Medicare and Social Security ... failures

[BeAChooser]

Ah yes, another government success:

http://www.breitbart.com/article.php?id=D9KEB06O0&show_article=1


WASHINGTON (AP) - You paid your Medicare taxes all those years and think you deserve your money's worth: full benefits after you retire.

… snip …

But a newly updated financial analysis shows that what people paid into the system doesn't come close to covering the full value of the medical care they can expect to receive as retirees.

Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers.

But they can expect to receive medical services—from prescriptions to hospital care—worth $355,000, or about three times what they put in.


Such a system could only work in a land where money grows on trees.

Such is the fundamental flaw of socialism.

:D

But there's more …


By comparison, Social Security taxes and expected benefits come closer to balancing out.

The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back.

But that's not telling the full story (what would you expect from the leftist Associated Press).

If that couple had invested that $614,000 into even a mediocre savings account over the years, they would be multi-millionaires now. And the money would be theirs to do with as they wish. They wouldn't even have to depend on the government for anything. Such are the fruits of socialism and the dependency it engenders.

What's remarkable is that people aren't storming the halls of congress in anger at such mismanagement. But then years of socialism also breeds docility. ;)

[excaza]

Such a system could only work in a land where money grows on trees.

Or in a land where not everybody racks up a hundred thousand dollar medical bill over their lifetime. It's based on the same logic as any insurance plan, whether it be health, car, homeowner, boat, etc. Why aren't you complaining about those, too?

[BeAChooser]

It's based on the same logic as any insurance plan

No it's not. You obviously don't know the first principle of insurance.

[DC]

No it's not. You obviously don't know the first principle of insurance.

making profit?

[CatOfGrey]

making profit?

Yes, that is the principle, but lets also mention one of the key assumptions here: when a buyer purchases something from a seller, both parties profit. In insurance, the buyer profits by having to save $500,000 for health care that they probably will never need. The seller profits by taking a bit more in premiums than it pays in claims. That's fine, too, because it pays people to keep track of everything, from a CEO to a fleet of janitors, clerks, and pompous middle managers.

The problem with SSA and Medicare is that is forces us to do stuff we wouldn't ordinarily do. For example, those who already save for our retirement are literally being ripped off by SSA. BeAChooser has given a case of this. The average earning lifetime in the US is 40+ years. To neglect an average of 20+ years of interest makes these programs an extremely raw deal. If I had the choice, I, a decidedly middle-class guy, would never agree to the deal. I would refuse to participate in the program.

Oh, by the way, if I was poor, I would appreciate the option to opt out of SSA, too. It sucks away 6.2% of their pay. That could have been used to get a better education, reliable transportation, or any other item that makes life better for the poor. And still have enough left over to save for retirement, in an account that will outperform what SSA promises. Or maybe it goes to making rent, or buying a big-screen TV. Doesn't matter. In my view, people have a right to do what they want with their money.

By the way, it also sucks an additional 6.2% away from the employer. If every employer had an extra 6.2% of wages to spend on their employees, you'd bet that a whole lot of people would get a raise. Of course, other firms would be extravagant, and hire more people instead.

An a former actuarial analyst who specialized in pension valuation, the SSA is a complete and total failure. It was a mistake to implement in the first place, it has not been properly maintained, and therefore is prone to collapse.

[geni]

If every employer had an extra 6.2% of wages to spend on their employees, you'd bet that a whole lot of people would get a raise.

Why on earth would you pay employees with money that rightfuly belongs to shareholders? I suppose a few cooperatives might have higher levels of pay but thats a fairly small chunck of the economy.

[DC]

Yes, that is the principle, but lets also mention one of the key assumptions here: when a buyer purchases something from a seller, both parties profit. In insurance, the buyer profits by having to save $500,000 for health care that they probably will never need. The seller profits by taking a bit more in premiums than it pays in claims. That's fine, too, because it pays people to keep track of everything, from a CEO to a fleet of janitors, clerks, and pompous middle managers.

The problem with SSA and Medicare is that is forces us to do stuff we wouldn't ordinarily do. For example, those who already save for our retirement are literally being ripped off by SSA. BeAChooser has given a case of this. The average earning lifetime in the US is 40+ years. To neglect an average of 20+ years of interest makes these programs an extremely raw deal. If I had the choice, I, a decidedly middle-class guy, would never agree to the deal. I would refuse to participate in the program.

Oh, by the way, if I was poor, I would appreciate the option to opt out of SSA, too. It sucks away 6.2% of their pay. That could have been used to get a better education, reliable transportation, or any other item that makes life better for the poor. And still have enough left over to save for retirement, in an account that will outperform what SSA promises. Or maybe it goes to making rent, or buying a big-screen TV. Doesn't matter. In my view, people have a right to do what they want with their money.

By the way, it also sucks an additional 6.2% away from the employer. If every employer had an extra 6.2% of wages to spend on their employees, you'd bet that a whole lot of people would get a raise. Of course, other firms would be extravagant, and hire more people instead.

An a former actuarial analyst who specialized in pension valuation, the SSA is a complete and total failure. It was a mistake to implement in the first place, it has not been properly maintained, and therefore is prone to collapse.

What on earth makes you believe you will get anything form the savings the company makes? :boggled:

i don't know in the US, but with Social Security here, it is actually the case that you profit from it when you are poor, even if you were not able to pay in all the time, Those that earn more pay more and will not receive that much later, a poor person will pay as much he can and will receive more later as he payed into it. He gets a part from the people that earned more.

That way we can guarantee that even the poorest will have enough money to have a decent living when they are old.

I see no reason for not taking part in that plan. I think in general it saves us alot lot trouble.

[BeAChooser]

making profit?

No, guess again. Although profit is desirable and necessary for the success of private insurance companies, the government could successfully provide "insurance" that in principle would make no profit.

No, the first principle of insurance is that a large number of people pool their resources to provide for an unlikely, unexpected calamity … one that will likely strike only a few people in the insured group. That approach works fine for fire, earthquake, car crashes, medical injuries, and the like, and can be quite self sustaining over the long term … as history proves. What doesn't work long term is having only a few be forced to contribute large amount of resources to cover costs that everyone will likely incur. Any private company that tried to do that would be out of business in no time. Belly up. And governments that try that approach just a take a little longer to fail. As we are now in the process of doing, unless corrective action takes place.

By the way, you act like "profit" is a bad word. It's not. It's a good word. As I told someone else just the other day, it's a word that has transformed the world in just a few centuries and vastly improved people's lives in mostly positive ways.

Furthermore, private health insurance companies actually make very little profit compared to many other businesses that I don't hear you or other liberals squealing about. Here:

http://mjperry.blogspot.com/2009/08/health-insurance-industry-ranks-86-by.html


As the table above of Profit Margins by Industry shows (click to enlarge, data here for the most recent quarter), the industry "Health Care Plans" ranks #86 by profit margin (profits/revenue) at 3.3%. Measured by profit margin, there are 85 industries more profitable than Health Care Plans (included Cigna (CI), Aetna (AET), WellPoint (WLP), HealthSpring (HS), etc.).


http://www.usnews.com/money/blogs/flowchart/2009/08/25/why-health-insurers-make-lousy-villains.html


Overall, the profit margin for health insurance companies was a modest 3.4 percent over the past year, according to data provided by Morningstar. That ranks 87th out of 215 industries and slightly above the median of 2.2 percent.

… snip ...

Among the large, for-profit health insurers, profit margins line up with the industry as a whole. UnitedHealthGroup, the biggest health insurer, had a 4.1 percent profit margin over the past 12 months. WellPoint, the next biggest, had a 4 percent profit margin. Aetna, Cigna, and Humana came in below that.

Health insurers turn out to be underperformers compared with the other parts of the healthcare sector. Pharmaceutical companies have a profit margin of 16.4 percent—seventh highest of the 215 industries that Morningstar tracks. Others segments of healthcare with margins well above the median include healthcare information (9.4 percent), home healthcare firms (8.5 percent), medical labs (8.2 percent), and generic drugmakers (6.5 percent).

The big money, in other words, isn't in the insurance industry. If it's anywhere, it's in the pharmaceutical industry. But the Obamanauts appear to have reached a kind of détente with Big Pharma in exchange for that industry's tepid support for some kind of reform. So Obama and his foot soldiers need to look elsewhere for black hats.


:D

[BeAChooser]

with Social Security here, it is actually the case that you profit from it when you are poor, even if you were not able to pay in all the time, Those that earn more pay more and will not receive that much later, a poor person will pay as much he can and will receive more later as he payed into it. He gets a part from the people that earned more.

What you describe is not "profit". It's forced redistribution. It's theft. It's welfare. It's socialism. It's soul-eating dependency. And besides, Social Security isn't as good a deal for the poor as you seem to think. In fact, the poor would enjoy much larger retirement benefits if they were allowed to redirect payroll taxes to individually owned, privately invested accounts. SS keeps poor people poor. Let me prove it.

The government currently takes about 15% of what poor people earn in the name of SS. They toss it into a lock box that doesn't exist. If instead you forced those poor people (certainly the relatively young ones) and their employers to take that same money and open an account only in their name and under their social security number at a reputable financial institution, with some limitation on how risky what they can invest in can be, and don't allow them to touch it until they are disabled, have passed on, or declared retirement, they will do MUCH better than if they continued to rely on SS.

http://www.independent.org/newsroom/article.asp?id=2302


it is important to compare the rate of return on taxes paid that is generated by Social Security to the rate of return people could receive on their private saving. For those retiring in 2008, the average implicit real (inflation-adjusted) rate of return on Social Security taxes paid was slightly below 3 percent—and it is scheduled to decline to under 2 percent in the next forty years. In contrast, if people retiring in 2008 had invested the taxes they paid into Social Security in a balanced portfolio (60 percent stocks and 40 percent bonds), they would have received a return of 5.5 percent.

The difference between a 5.5 percent return and a 3.0 percent return may not sound like much, but in annual returns compounded over a lifetime, this difference has a huge influence on the income available during retirement. In fact, the annual retirement income provided by a 5.5 percent return is double than that provided by the 3.0 percent return of Social Security. Even more compelling, an investment in the stock market averages a 7 percent real return, which would mean an annual income of three times what Social Security provides.

… snip …

While this simple comparison is compelling, it overlooks the huge hidden costs of this system. By reducing the incentive for workers to save privately for their own retirement, we reduce the economy’s saving and investment in productive assets. This means the economy grows more slowly as a result of Social Security and people end up with lower incomes even before they pay their taxes. When this cost is taken into account, the real return from Social Security to those retiring today is actually negative!



Thirty-year US Treasury bonds pay between 3% and 5% and corporate bonds from conservative well run companies will also yield 4% to 6% over time. A very safe return could be obtained by private investment. … much safer than getting an IOU from the Federal goverment with an actual negative rate of real return. Here's a post I made to a JREFer back in June 2008:

http://forums.randi.org/showpost.php?p=3782458&postcount=201


Let's consider a specific example from the SSA website (http://www.ssa.gov/pubs/10070.html ) ... that of a person who was born in 1946 and now has reached the age 62 and wants to retire. The website shows how to calculate what one would get on a monthly basis now based on earnings each year since 1951 (assuming they started work at age 15). Let's enter the maximum SS earnings that were allowed into the calculation in each year (those are indicated on that webpage). If one does that, and follows the steps laid out on that web page, one can find the estimated monthly retirement benefit at age 62 (the first year one can retire) and at age 66 (the full retirement age). It turns out that the SS system will pay $1713 per month starting at age 62 if this person retires at 62 (now) and $2284 per month starting at age 66, if he/she retires at age 66 (4 years from now).

Now, what if that person had taken his and his employer's contribution to SS over those years and instead put it to work in the stock market instead? Let's assume they invest each years contributions into the S&P 500 stock index ... a relatively conservative investment. In otherwords, one isn't allowed to put the money into individual stocks but must spread the risk out over all the companies in the S&P 500.

The SS tax rates have varied over the years (http://www.ssa.gov/OACT/ProgData/taxRates.html ). In 1951, the percent of earnings that one (plus one's employer) had to contribute to the SS system was only 3%. Which means a contribution of $108 in 1951 given the maximum SS earnings at that time of $3600. In 1967 it was 7.8% which meant a contribution of $515 on a maximum SS earnings of $6600. And so forth.

I built a spreadsheet to find the contribution each year from 1951 to 2007. Then multiplied each of those contributions by the ratio of the current stock market index (about 1400) over the stock market index in the year of contribution. That's how much that investment would have grown if left in the S&P 500 index the whole time. Then I added up the amounts to find out what the dollar value of the account would be today.

Let's start by taking that $108 dollar contribution in 1951 as an example. In 1951, the S&P500 had a value of perhaps 25 (see http://en.wikipedia.org/wiki/S%26P_500 and http://en.wikipedia.org/wiki/Image:SP500FF.svg ). The S&P 500, even during the huge dip in 2001 and 2002, never fell below 750. In other words, $108 dollars invested in 1951 in that fund and just allowed to sit there would have had a value of $108 * 750/25 = $3240 at the low of the 2001/2002 stock market crash. Currently, the value would be about $108*1358/25 = $5866.

If I now put that $3240 (at the low of the market) in just a 3% CD (very safe), I could draw off $8/month without touching the capital at all. Now for comparison, suppose that $108 dollars was all I'd ever contributed to receiving SS. Using the methodology provide by the SS office at http://www.ssa.gov/pubs/10070.html , I would receive 108*13.81/420*0.9*0.75 = $2.25 per month. In other words, putting that $108 dollars in the stock market back in 1951 would yield more than 3 times the return that I'd get from Social Security, even at the lowest the stock market fell in 2001/2002 ... PLUS, I'd still retain the full amount of capital ($3240) in my name which I could pass on to anyone I liked at my death or, if I wished to spite relatives and the world, blow it all in one big party near the end. :) Obviously, SS is not a good deal to someone retiring at this time for that particular year of contribution.

Now doing the same computation for each of the 55 years in the example but using todays S&P index value (about 1400) ... because after all you seem to think it's not doing very well right now ..., one finds that the total account value today would be on the order of $822,000. If I then withdrew that money and put it in a lowly CD yielding 3 percent, it would produce $24664 per year or $2055 PER MONTH ... without drawing down the principal. In other words, I would receive 20% more each month to live on PLUS I would be able to gift whoever I wanted all that capital when I died.

And that's assuming just 3% return (CD rates) on the assets from that point on. If I left even half of the total amount (say $410,000 of the $822,000) in an S&P index fund and let it grow at historical average S&P rates (over 8.5%) while I lived on the rest assuming no further growth on that portion of the total amount, I could withdraw $2230 per month (about the same as retiring at 66 under the SS system) and my total assets in 15 years would now be over $1,400,000! And then I could nearly double the amount of my yearly withdrawals and let the other half grow even more!

How anyone can think that Social Security is a good thing for ANYONE is beyond me. And of course, I haven't even mentioned the fact that the system is in trouble and there is no guarantee that anyone putting money into it now for retirement in 20 or 30 years will see a dime. That's because it's a transfer payment ... WELFARE ... not an investment vehicle. And I haven't even mentioned the 2.9% they are siphoning off for Medicare.

http://www.cato.org/pubs/ssps/ssp2.html "Retiring with Dignity: Social Security vs. Private Markets ... snip ... For example, assuming historical rates of return, if individuals born in 1970 were allowed to invest in stocks the amount they currently pay in Social Security taxes, those individuals could receive nearly six times the benefits that they are scheduled to receive under Social Security, as much as $11,729 per month. Even a low-wage earner would receive nearly three times the return on Social Security."

http://www.trippet.net/word/letters/20041021lvrv.htm "The average, year-over-year return of the stock market as a whole (meaning index funds like the S&P 500 that mimic the overall market) is 11% per year - that’s the average, including all the ups and downs that the market has seen over its lifetime. One great example of this long-term growth is that an investment of $1,000 on October 23 1929, right before the crash, would have resulted in a value of over one million dollars 40 years later."

http://www.cato.org/pub_display.php?pub_id=4237 "Social Security vs. Stock Returns: No Contest" The contents of that article are summed up nicely by the last sentence in it: "Whenever economists or journalists pretend that Social Security offers a better or safer return than the stock market, just remember Don Luskin's apt phrase about "the conspiracy to keep you poor and stupid."


Here's another study showing what something like I suggest would mean in terms of retirement benefits … to folks earning an annual salary of as little as $17,000 (who you'd surely call "poor"):

http://www.ncpa.org/pub/ba514


Workers making $17,000 a year are expected to receive about 50 percent more per month on our alternative plan than on Social Security - $1,036 instead of $683.

Workers making $26,000 a year will make almost double Social Security's return - $1,500 instead of $853.

Workers making $51,000 a year will get $3,103 instead of $1,368.

Workers making $75,000 or more will nearly triple Social Security - $4,540 instead of $1,645.

Galveston County's survivorship benefits pay four times a worker's annual salary - a minimum of $75,000 to a maximum $215,000 - versus Social Security, which forces widows to wait until age 60 to qualify for benefits, or provides 75 percent of a worker's salary for school-age children.


Given all the above, what you claim simply doesn't ring true, DC.

And there is another fact to consider. Only about 80% of men make it to the SS retirement age of 65. And remember, that they have to live decades longer than that to come even close to getting back a portion of what they put into the SS system. But only 60% of men even live to 75. Furthermore, poor people don't live as long as the non-poor so the percentage of poor who make it to retirement is even less. When they die, under the current system, what they put into the system simply disappears. But were Social Security replaced with individual accounts, the money the poor don't get because they die earlier would become an inheritable asset. Then it could be passed on to the next generation, making it less likely that their children will also be poor. I'll say it again. SS keeps people poor.

Here's another hard, cold fact for your consideration. Back in 1950 each retiree's SS benefits were paid by 16 still working people. But now that figure is about 3 to 1 … and that ratio is still shrinking. It's projected to be only 2 to 1 by 2025 … just 14 years from now. So increasingly, its the income of the relatively poor that will have to support poor retirees. That's a system that is clearly in the process of failing and in the end the poor will be hurt with the rest.

In summary, it's a dishonesty to sell Social Security on how the poor "profit" from it. Make no mistake. SS keeps most poor people poor and has the potential to make America as a whole poor. It's past time to wake up and smell the roses, DC.

[DC]

What you describe is not "profit". It's forced redistribution. It's theft. It's welfare. It's socialism. It's soul-eating dependency. And besides, Social Security isn't as good a deal for the poor as you seem to think. In fact, the poor would enjoy much larger retirement benefits if they were allowed to redirect payroll taxes to individually owned, privately invested accounts. SS keeps poor people poor. Let me prove it.

The government currently takes about 15% of what poor people earn in the name of SS. They toss it into a lock box that doesn't exist. If instead you forced those poor people (certainly the relatively young ones) and their employers to take that same money and open an account only in their name and under their social security number at a reputable financial institution, with some limitation on how risky what they can invest in can be, and don't allow them to touch it until they are disabled, have passed on, or declared retirement, they will do MUCH better than if they continued to rely on SS.

http://www.independent.org/newsroom/article.asp?id=2302




Thirty-year US Treasury bonds pay between 3% and 5% and corporate bonds from conservative well run companies will also yield 4% to 6% over time. A very safe return could be obtained by private investment. … much safer than getting an IOU from the Federal goverment with an actual negative rate of real return. Here's a post I made to a JREFer back in June 2008:

http://forums.randi.org/showpost.php?p=3782458&postcount=201



Here's another study showing what something like I suggest would mean in terms of retirement benefits … to folks earning an annual salary of as little as $17,000 (who you'd surely call "poor"):

http://www.ncpa.org/pub/ba514



Given all the above, what you claim simply doesn't ring true, DC.

And there is another fact to consider. Only about 80% of men make it to the SS retirement age of 65. And remember, that they have to live decades longer than that to come even close to getting back a portion of what they put into the SS system. But only 60% of men even live to 75. Furthermore, poor people don't live as long as the non-poor so the percentage of poor who make it to retirement is even less. When they die, under the current system, what they put into the system simply disappears. But were Social Security replaced with individual accounts, the money the poor don't get because they die earlier would become an inheritable asset. Then it could be passed on to the next generation, making it less likely that their children will also be poor. I'll say it again. SS keeps people poor.

Here's another hard, cold fact for your consideration. Back in 1950 each retiree's SS benefits were paid by 16 still working people. But now that figure is about 3 to 1 … and that ratio is still shrinking. It's projected to be only 2 to 1 by 2025 … just 14 years from now. So increasingly, its the income of the relatively poor that will have to support poor retirees. That's a system that is clearly in the process of failing and in the end the poor will be hurt with the rest.

In summary, it's a dishonesty to sell Social Security on how the poor "profit" from it. Make no mistake. SS keeps most poor people poor and has the potential to make America as a whole poor. It's past time to wake up and smell the roses, DC.

i don't know how it is in the US, i was talking about the swiss system.

but in short, and to use your words.
You have to steal it anyway from the taxpayers.
or
You let the poor of the old people, that have not enough money die on the streets.

And removing the old corpses from under the bridges also cost a lot unless you don't mind big fat rats.

[BeAChooser]

i don't know how it is in the US, i was talking about the swiss system.

Sorry, I missed the fact you were refering to Switzerland. Nevertheless, what I stated with respect to the United States situation … which is afterall what this thread was really about … stands. And I notice you didn't try to argue that.

But since you mentioned the Swiss system, has it defied the laws of simple economics? Why aren't the poor in Switzerland cheated by it's SS system in much the same way that they are by the US system? Afterall, they pay … if I understand the Swiss system (http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/TIES/Documents/SWITZERLAND_2010_TIES.pdf ) … about 10% of their pay into the system plus something additional via Confederation income taxes and VAT taxes. In fact, the confederation covers about 20% of old age benefits and over 13% of VAT taxes are allocated to old age and survivors insurance. So all told, the Swiss poor must currently contribute on the order of 13-15% of their yearly income to fund the Swiss SS system ... just like American poor currently do.

Now http://www.ssa.gov/policy/docs/progdesc/ssptw/2004-2005/europe/switzerland.html and indicates that on retirement, what you get from the Swiss government if you have an income less than about 37,000 francs (which is a little less than $37,000 USD) is 9,146 francs plus 13/600ths of your annual income. So if a person had a income of $17,000 USD (about 17,000 Swiss francs), they now get an annual pension of about 9500 francs a year … or about $9200 USD. But to get that full pension, they must have contributed from age 21.

So consider a poor person who started contributing to the system in 1967 and is now set to retire at age 65, at an income that is still considered poor. Like the US system, I'm sure that what that person had to contribute back in 1967 was less than what he had to contribute last year (10%). In fact, it turns out the mandatory contribution (total employee and employer combined) was 4% back then. Then in 1969, the authorities upped that to a total of 5%. If you add in the extra ordinary taxes that the Swiss person paid to fund the system, you get a percentage that is not all that different from the 7.8% (employee plus employer) contribution that a US poor person had to make back in 1969. Thus, one can reasonably conclude that the percentage of income that the US SS system has taken from poor American pockets has been roughly the same as the percentage that the Swiss system has taken from poor Swiss pockets since 1967.

That being the case, how does a $9200 USD payout compare to the payout that I noted in an earlier post that someone in the US would get at an income level of $17,000? Well, $683*12 = $8196, isn't all that different. So if the US system cheats the poor (i.e., they could have done much better investing their own money), clearly the Swiss system has cheated it's poor, too. :D

but in short, and to use your words.
You have to steal it anyway from the taxpayers.
or
You let the poor of the old people, that have not enough money die on the streets.


I never said or implied any such thing. Why must you lie to defend your position?

[Random]

Oh, by the way, if I was poor, I would appreciate the option to opt out of SSA, too. It sucks away 6.2% of their pay. That could have been used to get a better education, reliable transportation, or any other item that makes life better for the poor. And still have enough left over to save for retirement, in an account that will outperform what SSA promises. Or maybe it goes to making rent, or buying a big-screen TV. Doesn't matter. In my view, people have a right to do what they want with their money.

You are assuming that you would actually be able to save that money. The price of things in the US is in place with the assumption that that 6.2% is being taken out of people's paychecks. If that 6.2% was given back to wage earners, we would probably see an inflation spike of 6.2% and you would be right back where you started. Minus any future Social Security payouts of course.

[Dave Rogers]

As I understand it from the OP, then:

If a government social security program returns more to the payer than was paid into it, it's a failure because the payer is getting handouts from the government.

If a government social security program returns less to the payer than was paid into it, it's a failure because the payer is losing money on the deal.

If a government social security program returns exactly the same amount to the payer as was paid into it, it's a failure because the payer would have done better investing the money.

Therefore, all government social security programs are failures, irrespective of their actual performance.

Did I get that right, or is there some hypothetical situation in which a government social security program could be judged a success?

Dave

[fagin]

I think he would judge it a success only if there was no program at all. Damn commies.

[Halfcentaur]

America was founded in part with socialist ideals. Socialism is a part of our civilization, it's something to be balanced around, not turned into a dirty word to be thrown around. The common welfare is to be promoted.

[BeAChooser]

If that 6.2% was given back to wage earners, we would probably see an inflation spike of 6.2% and you would be right back where you started. Minus any future Social Security payouts of course.

How do you figure that? Tax rates are positively correlated with inflation. A positive correlation means that when taxes are higher, so tends to be inflation. Mankiw (1987), Poterba and Rotemberg (1990), and numerous others (too many to even name before and since) have reported this positive correlation. Higher taxes go hand in hand with higher inflation. So giving that 6.2% back to employees … in effect a tax cut … will likely lead to less inflation in the long run, not more as you fear.

[BeAChooser]

Did I get that right

Yes, Dave. A social security program that returns far less than said payer could have received by simply putting the money in a conservative private market investment and then *owning* that money at death, is a failure. SS keeps people and their progeny poor. But then maybe that's it's purpose ... since poor people tend to be dependent and vote democrat. :cool:

[BeAChooser]

The common welfare is to be promoted.

But ignoring simple economics and going broke is not promoting the general welfare. As the citizens of many a REAL socialist country have discovered.

[BeAChooser]

So if the US system cheats the poor (i.e., they could have done much better investing their own money), clearly the Swiss system has cheated its poor, too.

(crickets) :D

[Dave Rogers]

Yes, Dave.

Then, since you pre-define all possible government social security programs as failures, your post is tautological, and therefore worthless.

Dave

[BeAChooser]

Then, since you pre-define all possible government social security programs as failures, your post is tautological, and therefore worthless.

No Dave, it's just simple economics following the principle TANSTAAFL. :D

Read this ...

http://www.educatetheelectorate.com/index.php?option=com_content&view=article&id=110:tanstaafl&catid=44:basics&Itemid=114

[DC]

Sorry, I missed the fact you were refering to Switzerland. Nevertheless, what I stated with respect to the United States situation … which is afterall what this thread was really about … stands. And I notice you didn't try to argue that.

But since you mentioned the Swiss system, has it defied the laws of simple economics? Why aren't the poor in Switzerland cheated by it's SS system in much the same way that they are by the US system? Afterall, they pay … if I understand the Swiss system (http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/TIES/Documents/SWITZERLAND_2010_TIES.pdf ) … about 10% of their pay into the system plus something additional via Confederation income taxes and VAT taxes. In fact, the confederation covers about 20% of old age benefits and over 13% of VAT taxes are allocated to old age and survivors insurance. So all told, the Swiss poor must currently contribute on the order of 13-15% of their yearly income to fund the Swiss SS system ... just like American poor currently do.

Now http://www.ssa.gov/policy/docs/progdesc/ssptw/2004-2005/europe/switzerland.html and indicates that on retirement, what you get from the Swiss government if you have an income less than about 37,000 francs (which is a little less than $37,000 USD) is 9,146 francs plus 13/600ths of your annual income. So if a person had a income of $17,000 USD (about 17,000 Swiss francs), they now get an annual pension of about 9500 francs a year … or about $9200 USD. But to get that full pension, they must have contributed from age 21.

So consider a poor person who started contributing to the system in 1967 and is now set to retire at age 65, at an income that is still considered poor. Like the US system, I'm sure that what that person had to contribute back in 1967 was less than what he had to contribute last year (10%). In fact, it turns out the mandatory contribution (total employee and employer combined) was 4% back then. Then in 1969, the authorities upped that to a total of 5%. If you add in the extra ordinary taxes that the Swiss person paid to fund the system, you get a percentage that is not all that different from the 7.8% (employee plus employer) contribution that a US poor person had to make back in 1969. Thus, one can reasonably conclude that the percentage of income that the US SS system has taken from poor American pockets has been roughly the same as the percentage that the Swiss system has taken from poor Swiss pockets since 1967.

That being the case, how does a $9200 USD payout compare to the payout that I noted in an earlier post that someone in the US would get at an income level of $17,000? Well, $683*12 = $8196, isn't all that different. So if the US system cheats the poor (i.e., they could have done much better investing their own money), clearly the Swiss system has cheated it's poor, too. :D



I never said or implied any such thing. Why must you lie to defend your position?

so what is your plan for the people that failed to do better with a private plan, and end up old without enough money to survive?

[BeAChooser]

so what is your plan for the people that failed to do better with a private plan, and end up old without enough money to survive?

You didn't listen did you? The proposed alternative private plan isn't to let people invest in anything too risky. People would not be allowed to put the forced contributions into specific stocks, for example, where they could lose it all. Just make people put their contributions into an S&P index fund and they will do fine come retirement. As I essentially pointed out in a previous post, someone could have done that and even if they'd been forced to withdraw ALL the assets during the lowest point of the recent market collapse (which they wouldn't have to do anyway), they still would end up with a better return than what they'd get from SS. SS is that bad an *investment*. SS is designed to keep people POOR. Poor people tend to vote democrat. So SS is liked by democrats for that reason. Am I getting through to you? :D

[Thunder]

SS is designed to keep people POOR.

please explain to the audience how someone with a multi-million dollar 401k plan collecting his earned Social Security benefit, is being kept poor?

;)

[DC]

You didn't listen did you? The proposed alternative private plan isn't to let people invest in anything too risky. People would not be allowed to put the forced contributions into specific stocks, for example, where they could lose it all. Just make people put their contributions into an S&P index fund and they will do fine come retirement. As I essentially pointed out in a previous post, someone could have done that and even if they'd been forced to withdraw ALL the assets during the lowest point of the recent market collapse (which they wouldn't have to do anyway), they still would end up with a better return than what they'd get from SS. SS is that bad an *investment*. SS is designed to keep people POOR. Poor people tend to vote democrat. So SS is liked by democrats for that reason. Am I getting through to you? :D

Oh when you can decide where to invest decades later, it is easy.
But in what would you invest today? and how much will you have later?

[BeAChooser]

But in what would you invest today? and how much will you have later?

You don't listen. I just told you. :rolleyes: