My new stimulus plan idea

[jIM_Ohio]

We bought decorations which were "nice to haves" and not necessities. Yes we bought more than we needed, but at same time my wife loves to coordinate colors and rooms, so the babies bathroom matches the babies room, and that is important to her.

As for first comment, my point was the spending people do for kids is more than enough to stimulate economy. So people having kids sooner generates that sales tax revenue sooner for government, and generate revenue sooner for the merchants. If it also creates a population boom, there are more things to be said for 25 years down the line when the population increase is starting to fund more payroll taxes.

[jc3900]

No your plan will not work at all! What we need is to end all social welfare programs. Then we need to introduce new legislation to get rid of social security and retirment benefits. My solution would be to let anyone who wants to drop out of any government retirement programs at the gain of not paying the tax and at the cost of losing the benefit. What would then happen is that an equilibream age where benefits =costs would set up somewhere in 40 year old age group. Then I would also put forth an innitiative to force the government to take no more loans and to start paying off their accumulated debt. Oh also I would pull our troops out of Iraq and afghanastan and end the united states empire and the role of world policemen. This would most likely downscale the military to 50% its current $ level.

Basically I would end all the long term entitlements and thus end the dependency of the future generations on government. I would cut government spending and then cut taxes so as to provide enough money to start paying off our debt and running government. Each year as more and more people would be taken off entitlements taxes could again be lowered further and further. This is the plan our country needs, not some wimpy one time tax relief that keeps our country in debt and heads us ever faster into a financial crisis. You need more to save an economy than a spending frenzy. You need to fix the fundamentals instead of just trying to keep a sinking ship floating.

[noppenbd]

I guess I'm in the minority (big surprise). Getting that stimulus check wouldn't alter what I was willing to spend. If my budget was $1,500, that's it. Handing me an extra $1,500 wouldn't change my plans. I wouldn't go out and spend double what I had planned to spend. If I think $100 is fair for a item, the stimulus check wouldn't encourage me to go out and buy one for $200.

You are most definitely in the minority. I think most people's spending is limited by their credit limit and/or checking balance (and some not even by that). ESPECIALLY when it comes to spending for Baby.

Interesting thread hijack that is tangentially related. I am currently reading "Predictably Irrational" by behavioral economist by Dan Ariely. One chapter is about how people establish price "anchors" and that controls how much they are willing to spend on such a item going forward. He did some experiments which basically showed that people are highly influenced by suggestion in establishing this anchor and that it pretty much dictates what they feel is a fair price afterwards.

One experiment that was telling is that they asked people to write down the last 2 digits of their social security number, and then later asked them to judge the price of a variety of items, including a trackball, a mouse/trackball combo, and some bottles of wine. Invariably, those with the higher last 2 SS digits priced everything higher. This was due to having that number in the forefront of their minds right before they were asked to do the pricing estimations.

I think this has some relevance to spending on first weddings and firstborn babies. Since you have no prior frame of reference, it is difficult to decide what is a fair price. When we were shopping before our baby was born, we were fortunate to find a book called "Baby Bargains" which is very good at sorting the wheat from the chaff, but I remember a lot of people at the time saying things like "I bought X because I didn't want my baby to be deprived" and such.

[noppenbd]

Then we need to introduce new legislation to get rid of social security and retirment benefits. My solution would be to let anyone who wants to drop out of any government retirement programs at the gain of not paying the tax and at the cost of losing the benefit.

What would you do about all the people currently collecting social security? If you suddenly allowed younger workers to opt out, you would have nothing coming in and all of the elderly who are on fixed income including social security would be hung out to dry?

[Scanner]

I agree - we are having our 3rd baby next month.

Sweeps et al will be thrilled that I am strengthening our country's Medicare and SSI system by having more kids than we can handle.

We are re-priming the pump.

[jIM_Ohio]

No your plan will not work at all! What we need is to end all social welfare programs. Then we need to introduce new legislation to get rid of social security and retirment benefits. My solution would be to let anyone who wants to drop out of any government retirement programs at the gain of not paying the tax and at the cost of losing the benefit. What would then happen is that an equilibream age where benefits =costs would set up somewhere in 40 year old age group. Then I would also put forth an innitiative to force the government to take no more loans and to start paying off their accumulated debt. Oh also I would pull our troops out of Iraq and afghanastan and end the united states empire and the role of world policemen. This would most likely downscale the military to 50% its current $ level.

Basically I would end all the long term entitlements and thus end the dependency of the future generations on government. I would cut government spending and then cut taxes so as to provide enough money to start paying off our debt and running government. Each year as more and more people would be taken off entitlements taxes could again be lowered further and further. This is the plan our country needs, not some wimpy one time tax relief that keeps our country in debt and heads us ever faster into a financial crisis. You need more to save an economy than a spending frenzy. You need to fix the fundamentals instead of just trying to keep a sinking ship floating.

While I dislike government handouts, I do not consider SS to be a handout. Everyone pays in, everyone can take out. More than likely, based on inflation, everyone will get more real dollars out than they put in. It is an insurance plan and the purpose of government is to provide some basic things for it's people so the people do not bear the expense of that basic thing itself.

Utilities for example
military for example

equating the war on terror to a tax deduction for having a baby is way unfair. The two issues are not related.

[jc3900]

While I dislike government handouts, I do not consider SS to be a handout. Everyone pays in, everyone can take out. More than likely, based on inflation, everyone will get more real dollars out than they put in. It is an insurance plan and the purpose of government is to provide some basic things for it's people so the people do not bear the expense of that basic thing itself.

So if given the choice when you were 20, you would have chosen SS over getting 15% of your income each year? Sorry, but SS is one of the worst programs on the books and if you are saying that it runs effeciently than I must ask you to actually do a little research before you make such rediculous comments. Oh and when you finally do get to your research, you should consider that SS is just a large pyramid scheme that doesn't even pay you interest for holding your money.

[Scanner]

Most people like jc forget that SSI provides disability insurance as well as retirement benefits.

I am unable to qualify for private disability insurance because of my profession (underwriters starting exiting years ago). SSI is my families' only safety net for my income albeit a poor one.

The private marketplace just cannot fill the void.

[sweeps]

JC, Social Security is a small price to pay to avoid the massive human tragedy we would have on our hands if it did not exist.

It is not a financial investment it is a humanitarian investment.

[Broken Arrow]

Woah, take it easy, JC. Attack the issue, not the person.

[jc3900]

Most people like jc forget that SSI provides disability insurance as well as retirement benefits.

I am unable to qualify for private disability insurance because of my profession (underwriters starting exiting years ago). SSI is my families' only safety net for my income albeit a poor one.

The private marketplace just cannot fill the void.

All right Scanner, since you seem to think it is so fine and dandy, I will ask you the same question I asked Jim. If given the choice between receiving ss benefits and not paying the 15 percent, you would take the benefits?

I actually just ran the numbers really quick and here is what I came up with. If you are making 50,000$ dollars every year and you didn't pay the ss tax then you would have 7500 dollars that you would not normally have. If you would invest this 7500 dollars increased with inflation yearly for 35years you would have nearly a million dollars after accounted for inflation. ( assuming 3.5% inflation and 10% return) So you would rather have tiny yearly payments from social security than a million dollars? How good of a program does it sound like now. Oh and if you make $75000 a year that number jumps to 1.5 million.


.....Oh the wonders that can happen with simple math

EDIT: so is 1 million dollars a big enough safety net?

[jc3900]

JC, Social Security is a small price to pay to avoid the massive human tragedy we would have on our hands if it did not exist.

It is not a financial investment it is a humanitarian investment.

Well why don't you take your 1 million dollars and give out half of it? Oh I am sorry I am sure the government could fund $500,000 dollars worth of aid to the poor with a person only making $50,000

[jIM_Ohio]

I for one dislike the 15% SS tax. I think 5-10% is more in line with what a program like that should cost.

It also starts WAY to young (age 65-67 now), I think it should start around age 75. RMDs should be pushed later as well, that is another issue in and of itself.

Yes, the 15% could be invested better.
Yes, the government is inefficient in how it used the surpluses
Yes, the government is inefficient even if the surpluses were fixed.

I know a girl I went to HS with whose dad was a cop killed in the line of duty. She received SS checks as a survivor of her dad until she became 18. Without it, maybe she couldn't have gone to college (I didn't know her that well to know one way or other).

People cannot collect SS unless they paid in- SAHM need to collect based on their husband's plan (even when husband dies), so I think the plan has merit considering more than half of retirees would be destitute without SS.

[jIM_Ohio]

All right Scanner, since you seem to think it is so fine and dandy, I will ask you the same question I asked Jim. If given the choice between receiving ss benefits and not paying the 15 percent, you would take the benefits?

I actually just ran the numbers really quick and here is what I came up with. If you are making 50,000$ dollars every year and you didn't pay the ss tax then you would have 7500 dollars that you would not normally have. If you would invest this 7500 dollars increased with inflation yearly for 35years you would have nearly a million dollars after accounted for inflation. ( assuming 3.5% inflation and 10% return) So you would rather have tiny yearly payments from social security than a million dollars? How good of a program does it sound like now. Oh and if you make $75000 a year that number jumps to 1.5 million.


.....Oh the wonders that can happen with simple math

EDIT: so is 1 million dollars a big enough safety net?

SS is not an investment plan. It is closer to an annuity or insurance product.

The example above does not account for the following:

what happens if person dies at year 10? In your example, the survivors only get what was invested.
what happens if person is disabled at year 5? In your example the 5 years of 15% contributions need to last the rest of this person's life.
what happens if person lives until age 150? In your example, the person ran out of money around age 90 or so (based on 4% rule).

SS is insurance, similar to the way an annuity or insurance product works. It's rate of return will be similar to that of an annuity paying between 3.5 and 7% (meaning you will get between 3.5-7% of your contributions out annually).

If you know how an annuity works, skip the blue, otherwise, for review:

Annuities and insurance products work because the insurance companies can deal with probabilities. Myself as an individual I cannot take that risk.

There is a bell curve of when people live (say for example avg age of a male is 85). The insurance companies know that 66% of all males will die at 85 +/- 5 years (5 years representing the standard deviation of males).

So they can promise an annuity (series of payments) based on my age (say I choose to start at age 70) so they plan for 15 years of payments.

I give the annuity company money, they take on the risk of getting the return needed to make money, and in return for taking on that risk, they give me 1/15 (~6%) of my money back every year.

If I die at age 75, The insurance company made money on me.
If I die at age 100, I have been getting 1/15 of my money back each year from age 70 to age 100, so 200% return for me.

But the probability I live to 100 is low (maybe only 5% of people live that long), so the risk of insurance company actually paying out more than they take in is low, plus the insurance company invests the money in their "general fund" which has an average return of much higher than the 1/15 rate they promised me in the annuity contract.

The problem with SS is they need to pass legislation to make plan index to life expectancies, money coming in, and the general fund of the US government is invested in treasuries yielding 2.5%, not 5-7% like an insurance company can.

I consider this a good thing- government takes on less risk and gives a lower reward. People which want a higher reward need to take on more risk.

[disneysteve]

You are most definitely in the minority. I think most people's spending is limited by their credit limit and/or checking balance (and some not even by that). ESPECIALLY when it comes to spending for Baby.

Interesting thread hijack that is tangentially related. I am currently reading "Predictably Irrational" by behavioral economist by Dan Ariely. One chapter is about how people establish price "anchors" and that controls how much they are willing to spend on such a item going forward. He did some experiments which basically showed that people are highly influenced by suggestion in establishing this anchor and that it pretty much dictates what they feel is a fair price afterwards.

People definitely do this. I read a review of the book but haven't actually read it yet. I did see a study last week done by Stanford where they did a wine-tasting. They served people 2 identical glasses of wine but told them that one came from a $10 bottle and the other came from a $90 bottle. Sure enough, the $90 bottle was preferred 2 to 1 by participants in the study.

I guess I'm strange. My spending is guided by what I need and how much I'm willing to pay, not by how much is in my pocket or my checking account or how much is available on my credit card balance. Heck, my 2 Visa cards alone have a combined limit of about $70,000. If I used that as my spending guide, I'd be in a lot of trouble.