Question about Social Security privatization

[Killarney]

I don’t understand the whole “privatization of Social Security” argument. I know that Republicans push the idea and say that “we should be able to choose how to invest our social security money” blah blah blah. Sounds fine and dandy, but I don’t understand how it could actually be possible.

The money taken out of our checks today isn’t our money. It’s not going into some mystery bank being saved for us and waiting for our retirement. It’s going to the people that are retired and collecting SS right now. So, the people who will pay OUR social security are in diapers or not even born yet.

So, if the Republicans say, you should be able to take half your SS and invest it, how is that possible? It’s not your money right now. It’s not being invested anywhere. As soon as your money gets to the government, it goes right back out to Edna Smith immediately.

Anyone know how they explain that?

[Not Me]

1. That's one of the problems that opponents to the system cite...

That the current cost of maintaining SS recipients would have to be borne by the government, which we all know is the people.
So in bush-terms this would be a tax increase...but he won't bring THAT up.

The other very real problem with the private accounts is that in the markets, there are winners and there are losers. Will we, as a society, turn our heads from those who invested poorly, or were swindled? (ie: Enron, Worldcom, Global Crossing, etc.) Or who just happened to hit retirement age at the onset of a market crash (1987, post 9/11)??

Don't fall for this sham!!

[papau]

76. It's blue smoke and mirrors covering the destruction of Federal benefits

SS needs nothing for 50 years - except that the bonds the system purchased so as to finance the tax cut for the rich get redeemed over those 50 years via a tax increase on the rich.

Avoiding an FIT tax increase on the rich is the real GOP game.

[still_one]

2. Right now the money is guarenteed

What the pugs are pushing is privitization. Wall street is dying to get hold of your money. Most people do not realize that most 401Ks are not insured through the government. The funds people invest in, including the fixed income funds are usually not insured through the government.

One reason why social security has solvency problems is because Congress, including this administration have been borrowing from it.

Everytime they try to deregulate the consumer gets screwed and business profits. The best example is energy.

[RivetJoint]

6. Social Security

is guaranteed as long as there are enough workers to keep this legalized pyramid scheme afloat. Once we have more recipients than workers, the balloon will pop.

[sadiesworld]

20. The US is the only industrialized country expected to see

massive population growth in the next century. Our primary problem isn't having too few people to pay in, it is keeping our greedy politicians hands off of it. The "pyramid scheme" rhetoric is used to scare people in supporting reform.

[greenohio]

22. Thats right, no problem is too big to ignore.

No population "explosion" is going to help you when the surplus disappears in 2018. That army of 14 year olds entering the workforce just aren't going to cut it.

[sadiesworld]

25. Of course the IOUs must be paid as well.

[Yupster]

103. But there isn't any money to pay them

The money is gone. It's already been spent.

[Inland]

3. Krugman describes this as the Bush's 3 minus One equals Four math

You can't take out of the fund and invest it and still pay out the planned benefits. But Bush says that he can use the same pot as an investment fund AND pay benefits. Imposssible. The SS systeme would need about a trillion buck infusion to pay beneifts if contributions were used for private accounts.

[VOX]

4. Anytime a right-winger utters the word "privatization," it means one thing

Big $$$$$$$ for corporations. Our health care was privatized years ago, in the name of "choice" when it came to patient treatment, but everyone knows what a nightmare that has become.

This past year, AARP enabled the right wing to take the first step toward the privatization of Medicare -- a long-time dream of New Gingrich. (The CEO of AARP is Bill Novelli, a friend of Gingrich.)

The right wing wants to get its filthy hands on Social Security dollars to pass more dough on to their corporate buddies.

[greenohio]

5. We need to be careful about this issue.

More young adults believe in aliens then believe social security will be around when they retire.

http://www.ndol.org/ndol_ci.cfm?kaid=131&subid=207&contentid=2354

http://finance.senate.gov/hearings/testimony/100302omtest.pdf

[Kanary]

8. Hi greenohio!

Welcome to DU!

:hi: :hi: :hi:

:toast: :toast:

Kanary

[greenohio]

13. Thanks

Actually been reading for years. Best news source on the web.

[recidivist]

16. You win the gold medal.

Sooner or later, we will shift to a fully funded retirement system. We will have to, because the ratio of workers to retirees keeps dropping and the tax increases required to keep the Ponzi scheme alive will become prohibitive. The transition will be expensive but it only gets worse if we delay.

But you make the key political point. This ain't 1935. Half of all Americans have IRA's or 401(k)'s. These folks understand what a modernized Social Security System would look like and overwhelmingly favor it. And this group is growing -- a topheavy majority of people under 40 favor an investment option in Social Security, and the tipping point will come sooner or later.

The Democratic Party is courting disaster if we just sit tight trying to scare old folks with the absurd idea that it's dangerous to have real assets instead of pyramid scheme IOU's.

[greenohio]

18. It will take a ton of leadership

I liked Monyhan's plan the best, automatically adjusting to pay current beneficiaries. What most people don't realize is that in 2018 there is no more SS surplus. At that moment, we start cashing in the IOUs. To pay back the IOUs to ourselves we either raise taxes, cut benefits or cut other programs. Right now the average check for SS is like 800 a month. Who can live on that? How can we cut that? These people have been paying 15% (7.5 shows on the pay stub, 7.5 is hidden) for decades. No matter how we do this, its gonna hurt. Kerry has the leadership capacity. Does he have the will?

[recidivist]

33. True. I've said for years that one of the great careers ...

... of this generation is there for the taking for any prominent Democrat who embraces Social Security reform. Moynihan talked about it but always flinched when it came time to actually do something. Bob Kerrey also talked about it and there have been a few others, but no Democrat has run for President on the idea. Yet.

Hopefully, however, it's only a matter of time. This is a Nixon-going-to-China issue. The Republicans will keep charging up the hill regardless of what Democrats do, so in the short run we can keep playing stupid little scare-the-old-folks games and avoid the burden of learning anything new. This is, however, rapidly becoming a losing proposition as a steadily increasing percentage of the public favors reform. In fact, I think the Republicans are quite happy to have this as a wedge issue in the short run, and sooner or later they will roll over us.

But if a Democrat embraces reform, it will become a thoroughly bipartisan issue and happen fairly quickly. If added inducement is needed, wrap your head around the reality that the Democratic presidential candidate who embraces Social Security reform will pull the Republican coalition apart at the seams. He will win.

[greenohio]

36. Bingo.

Rumors have it Bush plans to push something after the convention. I would love to see us beat him to it. A strong creative position on this would bring the discussion back to the issues, rather than this cruddy mudslinging. This is the issue to steal from the Repukes.

[recidivist]

46. Agreed.

This is a perfect wedge issue for any Democrat who is prepared to lead. It's right substantively, and it's political dynamite.

[Yupster]

61. This is a fault I had with Clinton

He had peace and prosperity for most of his term, and a surplus the last few years.

He was also good at explaining complex issues.

He was the perfect man in the perfect time to tackle the social security time bomb that everyone knows needs to be tackled , but he didn't.

When Clinton is remembered 100 years from now, there will be few big items that he will be given credit for. I heard someone say that Clinton said you had to have a crisis to be a great president. I think Clinton had his chances to tackle greatness, but he didn't even try.

[Lydia Leftcoast]

98. Looks like we have the privatization tag team of

recidivist, greenohio, and yupster hard at work here--repeating the right wing fairy tale that we'll all retire wealthy if we just take a tiny percentage of our income and invest it with our absolutely trustworthy stockbroker or bank, because as we know, the market only goes up, and no, no, no, we could NEVER talk about the one unmentionable fix in that fantasy land: raising taxes on the rich.

[Yupster]

105. I'm not even convinced the Republican plan is doable

My point is that if we don't have any plan then their's will be better than ours. Doing nothing is not an option.

Tax the rich?

Maybe - depends on what congress wants to do.

It's the perfect solution of making someone else solve the problem since most of us aren't rich. Yeah let's all get together and solve this problem. Oh - I just meant the rich. I'll sit back and watch.

PS - I am a stockbroker. I'm also what most here would qualify as rich, or close to rich anyway. Threfore, I may have a bit of a different perspective than most here.

[Lydia Leftcoast]

110. That explains a lot

n/t

[recidivist]

169. 10% is not tiny, and higher benefits are not a fairy tale.

One of the differences between proponents and opponents of Social Security reform is that we crazy "privatizers" (an inaccurate label, but that's another discussion) have our eyes fixed on the destination, understand that it is highly desirable, and are willing to work through the transition issues.

Stand patters, by and large, do not focus on the destination. Lacking this sense of direction and an appreciation of the enormous potential of full funding, they tend to view the transition issues as prohibitive and the journey as not worth making. By default, they tend to become preoccupied with the sterile question of whether the current system can be propped up just a little bit longer with higher taxes, a higher retirement age, COLA cuts, means testing, or other such options. But when the current paygo system is inherently inferior to full funding, this painful bite-the-bullet exercise strikes reformers as spectacularly beside the point. We would want to move to a fully funded system even it the existing Social Security System were financially sound. We can, quite simply, do better.

Let us stipulate that the transition poses important choices and will take decades to effectuate. You and I are both too old to benefit materially from it. So is the journey worth making? Yes.

The Social Security tax (as you well know, being self-employed) is 15.3%. Part of this funds Medicare and disability. 10% and change funds the pension benefits. Once the transition is completed, people will be putting roughly 10% of their lifetime earnings into their retirement accounts. That is not negligible.

Currently Social Security pays a pitifully low rate of return, and many people end up losing money outright. These returns will only get worse absent reform, as we will be forced to raise taxes, cut benefits, and/or raise the retirement age to meet the funding shortfall. On the other hand, a fully funded system with 10% of earnings invested over 40-45 years would pay significantly higher benefits. It would also mean that even people of modest means would accumulate an estate.

Certainly, the amount saved by a minimum wage earner would be relatively small -- although it would still fund benefits significantly higher than current Social Security -- but over a couple of generations this would accumulate. Over time, it would move most American families into the investor class. Even a small stake has significant implications for the 50% of the population that now has no net financial assets. Even fairly modest sums at the right points in life -- to finance an education, buy a better house or into a better neighborhood, start a business, cushion a personal setback -- can make a huge difference. I like the idea of a society in which most people enjoy such options as a matter of course, and I'm old enough to realize that 40 years to get from here to there is not a long time.

This is not a fantasy of everyone retiring rich. A minimum wage earner is not going to be buying a Lear jet as a retirement toy. But for someone who now has nothing beyond the promise of a minimum Social Security benefit, it is significant. (Yes, there are the secretaries who retire with three million dollars because they always socked 10% away, but they are few and far between, and mostly spinsters. Kids are expensive ....)

Run the numbers of what 10% of earnings invested over a lifetime add up to. Everyone would benefit, but in terms of altering life trajectories the effects are probably most important for lower income folks who typically find it difficult to save. I don't see a downside to it.

Again, I'm too old to benefit personally. But I want my kids, and everyone else's kids too, to have the option. Social Security is one of our fundamental safety net structures, and it ought to be arranged in a way that maximizes utility. Why not?

[The Straight Story]

175. So do you trust Bush more than your bank?

right wing fairy tale that we'll all retire wealthy if we just take a tiny percentage of our income and invest it with our absolutely trustworthy stockbroker or bank, because as we know, the market only goes up, and no, no, no, we could NEVER talk about the one unmentionable fix in that fantasy land: raising taxes on the rich.

I don't mean to be overly harsh, nor am I really directing this at you as a person - but you hit upon something which has bothered me the last few years in this whole SS Mess.

I don't trust the government most of the time. From 9/11, Iraq, all the way back through the last century, they have a history of hiding things and trying to screw one group or another over. Now let's say (and I know I am leaping about here a tad) I find a company which has intentionally discriminated against blacks, kidnapped people, wasted money so much that it had to keep asking for me each year than last, and (insert here other negative items which come jumping to your mind).

Allowing that company to manage my retirement fund that they take from me does not always seem like a good investment to me, and here we have people telling us that the money we put in may not be there. How is that any different than putting it into our own investments? If we are going to end up with zero the way it is now then we don't really lose anything.

But I do understand, the idea would have worked well if the leaders of the 'company' had not mis-managed things. The government can do wonderful things which help many millions of people, and if ran right can do a world of good in many areas. But it, like private companies, can do stupid things - but when a company does it they usually go out of business, the government just stays there and pulls more money in to fix the mis-management (but rarely the problems that led to it).

Maybe the best solution overall is education of the people. Require the government to send out regular info on things like SS and new laws, etc and so on.

[papau]

75. Nonsense-GOP Reform of Social Security is destruction of SS and borrowing

from the capital markets a minimum of $1 trillion and more like 2 trillion.

I was in contact with Senator Moynihan (via email and via other Senators telling him what I told them)and was one of those that showed the numbers that proved the GOP were as always telling lies - with a real goal of destroying Social Services provided by the Federal government. I tore apart a lot of illustration that the GOP folks were putting out and showed where they were smoke and mirrors.

Any Democratic Party member that sells out the party by selling out the middle-class and poor and our kids via "Social Security Reform" will more than earn his corporate, GOP, funding. What else might happen to such a person is for them to worry about.

In 1942 the Dems tried to put Social Security on a funded basis - and have SS but non-gov bond assets - and the GOP shouted it down screaming socialism by the backdoor (The Retired Social Security Actuary's book - "Social Security" by Myers - has a good discussion of this.) So why would the GOP now embrace "socialism by the backdoor"? The answer is that the real plan is the destruction of social services, the destruction of the income tax, and an even better life for the very rich - albeit it would be for their grandkids 40 years from now - but this is a class war and they do plan ahead well.

The current "scare-the-old-folks games and avoid the burden of learning anything new" is the "generation fairness liability" approach to discussing Social Security. This forces the discussion to accept the GOP desire to "fund" the pension benefits via a payroll tax - and never change to funding from the general tax revenues - or equivalently, to fund via a payroll tax that covered all income - including investment income via a true-up on the FIT calculation. As with all partial truth arguments of the GOP, this one has points that folks managing Soc Sec should consider because they have a bit of truth - but the GOP stretches that truth into a reason and method of Social Security destruction.

Folks do not favor GOP "reform" once they are told the facts - it just when one limits the discussion to GOP slogans that you get any positive response any other than the 30% core GOP true believers.

The Democratic presidential candidate who embraces Social Security reform will indeed pull the Republican coalition apart at the seams - and perhaps win - but only because the rich will be more than willing to finance his message.

[Yupster]

88. Their plan has appeal

because it's the only plan out there.

You can't beat something with nothing.

[papau]

94. Continuing the current system is not "nothing" - it is the plan - as well

as wage base expansion sold as a payroll tax decrease, and taxing investment income at the same rates as wage income while selling both ideas as a "tax rate decrease" since we can use a smaller rate if we increase the amount of income we apply the rate to -and thereby still get the same tax revenue.

[Yupster]

97. In my opinion

continuing the same plan, or saying we'll just raise taxes again is nothing.

You can't keep the same plan if people keep living longer and having fewer kids. That's just demographics.

[papau]

173. Actuaries model Demographics - and continuing the same plan is best!

And, YES, living longer and having fewer kids is part of the model - a model that is run out for a hundred years of which the first 75 are published by the Actuaries and available to the public.

It's fun to be an actuary as you replace GOP partial truth with facts as to real world consequences of actions -

and it is tough to be an actuary as folks prefer to remember the GOP partial truth slogans rather than remember and trust the professional actuaries' results.

[shraby]

165. People need to remember history.

We had the "roaring twenties" where everyone was investing in the stock market and no social security safety net or other social programs. Then came the stock market crash which turned into the "great depression". People were starving, no jobs, no money coming in whatsoever..maybe an odd job here and there, hobos, whole families without a place to live.
Just what we need is a return to no safety net. If there were no social security, unemployment checks, welfare checks, food stamps, right now, this country would be in a "great depression".

Those programs were set up for a reason. If we forget the reason, we are doomed to repeat history. The stock market is no place for the average person to invest for his/her only source of income in his/her old age.

[TahitiNut]

47. Bullshit. It's not a Ponzi scheme and not a pyramid scheme.

If children support their parents, is that a "Ponzi scheme"??

For the majority of human history, the "social security" of anyone was having as many children as they could - in the hope or expectation that those children would (1) help support the family hunting and gathering or on the farm or ranch, and (2) support the parents as they became too old to work.

People who had no children died as soon as they couldn't work ... unless the 'social security' of the tribe or clan took over.

That's the beginning.

It's absolutely no accident that the number of children born to the average mother has gone down by more than half since the inception of Social Security. It's no accident that the birth rate in "socialized" nations is far, far lower than in other nations. People create their "social safety net" however they can -- either by copulation or cooperation!!

Today, I consider us the American Tribe. Each generation casts its bread upon the social waters, building social equity in the infrastructure, defense, and the next generation. We support public schools and, in many ways, contribute to whatever the next generation becomes. We teach them. We coach them. We train them on the job. We work to make their lives better, safer on the job and more free from exploitation and predation.

The better job all of us do in improving the heritage of the next generation then the more able that generation is able to offer a secure retirement to its parents. Workers NEVER collect the whole value of their labor. Much of the value of labor is "invested" in a better nation and world. That's equity.

The issues arise in the proportions of working Americans and retired Americans.

Tell you what. Younger workers need to develop patience and maturity.

Tell the "younger generation" to wait longer before they kick the older workers to the curb!

Tell the younger manager to wait longer before being promoted to a position held by someone with more skill, wisdom, and experience.

Then tell people they can expect to retire at "full benefits" at an age that's later by half the amount of increased life expectancy.

That's right.
Let's make a "bargain."
Let's agree that any increase in life expectancy gets split in half: half goes into the "working years" and half goes into the "golden years."
Then tell the younger workers to stop coveting the senior roles.

:shrug:

[Name removed]

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[Name removed]

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[recidivist]

60. I am in favor of higher pensions for everybody.

I still cannot quite grasp why you prefer lower pensions.

I pay plenty of taxes too, and I can get my social solidarity jollies from any of a thousand and one public programs. The difference between us is that I do not think we should condemn moderate and lower income Americans to a signficantly lower retirement income than they could otherwise enjoy simply because you are hung up on a mistake Franklin Roosevelt made in 1935. We can do better. You seem to be afraid of the very idea. Why?

I do have an IRA and a 401(k), and I'm probably too old for Social Security reform to benefit me. But I'd like for my kids, and everyone else's kids, to have a better chance at financial independence.

[TahitiNut]

67. Social Security ISN'T a Pension!

It's death insurance.

Just as "life insurance" insures against death, "death insurance" insures against life! Like all insurance, it's actuarially managed. Like all insurance, it's shared risk ... a risk of living! Since that risk is one that faces everyone, and one whose costs (in one way or another) will be borne by everyone, it makes sense to design it in exactly the way it was originally designed .. as long as the age of "retirement" (the "risk" of outliving one's working years!!!) is adjusted to keep the ratio of premiums to insurance proceeds in balance.

It's NOT intended to make one wealthy when one collects (nor impoverished when one is paying). It's intended to meet the costs of the "risk" called living!

[papau]

83. True - indeed the have an estate at death privatization benefit is just

life insurance and could be provided as such much more cheaply without this game playing with private accounts.

But private accounts are needed to kill Social Security.

[papau]

80. Crazy up is down GOP world is being sold you - the "reform" is a disaster

for the non-rich

but is sold to the non rich as a thing any greedy person (and as the 80's GOP taught - greed is good - or at least is motivational) should go for.

I wonder if there is even one GOP program that Bush will announce at his convention that will not be explained ass backwards as the sell up is down. Hell, they have sold war hero as bad guy while AWOL deserter is soldier protector against terrorists - at least to our media.

They are "good" at this.

sigh ...

:-)

[sadiesworld]

74. What happened?

One of the best posts on the thread. Sheesh. Can you repost w/o the offending truth, TN?

[TahitiNut]

119. Here's a (edited) repost, sadiesworld ...

Absofuckinglutely NOBODY is stopping you from investing in your own pension. Indeed, already workers bear the burden of not only increasing the "value" of whatever equities you choose to buy, you get to escape taxation on that incremental "value" (created by the labor of others) until your (hopefully early) "golden years." Not only that, but the "ownership addicts" even create tax benefits for you to do so, whether it be in an IRA, Keogh, ERISA plan, or several other programs.

Do it. And then <you'll get what you want>!

In my 60's, I've paid the MAXIMUM into social security my entire life. My father died before he benefited. My grandfathers BOTH died before they benefited. They all worked their entire lives to increase the "equities" for those who, apparently like you, saw the pot of gold at the end of the rainbow of "ownership." Even with that, the Social Security system is immeasurably fairer than "privatized" bullshit.

There are taxes and there are taxes. Right now, the least taxed are the least productive <and the most entitled>. Labor creates the <inheritable> wealth you covet for your retirement<,at a 'tax rate' of around 65%>. That's a far more onerous and inequitable "tax" than any the government assesses.

---

Thanks for the generous words.

[Lydia Leftcoast]

100. "Rape the next generation?"

That's not how I see it. Maybe I have some family values, like the younger generation SHOULD support the older generations that made possible everything that they have.

And you keep ignoring the fact that we could avoid raising rates on lower income workers IF we went for the ONE tactic that the right wing hopes people never find out about, eliminating the ceiling on FICA.

You'll have $3,000-$5,000 a month from an investment account? Maybe. Maybe, if there isn't another great depression and your broker doesn't cheat you. Oh, and did you notice that there's nothing to prevent you from investing already?

Invest if you want, but please have a little compassion on the people who cannot afford to invest. They should invest 7% of minimum wage--approximately $750 a year? Wow, they'll be just watching the money roll in by the time they're 65 and their bodies are broken down from hard work and poor health care.

[Name removed]

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[Lydia Leftcoast]

179. Your ill-informed talking points do not take into account two things:

1) Who takes care of today's elderly during the transition? We would either have to cut their benefits or go deeper into debt.

2) Social Security has a much lower administrative cost than ANY private sector investment firm.

I swear, this thread is being mobbed by stockbrokers and investment bankers who are just drooling at the thought of getting a share of 280 million new investment accounts.

[TahitiNut]

180. GMTA, luv.

It's incredible to find so much "Parker Brothers" thinking on a 'liberal' board. :eyes:

[Name removed]

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[recidivist]

186. Mobbed by reformer's? Ah, the sound of progress.:)

We are apparently not going to agree on the merits of full funding vs. paygo. At least not yet. But let me return to the political point.

This issue is moving quickly. Full funding and investment accounts for Social Security are hardly new ideas, but until fairly recently serious politicians have been afraid to touch the third rail. That has changed for at least two reasons.

First, IRA's and 401(k)'s have become common, though sadly not yet universal. The subject has been demystified for much of the electorate. The old scare tactics are less effective.

Secondly, the inexorable rise in Social Security taxes and the looming demographic crunch have focused attention on the issue. The under 40 crowd knows it is going to be holding the bag when Social Security slides into the red. This is no longer an abstract threat off in the never never land of the indefinite future. The crunch hits in a dozen years or so, close enough to fall within people's planning horizons. Younger voters are beginning to take it seriously and look at their options.

For both reasons, the constituency for investment accounts in Social Security is growing rapidly. This will continue. A majority of the public now favors an investment option in Social Security, and the margins are overwhelming among younger voters and voters who have experience with IRA's and 401(k)'s. The politicians are going to follow the voters.

I predict that by the end of this decade, support for this particular reform will be overwhelming. We need to take care that the Republicans don't own the issue lock, stock, and barrel.

[greenohio]

57. Lost me on the tribe thing

In 2018 we either raise taxes, cut benefits or cut other programs to pay the beneficiaries. Any adjustments at that point will be temporary and we will be doing it again 20 years later. Follow the trend line. Lets not screw-over our great grandkids like Bush is doing to them with the deficit.

[TahitiNut]

62. You've got the 2018 thing wrong.

In 2018, the costs of benefits is projected to exceed the revenues for the first time in over 20 years. What that means is that the Trust Fund balance (now approaching $2 trillion) will begin to decline.

During the first Reagan/Bush administration, Social Security taxes were increased to build up a huge Trust Fund against future expenses. This was the first "violation" of the pay-as-you-go philosophy. Currently, we're paying over 35% more than is required to pay current beneficiaries.

Like any Trust Fund, it's not being kept in a mayonnaise jar buried in the back yard of the White House. It's "invested"!! If it weren't for the Federal Deficit and the National Debt, those funds would be invested in securities other than Treasury bills. The fund would then be invested in municipal bonds and other securities.

The Trust Fund is not projected to be exhausted until 2042, depending on what economic crystal ball you use. (Some economic projections result in a later date.) And that assumes no adjustment in the retirement age, no adjustment in the inflation-protected value of the benefits, and no change in the rate of taxation.

If you reread my post above, I argue for an adjustment of the retirement age. I argue that the retirement age ought to be adjusted based on changes in life expectancy.

If, just for example using fictional numbers, the original retirement age of 65 when the average life expectancy was about 69 (in the 30's) were adjusted to a time when the average life expectancy was 79 (today), then the adjusted retirement age would be 70. That's not what we've done. We've piled the entire increase in life expectancy into the "golden years." We've only increased the retirement age by 2 years, not by the 5 or 6 years that would be half of the increase in life expectancy.

In my view, that's the only change that's needed. No other changes would be necessary other than outlawing "mandatory retirement." Age discrimination is "alive and well" in today's companies. Outlaw it.

[Yupster]

91. You would be correct if

the trust fund surpluses were currently in bank cd's or insurance fixed accounts. Then it would be there when we need it in 2018.

But it's not. It's gone. Pfffft. deceased, not among the living.

I could say that my retirement will be fine as long as my brother-in-law repays me the $ 50,000 he borrowed. However, my brother-in-law went to Vegas and bet the money on red and lost it. He's not going to repay me because he has no money. Just like the government.

Still, it makes me feel better that he gave me an IOU. It lets me dream.

[TahitiNut]

112. That's nearly total nonsense.

The Social Security Trust Fund is invested in Treasury securities ... just like George W. Bush's stash and the stashes of many other fat cats. Approximately a third of the Federal Debt is held by the Trust Fund. More than half of the remainder is held by corporations.

Now, you can legitimately argue about deficit spending (and I do!), and you can argue about the "solution" the bastards invented in the early 80's to increase the payroll tax so the OASDI tax rate is now more than 35% greater than is needed to pay current beneficiaries (and I do!), and you can certainly look forward with dread (as I do) at what's going to happen starting in about 2020 as the Federal government goes looking to borrow money from corporations and the public to not only refinance the debt held by the Trust Fund but finance continued deficit spending ... but you cannot with any degree of accuracy and honesty pretend that the Trust Fund contains anything less than if it were composed of CDs or any other debt instrument.

Anyone who thinks their savings account is any more 'there' than the Social Security Trust Fund is deluded and abysmally ignorant of the financial sector. Banks invest the money of depositors and are NOT required to keep more than a small percentage of those deposits in cash. Government securities (just like what the SSTF buys) are a significant amount of those investments. As another example, insurance companies are required to maintain sufficient 'reserves' to pay benefits even in the event of widespread losses. Those 'reserves' are largely invested in the exact same kinds of debt instruments as the Social Security Trust Fund.

[Yupster]

122. But if my money is in a CD

I can walk in the bank and they will give it to me. Same with an insurance company.

An investor can also sell a government bond to another investor.

If a bond is held to maturity, the government will send the investor his money. Since the government is in defecit and has no money, the only way it can do this is by selling a new bond to a new investor and sending his money to the old investor.

However, when the trust fund bonds mature, how will the government get the funds to pay them back?

Sell hundreds of billions of new bonds to new investors each year to give the money to the trust fund for their maturing bonds? You can do that if you just want to add mountains of debt on top of mountains of debt foerever. If you can find the new investors. Of course you can always find lenders if you just make the interest rate high enough.

Or you can raise taxes, but that has nothing to do with need. Congress will raise taxes if it wants to. Whether their are IOU's in the trust fund or not.

So yes, the money would be more secure in bank cd's as it would be there. The government money is spent as soon as it gets there so it's not there.

[TahitiNut]

143. "my money"??

So, now you want to pretend its an account. It's not. We were talking about the Social Security Trust Fund and "where" the money is. That's a different subject.

Again, the money you pay is not a savings account and was never intended to be. It's insurance. Like all insurance, your premiums go to pay the benefits of others who've incurred the loss insured. You can't walk into State Farm and ask for your 'deposit' back either!! You're buying, not investing. You buy a legal entitlement!

This is why this is such an aggravating subject. People want to play these intellectually dishonest games of pretending it's a savings account. Even the political partisans have gotten the SSA to talk about "your account" - and people think it's like a brokerage statement. It's not. They're letting people know about an entitlement to collect when the risk insured (old age, disability) is incurred.

The dishonesty continues when people look and say "I coulda done better!" Well, guess what. People whose homes don't burn down could do better, too. In this case, it's people who don't live very long. Remember, this is "death insurance" and the risk being insured against is living - living to a point where you can't or won't work for an income. Those people who die early don't collect ... since they didn't incur the "loss" of living!

Anyone who wants to "privatize" Social Security should first "privatize" all their insurance -- save enough money to buy a house if it burns down, a car if it crashes, or medical care if they get sick. In fact, tell your insurance companies to "invest" part of your money into a savings account. I'm really sure they'd love to oblige.

It doesn't take a mental giant to know that "investing" in "privatized" insurance is a pretty lousy deal -- unless it's in owning the company.

[Name removed]

182. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Lydia Leftcoast]

102. So we raise taxes by lifting the ceiling on FICA

and help the poor by exempting the first few thousands of dollars.

Oh, but that would be class warfare, wouldn't it? You're not supposed to make rich people give anything back.

[TahitiNut]

117. That's a possible part of the solution.

The other is to just get 'honest' about it and raise the 'retirement' age. At the same time, mandatory retirement before that age must be outlawed. By increasing the ratio of payers to payees, neither the rate nor the real value of the benefit need be changed.

The corrupted "American Dream" seems to be to live off (and become more wealthy from) the labor of others. This is predominantly the Busholini "ownership class" which is really only about 1-2% of the population. When someone complains about Social Security recipients, after a lifetime of labor (that enriched "owners"), getting to live off the labor of others, I have to laugh derisively. Social Security isn't about "ownership" which passes from generation to generation UNTAXED(!). The benefit stops when the person dies! (tax-free, too, but maybe not for long. How long before the "working class" inherits only debts? I think we're there.)

So, here's the question: If everyone aspires to live off the labor of others (by their "investments" of course), who the fuck is going to do the work?

When did we give up the dream of being able to 'own' the value of our own labor? When did we get to the point of having to sell our labor at a 65% discount? When did the American Dream become the American Nightmare?

[shraby]

166. I have to disagree with raising the

retirement age. Many people work hard at their jobs in foundries, manufacturing plants, etc. Not everyone by a long shot works in an office with minimal physical labor. When a person reaches 65 or so at a labor intensive job, it's quite often becoming physically difficult to continue working after 65. Until you reach that age, you don't realize what it feels like.
It's a lot different than jogging a bit, swimming, or riding a bike for an hour a day. I'm talking about 8 hours at a physically demanding job and that doesn't count any overtime hours that may be required. Give the 65 year old a little slack here.

[cosmicvortex20]

183. The system should adjust for growing life expectancy.

While you may poo poo the problem now, imagine if its not handled that way and life expectancies are increased drastically. Imagine only working 50 years out of a 100 year lifespan, or 120 year, or 150! What percentage of the population would be left working?

[AmandaRuth]

7. and in addition to the above

there is no way in hell, when the markets fail thru for whatever reason, (natural causes or human criminality) are we going let people go broke or starve. so some system of government insurance will have to be put into place, and we will have to pay the premiums for this insurance and also the benefits, and in any event, it will be another tax increase.

As soon as i heard the idea of privatizing SS, i knew that , in the end, the government (us) would get screwed as we would be responsible for any collapse in the market, which will happen.

[Kanary]

9. Are you *sure* the gov wouldn't "let people go broke or starve"?

I'm not so sure.

This country is becoming more hard-hearted by the minute, and I think it's just as likely many would just shrug it off and say, "Oh well, they made their own decisions with their money", and forget it and go about their own business.

This is NOT the same country it was in the 30's, 40's and even the 60's as far as compassion is concerned.

Kanary

[AmandaRuth]

12. in theory

isn't that why we are Dem's, its one of my main motivations .....

but, you are correct, the selfishness of the country as a whole never ceases to astound me. :mad: :mad:

[greenohio]

14. Mine as well

Which is why the current system must be reformed, to save our children and grandchildren. They are the ones facing the collapse and getting royally screwed.

[shraby]

167. Not as screwed as they would be

if social security were privatized.

[Kanary]

15. Yup, the US motto should now be "ME first --everyone else, outta my way!"

I'm very glad to hear that's a main interest of yours. It's not any longer a priority with the Dem party.

If you read much here, you will soon see that it doesn't rate very high here, either.

:( :( :( :(

Kanary

[greenohio]

11. Bad plan to make this a Dem or Rep issue

In the current system, the young get screwed. Clinton, Moynihan, and Kerrey (NB) supported SS reform. The problem is rate of return. Right now it is nil. We should at least move from IOUs to state and local government bonds. If we continue to take a walk on this issue, it is going to walk all over us. Kerry needs to take charge of this issue and present an actual reform plan.

[bearfan454]

10. It is nothing but a repuke scam to stop paying out

every month to citizens.

[recidivist]

17. To answer your question ....

EVERY Social Security "privatization" scheme provides a transitional funding mechanism. These differ in detail and the differences are important, but the basic point to make is that current retirees and those soon to retire will be protected while the new system is phased in for younger workers.

Once phased in, a fully funded system is much to be preferred. Social Security was created in 1935 when the average life expectancy was 63. Relatively few folks were going to give to a retirement age of 65 to begin with, and those who did usually didn't live long. Obviously, that has changed.

The ratio of workers to retirees is dropping steadily towards 2-1. At this ratio, financing benefits on a pay as you go basis means each current worker will pay half the upkeep of each retiree. Do the math. This translates into very high taxes to pay even a mediocre benefit. We can do better.

10% of one's lifetime income, invested conservatively over the 40-45 years of a working career, would yield dramatically higher benefits to everyone. Every worker would build a nest egg and, over a couple of generations, virtually every family would build significant intergenerational assets. It's a win-win situation. Internationally, over 20 countries are already doing this. Sooner or later the Democratic Party will come around.

[Killarney]

19. Transitional funding mechanism

How is that paid for?

To switch to a partially privatized SS system, we'll either need to reduce payments or increase taxes to pay the difference during the transition... right? Is there any other option I'm missing?

I want to try to understand this completely.

[greenohio]

21. Yes, this is going to hurt

All solutions, the individual accounts, the tax incentives to save, the reduction in benefits, or the increases in taxes are going to hurt. The best solutions probably includes all of them, that way everybody's pissed.

But we can't keep doing this every 20 years. Pretty soon we'll be paying 30% for a 400 month retirement check that we will eligible for at age 99. The absolute worst position, however, is sticking your head in the sand with no plan. The longer we wait, the more it is going to hurt. This needs a man with a plan.

[sadiesworld]

23. The first order of business is reversing the unaffordable tax cuts

from the past 25 years in order to pay off the IOUs. Of course, that would mean the wealthiest paying something resembling their fair share (which is unlikely if we continue to be divided on this issue).

[robodruid]

24. separate pots of money

The tax cuts and the Social Security money are separate deductions from my paycheck.

I don't see the connection you are making.

[sadiesworld]

27. The SS surplus has been used to fund the running of

the government when it should have been run using income tax revenues. Vast amounts are owed the SS fund. Hence those fund shortfalls should be met with income tax revenues (or cuts from other areas of government).

[greenohio]

28. Two pockets, same pair of pants

They all go to the fed. The fed spends it. The only difference is with SS the fed leaves a note saying I'll pay you back later.

[Yupster]

63. They are separate line items, but

they don't go into separate pots.

They are both spent immediately.

[greenohio]

26. I agree

Means testing in SS is inevitable. It should include all income, not capped at 80k or wherever the cap is now. The poor get totally screwed in this because they have no income above the cap.

[sadiesworld]

30. I don't know that means testing will help much...

too many rely solely/primarily on SS. Uncapping is good (certainly simpler than reworking taxes).

The bottom line for me is that it is incredibly unfair to start cutting benefits or to continue to raise the eligibility age while those IOUs are outstanding. That is the REAL scam.

[Yupster]

64. Two changes to help in short run

Lift the $ 85,000 cap.

Force teachers who are allowed to stay out of social security back into the system.

Those two changes would help a lot, and if they are done together, they could happen since each party would have to stand up to one of their key special interest groups.

[Lydia Leftcoast]

141. Trouble with means testing

Once any program becomes means tested, it gains a stigma of being "welfare." Affluent Americans tend to be greedy, and they're against all forms of government assistance that they themselves don't benefit from. Medicaid=bad. Disaster relief to rebuild their winter home in Florida=good.

European countries have found that making benefits universal (even for the rich) is the best way to win public acceptance for them.

[Kanary]

92. So, are you going to make sure you provide the "out pill" for those who

are going to "hurt" to the point of not being able to make it anymore?

Or, are you just concerned about those who want to make sure they have their RV safely in the garage?

Some of you dismiss "hurt" so easily.

Kanary

[Lydia Leftcoast]

104. You mean that it will hurt everyone who isn't rich, don't you?

Just like the transition to laissez-faire capitalism in Russia hurt everyone who wasn't rich or criminal.

[recidivist]

31. Options.

Social Security has an enormous unfunded liability. Under the current system, if nothing is done, this will require very significant benefit cuts or tax increases. The problem is, Social Security already pays a pathetically low return on investment, and many people even lose money outright. This is an idiotic way to run a pension system. The benefit cuts and tax increases needed to keep the current system alive will only make it worse in years to come.

We need to be clear that the transition cost involved in shifting to a fully funded system is nothing more than the amortization of this ALREADY EXISTING Social Security unfunded liability. It is NOT a product of the new system. Once the new system is in place, benefits will be prefunded. Instead of a massive unfunded liability and a very heavy burden on future generations, Social Security will be based on real assets. Instead of a bleeding ulcer, we will have a tower of strength. A generation from now, if we fail to begin the transition in time, we will be at a severe competitive disadvantage against those countries that have already rationalized their pension systems. That is yet another reason to switch.

Ok, how to pay for the transition? The reform plans vary in detail. Most rely on some combination of short term borrowing coupled with earmarked tax revenues. Whether this can be done without raising the overall federal tax burden depends on several factors including the time period over which the transition is spread, the performance of the economy during that period, and the degree to which we are able to restrain growth in other parts of the budget.

Obviously, the infusion of general revenues into Social Security to help finance the transition will put significant pressure on the rest of the budget. I think this is the primary reason most liberals are opposed to reform, but IMHO this is a foolishly short sighted objection. As noted above, the transition costs are nothing more than the EXISTING Social Security unfunded liability, and these costs have to be paid sooner or later. The stand-patters simply hope to defer these costs onto the next generation. Our children will not appreciate this choice.

One other point. As investment accounts are phased in, people in the transition generation would begin to receive benefits from two sources: the residual "conventional" Social Security system and the new investment based system. Obviously, as the investment accounts grow over the first two or three decades, they will progressively back out more and more of the necessary residual paygo funding. Imagine, for example, a $1,000 monthly benefit: individuals retiring ten years into the transition might get $250 a month from their investment accounts and $750 from paygo, while those figures might be reversed for folks retiring 20 years later. Eventually, of course, 100% of benefits will come from the new system.

The cost of the transition will thus also depend on the linkage established between "new system" dollars and "old system" residual benefits. If there is a one-to-one tradeoff -- for every "new" dollar you lose one "old" dollar -- then people net out the same and there would be no benefit to the switch during the transition generation. I don't think that is either desirable or politically astute. The way to do it is to back out the old dollars at a 1-2 or 1-3 ratio, so that everyone -- right from the start -- will receive a higher benefit than he would under the current system. That, of course, lengthens the transition somewhat, but so be it.

To recap: current retirees and those soon to retire will be protected. The transition will be paid for through some combination of general revenues, perhaps new taxes, borrowing, and the higher returns generated by the investment accounts. How the balance eventually comes to rest among these factors depends on the length of time over which the transition is spread, the performance of the economy, and the choices made among these variables. It's expensive and will take time, but it's doable.

At the end of the day, we will be dramatically better off by making the change. If we do nothing, we will just end up cutting benefits and raising taxes down the road to prop up what is, at best, a mediocre pension system and is, for many, a money-losing proposition. With reform, we get a better system at the end. Without reform, all we get is more pain, no gain. The sooner we get started, the better.

[greenohio]

35. Whew

That took some time to write. :-)

What is killing me about this, is our current plan is that we don't have one.

[recidivist]

39. Double whew.

It didn't take all that long because I've been arguing Social Security reform on these threads for some time. It's pretty canned by now.:)

I dislike going into such detail, but as you will see if you monitor this thread, there are quite a few posters who simply don't have a clue what the issues are. I'd oppose reform myself if half of what the howl-at-the-moon crowd said about it was true, but of course it's not. I've taken to putting down a few markers, not that those who need to will read them.

Welcome to the debate. It used to be lonely around here supporting Social Security reform. Over the past couple of years, the reform caucus has grown substantially. We're winning.

[greenohio]

42. Somebody's gonna win

Reform is coming. The questions is, who will champion it and make sure it protects the weakest. The Repukes will just screw it up. But right now, we have no plan.

[loveandlight]

37. doesn't this all depend on the market being high?

I don't understand the logic of the private accounts. Social security is supposed to be a secure fund, a specific amount guaranteed to the worker who has put in their years of contributions, based on how much earned and years of work. If this money is put into the market, what prevents another disaster like what has happened to so many recently with their 401k's and Enron type pension plan collapses? That doesn't sound very secure to me.

I understand there needs to be some kind of reform, because of the growth of the number of retirees and the age that people are now living until, but privatization scares me, just sounds like another ploy by the market capitalists to get more of our money with no guarantee. Would there be a loss limit or some kind of government guarantee or protection in the case of a bad market economy?

[recidivist]

45. No.

First of all, every Social Security reform plan I've ever seen provides a baseline guaranteed benefit that will be paid even if everything tanks.

Secondly, every Social Security reform plan I've ever seen includes diversification rules to prevent people from sinking everything into the next Enron.

Third, the choice between returns from the existing Social Security System and a fully funded system is not close. Projections vary depending on many variables but as a broad generalization, over 40-45 years you would do more than three times better investing in safe government bonds as compared to Social Security. Your returns from a mixed stock/bond funds would be even higher. Whether the market is a bit higher or lower the day you retire does not change the direction of the results. You would still be better off in a fully funded system.

This brings us to one of the silliest, most intellectually corrupt objections: the Titanic scenario.

Some opponents of a fully funded system will acknowledge much or all of the above but then say, "But what if we have another Great Depression? What if the economy collapses, the market dives 95% and stays down for 20 years, and millions of Americans are standing in breadlines? Don't we need the guarantee of Social Security just in case? Huh, huh, huh, etc."

The problem with this is that it totally ignores the staggering Social Security unfunded liability. Social Security is unsustainable in its current form without massive tax increases and/or benefit cuts, even with rosy assumptions. If the economy tanks, Social Security will be a casualty too.

You gotta compare apples to apples: paygo and full funding in good times; paygo and full funding in adversity. Either way, you are still better off with the money in the bank.

[greenohio]

48. Here comes the iceberg

I love the titanic scenario.

In a private/market system, if things tanked, the deposits can have federally funded insurance, to provide some protection.

What we need to realize is that the current SS structure goes to pot as well when things tank. The current system is funded by taxes, based on incomes. You run into a 30% unemployment rate like we had in the 30's, add to it a reduction in incomes and you you have major problem paying benefits. In fact the problem is worse because you have no assets to feed off of to tide you over.

[recidivist]

59. The emperor's new clothes syndrome.

I agree completely with your post. What I cannot fathom is the mentality of people who believe, contrary to all reason and experience, that kiting checks to the grandchildren is preferable to having the money in the bank.

I truly think most of it is pure blind partisanship. When a major Democrat gets out in front on this, I think most of these people will instantly reverse course. In fact, in no time at all they'll be insisting it was our idea all along.

This is an election winner for Democrats. It's time to get over whatever reflexive hangups are involved and tackle the issue on the merits. It would be a grave error to concede this issue to the Republicans.

[greenohio]

118. Yep a little leadership will fix the problem

Bill Clinton's study team proposed either raising taxes, cutting benefits, increasing rate of return or some combination. Kerry said he will not raise taxes, cut benefits or move to individual accounts allowing for a high rate of return. If Kerry leads on this, the blind will fall in line. If he were to steal the issue before the convention, he would eat shrub's lunch.

[Yupster]

65. No

You could have a private account and choose the government bond option, or a CD option.

You can even require everyone put at least half in the CD option.

No one will be forced to be in any market. That's a scare tactic used a lot.

[robodruid]

171. With a 40 year time frame????

I think that you need to think in the much longer time frame. I started working when I was 16. If I retire at 67, that is 51 years in an indexed fund.
Even if i just put it in govt. bonds I will be so much better off than using SS.

Diversification will guard against cooperate fraud, as well as a more vigorous SEC.

[Killarney]

41. Another question

Thanks for writing so much about this. I appreciate the time and effort.

So, the transition will definitely cost money and taxes will have to be increased to do it. So why on earth are Republicans of all people touting this idea? Republicans would never say "I'm going to raise your taxes for XYZ". I don't get it. I've heard that Bush is going to push this at the RNC. How is he going to explain the costs? He's obviously not going to tell us he'll raise our taxes. And he can't claim that spending decreases will pay for it either because he can't even reduce spending enough to erase the deficit. I don't understand how Republicans can push this idea without explaining where the money's coming from. Where do they say the money will come from?

[greenohio]

44. The devil is in the details

I don't know. We will see. My guess, Bush will probably cut spending in other areas to pay for it. He'll call it cutting waste or reigning in spending... but it is still the same. Even if tax increases are part of his plan, I assure you, he will say nothing about it until AFTER the election...a lesson he learned from dad.

[Yupster]

108. My guess is Bush will

just talk about the goal of having people own their own social security accounts.

He won't get into any specifics.

He'll blame the Democrats for being against any changes no matter how needed.

[recidivist]

50. You have to read the fine print.

Every Social Security reform plan includes a transition funding mechanism. That, in fact, is what most of the debate is about. If we didn't have the overhang of the exising Social Security unfunded liability -- if we have the luxury of simply starting over clear -- the choice would be a no-brainer.

I'm not going to repeat my earlier overlong post. The transition will be funded by some combination of dedicated taxes, borrowing, higher returns from investment accounts, and savings wrung from other parts of the federal budget. There are many choices to be made. Every reform plan addresses them. As a practical matter, by the time something clears Congress, I suspect a bit of everything will be included to share the pain.

I have no idea what specifics, if any, Bush will propose. If he talks about it at all, he will focus on the benefits. His proposed funding mechanism will be buried in the fine print. Politics 101.

[papau]

79. The best option for OASDI - Social Security - is to do nothing new

As you say Social Security has an enormous unfunded liability - but the game is a pay as you go game - where that liability need never be paid off.

If nothing is done, this will indeed require very significant benefit cuts (under the modest economic growth scenario over the next 50 years, we will in 50 years time cut back the benefit for those that retire at 62 from the benefit under current law to 70% of the benefit under current law - but then that is what Reagan had us agree to do back in the 80's with his screaming about the need to cut SS benefits while increasing the payroll tax - so now the "normal retirement age is in transition under the Reagan law from the former 65 to the new 67 - indeed most on this board are under the new age 67 rules now (if you are into your 50's you are some where between 66 and 67).

There is no rate of return concept in a pay as you go system - so complaining about the SS rate of return is bogus. We have an intergenerational promise and money transfer system - which if not messed with, can go on forever.

You speak of the "benefit cuts and tax increases needed to keep the current system alive" as if they amounted to more than an age change to a retirement age of 70 in 50 years (assuming we can not expand the wage base to all income because of push back from the rich). What horrible benefit cuts and tax increases do you see in the future that I and other actuaries do not see?


The tax for the amortization of this ALREADY EXISTING Social Security unfunded liability is one that we need never pay if we continue with a pay as you go system and do not try for a fully funded - or the Bush partially funded - system.

Pre-funding is a Government Agency owning a huge piece of America - but that is socialism - why would the GOP favor socialism? The answer is that they do not. Ripping of payroll taxes for "investment accounting, advice, handling" fees is the name of the game for one portion of the GOP - and destruction of Social Services in the Federal budget is the goal for another section of the GOP, while a 3rd section of the GOP likes the idea of passing debt to the middle class kids so that the only thing their taxes can buy for them is the current years payment of the National Debt.

But it all depends on letting the GOP choose the language of reform.

Let's use democratic Party reform - we need to move to a wage base that covers all wages and even has a true up to "income" by apply to investment income via the FIT form

As you note a variable in all this is the performance of the economy - what no one speaks of is the fact that robust economy over the next 50 years means middle class and poor retirement heaven under the current system. For some reason the GOP is against this.

I like your idea of "an infusion of general revenues into Social Security to help finance the transition" - ya - right - and who thinks the GOP will allow the tax increase - or the cut back in defense spending welfare for their corporations that this would require? The size of the budget for "Social Services" type expense beyond SS and Medicare is minimal compared to the transition cost.

You do have the mechanics of the Bush proposal correct - as investment accounts are phased in, people in the transition generation would begin to receive benefits from two sources: the residual "conventional" Social Security system and the new investment based system" - if only the game was a move the huge fund and the funded SS system that the GOP talk about - wink, wink - but we know they are not into gov owned assets and a Social Security board voting their shares to stop CEO theft

It is a fun math exercise to develop the linkage between "new system" dollars and "old system" residual benefits - just close your eyes to the bigger picture of the pain that is caused the middle class and poor and our kids.

Indeed, the whole argument for the "reform" is that the current system - like an tax on the rich is seen by the rich as a - as you say - "a money-losing proposition" - of course the argument that the quality of life is better for the rich if it is better for the middle class is not one that will fly with the GOP.

[Yupster]

99. The hope was to use the surplus

That doesn't look too good right now.

There's no doubt the transition cost is the killer. It may be like raising the retirement age to 67 which has already been done. You phase it in over an entire generation or more.

[papau]

77. a GOP transitional funding mechanism will be funded by our Grandkids

as they pay off the 1 to 2 trillion dollar debt used to fund the transition (no one expects an increase in taxes on the rich to fund it - so that leaves increased taxes on you and me - or debt. The only reason it is only 1 to 2 trillion is that the 12 trillion size fund needed to go to a full "privatization" belows folks away from taking the "little step" of a small "privatization" (the 12 billion is my own number and is independent of my work the same number CATO is getting these days, assuming the payroll tax stays at the levels in the current law).

So that generational equity that is the great benefit of separate accounts "privatization" really means screw the current generation.EVERY Social Security "privatization" scheme provides a transitional funding mechanism. These differ in detail and the differences are important, but the basic point to make is that current retirees and those soon to retire will be protected while the new system is phased in for younger workers.

The fact the we live longer is reviewed by the SS actuaries whose math skills tell them their may be a problem in 50 years in US economic growth is not all that great over the next 50 years (indeed the retirement age will need to transition to 70 or 72 - meaning you get less at age 62 if you retire early - but this is the same thing that is happening now under the Reagan demanded and passed SS law that is transitioning us to age 67 from the original age 65.

Again the GOP scare "The ratio of workers to retirees is dropping steadily towards 2-1", and "longer life span" end up being partial truth that we need not fear - and the actuaries at SS - and independent actuaries like myself - have proven that their is no need to fear for SS. SS is solid and need not be changed - and private accounts do nothing to help SS - and indeed will badly hurt this generation via the "transition" and all future generations via the debt and the slower job growth caused by higher than necessary interest rates.

While it is fun to spreadsheet out the result of a projected "equity return" - the fact is that return against current real dollars from our taxes and the trust assets is easily obtained via moving the Social Security Trust fund assets into equities. The fact that this is not on the GOP table tells you this is not about getting equity returns.

Also folks will need a minimum guaranteed by the Fed investment return that kicks in when your private account chose the wrong investment or asset class. Otherwise the point of Social Security - not having retired folks on the "embarrassment" of welfare if they worked a lifetime will not be met for those with bad luck.

If you want to get a fun - large - very large - number - try to price that option cost via Black Sholes - of course the Federal Government could not really buy - or want to buy - such an option. But the size does tell you the likely yo-yo effect on the nations budget - talk about out of control!!!!

:-)

[Name removed]

177. Deleted message

Message removed by moderator. Click here to review the message board rules.

[papau]

82. Shall we discuss the 20 countries that have a non-defined benefit

retirement plan - and why?

Or we can discuss how one develops the free lunch of new assets for the middle class in future over the assets they would have under the current system - assuming they also get the same social services in some way that they get from the Federal budget now - by having the rich pay less and government telling the middle class to pay out of their personal pocket - thank God it is not a tax - for any and all social benefits/services - as the Federal budget will only fund welfare for the corporations of the rich (those "defense" dollars), and interest on the debt.

[quaker bill]

170. Here is the problem

By creating an automatic and compulsory mechanism by which dollars get pumped into the equity market every month you subvert natural market pricing mechanisms. The value of equities should always be based on their value as investments (how desirable is it to own this stock today?) Prices of equities are controlled today because choosing to own them is very much voluntary.

However, if you have billions of dollars that must (by law) find a home in the equities market (rather than be invested elsewhere) every month then the value of equities will grow, but over time will have no necessary relation to the fundamental value of the companies issuing them.

The situation created is ripe for the perversion of market mechanisms represented by recent scandals like ENRON. Market reforms taken since ENRON, according to most market experts, are no where near sufficient to prevent further exploitation. Remember ENRON is not a new or isolated phenomena. Similar scams have happened in the past (check the Great Depression) and a very large number occurred concurrently with ENRON.

There is one and only one reason republicans want to place a large pile of taxpayer cash in the equities market, it is the easiest place to plunder it.

Better yet, since privitization comes with the loss of a guaranteed benefit, once the money is plundered, there will be no obligation on the part of government or it's wealthier taxpayers to replace it.

The plan is little more than the abdication of the social contract combined with a potential for a multi-trillion dollar stock market scam.

[greenohio]

174. Uhh that logic doesn't hold up

The current system then is "subverting the natural market pricing mechanisms" of the Treasury Bills market because all SS money is forced to be placed there. How then can Treasury Bills be considered to be the SAFEST investment period?

Secondly you assume that all of this money will go into one market when exactly the opposite is true. It is the CURRENT system that forces investment in one market. In an individual account system, people should be able to invest in many markets (bonds, money market, Treasury Bills, and yes stocks both US and of other nations).

But right now its possible that the Repukes will only let us invest in local stocks because they are the only ones with a plan for reform. We're stuck defending the status quo while throwing rocks at anyone trying to address our rate of return problem.

Clinton understood this. Gore dropped the ball. Kerry, unfortunately, is punting.

[Cleita]

29. That's a bad, bad idea.

This is what IRAs and 401K plans are for, individual retirement plans that give you a tax break and let you choose how you will invest it. Social Security is a safety net that would be badly weakened if privatization became the norm. Again, the people who need social security the most would be cheated.

[greenohio]

32. Yes and No

The ones who get cheated the most from the current system, are the ones who die young: the poor. The ones who benefit the most from the system are the those you live long: the rich and middle class.

Particularly African American males. They pay into the system for 20 years and die at a young age with little or nothing to pass on to their families and loved ones. 15% of their pay, 20 years, just gone.

Don't we put our money in a private bank? The money is federally insured, but the return on investment is from the private sector.

We have a return on investment problem. We either fix it or raise taxes and cut benefits every 20 years. We had this conversation in the 80's. God forbid we see another flattening of the birth rate.

Have the government do what it does best, insure.

[Cleita]

34. "Those who die young are cheated by the system."

Ask yourself this question. Who will look after my grandparents and my parents if they can't look after themselves? It will be you of course if they don't get some sort of pension. You may still die young but the money and inconvenience of taking care of elderly relatives probably would hasten that early death. So the money from young and middle-aged people is pooled to look after the oldest members. When it is your turn then the money is pooled to look after you. If you should die before retirement, all that money you saved and invested for retirement will go to someone else anyway so people who die young will be cheated, if that's the way you want to look at it, anyway.

[greenohio]

40. Kinda lost me there.

I don't think we should take money from the poor to pay for my father's retirement. I don't care what pooling system does it. The poor, who pay in and die young, pay for the well off, who live old. This is not a system based on Democratic principles. With the current system, we have to cut benefits and raise taxes every 20 years.

If we continue to do what we have always done, then we will continue to get the results we have always gotten.

[sadiesworld]

49. Those who die young also leave dependents.

My father died at 39 leaving a widow, 29, with a high school degree and three children under the age of eight. Social Security survivors' benefits were crucial to my mother being able to obtain a degree in special ed. The benefits allowed us to stay in a decent neighborhood with decent schools.

I spent several years in private practice and represented quite a few clients in SS disability cases. While the payments weren't much, I don't know where these people would have been without them.

In spite of the "black men die young" meme that is currently being shopped around (not sure why black women don't matter...oh yeah, they are more likely to be employed and to live longer), SS is most important to those who have the least.

[greenohio]

51. Why are survivor benefits less than full benefits?

Survivor benefits only apply if you are married and or have dependents. Survivor benefits are a portion of the full benefits, not the full amount. Why?

Why do we have a system where you pay in 15% over the course of your lifetime and when you die, your family gets less?

SS IS most important to those who have the least. I agree. We either reform it, or lose it.

[sadiesworld]

55. Not sure I understand.

Survivors' benefits are FOR dependents. I don't recall the exact amount of the benefits but I'm confident that we received more than my father put in.

[Yupster]

69. If you die at 59, and your kids are grown,

then you get nothing to anyone.

[sadiesworld]

71. And you, and they, don't NEED anything.

You're dead and presumably they are employed. It's insurance, not an inheritance.

[Yupster]

68. A-A women live longer than A-A men

Is that so surprising?

White women live longer than white men too.

[Cleita]

52. You're right we shouldn't take money from the poor for your

father's retirement, but that is how the system is set up. FICA is capped at an income of $86,000 a year, which means the lower wage earner is paying disproportionately into the system. Caps should be removed and instead people who earn $30,000 or more a year should pay into the system with no caps on income. Of course then the well-heeled will come along whining about entitlement programs, boo hoo.

[greenohio]

53. I agree

Any reform must remove the caps. FICA is regressive. The rate of return is still killing us. I think people should have the choice to choose a better rate of return.

[Cleita]

56. You do have a choice. You can set up an IRA.

My husband and I did, but let me tell you after almost fifteen years of retirement, it is the Social Security that has been a constant and that we could rely on up until now. Interest rates are so low now that we barely make any income on what is left of this money, because we keep dipping into the kitty for emergencies and car repair expenses, taxes,and prescription medication and all these expenses that go up, not down. So the smaller our principal becomes, the less is left to generate income and growth.

[Yupster]

70. Of course the payout formula is

incredibly progressive so the poor get a much higher percentage payout than the rich.

The formula is based on bendpoints which favor the lower paid.

[sadiesworld]

38. The 80's "reform" was a joke.

We should have stuck with the pay-as-you-go system. Instead income taxes were reduced, SS taxes raised, and the surplus has been used to fund the revenue shortfall ever since. Now that the time has come to pay the piper, the powers-that-be have all sorts of ways to "fix" the problem. I say the wealthy need to put the fucking money back in the fund and THEN we'll talk about any additional tweaking that may be required.

edit to remove numbers I need to recheck.

[FlaGranny]

43. Yes!

And I'd rather not have private funds giving me a few perctage points of interest and then lending my money to someone else at several times the rate they pay me. Private companies have all kinds of nifty ways to misplace money, file bankruptcies, and buy the CEOs nice new mansions and yachts. Whoops, sorry friend, your retirement savings are all gone. Private corporations haven't given me much confidence over the years in their concern for the safety of my money.

[Yupster]

66. If you die before age 62, currently you get

nothing from social security.

15 % pissed away for your whole working life.

That hits poor men the worst, especially A-A poor men.

White women do the best under the current system as they work the least hours statistically and live the longest on social security.

[Cleita]

72. The argument doesn't address the fact that privatizing SS

doesn't let you take it with you either, but it's kind of implied. The RW talking point on this, and I am amazed how many liberals are falling for it, bbbut if you die you are cheated out of the 7.5% from you wages, of course you try to imply it's 15%.

That 7.5% that is matched by your employer comes out of his bank account and he never sees a dime of it back and neither would you if there was no SS. As a matter-of-fact the private accounts are the first step in eliminating the employer's matching funds. These are things they don't tell you when they speak with forked tongues.

Let's say that you do invest that 7.5% any way you want and you die when you are 62. Sorry buddy, but there is no way you are going to spend it, anyway. Nothing has been mentioned whether the money would go to an heir or if it would go back into the general fund. If one of your heirs gets the money, he will no doubt have a few taxes to pay on it and not much might be left anyway. There are a lot of unanswered questions as to exactly how the neo-cons are going to steal your money, and they are going to steal your money. Don't even have a doubt.

The Social Security program has helped many people since it was passed into law. It's not as strong as it could be because of the neo-con tinkering in the past, but it has stood up well and as far as I am concerned don't fix what isn't broken, because the intent is to break it.

[Yupster]

84. It would be your account

with a beneficiary on it. Just like an IRA. That's how I've always heard it explained anyway.

[Yupster]

93. I've owned a small business the last

15 years. I did pay the whole 15 % every year.

PS - I sold out in January and went to work for a large company so now I pay 7.5 % and my employer 7.5 %.

In my line of work, I certainly would get that 7.5 % because my business is very competitive and companies are constantly trying to buy me away to them.

[Lydia Leftcoast]

106. I own a small business, too

and it's a 15.3% assessment on what's left over after business expenses. (I don't have employees.)

But so what? I'm an adult. I know that I can't expect to grasp and hoard and have orgasms over every penny I earn. I have a duty toward the rest of society.

[Yupster]

111. I didn't say it was good or bad that I paid 15 %

I just said I did - because I did.

[Lydia Leftcoast]

138. You haven't read any of Papau's or Nicholas J's posts, have you?

They've actually studied the program in detail.

[Nicholas_J]

73. The problem with all such programs as sugested by Republicans

Is that they always are set up as the business serving U.S. tax code has been since Reagan. The average worker willbe allowed to put in a certain percentage, very small, you will own it, but by and large, it will not add much to the money available to you uopn retirement.

FOr the rich however, this plan (as far as I can tell so far) is designed to remove the current top out salary towards which you currently pay social security taxes on. So right now, If you earn 86,500 dollars, you will pay the maximum amount that can be taken out of your paycheck. Anything above that is free from the standard Social Security tax. So whether you maks 86,500 or 8,650,000 dollars, you pay the same out in Social Security. The current republican proposals will allow the person who earns 86,500 to put 865 dollars a year into their own privatized Social ecurity account. But they do not have a top in place for the privatized portion of their new plan. SO the guy making the 8 and a half odd million dollars, can put 85,600dollars into their own tax free retirement account, paying o taxation on dividends and increase in the value of the stocks and bonds and whatever investments they put into them.

So far, the issue of penalties for early withdrawal from the privatized social security account is being handled very sketchily, but as usual, those who can affod to diversify and put a lot of money into different stocks are in general going to earn an average of anywhere from 12 to 18 percent per year on the money they have made. Now the little gut is likely to not maks that kind of money, as they are not able to diversify their portfolio as much, but the ruch guy is more likely to earb at the higher percentages. SO unless the little guy gets real lucky and invests in something that has a ten fold ot 100 fold increase, he isnt going to make anything, and igf he needs to take anything out early, the penalty will hit them hardest. The rich guy who makes 18 percent lets say on the investments, mighe lose ten percent on what they take out, but that means they have picked up 8 percent interest, tax free.

Republicans always ake these things sound good for the average person, but considering that the average family has less than 4,500 dollar in their own saving accounts, this program does little for them, though itv sounds good, I own my own retirement account. The limits on existing programs like 401k's and IRAs aply to everyone, so they are not a great source for someone who wants to keep large sums of money away from taxation. They have a top out, so a rich guy cant put anymore into them than a poor guy per year. The Bush idea from what I can tell, removes the top restrictions and becomes another way to avoid taxation on large salaries.

Republican tax ideas always have an element of "ME TOO ISM" to them. The plans are accessible to every single tax payer. But they do not contain any overwhelming advantage until you are really putting tons of money into them. This is the primary reason that democrats oppose the plan, and one of the reasons that republicans are nuts about them. It is simply another tax shelter for the rich.

Now what the democrats have wanted to do for decades, but have met extreme amounts of resistance against, is to remove the top out on the income you have to pay social security taxes and medicare taxes on. Which means that a guy earning a million dolllars in his own coporations would have to pay a total of 75,000 dollars a year in Social Security PLUS, his own company weould have to match that, and pay another 75,000 dollars, which is the companies half of Social Security. This is what Howard Dean was suggesting when he was discussing how to fix Social Security, but the idea is really not new, and most Democrats, from Ted Kennedy, to Dennis Kucinich to anyone you can think of, has at one time or another supported, sponsored or signed onto som bll that wanted to take the top off of the amount of Social Security that individuals have to pay on. By and large, for some reason , Republicans have been able to terrify the average tax payer into not supporting this, when it actually would have no effect on them.

What is really needed is to stop REpublicans from raiding the SOcial Security trust fund whenever they want to give the rich a tax cut.

When you think about it, rich people never put more than 15 percent of 86,500 per year into the Social Security Trust fund..or 12,975 (thats if they own their own corporation, if not and they are earning a salary, they pay half that, the corp pays the other half). But when they got their most recent tax cut, the millionaire got a little over a hundred thousand dollars a year out of a tax fund that they never paid more than 13,000 dollars into. The guy who owns his own business and pays himself 86,500 shelled out a little less than 13,000 dollars, but the average income tax return for this person, if they had a family of 4 was about 4,000 dollars. So the average worker is having the socal security trust fund raided, to give a tax bonus to person who earns a million bucks ant anywhere from 8 to 16 times the rate they put money into that fund. Very clever shell game.

Everyon is talking about the insolvency of Social Security, but Social Security would be massively solvent right now if REpublicans were not allowed to raid the find everytime they wanted to do so. Ever since the lockbox was unlocked, Republicans have raided the trust find to the sum of 26 trillion dollars since Congress first allowed this to be done early in Lyndon Johnsons presidency. Johnsons reasoning was to have money available to jump start the Medicare Program started during his presidency, and the intention of Democrats and Johnson was that this was the only thing that the trust fund could be raided for, but as the years went by, Republicans, while in power, kept expanding the reasons for raiding it, anything from avoiding raising income taxes, to giving tax cuts.

You have to remember, the baby boomers put a lot of money into this fund for decades, when very few people were taking money out of it. The I.O.U.s fot the money that was taken out for tax cuts were essentially no interest loans from the Social Security Trust Fund. Had this money been kept in the lock box, or used for things like low interest home loans and low interest student loans and such, the interest alone on the money would have been enough to keep social security not only solvent, but would have easily been able to take care of the baby boomers, at a much higher retirement income, still leaving a lot more money in reserve.

ONe of the primary reaasons form the problems SOcial Security faces is the fact that it has been raided to give money that was put into it people with relatively modest incomes, to people who put a very small percentage of their own incomes into it.

Another clever way that convervatives get a large number of people of relatively modest means, to give large sums of money to individuals and corporations.

[loveandlight]

78. thanks for this great explanation of Repub plan

I have been reading the other posts here and feeling there has to be something missing. Why would the Republicans be promoting privatization, there has to be an angle that the corporate guys get out of this, they certainly never do anything just for the benefit of the average worker. And all I read the other posts is that we need to fix SS, its broken, no money, investing in private plans is the way to go.

Well, you have opened my eyes to facts that I knew had to be there and I thank you for that. And the point about having taken out all the money that the baby boomers were putting in when there were not that many people using it, money that could have been earning interest and increasing the pot for us all now, is especially to the point. First they raided what was there and now they want to prevent us from getting it back. What a clever trick. I hope we don't let the Repubs trick us into falling for this game.

[Nicholas_J]

87. The main differnce between Republicans and Democrats

Is that Republicans go for quantity. The philosophy is to rob a little money from a lot of people and hope that they are robbing so small an amount from each person ,that they dont bitch much.

Democrats want to take a lot of money from a small number of people, and utilize it for the benefit of the greatest number of people.

This is political economics in a nutshell.

From the Great Depression to the present, the greatest economic growth for the largest number of people has always occured during Democratic Administrations. Most Bull MArkets have occured during Democratic Administrations.

The trend has been for the Stock Market to go down in the first six months of Democratic Administrations, and then start toclimb for the rest of the Democrats term in office.

On the other hand, the usual case in Republican Administrations is for the Market to improve during the first six months of the administration, and then settle into a Bear Market.

Basically Stems from the fact that Democratic Administrations are friendlier to Small Businesses and small investors, while REpublicans are friendlier to large corporations.

During Democratic Administration, Government spending has a tendency to lead to small businesses running with new ideas and turning into big Businesses. Programs started under both John Kennedy and Lyndon Johnson led to the development ofd many of the buggest businesses in the antion. Same thing happened under Clinton, a lot of very small start up businesses have become some of the largest compnaies in the world.

After World War II the programs started under Truman led to the growth that occured later. Under Eisenhower, the economy slowly ground to a kind of stagnation.

It seems to me that whenever the economy starts getting too good for the middle class, REpublicans just have to create the environment that crteates unemployment, allowing employers to let people go, hang in long enough for people to get desperate, and then take jobs that are being re-offerd by the same corporations at a significantly lower salary.

This happened during the Reagan years. The economy sucked for most of it, the middle class did not benefit at all from the Reagan tax cuts, and economists have shown that 95 percent of the tax cuts given by Reagan were not used to create new jobs, or to provide more benefits for workers, or to update plant equipment, but most of it was used to give CEO's larger salaries, and pass on as dividends to shareholders (the majority being CEO's and the rich) Towards the end of Reagans lalst term, jobns started coming back, but the salaries did not keep up with the cost of living that occured under Reagan.

Under Reagans administration, the method of calculating cost of living was changed to exclude a number of things that are necessary expenses for the average person, like housing and fuel costs, so cost of living appeared to stop growing at the higher rates of inflation that occured during the Carter years when double digit inflation started occuring. Reagan just took out a number of items, and thus the Reagan miracle occured. While in the eight years of Reagan rental apartment rates increased anywhere from 3 to 4 times. At the Beginning of the eighties. For example, in places like South Florida, rents for one bedroom apartments could go from 175 to 200 dollars a month. By 1988, 450 dollars to 700 dollars were not uncommon for rentals in the same areas. But this was not reflected in the cost of living numbers provided by the government and used to give cost of living raises to employees, and were also used to justify not raising the minimum wage.

Reagan's Tax Simplification Act while claiming to cut taxes, actually increased taxes for a good percentage of the lower middle and middle classes, particularly for single people without families or other deductions. Someone with an income of 20,000 dollars during the year prior to Reagan's tax cuts would receive a small income tax return from their paycheck, 150-200 dollars if they filed simple tax forms with no deductions.

The year following Reagans cuts, the same people with the same salaries using the same simple tax forms found themselves owing between 200 and 250 dollars.

When Republicans give tax cuts, someone, somewhere in the middle classes will get hit with more taxes. But ususally not enough to bitch to the point of things changing.

Which is why by the time CLinton came along, he was able to state, "How Many of you are better off than you were 12 years ago", and get the public to pay very serious attention. Most people couldnt put their finger on where or when it happened, but everyone knew that their economic lives just were nt the same as they were prior to that.

Yet Reagan, because of his skills and personability, will never be blamed for the decline in the standard of living of the average American. Reagan was largely responsible for the promise of the fifties, when everyone was told that as technology and progress moved on, there would be more and more leisure time, the work week would grow shorter, and so on. Reaganomics was the art of redistributing the results of incresed productivity to the top, rather than an equitable distribution between those who owned businesses, and those who made them work.

The vast improvements in technoilogy that came as a result of Kennedy's space program and funding of pure research was killed by Reagan who saw no use in science for sciences sake, and research for research sake, cut funding to projects like thermonuclear energy sources, and so on, and only funded things t5hat appeared to have immediatel, practical applications.AS a result, our technology is still coasting off of the last remnants of research done for the Apollo Program and there has been little real technical advance since. The original technologies that were used to develop todays computer technology, are still stuff that they are pulling out of stuff they were trying to develop for the Apollo Program. Most of our medical technology was developed by the human factors people at working for NASA, incliding MRI and PET Scanners. Composite materials to make lighweight cars and other vehicles are based on ideas that came out of NASA Reearch. Not much else developed in the U.S. has some from any new research, most of it is from modification of these technologies.

For every dollar spent on the pure "useless research" Reagan stopped funding, there was a hundredfold return in the marketplace.

Bush is just a terminal case of visionless conservatism.

[TahitiNut]

124. We should also keep very much in mind WHERE the money goes.

We have an overly reductionist kind of thinking. We think "Oh, it goes to old people."

Well, then where does it go?

It gets paid out for food, health care, rent or property taxes(!) on a residence, small gifts for the grandchildren, someone to mow the lawn and shovel the snow, and a plethora of the other basic elements of the economy.

These people aren't wasting away in some dump (like in some countries) or consuming the labor of their family (not the wealthy ones, though). When smaller working families are left to provide the ONLY care for their own parents, that's time not spent raising their kids, doing volunteer work, getting an education, and all of the things that raise the standard of living for everyone. For the aged parents, it's a loss of dignity, deterioration of health, and loss of independence. What does THAT show the kids? Does that motivate anyone to go work for "the man"?

There are two "economic miracles" in the 20th century: Social Security and the WW2 GI Bill. The enormous benefits to this country's overall wealth and standard of living are virtually immeasurable.

The biggest economic disaster of the 20th century was in "privatization" - it was called the Great Depression. It was a lesson some seem not to have learned!

:puke:

[greenohio]

126. Your right

Before the great depression everything was public. Then they let people own stuff and everything went to pot from there.

[TahitiNut]

149. Yup. "Dubya" stand for 'Warren' as in Warren Harding.

The "economic" policies are even worse. as is the rampant corruption. Remember Tea Pot Dome? That was about oil, too. Harding sent the military into other countries to serve private wealthy interests, too. The policies of that day brought us TWO depressions, the second of which was the Great Depression.

It's not a case of "what if there's a great depression?" ... it's a case of this being the kind of economic policy that CAUSED the Great Depression! (But a LOT of rich people got even richer then. They liked it!)

[Cleita]

81. Nicholas_J

:thumbsup:

[Lydia Leftcoast]

107. Yes, thanks for your thoughtful analysis!

I've lived long enough to know that the Republicans NEVER propose anything unless their rich buddies can profit from it somehow, especially by screwing over the less affluent.

[Yupster]

95. You have to take the surplus physically

out of the nads (on edit this was supposed to be hands, but nads seems better somehow) of the government. Put it in CD's, or insurance fixed accounts - somewhere that is away from the government.

Then it will physically exist when it is needed in 2018.

If you leave the surplus with the government they will spend it. They have to. They don't have anything else to do with it.

[Andromeda]

85. Social Security is not a pension plan.

It is an insurance plan. Privatizing Social Security would be a disaster for retirees, the disabled and widows with children. They would be virtually destitute with no visable means of support and we would have more homeless people than we could afford to deal with -- not that we deal with it very well now.

Anybody can have an IRA, 401{k} or other kind of retirement plan but the amount of cash available to collect on these pensions depends on the markets. During Clinton's presidency we did very well but when Bush was sElected our retirement accounts took a nosedive.

Right now our portfolios are anemic -- and that's the downside. There is no guarantee that there will be enough money in your retirement account(s) to support you in your retirement. If you start when you're young enough and you invest wisely then you have a chance to retire comfortably but there's no guarantee of that.

Changes in fortune could leave you destitute and without Social Security you would have nothing to fall back on. If you're older and have had illness, employment problems or other life-altering events that have left you broke it's doubtful that you would have money to put aside for retirement because you would need every cent you have to live on. There are more people in this situation than you could ever imagine.

Privatizing Social Security is a Republican ploy to get rid of what they consider "welfare." Social Security is not welfare. It is a promise to men and women in this country that when you are too old or sick to work anymore you will not be destitute.

[stavka]

86. I don't understand it either...

That's why I NEVER vote yes or no in some poll question that asks, "Should SS be privatized?"

If that means my 9%, or what ever it is, goes to a savings account with my name on it that earns at least 2% a year if not 4.5 or 6% - that's better than what I am promised now - but who knows

[Samantha]

89. Social security was NEVER intended to be an investment or retirement

plan. It is an insurance policy against poverty for seniors. That's it, plain and simple. Many of the arguments floated below tend to ignore that fact.

I am strongly against privatization of social security. There is a contingency of conservatives who are intent in seeing it dissolved, (for instance, Gingrich) or in the political alternative, run ito bankruptcy (for instance, Bush*). For many years, the investment community has made noises about getting its hands on social security funds for investment purposes, and Bush* does lean towards giving it to them. After all, they help bankroll his political campaigns.

The simple truth of the matter is it is impossible to be more than fair to a certain group of people without being less than fair to another group. Paul O'Neill discussed privatization in his book, the Price of Loyalty. He and his friend Greenspan independently ran the statistics to come up with a number (an age) above which no one's social security should be touched. When they met to discuss what that number should be, ironically each had the same: 37. People who have been taxed by the Federal Government under the assumption that this program would be there when they retired cannot be expected to endorse any type of privatization plan. For those less than 37, the willingness to invest 2% should be a private alternative, assuming of course, a decreased benefit is to be expected.

Al Gore said the "crisis" of the social security program was a myth. If nothing is done, the program will remain solvent until 2047. By that year, many of the babyboomers will be deceased and the strain on the program will lessen.

There is no way anyone can convince me the IOU's the government has thrown to spend these social security dollars on illegal wars, among other things, should be simply written off. To ask the participants in the program to absorb the now estimated $3 trillion dollar transition cost is utterly outrageous. A parallel to what some in the government are trying to do to future social security beneficiaries lies in what Ken Lay did do to the Enron workers who had 20 to 30 years worth of retirement investment income in Enron stock - a pure, unadulterated gouging.

I have a 401k, a savings account AND my social security projected earnings. There is no way after being taxed all of these years I will agree to a privatization plan that lowers my projected retirement income or raises the retirement age (once again).

[Yupster]

101. Gore was wrong

He said the program is fine until 2047 if the government pays back the IOU it owes to the trust fund.

That's nice, but that money's already been spent. It doesn't exist. It's (add Monty Python quote here). So what Gore said was just wrong.

I won't be hungry for lunch as long as I can eat my oatmeal. That's nice dear, but you ate the outmeal for breakfast. Remember?

[kohodog]

90. Privatation will speed up the Walmartization of America

My struggling printing business will surely be "collateral damage." Think about it, Wallmart puts local business to rest. Why? Because big businesses (publicly traded) with capital that have world wide presence can shift capital from profitable regions to struggling ones and put smaller competitors out of business. If SS money goes into the market it will kill off a huge percentage of locally owned companies. Companies with capital can squeeze companies that are on a limited credit line. So the huge influx of money into the market will kill locally owned companies.

Let's go Bush! I want to work for Wallmart.

[Lydia Leftcoast]

109. That's an angle I hadn't thought of!

Thanks for bringing it up.

[kohodog]

114. Thanks for responding!

I haven't heard anyone talking about this either, and I'm no economist. But it worries me and I may be more sensitive because I see the Independents in my industry (printing) disappearing, and I know it is happening to so many great independent retailers too.

[Lydia Leftcoast]

96. The Republicanites count on the fact that most people don't know

how Social Security works. Actually, because of inflation (today's seniors spent much of their working lives when the minimum wage was $1.25 or less), most people will withdraw the equivalent of what they put in within two to five years.

There are so many problems with the math and logistics of privatization, aside from the fact that it would rob today's seniors, that I don't have time to elaborate, but basically, low-income workers would have so little to "invest" (a percentage of the approximately 7% that comes out of their paycheck now) that the likelihood of their making a significant nest egg would be almost nil. Surprise, surprise, the chief beneficiaries of privatiziation would be... affluent people!

[Cleita]

115. You start making me think of revolution.

But I know it doesn't work. How about really studying the union issue against the employer's rights issues? There has to be an answer. However leaving the most helpless people on the planet alone other than children, the elderly, is just plainly wrong.

[camero]

113. In a nutshell

the GOP is saying, "Trust us with your money". They being the same corporate cronies that run Wall Street and like any other casino, the house always wins. Meaning just a chosen few investors and investment companies would have access to trillions of dollars in SS payroll taxes.


They aren't satisfied with only stealing 401(k) money. They want it all. It's another redistribution of wealth, from the poor to the rich.

Par for the course with those in corp land.

[kohodog]

116. WHO WILL BENEFIT from all the money poured into the market?

Local, independent companies and shops, or Multinational Corporations?

Just curious.

[Cleita]

120. You are assuming that there would be a broad base

of people who would have enough money to pour into the market after they have really poor paying jobs. Wasn't that tax windfall for the rich supposed to trickle down?

[kohodog]

121. Social Security Deducts 7% out of every single paycheck unless you make

around 90k. So the money is pouring in every week. If that money goes to the market the corporations win. By Billions!

[TahitiNut]

159. That's the most important point.

If that money is poured into the equities markets looking for 'value,' then you have the classic effects of inflation: too much money chasing too few goods. In this case, however, it's money chasing equities. Stock. Less than 1% of the money in stock trades actually goes into companies to hire people or buy equipment. It goes to paying the guy (or investment bank) who already bought that stock and, only because of the "new" money, results in a stock price increase. The 'value' of every share of stock in any company is regarded to be the publicly traded price last paid for any share of that stock. This would create ENORMOUS 'gains' for those holding stock.

Now, what happens to that 'value'? For those who trade in stock, they realize capital gains - taxed at rates less than labor is taxed. But the real 'magic' happens in a merger or acquisition. Since the market capitalization (the total 'value' of the outstanding stock) of a company can be greater than the value of all the assets of the company, the difference is posted to the company's balance sheet as 'goodwill.'

Goodwill needs to be amortized. It's an offset to a liability and that liability is offset as an expense. It lowers profits. The reaction of the company is to cut other costs. Labor. Employees (other than the Executive class) get screwed.

To the degree that profits are reduced, corporate taxes are reduced. Reduced corporate taxes mean someone else must take up the slack. Guess who? Labor. The working class gets screwed again.

This is where the 'ownership class' drives the 'working class' to row harder. The boat is carrying the King's gold.

[OHswingvoter]

123. Can someone please

explain the social security thing simple so that I can understand it?

I know that both Bushes do nothing but screw up the economy for the common folks. But I really don't understand how social security works at all or what the Bushes want to do to it. All I know is that it is likely there won't be anything for a poor working stiff like me.

[Yupster]

128. Social Security 101

During the Depression, many elderly were on the street destitute. The custom was to work until you died, but with a national unemployment rate of 25 % the elderly suffered worse than average.

FDR came up with this idea. Everyone puts in 1 % of their earnings into a fund and it gets sent out to anyone 65 or older.

The beauty of the plan was that there weren't that many people over age 65, and those that there were didn't live too many years after that, so the government didn't have to send out that much. In fact there were about eight workers contributing for each retiree so it was no great burden.

The program was a huge success.

It would have been nice to have had everyone save up money during their working years before starting to send checks out, but that wasn't possible. The depression was an emergency and people needed money now.

Therefore the system was set up as a pay as you go plan. The 1 % one person sent in was immediately sent out to an over 65 person.

That worked fine until a few things started happening.

1. People started having fewer kids. As people moved off the farms into big cities, space was dear and kids not so vital. This problem got much worse in the 50's and 60's as birth controll became widely available. So there were fewer workers to take contributions from.

2. More workers started living to age 65 and were therefore eligible to get a check. Together with number one this starts to become a problem.

3. Not only are more people making it to 65, but now people are living another 30 years once they hit 65, so instead of sending grandma a check for 6 years, now grandma is getting a check for 28 years. This has strained the system to the breaking point.

In the past each time things have gotten out of whack, the response has been to raise the contribution. The 1 % is now 15 %, half from you and half from your employer. Also the retirement age was changed from 65 to 67.

However those changes have not been enough. The projections are that we will be in trouble again in another 15 years or so.

What to do?

Can you raise taxes to 18 % ? This is on top of your income tax which may be 25 % more. Should the retirement age be raised again? Maybe to 69 next time?

This is the problem that's facing the system.

Bush proposal in next post.

[Lydia Leftcoast]

131. Gee, Yupster, you keep forgetting the idea of

raising taxes on the rich. And no, I do not feel sorry for rich people in non-progressive tax systems.

[OHswingvoter]

132. Thank you Yupster!

I think I understand the problem now! Social Security for Dummies. I appreciate it. I haven't studied things as much as some of the people here.

I hope that you explain privitization next. I havent a clue what that means.

[Lydia Leftcoast]

136. But he's giving you the rightwing rich people's spin on it

Some facts that he is ignoring:

1) Everyone already has the right to invest part of their income, including tax-free investment programs such as IRAs (which are even more generous for self-employed people than for employees)

2) Any transition to a privatized system would hurt lower-income workers more than anyone.

3) Low-income workers pay too much of their income in FICA assessments, and rich people pay too little. Exempting the first $10,000 from FICA and raising the ceiling to $500,000 would be a step toward progressivity, which the system is lacking at the moment.

4) Social security is not a savings program. I don't know how many people in this thread have to say this and why the privatization proponents keep ignoring it. It's an income transfer.

[OHswingvoter]

140. Thank you for your points.

I am not in that rich group. I don't know much about investing. I guess it is good I am here to get Educated.

I was in the Corps for six years and then worked in the Ford Plant for Fourteen and a Half years until it got closed. Thirteen and a Half years down the road and I am a damned janitor at the local college for about Forty Percent of what I was making when the Ford Plant closed. I hold Bush I personally responsible for my situation because it happened on his watch and his boy has just given us more of the same. Us regular guys...blue collar guys...we have to get Bush out if we are to survive in this country.

[Yupster]

145. I am a stockbroker

I'll answer any questions you have, other than recommending specific ivestments, if you have any questions.

[OHswingvoter]

147. Thank you so much. You sound

like a great guy. I don't even know enough to ask a good question yet though. Can you recommend any reading material to get me started?

[Yupster]

151. Two Books

"The Richest Man in Babylon" is a very short pocketbook that I give to the teenage children of my clients. It teaches how to live your life in a responsible fashion money-wise in a fun and light hearted way. Don't mean to insult and call you a teenager.

"The Millionaire Next Door" is a more serious work. It's basically a grad thesis where some guys cordoned off a neighborhood, found out who were millionaires and who weren't and then wrote about what they found was different between the millionaires and the non-millionaires. There results were very interesting and coincide closely what I see every day in meeting with the 450 families I work with.

Best of luck.

[OHswingvoter]

154. I really appreciate the advice.

No offense taken. I could stand to read something simple first before I move up to the hard stuff.

I will read both of these and see what this old dog can learn. I will also keep an eye out for your posts.

Thank you for being so helpful.

[greenohio]

148. The poor have all that extra disposable income for an IRA

Lydia's giving the "everything is fine, nothing to see here" routine.

1)IRA's do not help the poor. They don't have the spare cash. 15% of a paycheck should be enough to fund a retirement.
2)The method of transition will decide who is hurt which is why we can't leave this to the Repukes.
3)The cap needs to go but, unlike in Lydia-land, it is not the silver bullet that will fix the ongoing structural problems the US deals with every 20 years.
4)"It's not a savings program...it's an income transfer" is the last ditch effort to lower expectations. "People, you weren't supposed to get much in benefits anyway. This is as good as it gets."

[Lydia Leftcoast]

158. No, everything is not fine, but privatization will be worse

1) But it's really 7.6% of a paycheck, since the employee never sees the employer's portion. And none of the "privatization" proposals I've seen involve investing the full amount--it's always a small percentage. Even at 7.6%, that's only $814 a year for a minimum wage employee. Even assuming 15.3%, that's $1628 a year.
It's too late at night to dig out my old accounting textbook with its interest tables, but that's nothing to build one's entire retirement on, especially since you're ideally supposed to live off the interest and not spend the principal.
It would be really easy for people to outlive their savings, especially if they had unexpected expenses.

2) You're just starting by assuming that privatization is necessary.

3) Why won't it? We've got another large generation coming up.

4) "It's not a savings program, it's an income transfer" is a FACT, not a "last ditch effort." Get it through your head that a savings program and Social Security are apples and oranges.

[greenohio]

161. You attack privatization and then tell everyone to get an IRA

Make up my mind here.

1)No it really is 15%. Apparently you've bought into the gov game where just because it doesn't show on the pay stub, you never miss it. I assume if they move the 7.5% over you'll say we don't pay anything in FICA and the corporations pay it all. In the end, it is 15% calculated on your income. If you are self employed you pay the whole 15%. Yes there are problems with the current proposals. Which is why we need one. All the current proposals are from the other side. Our proposal currently is to stick our head in the sand. We can argue over the minimum % needed to fund a retirement which brings me to number two.

2)I am assuming that SS will have problems as long as its rate of return is so low.

3)Thats just it. In the current model, with such a low rate of return, each generation has to be bigger than the one before. Any contraction (like we're seeing) and you're in "fix it" mode again.

4)Do "income transfers" send you a yearly statements noting your "contributions" and your "projected guaranteed benefit?" You can't have it both ways. If it is just a tax, then roll into the income tax, take it and tell me that I will get nothing. If I become destitute when I get old, there will be programs I can apply for to get help. Don't tax it separately, send me a yearly annuity-looking statement, talk about surpluses and lock boxes and then turn around and say, hey just kidding...it really was just a charity program.

[Lydia Leftcoast]

178. Are you, like Yupster, a stock broker or investment counselor, and

therefore likely to profit personally from "privatization?"

1) Yes, I know it's 15.3%, because I'm self-employed.

2) Sorry, I can't see what you replied to, since I'm looking only at your message as I write the reply.

3) Or taxes have to be raised on the wealthy. Why is this anathema to you? At this point, the burden of SS taxes falls heaviest on the poor, while the super-rich get to pay it out of their pocket change. I'd slide the floor for SS taxes up to $10,000 and the ceiling up to $500,000. That would take care of both the solvency problem and the burden on the poor.

4) It is an income transfer program because my payments go to today's elderly, not into an earmarked account. If you actually read the statement they send out every year, you're not accumulating money, you're accumulating eligibility, and the amount you earned as a working person is recorded to determine what your pension will be. It may go up or down, depending on how many years you work and at what income level.

[greenohio]

185. No I'm not a stock broker

Do you work for SSA?

Welfare, HUD, and other charity programs are income transfers. Income transfer is a component of SS. SS is more than that because of the "accumulating eligibility" factor as you put it. Social Security on the annual statement (I pulled mine out.) calls itself a retirement program....not an income transfer program. It also says "the Social Security system is facing serious future financial problems, and action is needed soon to make sure the system is sound when today's younger workers are ready for retirement."

I have already said on this thread that I believe the caps should be removed. I have even promoted means testing on the thread. Both methods stick it to the rich. Apparently this will make you happy. This, however, does not solve the fundamental problem. It only buys you time until you have to deal with it again.

The problem with the "income transfer" method is that it fails to work if the group you are transferring from is much smaller than the group you are transferring to. You cannot guarantee the working generation will always have enough to support the current retired generation. Now you may not care who that happens to, as long as it is not you. I, however, do care.

The idea is to have each generation fund their own retirement as much as possible. In order to do that, you have to have a positive return on investment. You can't borrow the money from yourself and leave a note saying how much you'll pay back later with interest. In order to do that, you have to invest it.

It would be nice to just tell the US govt to go invest somewhere and get a better return. Lets say they pick stocks. Unfortunately, at that point, the US govt becomes the largest stock holder in the US. Do we really want to create a situation where the fed has to investigate and prosecute Enron while they are the largest shareholder in Enron? It's like having a referee who also is owner of one of the playing teams. Bad plan.

Now the gov can invest in municipal equities, which will help some. But individual accounts will give the greatest return, because at the moment the money is in an individual's hands, it can be invested in anything, stocks included.

Now rather than taxing the rich to delay the crisis, why not tax the rich to fix the structure. Rather than putting off the collapse so our Grandchildren or great great Grandchildren have to deal with it...why not fix it?

This is not a Dem or Rep issue. Clinton (via his task force), Lieberman, Moynihan, Kerrey (NB) and others have all supported individual accounts of some form or another. You can call them right wingers. I call them responsible.

[Yupster]

142. The Bush proposal

is not on paper so it is not something that can be argued. It's more a concept than a proposal.

The concept is that the social security system should be changed so that a person can take a portion of his 15 % (6 % is the number I've seen the most) and invest it himself in a social security savings account with his name on it.

There would be investment choices just like a 401(k), presumably a fixed option, a bond option, and some stock mutual funds. I think it unlikely that individual stock purchases would be allowed.

The other 9 % would still go to the government and would pay for a reduced "floor" benefit to keep you from starving no matter what your account was worth, and it would also pay for the life insurance "dependent benefit" that social security offers, and the disability benefit (SSI) that social security offers.

If you die before retirement your account value would go to your family and maybe get you out of the ghetto and buy you the first house your family ever owned. After all, it's the poorest who die the youngest. Currently if you die at age 60, you get nothing.

Sounds great, so what's the catch?

The main catch is that if I start using my money to save up this personal account in my name alone, then what's going to happen to grandma's check that she's been getting for 15 years? The money she's been getting has been the money I've been sending in. If I keep it, she can't get it.

In short, changing the program from pay as you go to save for yourself will be hugely expensive because the government will have to pick up the cost of grandma until she dies.

There really isn't an answer to the transition costs other than do it real slowly which is hardly an answer.

The other complaint is that if a person invests in the riskiest options and then they crash on him, he will be destitute without a government program for help. I think this risk can be managed by only allowing certain options within the program.

There are other complaints that I put in the political category. An example is that this will just give more money to stockbrokers. If it's a good deal and you end up with more money at retirement, I don't see why you would care if your broker did better too. Another example is the fear that any plan the Republicans like must automatically be done just to screw the workers. In fact you will hear that social security currently vastly favors the rich, and then you'll hear that the rich want to get rid of social security to screw the poor.

Anyway, that's my short answer to your question.

Hope it helps.

[OHswingvoter]

146. It does help.

I have not understood it much but have been automatically against it because it was proposed by a Bush who does not know his ass from a hole in the ground when it comes to economic stuff.

Honestly I would not know what to do if investing the money was up to me. It sounds like there are a lot of people here who would be able to take care of themselves. But I am one of those poor folks who doesn't really understand about investments much. And I am getting up there in Age too. This is frightening for someone like me.

[greenohio]

150. In that case just stay in the system

Any reform needs to be optional. Leave it to the repukes and we'll all be forced to go.

[Yupster]

153. That's why there are people like me around

I taught for nine years. Now I teach people about money.

Ask your friends for referrals and visit some investment advisors near you. Talk to a few and start slow. Save $ 25 per month and see if the guy cares about you or just wants your money. There are good and bad advisors just like everything else.

[OHswingvoter]

156. I am going to get started first thing

tomorrow. I will get my books and start Plotting out my financial future.

I am glad that there are great people like Yupster here who are willing to teach and advise the rest of us.

[Lydia Leftcoast]

129. Read the rest of this thread, and you'll find out

And welcome to DU! :hi:

(I don't mean to be flippant, but other people explain it in other posts in this thread.)

[OHswingvoter]

133. I read them. But I found them

confusing. Sorry, I am not as up on things as I should be but I am working on it. It was very nice of Yupster to explain it clearly in more detail to me.

Thank you for the welcome. I hope that I can learn a lot here. I am trying to educate myself more on political issues. I have lost out under Bush 1 and Bush two continues the bad economic policies. I want to educate myself and help get the Bushes out of office.

[cosmicvortex20]

125. I personally would prefer a mandatory retirement account.

Im quite confident that I can invest and provide for my and my wife's retirement better then the government, then they wouldnt need to tax others to pay for me.

If everyone else took a modicum of interest in their retirement, plans like SS wouldnt be needed. As it stands now, people are forever dependant on the system and think that taking care of their own retirement as a totally alien concept (as illustrated from 99% of the posts here).

That said, even a poorly run "mandatory" retirement account would return more on the investment then SS and provide the safety net I think we are all wanting.

As for buisness owners paying half of SS... the cost naturally just gets tacked on to the price of the product or services produced, and gets handed right back to the consumer. If we went to mandatory retirement accounts, then the prices of goods would drop and the worker would get to spend less money on goods and could then invest more in their retirement, making up for the loss of the employer's portion.

[Cleita]

127. And who told you that?

I'm talking about the historical stuff. I need references charts and historical evidence.

[cosmicvortex20]

130. .

.

[Cleita]

135. I've done a lot of research.

It's known as my life. The fact is no one knows the future and your investments just may not carry you through after retirement. I know. My husband and I did our best, but as working class professionals, because that's what we are, we did all the bullshit things we were expected to do to not be a burden on society. Well, guess what! We are!

[cosmicvortex20]

137. Theres an answer for what your saying...

If you dont plan on micro-managing your money, there are investment vehicles called "index funds". They take a wide spread of stock and averages it out for you.

You essentially can stick money in these and get "average market performance" which is what you should expect to get. You dont need to be a wall street broker to do this stuff. It doesnt matter if the "high tech sector" takes a hit, or if corn is down, or if platinum takes a dip. You get the entire stock market average. Great things index funds are...

Also, the reason your savings plans may have been off is due to inflation - which ole Uncle Sam is more then happy to produce. Any decent retirement plan should take this into consideration. Adding things like gold and other commodities into your investments helps on this particular issue.

[cosmicvortex20]

134. Took me all of 2 secs to find

http://money.cnn.com/pf/101/lessons/4/


From Money 101 - the basics of investing.

[Cleita]

139. You guys know nothing about gambling.

In 1992 I bought $10,000 of IBM, when every asshole financial type told me I was an idiot. I am going to sell what I have left of it this week. Stock market is over for the small investor in my estimation.

[cosmicvortex20]

144. I wouldnt walk away just yet.

Then again, I wouldnt put all my money in the stock market either.

This is what Im talking about. I could be investing my money in good investment so that I can retire comfortably, but I have to have a sizable fraction of my income siphoned off to cover all the people out there who just dont care to invest the time and effort to learn how to take care of themselves economically.

Excuse me if I sound a bit cynical, but I really hate funding a system thats just going to create more people that arent money savy - after all, uncle sams gonna take care of me right?

[Cleita]

152. Hmm.

The fact is the $10,000 in IBM was a small part of what we invested in very safe things. IBM was very good to us. The fact is the climate today is inspiring mattress thoughts in me. Actually, at the time if we had gambled the whole thing on IBM back then we would be rather well off today. However, money has never been that important to us except when we don't have any.

[cosmicvortex20]

155. I totally agree.

Im not disputing the fact you CAN make bad investments. Im saying that diversity can overcome individual bad investments.

Mandatory retirement accounts would make people save, actually invest the money into companies where they can expand and hire more people and equipment, and give some factor of control and responsiblity to those involved.

When people discuss this stuff, they tend to forget "mandatory" part and quickly jump to "but Ill be poor and thrown into the streets!".

[Cleita]

157. And this is what IRAs and 401k accounts are for.

Don't mess with the safety net know as SS. Oh, I forgot about Keogh accounts. I had to set them up in the company I worked for a long time ago. I don't even know if they are still around.

[Lydia Leftcoast]

160. "Mandatory investments"

A couple of years ago I read an essay by a former head of Social Security, explaining why this would be a bureaucratic nightmare.

Who decides who invests where? With high-income earners, no problem, investment firms are always happy to see them, but what about our minimum wage guy, who currently would have $814 a year to invest, assuming that the entire 7.6% employee contribution would be invested privately, or even less if only a percentage of that were invested.

Now, if it's totally up to the employee, where is he going to stick his $814? What kind of investment firm wants all those piddly little accounts? Will it just go into a CD? Oops, not enough money for a CD for at least two years, so it goes into a regular savings account, where it earns little interest and is available for the emergencies that constantly occur in the life of a low-income person. There goes the mandatory investment.

Okay, well, then, how about if the employer withholds the money from the employee's paycheck and sends it to the investment firm of the employee's choice, to make sure that it's not frittered away on dental bills and car repairs? Great, another bit of bureaucratic paperwork that is laid upon employers.

Okay, well, then, how about the employer pooling the accounts for all his employees and having them invest with the same firm, like 401ks? Firms might actually compete for that kind of business (and would rake in billions on management fees), but there goes the "freedom of choice" that is supposed to be such a selling point.

Well, what if the employer sends the 15.3% in to Washington as is the case now and has the government send it on to some investment firm? That would require an extra layer of bureaucracy, since the SS Administration is not set up to accumulate and invest anyone's money on an individual basis. In fact, it takes a couple of months for an individual's contribution even to count as "credit" for eligibillity.

Like most economic-libertarian schemes, it sounds great until you actually think it through.

[greenohio]

162. And the current system is a blissful Utopia

All is well. Let our kids deal with it.

[Yupster]

164. My company's minimum monthly investment amount is

$ 25 per month. It's made the same way someone else would save $ 250 per month, in a mutual fund.

I have a customer who is a public school attendance clerk. She's been saving $ 25 per month with me for ten years now. No problem at all.

[sweetheart]

163. SS is income transfer to the wealthy

Poor people have worse medical care and don't live as long, so while
they pay in their entire lives, they die earlier, so that the
"winner's" are those who live long and can afford medical care.

I am for means-testing the benefit, so that only people who are
below poverty after retirement may collect benefit, that SS be
returned to its original basis of defending poverty in old age.

That said, geez, perscription drugs, which are the massive cost
item for the elderly should be subsidized at a flat rate like 10
dollars per perscription regardless of the drug. This way the
pay outs don't go to the drugs companies still leaving people in
poverty.

[shraby]

168. I have one question.....

if there will be fewer people paying into social security to support the baby boomers when they retire, why are we having to build more and bigger schools all the time?

[RivetJoint]

172. Fine, then lets change SS from an insurance program,

which it is, to a welfare program, which is what you want. I'm not against that, but then let's call it what it is, and DO AWAY with the payroll deductions and raise income taxes to pay for it.

[sangh0]

184. No, it's a transfer to a group of people

who were experiencing a poverty rate of 50% without Social Security. If the elderly are wealthy NOW, it's because of Social Security.

1) The difference in life expectancy between the rich and poor is not as great as you seem to think.

2) It's an insurance program, and insurance programs are not meant to be means-tested. Furthermore, limiting who gets benefits also reduces it's political support. Republicans would love to see SS turned into a poverty program, just like they want to do with Affirmative Action