A rabid Republican I work with sent me this info on Soc Sec...

[SeekingDemocracy]

http://www.heritage.org/research/features/socialsecurity/welcome.asp

Any arguments against the heritage foundations calculations?

I'm not an accountant or an economist, but I'm assuming this Republican think-tank propaganda can be refuted with numbers.

[Worst Username Ever]

1. According to this, I will be putting int 750 dollars a month into the

fund. I assume they are accounting for both my contributions and my employer's matching funds, but that still works out to be 375 a month for the next 40 years. I find that highly unlikely for the average american.

[blm]

2. Isn't a Heritage Foundation team overseeing the accounting

of the money spent in Iraq, and isn't it already missing over 8 billion dollars that noone can explain?

[noamnety]

3. LOL at the "create wealth" button

*clicks repeatedly on that sucker*

[Zeke]

4. NAZIS

Their a right-wing NON-think tank bent on destroying the USA.

My God smite them, smote them, and blot them from Ye Old Earth.

[Ganja Ninja]

5. Forchristsake! It's the F-ing Heritage foundation.

There is no crisis in the social security system and even if there was where's the guarantee that putting money in the stock market will cover you when you retire.
The whole idea of social security came about because of a stock market crash and a banking collapse. That's what it's there for. It's to give you something to fall back on when everything else fails. You can take all the money you want right now and invest it any way you want. If it all blows up in your face then you will at least have something coming in. If you take that away then your at the mercy of the Ken Lays of the world. If you want to put your trust in people like that then you deserve what you get.

[hunteky]

17. Why we have social (insurance) security

There are really 2 views on social security. The first is that social security is social insurance. That is, it is an economic floor under which no recipient would fall and it is a mechanism whereby the part of society which is not receiving social security benefits is protected from some type of rebellion by the recipients (demands for tax increases on the workers by the retirees, scared politicians who would capitulate). That is, the recipients are receiving some minimal amount, which will placate them and discourage them from complaining. So, one could argue that social security is really a type of society insurance.

The other view is that social security is a government protected retirement fund. As such, the tax payer funds their own government-protected retirement account. The amount the recipient receives is then dependent upon the amount they paid over the years.


If the first view is the "correct" view, then I believe it follows that personal retirement accounts should be added in addition to the current social security funding structure. This is because the current funding mechanism is a "pay as you go" system. I pay for the current retirees. Their children will pay for me in 30 years and so on.

If the second view is correct then private retirement accounts are a logical consequence of government protected retirement accounts. If I choose to accept the risk of market gyrations, I should not have to ask permission to invest my retirement funds as I choose. After all, it’s my money.

So, which is correct? Well, originally it was a retirement fund. However, one of the first changes to the system in order to "strengthen" it (how often have we heard that) was to disallow leaving unpaid social security proceeds to one's heirs. So, it is not a real retirement fund. More recently, a recipient’s social security payments became federally taxable. Additionally, starting with the Johnson administration, social security receipts were mingled with the general revenue receipts for reporting purposes. Later still, the actual funds themselves were mingled.

This leads me to believe social security is not a retirement fund. Whether social security is good or bad is not at issue for this comment. It is simply not a retirement fund, as one would usually describe a retirement fund. There are no separate funds for individual retirees; there is no lock box. It is however a form of social insurance. It is apparently a cost which extracted from the working population via the government and given to the non-working population which serves to keep them relatively docile.

[mcscajun]

6. Plenty...start with this...

http://www.nytimes.com/2005/01/04/opinion/04krugman.html?oref=login&n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists

and follow it to the Economist page that Krugman mentions.

[SeekingDemocracy]

9. Great article!

Thanks - I especially liked Krugman's point that some economists "seem to treat that 7 percent rate of return as if it were a natural constant, like the speed of light."

LOL

[happyslug]

10. Here's Krugman's longer article on this subject to long for NYT.

http://www.bepress.com/ev/vol2/iss1/art1/

[papau]

7. Interesting GOP Partial Truth Lie - the results of their calculation is

below for an age 50 Male retiring at age 66.17 w/ life expectancy of 78.10 w/ today's Earnings of $63,572 as "default based on the US Average for males" investing any private account investing in Large Corporate Stocks-Blue Chips(50.00%) and U.S. Government Treasury Bonds (50.00%).

Taxes paid into Social Security $233,551
Monthly Benefits $1,988
Rate of Return on Monthly Benefits 0.82%
Had Your Taxes Been Invested in a Personal Retirement Account (PRA)
Total Value of your PRA at Retirement $923,549
Rate of Return of your PRA at Retirement 6.22%
With Your PRA You Can:
(1) Spend it All on Yourself Or
Monthly PRA Benefits $7,306 (a lie - The METLIFE Insurance Company requires $185.024 per $1 of monthly pay out - or did in 2nd qtr 2004 - these rates change all the time - which means a cost of 1.352 million for $7,306 - meaning real value is only $4,991 per month for life.
Rate of Return on PRA Monthly Benefits 5.58% (god only knows what this is - ROR is not a correct concept for an annuity)
(2) Create Wealth for Your Heirs by not converting all of the account to an annuity
Monthly PRA Benefits $3,653
Rate of Return on PRA Monthly Benefits 3.14%
Amount Passed to Heirs (Bequest) $781,147 (this is cute - you must live to age 78 and then die as this is the half of the account not used for buying an annuity, which is then invested and grows with $319,372 of addition interest on the $461,774 initial value)

This calculator is intended to be used solely as an educational tool to help citizens better understand public policy issues associated with Social Security. It is not intended for use as a retirement planner. The data, assumptions and formulas used in this calculator are based on information currently available to The Heritage Foundation.

WHERE TO BEGIN ON THE OTHER LIES IN THE ABOVE?

The $ 2 Trillion over next 10 years transition cost interest will increase your taxes unless we let the economy be destroyed by a balloning National Debt/

You should subtract that extra tax and the compound interest forgone on same from any calculation.

The rate of return on you private account is not guaranteed - indeed if we do not raise taxes to cover the transition cost it is likely that the value of US assets will drop and the value of your private account may be near zero.

[hfojvt]

14. At a lower income, it seems that I am not that much worse off

"You can expect to pay $71,139 in Social Security taxes over your working life for retirement and survivors benefits. For those taxes, you can expect to receive $976 a month in Social Security retirement benefits. Your rate of return under today's Social Security is 2.97%.

However, if you had been able to invest your Social Security taxes in a Personal Retirement Account (PRA), you would have had a total of $141,254 when you retired. Your monthly benefits would have been $1,086. You lost $110 a month."

Also, it does me no good to make the assumption that I could have invested all of my SS taxes in a private account, because there is no way to erase the last twenty years of my work history.
Actually, I agree with them in theory, younger people are sorta screwed by social security, because their taxes are being used to pay for their fathers' and grandfathers' retirement rather than their own. Older people got a way better deal as far as taxes/benefits goes. However, there is no way to let them opt out of the system without giving my generation the shaft. However, if Repubs want to privatize the system and pay for current benefits by raising taxes on the top 20%, then I would be all for that. Except that there is progressivity built into the SS system (wealthier people have a higher taxes/benefits ratio than poorer people) and I think that is a good thing.

[Robert Oak]

8. corrupt "think tank" spewing more propaganda, see link

http://www.mediatransparency.org/funders/koch_family_foundations.htm

that's like listening to EI lilly about how you've got a chemical imbalance and also your rage and suicidal feelings are due to your
malformed chemicals...please take even more of our 2 dollar pills...

on no, absolutely not, do our wonder drugs actually cause those feelings.

Tell your rapid friend to follow the money on his right wing dogma...
maybe you will get through a concrete brain how they have been duped by multinational corporations preying off their fear and anger.

[ProudDad]

11. The basic fallacy

The basic fallacy is that they're assuming that everyone is qualified and skilled at "playing the market"!!!

What utter Bullshit!!!!

What about the numerous folks who thought, "Wow, that Enron stock would really give me a great return!". Remember, almost half of the country are the same folks who voted for that piece of shit bush while saying that they didn't like the war, felt poorer now than four years ago, etc.etc.!!!

heritage also assumes that the "market" will continue to become more and more overinflated -- stock prices growing higher and higher while the underlying "corporations" become worth less and less in relation to the stock price -- forever. Once the petroleum begins running out with a vengeance (about the time my grandson would retire), the market will have collapsed like the house of cards it is.

They also probably aren't including "administration" fees, etc.. just cherry picking the fastest rising stocks during the fastest rising period in history to get their overinflated "returns". Again, talk to the folks who had Encon 401K's....

Plus, it's the heritage foundation -- they could spin ANY numbers into repuke-neocon bullshit.

:nuke: bush

[Coexist]

12. here is an essay from Rockridge Institute.

http://www.rockridgeinstitute.org/research/block/pessimism

[solarspa]

13. good calculator for your 401K or IRA

This calculator could work for your investments besides SS. SS should be no more than 1/3 of your retirement savings and is a safety net that should be left alone.

Those people who are excited about private accounts are all mixed up about what has been proposed (although they haven't been too specific so it is hard to debate the issued). What I've heard is that a person can choose to invest 2-4% of their earnings in a private account (there may be a couple of choices of investments--but you are not going to be able to "play the market") up to a maximum of $1300-$1400 per year. I guess once you reach that max, you resume contributing the full amount to SS fund--who knows. Everyone should be doing this now anyway.

[German-Lefty]

15. They are assuming we can dump some seniors

SS has liabilities. It has promised retired or soon to be retired people that they'll get some money. They assume that you can invest all your SS money, when in fact most of the SS money goes as transfer payment to people already retired. The German concept is "generational contract"; the working age people pay taxes for the young to get and education and the old to have retirement benefits.

Basically their model assumes that nobody older than you is in there, or that we can just screw those people. At least that's what it sounds like they're doing.

[stevebreeze]

16. some serious flaws in logic in this alternate universe.

First Grandma didn't have personal account and so ate cat food to extend here life to the ripe old age of 63. Uncle Iggy's boy Chuck is locked in the closet 8 hours a day because there is no SSI for the disabled, and Iggy can't afford the day care Chuck needs(he was born with serious disabilities).
The Stock market in this alternate reality grows at a faster rate(6.5) then the economy as a whole(1.8%). This Of course this can and does happen from time to time we called it the stock market bubble that last time it happened. Stocks are already vastly overpriced at 20/1 price to earnings and are not likely to return 6.5% anytime soon.

[happyslug]

18. Lets look at some standard investment advice,

Any good investment counselor will advise any investor that the investor should invest what he absolutely need to live on in the most secure investment the investor can. Basically that is US Treasury bonds. That is what the Social Security Administration (SSA) invests in. Are there investments with higher returns? yes, but with higher risks. You have to MINIMIZE your risk on what you need to live on.

Social Security (SS) was designed to provide for such absolute amount you need to live on. Given that premise it has always invested excess funds (i.e. funds not spent on SS) in Treasury Bonds (Often called T-Bills). Anybody who invest any of their Social Security into anything except T-bills is a fool. Thus it would be best for people just to leave Social Security as it is, for it has the lowest overhead rate of any investment/pension/annuity plan in the world.

As to the argument that you can do better than SS, yes but only with greater risks, risks you SHOULD NOT BE TAKEN WITH WHAT IS YOUR BARE ESSENTIAL INCOME WHEN YOU RETIRE. This is the best argument I can come up with, you have to be VERY CONSERVATIVE when dealing with "Old Age Pensions" that is to provide you a bare essential living.