Posts tagged with: social security

Blog author: ken.larson
posted by on Friday, October 30, 2009

Recently I got a phone call from an engineering manager I’ve known for over ten years. He informed me that he’d been laid off last spring, but before I could offer condolences he added that he’d been hired by another company in the same industry for a consulting assignment.

That temporary work had lasted over six months but was winding down. He hadn’t been a contract “consultant” before and after some additional small talk told me, “… and I’ve discovered something I never knew.” Anticipating a revelation about a new found inner strength, I listened carefully.

“You know,” he began, “when you work as a consultant, you have to pay twice the withholding for Social Security and Medicare that you do when you work for a company.” I told him that wasn’t exactly true and we discussed briefly the labor burden — those costs the employer pays in the U.S. when they hire someone.

The big story these days is employer provided health benefits, but unfortunately that subject overshadows the longer term liability an employer or company faces when they hire employees; and is certainly one of the reasons why many firms increasingly like “contract” agreements. My friend’s take on having to pay a greater amount to Social Security and Medicare was not “exactly true” because the money “contributed” by the employer was always part of his gross wages, but was obscured by the mechanism of the deceit explicit in the government’s term “employer’s contribution.” I have some experience here. I’ve been a business owner and self employed most of my adult life.

You see, the employer by law must add to and pay the government an amount equal to what he withholds for Social Security and Medicare on a full-time employee’s behalf. If you regularly earn $400 a week, you are responsible for sending $30.60 of that amount to the federal government. (And that’s separate from what you may owe for income tax.)

The employee’s Social Security portion is 6.2% of gross wages up to $106,800 a year; and Medicare another 1.45% of gross wages but without a cut off point. For most of us, the combined 7.65% is our “contribution” to the federal retirement and healthcare systems already in place. But it’s not the total “contribution.”

As stated above, an employer or company that hires you is responsible for an equal “contribution” in your name of an additional 7.65% of your gross wage. Many who work for company’s lose sight of the fact that employers must add that cost of having them on the payroll to their cost of hiring us. Put bluntly, our employee has to account for a profit of at least $430.60 a week in order to justify being on a payroll. And because of the federal government’s demand that his and the employer’s “contributions” must be paid weekly, or monthly according to the government’s demands; the system has a tendency to put its own demands on a company’s cash flow. A company has to have enough profitable receipts to be able to “contribute” their one-half of what is demanded for their employee’s government retirement and healthcare system. And believe me, the government wants “their” money first and doesn’t care what other bills an employer has to pay.

My engineer friend was facing the reality of having to be his own employer so to speak and ante up the total 15.3% all on his own. Like most consultants he’d arranged a fee that paid him an amount from which no deductions were taken. At times like these, we’re all small business owners. It’s sobering. Imagine if there was no withholding and all taxpayers had to write a check at the end of the year. How might they choose to act? These government systems managed by Caesar are soon to be bankrupt. I heard someone report recently that Medicare is in arrears by $38 Trillion.

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Fall is typically the season during which the sermons delivered by pastors from church pulpits concern stewardship. In making the case for Christian Stewardship many pastors will visit Genesis and the story of Abel and Cain. Compare and contrast are my favorite means of offering clarity on many subjects so I like the Genesis story of obedience versus selfishness. Many use the Bible to promote the concept of the tithe and if you Google Tithe you’ll come up with a plethora of explanations, indictments and opinions. Generally the percentage of income or produce that we are persuaded God asks of us is ten — 10%.

I can tell you that the tithe is a request that staggers most Christians. Those with work earning $400 a week are not likely to volunteer $40 when the plate is passed on Sunday — yet seemingly ignore the fact that $61.20 was sent to the IRS on their behalf that week.

It’s instructive to remember that the concept of the religious tithe contains a lesson which is not of taxation. It’s argued that all is God’s and all we have comes to us through His Grace. I believe that’s true.

Yet as I sat in the pew recently listening to one of those sermons about “giving” I took a break to recall and pray for my engineer friend’s employment perdicament, I also compared my own hesitation at pledging myself toward a 10% tithe in light of the reality that I was already on the hook to give Caesar 15.3% off the top. Glancing around the sanctuary, the question arose as to whether the bureaucrats at a government office could match our congregation in our common devotion to each other, our Lord; and the missions we support in service to Him.

And it got me realizing that when you compare the two: Caesar and God — 10% is one heck of a deal.

Blog author: kschmiesing
posted by on Wednesday, April 1, 2009

“Power permits people to do enormous good,” Lord Acton once said, “and absolute power enables them to do even more.”

This wisdom from the nineteenth-century’s champion of state prerogative applies as well today. Politicians are crippled by the lack of the one thing they need to yank our hobbled economy out of the mire of recession: adequate power. It is our duty to grant it to them.

Yes, from time to time this commentary space has been critical of government meddling in economic affairs, surmising, for example, that trying to cure poverty by funneling more money through Washington would do less to assist the poor than to pad the salaries of middle-class bureaucrats. We have emphasized the effectiveness of private and faith-based charity, of its capacity at once to use resources efficiently and to respect the individual’s dignity. We have argued that persons, morally formed, acting freely, and operating within the context of a rule of law, will generate a bountiful and equitable economic environment without counterproductive interference by the state. We have posited that our current difficulties derive from a combination of moral turpitude and government bumbling.

We were mistaken. (more…)

Blog author: jballor
posted by on Tuesday, December 23, 2008

Ramesh Ponnuru says Social Security is worse than a Ponzi scheme.

He’s right. It’s more like an inter-generational pyramid scheme, a pyramid tipped on its side…


To be sustainable, over time (T) it has to take more from more people (thus a three-dimensional pyramid rather than a two-dimensional triangle. It’s really exponential rather than multiplicative).

Social Security. In case you forgot, it still needs fixing. This Christmas, think about the rather unpleasant gift we’ll be leaving the generations that follow in the form of unsustainable and unfunded “entitlements.”

Blog author: kschmiesing
posted by on Tuesday, June 10, 2008

It might seem like ancient political history to younger readers, but once upon a time there was a Republican Speaker of the House named Newt Gingrich and a Democratic President named Bill Clinton. A new book by Steven Gillon, The Pact, claims that the two ostensibly bitter enemies made a promising but ultimately abortive attempt to reform Social Security and Medicare.

As one who has contributed modestly to that quixotic quest (here, most recently), I was fascinated by this interview with Gillon as he talks about the main subject of his book.

Blog author: kschmiesing
posted by on Thursday, March 27, 2008

In my commentary on Social Security yesterday, I referred to the latest trustees’ report as evidence of the continuing need for reform. Anyone who happened to see New York Times columnist Paul Krugman’s blog a day earlier might understandably wonder whether we were looking at the same report. Krugman highlights a modestly improving actuarial balance as justification to conclude, “Social Security’s financial problem is relatively minor. It doesn’t deserve the emphasis it receives from most pundits.”

One of Krugman’s commenters corroborates what was my hunch, which is that worsening economic conditions (or other reasons) have led more seniors to put off retirement, or at least full retirement. This has made the actuarial balance number slightly better.

But the dominant theme of the report, as I accurately stated in my commentary, was that Social Security remains in financial trouble, is not sustainable, and should be reformed sooner rather than later. An analogy: Five armed hoodlums confront you and a friend in a dark alley. You say to your companion, “We’re in trouble.” He says, “I don’t know, one of those guys’ guns appears to be an older model. It may not shoot perfectly straight.”

It’s true, but not very comforting in view of the situation as a whole.

Krugman linked it as well, but I’ll do so again here, so that any fairminded reader can judge for himself which of us portrayed the report’s findings more forthrightly. (See the “Overview” for a summary.)

Blog author: kschmiesing
posted by on Friday, September 29, 2006

According to Census Bureau estimates, the population of the United States will hit 300,000,000 sometime in the next couple weeks.

Discussion of the significance of this demographic milestone, such as the latest issue of US News & World Report brings to mind a related topic: social security. Having harped on social security reform for some time, I gave it a rest for a while. But the issue hasn’t gone away. All the dire projections of a shortfall in social security—and other entitlements tied to the aging of America’s population, such as Medicare—have simply become clearer and more certain over the course of the last couple years.

President Bush’s talk of reform gave hope to some, but the reality has been little more than treading water (conceding that there have been other pressing concerns with which the administration has had to deal). As the analyses at the Institute for Policy Innovation (see “Entitlement Reform”) show, the problem can’t be ignored forever.

Blog author: jballor
posted by on Wednesday, August 30, 2006

In this week’s Acton Commentary, Jennifer Roback Morse wonders why no one is talking about the Forbidden Topic in the Social Security debate. That taboo subject is the declining birth rate. Jennifer Roback Morse writes that “the collapse in the fertility levels, particularly striking among the most educated women in society, is a contributing factor to the insolvency of our entitlement programs.”

Read the entire commentary here.

Blog author: jballor
posted by on Friday, July 14, 2006
Nipsey Russell (1918-2005)

I was flipping stations tonight and passed the Game Show Network, which was showing reruns of Match Game ’74. Nipsey Russell, the so-called “Poet Laureate of Television,” began the show with this poem for prosperity:

To slow down this recession,

and make this economy thrive,

give us our social security now,

we’ll go to work when we’re sixty-five.