the crisis is "imminent"

[corplinx]

I decided to dust off my old bookmarks file and found my national review online link. I perused around and found a nifty column by Donald Luskin about social security.

He basically says that the people who claim the crisis is too far off to worry about now are misleading the public or perhaps don't undertstand the nature of the problem.

Read for Yourself, Luskin's column at NRO (http://nationalreview.com/nrof_luskin/luskin200501110842.asp)

What do I think? I'm not sure. For years we've been told that social security is a slow train train waiting to happen.

When Bush finally decided to do something about social security, then all of sudden there was no longer a looming threat according to people like Krugman at the Times.

However, according to Luskin we get pushed onto the slippery slope around 2009.

Well, what do you guys think? Now, its impossible to mention Luskin/Krugman without people chiming on the feud and such; but please don't derail the thread with that.

[Random]

Basically it’s yet another argument from some conservative trying to convince us to put all our retirement money into the Stock Market casino. They drag out the earliest possible dates for something “bad� happening, while pushing projections as far into the future as possible in order to pump up the “deficit� numbers. “Ten trillion dollar deficit! Stocks do better than bonds! Nude girls dancing!� Whatever.

I mean come on. This isn’t when the trust fund “runs out of money� that he’s talking about (2045-2055 about). This isn’t even when Social Security revenues become less than payouts (2018 about). He is trying to get us all into a lather about when the annual surplus stops growing. “Oh no! Social Security will only make a hundred-billion dollar profit in 2009! The horror!�

Luskin argues that the reduced amount of money coming in will cause the government to have to find money from some other source. I think the government should be doing this anyway and stop treating Social Security as their personal piggy bank, but what do I know?

If we do nothing, then when we hit 2045, Social Security will only pay out eighty cents to the dollar for its obligations. That’s a problem, but it’s hardly collapse. The only thing that can really get in the way of that is if some idiot decides not to honor the bonds held in the Social Security trust fund. Bush is that idiot. For the past few decades, government has been borrowing money from Social Security and promising to repay. Bush is trying to find a way out of repaying so he can keep his tax cuts for the rich and maybe send some money to the brokers on Wall Street.

Think he’s concerned about Social Security’s health? Social Security runs into trouble in 2045. The fiscal disaster that is Medicare is three times larger and we’re gonna hit that in a decade. Bush’s tax cut spawned deficit is just as big, if not bigger, and that’s here now. What makes Social Security so imminent?

[Bikewer]

They had an administration cheerleader and a spokesman from AARP on Diane Rehm last week.

I thought that the AARP guy made the better case, maintaining that the system would be solvent without changes for nearly 50 years, and only minor tweaking needed to maintain the status quo.

The big problem with the administration plan is funding the shortfall. With "raising taxes" being a big no-no, most pundits I've heard speculate that borrowing as much as a trillion bucks might be necessary.
With the Iraq situation continuing to be a budgetary black hole...this doesn't look promising.

[Number Six]

It's hard finding the truth on this and many other issues. As near as I understand it the fact that guy lists are correct. AFAIK the Social Security money isn't included in the annual federal deficit. That is, when we read "The US Gov't will have a $440 B deficit this year" what they mean is "The US Gov't will spend $520 B more than it takes in but $80 B of that is surplus Social Security money that won't have to be paid back until later." (The numbers may not be exactly right but you get the point.) If that is true then it's really misleading to say it like that.

We have been hearing for a long time about the looming Social Security crisis so it does seem weird to hear people now saying that it's not really a crisis. One of those POVs must be wrong.

Here's something I don't understand...even if a Social Security crisis is looming, how does that necessarily make an argument for privatization? If privatization is a good thing and will make people more money then that in itself is an argument for it, regardless of whether a crisis is looming. Or if a crisis is looming then that doesn't necessary mean that privatization is the only solution but rather that the crisis needs to be addressed in one manner or other.

As near as I can tell some kind of crisis is coming eventually...the numbers are the numbers. The Fed Gov't is already famous for being free spenders and that is before they face a Social Security funding shortage in the future. In the past 30 years the US has had what, about two years with a federal budget surplus? And now the Social Security crisis is looming and any peace dividend from the end of the Cold War may be eaten up by new expenses for the WOT.

How many decades can the US run deficits before it starts to become a major fiscal problem? I don't know, I'm not an economist. Maybe they can do it indefinitely. But from a laymans perspective the whole thing just looks really bad.

[Number Six]

I've read a couple other posts since I wrote mine and I have a question...isn't it the case that even though the Social Security fund itself won't be broke until 2042, starting in 2018 the Fed Gov't is going to have to start paying back money to Social Security that it borrowed? So although Social Security will technichally be okay in the 24 years from 2018 to 2042, the Fed Gov't as a whole, which already has massive debt, will have to also starty paying back the Social Security money it has borrowed in the past.

[LostAngeles]

That the liberals are stealing our capitalization in our titles!

Ok, cheap shot. I had to take it. :D

I was speaking to the security officer in the frieght elevator about it this morning. He's considering retiring for good in the next few months out of fear that privitizing SS could end up like Enron, with the retirement money gone.

It's a legitmate fear from where I stand. Do I have suggestions on how to fix it? Er, well aside from being willing to kick in a few more bucks to FICA a week, not really. Especially since that's really more of a band-aid.

What else do we do? Start killing off baby boomers before they reach retirement age?

I don't know enough about these things to give up any good ideas. I'm not sure that privitization is a good idea, but like I said, I don't know enough aside from a basic understanding of the problem.

Myself, I've started a small savings account that will be invested and this is so I can a) have money b) have money to retire on c) have money to help Mom out with her retirement.

[corplinx]

Originally posted by Number Six

Here's something I don't understand...even if a Social Security crisis is looming, how does that necessarily make an argument for privatization? If privatization is a good thing and will make people more money then that in itself is an argument for it, regardless of whether a crisis is looming.

I think privatization is sort of being piggybacked here.

We can obviously fix social security as it is by balancing the budget (for real, not a clinton/gingrich balance where we use less of the ss surplus). That coupled with means testing and perhaps a benefits cut could fix things.

In other words, the problems with social security is the goverment and its lack of discipline. If you opt for a private account, you get out of the ponzi scheme to an extent. Even if the system collapses, you stick "own" something that can be redeemed. In the current system, if it collapsed you would just have a big IOU from uncle sam.

[a_unique_person]

Social Security is not a Ponzi scheme. A Ponzi scheme is based on a short term get em in till they don't join up any more attitude. Social Security will alwas have more people joining.

What the issue is, is that the 'baby boomers' have always had things their way, since they have been a major voting market for the politicians to chase.

They have sucked up massive government aid all their lives, and will continue to do so till they move on to the afterlife.

As social security is largely self funded, as far as I can see, the only issue is how much the government is going to top up the fund when it has to. If those boomers are dying off, and their numbers no longer give them the political clout they used to have, then they won't be getting much.

In Australia, the issue has been treated just as fraudulently. Our pension system is different, in that it comes out of general revenue every year, there is no pretence at it being self funded. But the replacement for this has been a compulsory superannuation scheme, that is not run by the government, but by private industry.

(You can, however, run your own pension fund if you want, which is what many people are starting to do now).

Let's just say, those who run the super funds are making bucket loads of money, for not doing much at all, and it is the union run funds that do the best.

[WildCat]

Originally posted by Random
Basically it’s yet another argument from some conservative trying to convince us to put all our retirement money into the Stock Market casino. They drag out the earliest possible dates for something “bad� happening, while pushing projections as far into the future as possible in order to pump up the “deficit� numbers. “Ten trillion dollar deficit! Stocks do better than bonds! Nude girls dancing!� Whatever.

I mean come on. This isn’t when the trust fund “runs out of money� that he’s talking about (2045-2055 about). This isn’t even when Social Security revenues become less than payouts (2018 about). He is trying to get us all into a lather about when the annual surplus stops growing. “Oh no! Social Security will only make a hundred-billion dollar profit in 2009! The horror!�

Luskin argues that the reduced amount of money coming in will cause the government to have to find money from some other source. I think the government should be doing this anyway and stop treating Social Security as their personal piggy bank, but what do I know?

If we do nothing, then when we hit 2045, Social Security will only pay out eighty cents to the dollar for its obligations. That’s a problem, but it’s hardly collapse. The only thing that can really get in the way of that is if some idiot decides not to honor the bonds held in the Social Security trust fund. Bush is that idiot. For the past few decades, government has been borrowing money from Social Security and promising to repay. Bush is trying to find a way out of repaying so he can keep his tax cuts for the rich and maybe send some money to the brokers on Wall Street.

Think he’s concerned about Social Security’s health? Social Security runs into trouble in 2045. The fiscal disaster that is Medicare is three times larger and we’re gonna hit that in a decade. Bush’s tax cut spawned deficit is just as big, if not bigger, and that’s here now. What makes Social Security so imminent?
Stock market casino? Tell me, just what is funding your retirement? This isn't a rhetorical question, I really want to know.

And are you saying that because Medicare isn't getting fixed SS shouldn't be fixed either?

[Random]

Originally posted by WildCat
Stock market casino? Tell me, just what is funding your retirement? This isn't a rhetorical question, I really want to know.

And are you saying that because Medicare isn't getting fixed SS shouldn't be fixed either?

Social Security, Roth IRA, and State government pension. I have about forty years to retirement though.
The stock market does make good returns over the long run like a couple of decades, but returns can vary greatly from year to year. The DOW Jones gave a five percent return last year, but over the past five years it has given less than one percent annual return on average.
I guess I have a lot less trust in the infallability of the stock market as I took a bit of a bath in the most recent bubble. My mutual fund had some stock in both Enron and Worldcom, and it took me a year to dig out of that. The idea of something like that happening just before retirement should give anyone pause.

As for your second question, I think it is a matter of triage. You take care of the bigger, more immediate problem first. The only actions that Bush has taken on Medicare are the half trillion dollar drug benefit that will end up in the hands of the drug companies, and his push for tort reform, which I bitterly disagree with for a whole list of reasons.

[Random]

Originally posted by Number Six
It's hard finding the truth on this and many other issues. As near as I understand it the fact that guy lists are correct. AFAIK the Social Security money isn't included in the annual federal deficit. That is, when we read "The US Gov't will have a $440 B deficit this year" what they mean is "The US Gov't will spend $520 B more than it takes in but $80 B of that is surplus Social Security money that won't have to be paid back until later." (The numbers may not be exactly right but you get the point.) If that is true then it's really misleading to say it like that.

Oh, lot's of good stuff here. OK, first off, you have it right. The Gov't does count the SS Surplus in its calculations of the Defecit. It is dishonest, it is misleading, but as long as the Gov't fulfills it's obligations, I have no problem with that. The problem I have with Luskin is that his tacit assumption is that the SS Surplus is somehow not the People's money but some kind of lucky cash windfall. When the Government is borrowing money from the People through the trust fund, he has no problem with that, but now it looks like the bills are going to come due, and he is trying to justify weaseling out of it.

We have been hearing for a long time about the looming Social Security crisis so it does seem weird to hear people now saying that it's not really a crisis. One of those POVs must be wrong.

I blame Clinton. Everybody loves Social Security except rich Republicans who hate it because it was created by Democrats. Clinton wanted into the White House, so he played up how he was going to "protect" Social Security and insure that it stayed safe and solvent. It was later that the GOP realized that they could destroy government programs by saying they were full of waste, cutting their funding, then calling it "Reform". They are simply trying to aply those same tactics to Social Security. Clinton started the Social Security "crisis" talk. Republicans just ran with it.This is a very simplified version of the past decade, but it holds up pretty well.

Here's something I don't understand...even if a Social Security crisis is looming, how does that necessarily make an argument for privatization? If privatization is a good thing and will make people more money then that in itself is an argument for it, regardless of whether a crisis is looming. Or if a crisis is looming then that doesn't necessary mean that privatization is the only solution but rather that the crisis needs to be addressed in one manner or other.

There's another nail you have hit on the head. The fact is that pretty much every privatization scheme the GOP has come up bigger problems than Social Security. That is one of the reasons that Bush has avoided giving out any details. He has to pump up the "crisis" talk to the point where people will believe that the barbarians are at the gates, and will accept anything that will save them. That's when he will stick us with his Wall Street cash giveaway.

As near as I can tell some kind of crisis is coming eventually...the numbers are the numbers. The Fed Gov't is already famous for being free spenders and that is before they face a Social Security funding shortage in the future. In the past 30 years the US has had what, about two years with a federal budget surplus? And now the Social Security crisis is looming and any peace dividend from the end of the Cold War may be eaten up by new expenses for the WOT.

How many decades can the US run deficits before it starts to become a major fiscal problem? I don't know, I'm not an economist. Maybe they can do it indefinitely. But from a laymans perspective the whole thing just looks really bad.

The numbers you need to worry about here is not the deficit or Federal income, but rather the rate of increase of the debt vs. the rate of increase of Federal revenue. As long as the Gov't revenue increases at a rate higher than or equal to service to the national debt, we can maintain a deficit forever. This is what Clinton realized, and what helped him to "balance" the budget. He simply made sure that the debt increased at a slower rate than Gov't revenue. As the debt increased, the amount of money we had to spend on debt maintenance increased, but the Gov't made money faster. The result was that we spent a smaller and smaller portion of our budget on servicing the debt, even as we added to it. If we kept this up, our economic situation would have gotten better and better. Bush's tax cuts really hurt us in this respect.

[WildCat]

Originally posted by Random
Social Security, Roth IRA, and State government pension. I have about forty years to retirement though.
The stock market does make good returns over the long run like a couple of decades, but returns can vary greatly from year to year. The DOW Jones gave a five percent return last year, but over the past five years it has given less than one percent annual return on average.
I guess I have a lot less trust in the infallability of the stock market as I took a bit of a bath in the most recent bubble. My mutual fund had some stock in both Enron and Worldcom, and it took me a year to dig out of that. The idea of something like that happening just before retirement should give anyone pause.
You're too worried about short-term results for a long-term investment. You should be thinking a 30-year time frame, not year to year fluctuations. You'd have a very hard time finding any 30-year stock index that doesn't pay off handsomely. When you retire, your SS money might buy you lunch every day, but you'll be living off your investments.

As for your second question, I think it is a matter of triage. You take care of the bigger, more immediate problem first. The only actions that Bush has taken on Medicare are the half trillion dollar drug benefit that will end up in the hands of the drug companies, and his push for tort reform, which I bitterly disagree with for a whole list of reasons.
Fair enough.

[Random]

Originally posted by WildCat
You're too worried about short-term results for a long-term investment. You should be thinking a 30-year time frame, not year to year fluctuations. You'd have a very hard time finding any 30-year stock index that doesn't pay off handsomely. When you retire, your SS money might buy you lunch every day, but you'll be living off your investments.


The problem is that people don't retire over the long term. If the stock market has a "correction" just as you are hitting retirement, you could get really screwed up by the Bush Privatization scheme.

The whole point of Social Security is the "security" part. It is not a retirement plan, it is not an investment, and it is not a Ponzi scheme. It is insurance. It is supposed to guarantee a certain minimum income for individuals who cannot work due to old age or illness. As soon as you take part of that money and start putting it into something volitile like the stock market, you lose that "security".

I am sure that a lot of people would do as well or better than the current system if they were given control of that money, but a lot of people wouldn't, and after Enron/Worldcom I can't say for sure which category I would fall in.

[peptoabysmal]

When Pres. Reagan decided to cut taxes, Congress began raping any public trust funds, leaving behind essentially worthless I.O.U.'s. This is the way it has been done ever since and Social Security at this time holds NO assets, merely I.O.U.'s from the government. It is not going broke, it is already in the red to the tune of some 44 trillion dollars.

You can scare yourself silly at this site:

http://mwhodges.home.att.net/soc_sec-a.htm

Ready for across-the-board term limits on Congress and Senate yet?

[WildCat]

Originally posted by Random
The problem is that people don't retire over the long term. If the stock market has a "correction" just as you are hitting retirement, you could get really screwed up by the Bush Privatization scheme.

The money has been in the market for 30 years (or more) before retirement! If a current retiree had put the money from SS into a stock index fund for the last 30 years, they would have fared many times better as far as their ROI goes. Even the stock market doldrums over the last 4 years wouldn't have affected it materially.

No one is advocating this idea for people who plan on retiring in the next few years.

[dsm]

Originally posted by WildCat
The money has been in the market for 30 years (or more) before retirement! If a current retiree had put the money from SS into a stock index fund for the last 30 years, they would have fared many times better as far as their ROI goes. Even the stock market doldrums over the last 4 years wouldn't have affected it materially.


Past results are not indicative of future returns...

;)

[SezMe]

Originally posted by corplinx
In other words, the problems with social security is the goverment and its lack of discipline. If you opt for a private account, you get out of the ponzi scheme to an extent. Even if the system collapses, you stick "own" something that can be redeemed. In the current system, if it collapsed you would just have a big IOU from uncle sam.
Corp, I have to start with the same disclaimer as many others; I'm not an economist, so I don't KNOW squat. But it seems to me that if "the system collapses" (your words) we're all gonna be in a world of hurt. Your private account will probably be just as worthless as your ponzi account. No?

[SezMe]

Originally posted by a_unique_person
Social Security is not a Ponzi scheme. A Ponzi scheme is based on a short term get em in till they don't join up any more attitude. Social Security will alwas have more people joining.
Utter nonsense. The USA has a fertility rate below replacement except for immigration. When the next terrorist attack occurs and both legal and (especially) illegal immigration is brought under control, the number of people joining SS will drop like Scrut's opinion of ShaneK.

It's the "mother of all .." ponzi schemes

[WildCat]

Originally posted by dsm
Past results are not indicative of future returns...

;)
Of course not! But a market decline for 30 years straight would be indicative of such severe economic problems that retirement security would be the least of your worries. Also, it's unlikely that SS would be even remotely viable in such a prolonged depression. You'd be in a situation not unlike the post-nuclear apocalypse depicted in the "Road Warrior" movies. :p

[Lurker]

Originally posted by Random
I blame Clinton.

Good post, and not just because I agreed with it 99%! :)

But I do question this excerpt. When did Clinton ever say it was a crisis or the equivalent? I remember Clinton/Gore talking about protecting the money but not saying the program itself was in crisis. I think that has been ballyhooed by conservatives in general.

Lurker

[Lurker]

Originally posted by peptoabysmal
When Pres. Reagan decided to cut taxes, Congress began raping any public trust funds, leaving behind essentially worthless I.O.U.'s. This is the way it has been done ever since and Social Security at this time holds NO assets, merely I.O.U.'s from the government. It is not going broke, it is already in the red to the tune of some 44 trillion dollars.


Pepto:

Since the "I.O.U.'s" are in the form of govt bonds, are you saying the US govct will selectively treat these bonds differently than all of its other bonds? I doubt many people holding govt bonds consider them worthless I.O.U.'s.

Lurker

[Ed]

Originally posted by a_unique_person
Social Security is not a Ponzi scheme. A Ponzi scheme is based on a short term get em in till they don't join up any more attitude. Social Security will alwas have more people joining.

What the issue is, is that the 'baby boomers' have always had things their way, since they have been a major voting market for the politicians to chase.

They have sucked up massive government aid all their lives, and will continue to do so till they move on to the afterlife.

As social security is largely self funded, as far as I can see, the only issue is how much the government is going to top up the fund when it has to. If those boomers are dying off, and their numbers no longer give them the political clout they used to have, then they won't be getting much.

In Australia, the issue has been treated just as fraudulently. Our pension system is different, in that it comes out of general revenue every year, there is no pretence at it being self funded. But the replacement for this has been a compulsory superannuation scheme, that is not run by the government, but by private industry.

(You can, however, run your own pension fund if you want, which is what many people are starting to do now).

Let's just say, those who run the super funds are making bucket loads of money, for not doing much at all, and it is the union run funds that do the best.

It is a Ponzi scheme. Fewer people will be part of it in the future. That is what makes it one.

[Ed]

The reason it is a crisis is pretty simple.

An ocean liner approaching a dock is really in crisis mode a couple of miles away. The SS system is like that since you cannot suddenly conjure up more people in the workforce whenever you need money. If we hit the "crisis" point in 2045 retirees are simply ***** out of luck. Our politions are really ballsless so they would much prefer to put off doing anything.

Privitization makes good sense. It makes the system more self funding and begins to remove the government from it, a bit at least. I suspect that they will only allow it for workers 30-40 years away from retirement, initially.

[Lurker]

Originally posted by Ed
The reason it is a crisis is pretty simple.

An ocean liner approaching a dock is really in crisis mode a couple of miles away. The SS system is like that since you cannot suddenly conjure up more people in the workforce whenever you need money. If we hit the "crisis" point in 2045 retirees are simply ***** out of luck. Our politions are really ballsless so they would much prefer to put off doing anything.


I agree that there is a certain amount of inertia in this dilemma. The sooner we act the less hard the crash. Still, I am not going to be scared into a rash decision without considering myriad alternatives. Certainly privatization is not the only answer. Perhaps it is the best answer, I don't know. We have seen scant details from Bush about his plan.

From what I have gleaned thus far, Bush is proposing investing quite abit of your SS, not just a small sliver like some would have you believe.

Lurker

[SlippyToad]

Originally posted by Ed
It is a Ponzi scheme. Fewer people will be part of it in the future. That is what makes it one. No, Ed, in a Ponzi scheme, you have at most a handful of people at the top making all the money, and an eventual collapse of the system, measured in a matter of months. The instigators of such a scheme never intend to pay off their marks.

With SS, you have a system that has successfully functioned for 70 years now. The demographic changes that have made SS a problem are not insolulable, they merely require an adjustment to the formula by which people are paid, and a realistic assessment that people are living longer and having fewer children than they did in the 1930's.

I object to people who call it a Ponzi scheme because this implies intentional fraud, which is utter bull.

On the other hand, proposing to solve the SS 'shortfall' by investing it with people who have just recently made a major public demonstration of their criminal tendencies -- well, I can only say that suckers are born pretty often. It's another demographic adjustment I guess we'll have to allow for.

[SlippyToad]

Originally posted by Ed
Privitization makes good sense. It makes the system more self funding and begins to remove the government from it, a bit at least. Really. Why don't you cast about for some examples of other governments that have tried privatizing their public pension system.

Why look! The British had a go at it 20 years ago! (http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=8997) Didn't go very well, did it? In fact, they are now giving envious looks to our own public pension system, which to them doesn' t look at all as if it's teetering on any brink.

I mean, I looked around because I knew it had been tried in places like Argentina -- you expect something like that to fail in a bananna republic -- but in a relatively advanced parlimentary democracy with plenty of responsible history behind it . . . well, anyway. Nice try.

[CapelDodger]

Originally posted by a_unique_person
What the issue is, is that the 'baby boomers' have always had things their way, since they have been a major voting market for the politicians to chase.

They have sucked up massive government aid all their lives, and will continue to do so till they move on to the afterlife. Oy. Watch your lip, sonny. That's ... acronymist talk, or something. We're not all the same, you know.

[WildCat]

Originally posted by SlippyToad
With SS, you have a system that has successfully functioned for 70 years now. The demographic changes that have made SS a problem are not insolulable, they merely require an adjustment to the formula by which people are paid, and a realistic assessment that people are living longer and having fewer children than they did in the 1930's.
Of course it's solvable. But the solution requires either:
1. Raising SS witholdings.
2. Reducing the payout.
3. Raising the retirement age to, say, 75.
4. Any combination of the above.

If you raise the witholdings, your taking money away from workers who would prefer to put it into a 401(k) or other retirement instrument that will pay much better than SS.

Reducing the already meager payout defeats the stated purpose of SS, which is to provide needed money to retirees.

Raising the retirement age past the age of which many are no longer capable of working is not an ideal solution either.

[WildCat]

Originally posted by SlippyToad
Really. Why don't you cast about for some examples of other governments that have tried privatizing their public pension system.

Why look! The British had a go at it 20 years ago! (http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=8997) Didn't go very well, did it? In fact, they are now giving envious looks to our own public pension system, which to them doesn' t look at all as if it's teetering on any brink.

I mean, I looked around because I knew it had been tried in places like Argentina -- you expect something like that to fail in a bananna republic -- but in a relatively advanced parlimentary democracy with plenty of responsible history behind it . . . well, anyway. Nice try.
I don't know enough about the British plan that caused such problems, but it was obviously screwed up big time and I doubt it has any similarity to what is being proposed here. And Federal workers have opted out of SS for quite some time now, w/ far better results than they would have received from SS.

Argentina? Oh, please. That's a country that had 4 digit inflation rates recently. Hardly a comparable system. An advanced parliamentary democracy? It was a military dictatorship until recently. Mass killings, disappearances, corruption and all the rest associated w/ the banana republics you claim it isn't.

[WildCat]

For all against SS reform, do you really think that the system as currently constituted for the past 70 years is the best it can be, w/ no room for improvement?

This is a system that costs a sizable percent of every American's paycheck. Money that could have been invested far better in other investments. If this witholding is going to be mandatory, I would like an expectation of a reasonable return on my inbvestment.

[CapelDodger]

Originally posted by SlippyToad
Why look! The British had a go at it 20 years ago! (http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=8997) Didn't go very well, did it? In fact, they are now giving envious looks to our own public pension system, which to them doesn' t look at all as if it's teetering on any brink.

I mean, I looked around because I knew it had been tried in places like Argentina -- you expect something like that to fail in a bananna republic -- but in a relatively advanced parlimentary democracy with plenty of responsible history behind it . . . well, anyway. Nice try. These were the people that brought the world the Falklands War, remember. Against ...

Not, frankly, the brightest and the best, and I include Hayek in that. Blinkered idealogues. Not a rare breed. Sadly.

[Ed]

Originally posted by SlippyToad
No, Ed, in a Ponzi scheme, you have at most a handful of people at the top making all the money, and an eventual collapse of the system, measured in a matter of months. The instigators of such a scheme never intend to pay off their marks.

With SS, you have a system that has successfully functioned for 70 years now. The demographic changes that have made SS a problem are not insolulable, they merely require an adjustment to the formula by which people are paid, and a realistic assessment that people are living longer and having fewer children than they did in the 1930's.

I object to people who call it a Ponzi scheme because this implies intentional fraud, which is utter bull.

On the other hand, proposing to solve the SS 'shortfall' by investing it with people who have just recently made a major public demonstration of their criminal tendencies -- well, I can only say that suckers are born pretty often. It's another demographic adjustment I guess we'll have to allow for.

First, I suspect that when the system was initiated, they probably knew what the weak spots were. After the baby boom, the future was pretty much written.

Second, the timeing is relative. Small scam, short time, big scam big time periods.

Finally, I was not aware that anyoneone proposed "investing it with people who have just recently made a major public demonstration of their criminal tendencies ". Do you have a reference for this or are you suggesting that CEO's and Boards and management teams of all publicly traded companies are corrupt? I'd like references for the latter contention if that is what you meant.

[Frank Newgent]

Originally posted by Ed

I was not aware that anyoneone proposed "investing it with people who have just recently made a major public demonstration of their criminal tendencies ".
Reminds me of this (http://www.cbpp.org/12-13-04socsec2.htm).

[dsm]

Originally posted by WildCat
I don't know enough about the British plan that caused such problems, but it was obviously screwed up big time and I doubt it has any similarity to what is being proposed here. And Federal workers have opted out of SS for quite some time now, w/ far better results than they would have received from SS.

Argentina? Oh, please. That's a country that had 4 digit inflation rates recently. Hardly a comparable system. An advanced parliamentary democracy? It was a military dictatorship until recently. Mass killings, disappearances, corruption and all the rest associated w/ the banana republics you claim it isn't.

Umm, reread SlippyToad's quote. He was saying that you can easily discount Argentina, but can you so easily discount what happened in Britain (the advanced parliamentary democracy)?

[dsm]

Originally posted by WildCat
For all against SS reform, do you really think that the system as currently constituted for the past 70 years is the best it can be, w/ no room for improvement?


Of course it could be changed -- do you have a proposal?

This is a system that costs a sizable percent of every American's paycheck. Money that could have been invested far better in other investments. If this witholding is going to be mandatory, I would like an expectation of a reasonable return on my inbvestment.

The same could be said about the military.

H***, if we balanced the budget and paid down the debt, think of how much we could do with the money we're currently funnelling into interest payments!

[dsm]

Originally posted by Ed
Finally, I was not aware that anyoneone proposed "investing it with people who have just recently made a major public demonstration of their criminal tendencies ". Do you have a reference for this or are you suggesting that CEO's and Boards and management teams of all publicly traded companies are corrupt? I'd like references for the latter contention if that is what you meant.

Why do you put the word "all" in here? Does all CEOs (et.al.) and mutual fund money managers have to be corrupt to make the SS scheme worrisome?

:confused:

[WildCat]

Originally posted by dsm
Umm, reread SlippyToad's quote. He was saying that you can easily discount Argentina, but can you so easily discount what happened in Britain (the advanced parliamentary democracy)?
Cripes, I really misread that one. :p That's what I get for posting while also cooking dinner.

[WildCat]

Originally posted by dsm
Of course it could be changed -- do you have a proposal?
Yes! Allow me to invest the money ina diversified portfolio of stocks and bonds, instead of sending it directly to current recipients and to fund some Congressman's pork barrel project.

H***, if we balanced the budget and paid down the debt, think of how much we could do with the money we're currently funnelling into interest payments!
That's crazy talk!

[Dorian Gray]

All I have to say about the thread title is, the last time "imminent" threats were pasted all over the media by the Bush administration, NOTHING TURNED UP. Why should Social Security somehow be different?

Does Bush's proposal mean they will no longer be taking that huge chunk out of my paycheck and allow all my money to go to me, other than income tax? Or is it some sort of "different" account that is just SS by another name?

[SlippyToad]

Originally posted by CapelDodger
These were the people that brought the world the Falklands War, remember. Against ...

Not, frankly, the brightest and the best, and I include Hayek in that. Blinkered idealogues. Not a rare breed. Sadly. But this is the same plan that we are about to engage in. There are very few differences. So what are you trying to say? Aside from dismissing my comment with what amounts to an ad-hominem attack on an entire nation?

By the way, here's a bananna republic having a rotten time with a privatized pension system (http://www.nytimes.com/2005/01/27/business/worldbusiness/27pension.html?oref=login&hp&ex=1106888400&en=82af08c4c479186f&ei=5094&partner=homepage). I'm telling you, they're not hard to find. Examples of failure, that is.

And the word is on the street that SS privatization is already DOA. The AARP have learned from the Medicare fiasco. Those old people get pissed, don't they?

[SlippyToad]

Originally posted by WildCat
For all against SS reform, do you really think that the system as currently constituted for the past 70 years is the best it can be, w/ no room for improvement?[b]There are demographic adjustments to be made, but that's about it.
[b]This is a system that costs a sizable percent of every American's paycheck. Money that could have been invested far better in other investments. If this witholding is going to be mandatory, I would like an expectation of a reasonable return on my inbvestment. Boo frickety hoo. It's not an investment scheme. It's an insurance scheme. Not only that, but your contention that it could be "far better invested" is malarkey. As is easily proven, most people end up losing their ass to the stock market. They don't make reasonable decisions, hold it too long or blow their load early, it doesn't matter.

What is important to note about this "lousy investment scheme" that you hate so much is that it is insurance not only for your retirement, but for the society around you. If you would like to go back to being surrounded by miserable, angry, poor people living in hovels, you may choose the third world nation that most suits your desires and get the heck outta here right now. No one here will miss you. You can then take your chances in a nation where there is no social safety net. I think you will find, however, if you trouble yourself to study the topic, that nations with a strong social safety net and a public conscience are generally nicer places to live than Libretarian Paradises of self-determination.

[jay gw]

Good grief. You people that have posted are way off the mark.

Good intro right?

Seriously, the US government spends billions on other programs like the military etc. Just divert the money to SS until the old/young balance is there again.

What's the problem?

[Magyar]

I've been trying to follow this story/subject and I am more confused than ever.


1) Accounting seems a nightmare even if you are fairly
proficient at standard forms of math, and a good accountant can make any set of numbers appear to be waht ever they want it to be.

2) This issue seems to be PURELY politically driven and therefor any numbers provided by either side is, being kind - suspect!
(this goes for the left and the right)


So, where does a guy like me -
who understands math fairly well to Algebra II, and if really pushed Trig. Understand the concepts, more or less, of Calc but couldn't solve a problem under any circumstances, and understands Economics to the point of buy low sell high -
go to get information about this issue that I can have SOME faith in??


3 things I uderstand

GAO ( general accounting office ) says (they just revised it this morning) that SS will be receiving a surplus untill 2010. IT will be completely solvent untill 2050! AND if we do NOTHING it will have to cut back to 80% of current benefit!

Now Comes the most important part - These numbers are based on a projected growth of 1.8% A TOTALLY WORSE CASE scenerio! FRom what ecomist say this level of growth would mean a totally sh8ty ecomomy!


At the same time Bush projects a 3.9% growth inorder to cut the interest on the defecit in half. Republicans continue to tell us how great the ecomomy is doing and how it will continue to do so with all the tax cuts etc.

If this is TRUE, then with this kind of growth the actual state of the SS account is FAR better off and is not only solvent but running a surplus well beyond the time of the baby boomers!
So Where is the crisis??????
If the ecomony is not doing this well then ALL the lies we are being told by Republicans about tax cuts and their whole damned theory of supporting the rich to drive the ecomomy is horsesh8!
(as if we don't already know that)

There for privatizing this system will not solve the issue, it will simply create another set of problems ( I am being kind)
where by the govt. will not be held responsible for the lives of the poor, the elderly and the handicapped. Which is, to me the obvious political agenda here. And to top it off will allow the same wealthy to put billions of dollars into their pockets at the onset of the program AND allow people to rip off additional billions like the Enron scandle without ANYONE being held accountable or responsible.

I don't see ANY benefit to the average Jo who'd be sinking his money into it. IF, the proponents really want to have ownership
let me OPT out of Social security PERIOD!

[Random]

Originally posted by Magyar

Now Comes the most important part - These numbers are based on a projected growth of 1.8% A TOTALLY WORSE CASE scenerio! FRom what ecomist say this level of growth would mean a totally sh8ty ecomomy!


At the same time Bush projects a 3.9% growth inorder to cut the interest on the defecit in half. Republicans continue to tell us how great the ecomomy is doing and how it will continue to do so with all the tax cuts etc.

If this is TRUE, then with this kind of growth the actual state of the SS account is FAR better off and is not only solvent but running a surplus well beyond the time of the baby boomers!
So Where is the crisis??????

Paul Krugman recently wrote about this. The article is here (http://www.nytimes.com/2005/02/01/opinion/01krugman.html?oref=login) (New York Times login required) but the basic gist of it is that if the long-term economy is bad, Privatization won’t work, and if the long-term economy is good, Privatization is not necessary. Here is the good part:

Social Security privatizers usually defend their bullishness by saying that stock investors earned high returns in the past. But stocks are much more expensive than they used to be, relative to corporate profits; that means lower dividends per dollar of share value. And economic growth is expected to be slower.
Which brings us to the privatizers' Catch-22.
They can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.
Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.
It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.

[Frank Newgent]

Originally posted by Random

Paul Krugman recently wrote about this. The article is here (http://www.nytimes.com/2005/02/01/opinion/01krugman.html?oref=login) (New York Times login required) but the basic gist of it is that if the long-term economy is bad, Privatization won’t work, and if the long-term economy is good, Privatization is not necessary. Here is the good part:
Another quote from the Krugman link...

It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.

And I suspect that at least some privatizers know that. Mr. Baker has devised a test he calls "no economist left behind": he challenges economists to make a projection of economic growth, dividends and capital gains that will yield a 6.5 percent rate of return over 75 years. Not one economist who supports privatization has been willing to take the test.

Here (http://www.cepr.net/publications/ss_economist_test.htm) is that test.

It is the surplus in Social Security which is being targeted. One that'll continue to grow until the bonds are redeemed.

Too much easy money available to be spent. That is the whole point.

Why can't Bush just admit it?

[peptoabysmal]

Originally posted by jay gw
Good grief. You people that have posted are way off the mark.

Good intro right?

Seriously, the US government spends billions on other programs like the military etc. Just divert the money to SS until the old/young balance is there again.

What's the problem?

The problem is that you could divert every penny spent on military in the US from now 'til 2045 and it would not be enough.

I wouldn't be opposed to a tax increase to fix Social Security, but it would have to be conditional upon 1) The government can no longer borrow any money from SS and 2) The welfare entitlements given out by SSI must be moved into, well, Welfare. SS has been a "backdoor" entitlement for years.

As it is, we are screwing our future generations and someday they may have to work two jobs just to pay the taxes.

[peptoabysmal]

Originally posted by Lurker
Pepto:

Since the "I.O.U.'s" are in the form of govt bonds, are you saying the US govct will selectively treat these bonds differently than all of its other bonds? I doubt many people holding govt bonds consider them worthless I.O.U.'s.

Lurker

These are not marketable bonds, these are non-marketable Treasury securities. The only asset that SS owns is the government's promise to pay the money back.

Can an illegal alien claim SSDI benefits? Can drug addicts draw SSDI and SSI benefits?

Republicans are not off the hook for this, either. It's been a truly bi-partisan effort to screw the middle class and run the country into massive debt.

Me? I blame the lawyers. :D

[Bjorn]

Originally posted by peptoabysmal
These are not marketable bonds, these are non-marketable Treasury securities. The only asset that SS owns is the government's promise to pay the money back.Which is exactly the situation for anyone who owns a US bond or Treasury Note.

.... you could divert every penny spent on military in the US from now 'til 2045 and it would not be enough.Not that matters (it won't happen), but I would like to see that calculation.

[Frank Newgent]

Originally posted by peptoabysmal

The only asset that SS owns is the government's promise to pay the money back.
Speaking of which, did you know that George W Bush seems to have (http://www.opensecrets.org/pfds/pfd2003/N00008072_2003.pdf) somewhere around five to ten million dollars in US Treasury bonds. Someone sure took him to the cleaners...

Hey, but what's gonna happen when he tries to redeem these (upon maturity)? Won't he have to raise taxes to cover it? The answer, very clearly, is that money from the general revenues will have to be used to redeem the bonds from the President.

And come to think of it, having this big stack of big government IOUs written out to yourself when you're the head of that same big government is equivalent to having nothing at all.

What this means is that the President has gotten government bonds in exchange for the tax money that is being spent today instead of being saved. And his only asset that he owns is the government's promise to pay the money back.

Whew, I sure hope nobody else ever falls for this.

[Random]

You know, there are a lot of declarations from the right that the bonds held in the Social Security trust fund are worthless pieces of paper. Why hasn’t anyone asked Bush about this? Something simple like, “Mr. President, do you intend to default on the bonds held in the Social Security Trust fund?� I don’t think anyone has asked that question to him straight up. The answer would be interesting to hear.

[CapelDodger]

Originally posted by SlippyToad
But this is the same plan that we are about to engage in. There are very few differences. So what are you trying to say? Aside from dismissing my comment with what amounts to an ad-hominem attack on an entire nation?
My comments were directed at the Thatcherites, Friedmanites and nascent neo-cons that launched these policies. Not the average gaucho-in-the-street. I'm actually on your side of the argument. And the word is on the street that SS privatization is already DOA. The AARP have learned from the Medicare fiasco. Those old people get pissed, don't they? You bet we do.

[Bikewer]

Listening to NPR all day as I do, I've heard half-a-dozen pundits say (from both sides of the political spectrum) that if Bush wants to adress a crisis, Medicare/Medicaide is far more pressing than SS.

[a_unique_person]

And surprise, surprise, the columnist quoted from the OP has mysteriously read the president's mind. He must be psychic, along with all his friends who just happened to suddenly come to the same conclusion as Dubya.

My guess is, they have seen the Australian model at work, and are salivating at how much they can pull out of a privatised system for no effort at all.

[Ed]

Originally posted by peptoabysmal
The problem is that you could divert every penny spent on military in the US from now 'til 2045 and it would not be enough.

I wouldn't be opposed to a tax increase to fix Social Security, but it would have to be conditional upon 1) The government can no longer borrow any money from SS and

I believe that currently the SS funds are invested in government securities. That is effectively a loan to the government. OK. They don't do that. Where does the money go? The market?

[Bjorn]

Originally posted by Ed
I believe that currently the SS funds are invested in government securities. That is effectively a loan to the government. Yes, it is.

OK. They don't do that. They don't do what?

Where does the money go? The market? I guess it goes to whatever project the government needs money for - just like the money from bonds sold every year?

Originally posted by peptoabysmal
The problem is that you could divert every penny spent on military in the US from now 'til 2045 and it would not be enough.Did you have any calculations/comparisons of the numbers, Pep?

[Ed]

Originally posted by Bjorn
Yes, it is.

[B]They don't do what?

[B]I guess it goes to whatever project the government needs money for - just like the money from bonds sold every year?

Did you have any calculations/comparisons of the numbers, Pep?

I mean since the money must go somewhere, either it is loaned to the feds or the private sector.