of the SS trust, and give ammo to those who claim SS is unsound and want to blow it up.  Big, big mistake.  It would have been far, far better to increase the dole in some other way for those at the low economic end of the spectrum.  But that is not anybody's goal these days.



Here is a look at total FICA collections per year from 1957 on.  The hook at the end is rather disturbing.  (Vide supra.)  Other than that, it's an exponential looking line, and those are hard for the human eye and brain to suss - at least for this aging, bifocal-laden human.  Let's try a log scale.




I'll over-state the obvious again, since it's central to my main point: a log scale presents a steady rate of growth as a straight line.  What we have here is clearly two different realms, with two different growth rates.  Each realm has a best-fit straight line superimposed.  Raising the amount collected per earner in the most recent years has not even maintained the slower growth rate of recent decades.  I picked a break point of 1984.  Your eyes might wiggle it around a bit differently, but that is a second order detail, at best.


Here is a close-up of recent history.


It's no surprise that the Clinton era was above trend, and the W regime pretty much defines the trend since Reagan.  Receipts for '08-9 are not just below trend, but flat, due to the recession.  In 2010 we have only actual decline in the data set.

What does this tell you about the state of the American worker?  Remember, the collection base went up every year through '09.

Here's a look at what a program in trouble - and then not -  looks like.  The plot is log of Total Fund Assets at the end of the year.


It looks as if the fund - for whatever reason - was not on a sound actuarial basis through the 60's and 70's - despite robust growth in collections.  During the Reagan administration, this was addressed, and the fund has grown every year since - even through 2010, with receipts stagnating.

Slower year over year growth in receipts since 1984 saved the program.  It will take someone with more knowledge than I have to explain that conundrum.

But my main point is that - at least through 2010 - total FICA receipts are an indirect indication of how the American worker is faring.  It's clear that since around 1984, he hasn't been faring very well.

Data through '09.
Data for '10.
  .

1 comment:

Octopus said...

Nice analysis. Only one thought comes to mind. How do these FICA receipts compare with the cost of living index or the inflationary index for healthcare? Therein is an interesting story. Perhaps a net present analysis of projected receipts compared with projected costs.

I suspect the FICA cap will need to be lifted someday. Goodie, goodie!