| Author | Message | ||
     cjc Citizen Username: Cjc Post Number: 2943 Registered: 8-2003 |
December 21, 2004, 8:58 a.m. No ‘Fool’s Paradise’ Krugman lies about personal accounts for Social Security. If the liberal establishment is so sure that reforming Social Security with personal accounts is such a terrible idea, then why do they have to lie about it? http://www.lucianne.com/threads2.asp?artnum=189752 | ||
| Mark Fuhrman Citizen Username: Mfpark Post Number: 1005 Registered: 9-2001  |
An honest question: Can someone explain to me how we get from the current system (retiree benefits funded by deposits from current workers) to a privatized system (current workers deposits go into individual market accounts) without having to borrow billions to keep the current benefits flowing? Increased interest rates due to federal borrowing are as much a tax as social security taxes, as far as I am concerned--only less evenly distributed across the population. | ||
| mjh Citizen Username: Mjh Post Number: 11 Registered: 5-2001 |
From Columbia Journalism Review Daily http://www.campaigndesk.com/ December 21, 2004} Spin Buster Keeping an Eye on the Social Security Shell Game Social Security debate has dominated the news over the past few weeks as the Bush administration has begun its campaign to partially privatize the program. At the center of the Bush administration's campaign is a projection of Social Security's unfunded liability -- and, like any projection, it's a product of a host of other numbers. So far, the Bush administration and its supporters have used two figures to talk about the unfunded liability -- $3.7 trillion and $10.4 trillion. The smaller sum is projected over 75 years, while the larger sum is projected over an infinite timeline. Few, if any, are challenging the validity of these numbers. The Center on Budget and Policy Priorities, which has argued against the privatization of social security, confirmed for CJR Daily that these numbers are accurate within the timelines attached to them. But as the Bush administration trots them out to makes its case, the public generally receives them with little context to explain the difference. The numbers are often included in Social Security articles without mention of the timeline that they refer to, leaving the reader wondering what to think. Much like a poll result is incomplete without the margin of error, so the unfunded Social Security liability is incomplete without the number of years that it's projected over. Including the timeline at least provides transparency, but even that does not provide context. In the spirit of context, the Associated Press does something today that very few other outlets have done -- printing both numbers in the same article. The result is a piece that reveals how easily the Bush administration can inflate a problem to make it seem worse than it is: The retirement system faces a projected $3.7 trillion, 75-year shortfall. ... The figure -- $10.4 trillion to be precise -- is the shortfall over the "infinite horizon," as measured by Social Security's Board of Trustees. After digesting both numbers it's unlikely that the average reader will have a complete grasp of Social Security's financial stability over the next X number of years. But at least he or she will be aware that the administration is playing shell games with numbers. --Thomas Lang | ||
| Mark Fuhrman Citizen Username: Mfpark Post Number: 1007 Registered: 9-2001 |
Figures lie and liars figure. Look, I know there is an unfunded liability under Bush's plan. But there is one under the current system, also. The privatization liability hits a lot earlier as we shift funds from current retirees to private accounts. I just want to understand how it will be funded, and what the impact will be on the budget, interest rates, cash available for other programs, taxes, etc. | ||
| cjc Citizen Username: Cjc Post Number: 2945 Registered: 8-2003 |
The question is how to fund a transition or fund the infinite horizon of the current system. Raising the cap on income taxed by FICA, borrowing or a combination of the two. With a gradual movement to personal accounts, the people will be responsible for their retirement and the obligations to the government will decline (that is, of course, with a minimum guaranteed retirement income if things turn our poorly, intermittant work history, etc). Deficits were lower during the Clinton Administration and interest rates were higher. I'm not sure that higher deficits automatically equal higher interest rates. They might, but I think that has to do with how the market assesses the economy here. I'd also be leery of any long-term projections. Just like with surpluses that can disappear with recessions and wars, or Medicare projections at the outset of it's creation that were totally off the mark, so too the Social Security unfunded liabilities. Might be less, but govt tends to err on getting more expensive, not less. Demographics figure prominently into this too, and immigration rates.... | ||
| Bobkat Supporter Username: Bobk Post Number: 7070 Registered: 5-2001 |
I have two problems with private accounts. First, I don't think we can just put the transitions costs on the deficit. We have to fund the vast majority of these costs now if we go in that direction. This means either higher SS taxes, an increase in the maximum income subject to tax or a reduction in benefits, or, most likely a combination of all three. Second, I am worried about administration costs. Most likely the Bush plan will allow the participate to direct his contribution. Most companies will be faced with hundreds of transfers to be made every payday. Also, it isn't hard to work up a scenario where in poor investment enviornments the service fee will be more than the investment gain. | ||
| kathy Citizen Username: Kathy Post Number: 1030 Registered: 5-2001 |
The Bush administration wants to frame the issue as, Why should the government have control of your retirement account? The simple answer is that Social Security is not and never was a retirement account. It was structured as a welfare-type safety net for the elderly poor, funded by current workers. In its early years it worked pretty well on a cash-in/cash-out basis because there were 50 or so workers for every retiree. But today each retiree is supported by only a couple of workers, and we have had to accumulate a pool of Social Security savings to prepare for even more retirees and fewer workers in the future. But in its essence Social Security does not involve any kind of savings or personal accounts. Money is not being put aside for your future. Because the Bush administration does not want to be associated with increased taxes in any form, the transition to personal accounts is expected to be funded with $2 trillion in new debt. A columnist in today's Washington Post also points out that the economic figures that Bush uses to show that Social Security is in crisis are different from the ones he uses elsewhere, and even the ones that he uses to justify private retirement accounts: Harold Meyerson | ||
| wharfrat Citizen Username: Wharfrat Post Number: 1464 Registered: 6-2001 |
Inventing a Crisis Privatizing Social Security - replacing the current system, in whole or in part, with personal investment accounts - won't do anything to strengthen the system's finances. If anything, it will make things worse. Nonetheless, the politics of privatization depend crucially on convincing the public that the system is in imminent danger of collapse, that we must destroy Social Security in order to save it. I'll have a lot to say about all this when I return on my regular schedule in January. But right now it seems important to take a break from my break, and debunk the hype about a Social Security crisis. There's nothing strange or mysterious about how Social Security works: it's just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline. Right now the revenues from the payroll tax exceed the amount paid out in benefits. This is deliberate, the result of a payroll tax increase - recommended by none other than Alan Greenspan - two decades ago. His justification at the time for raising a tax that falls mainly on lower- and middle-income families, even though Ronald Reagan had just cut the taxes that fall mainly on the very well-off, was that the extra revenue was needed to build up a trust fund. This could be drawn on to pay benefits once the baby boomers began to retire. The grain of truth in claims of a Social Security crisis is that this tax increase wasn't quite big enough. Projections in a recent report by the Congressional Budget Office (which are probably more realistic than the very cautious projections of the Social Security Administration) say that the trust fund will run out in 2052. The system won't become "bankrupt" at that point; even after the trust fund is gone, Social Security revenues will cover 81 percent of the promised benefits. Still, there is a long-run financing problem. But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year. Given these numbers, it's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come. It's true that the federal government as a whole faces a very large financial shortfall. That shortfall, however, has much more to do with tax cuts - cuts that Mr. Bush nonetheless insists on making permanent - than it does with Social Security. But since the politics of privatization depend on convincing the public that there is a Social Security crisis, the privatizers have done their best to invent one. My favorite example of their three-card-monte logic goes like this: first, they insist that the Social Security system's current surplus and the trust fund it has been accumulating with that surplus are meaningless. Social Security, they say, isn't really an independent entity - it's just part of the federal government. If the trust fund is meaningless, by the way, that Greenspan-sponsored tax increase in the 1980's was nothing but an exercise in class warfare: taxes on working-class Americans went up, taxes on the affluent went down, and the workers have nothing to show for their sacrifice. But never mind: the same people who claim that Social Security isn't an independent entity when it runs surpluses also insist that late next decade, when the benefit payments start to exceed the payroll tax receipts, this will represent a crisis - you see, Social Security has its own dedicated financing, and therefore must stand on its own. There's no honest way anyone can hold both these positions, but very little about the privatizers' position is honest. They come to bury Social Security, not to save it. They aren't sincerely concerned about the possibility that the system will someday fail; they're disturbed by the system's historic success. For Social Security is a government program that works, a demonstration that a modest amount of taxing and spending can make people's lives better and more secure. And that's why the right wants to destroy it. Paul Krugman column, originally published in The New York Times, 12.7.04 So cjc- What exactly is Krugman lying about?} | ||
| Straw's world Supporter Username: Strawberry Post Number: 4184 Registered: 10-2001 |
Am I the only one who thinks Wharfie really is Paul Krugman? | ||
| Parkbench87 Citizen Username: Parkbench87 Post Number: 1645 Registered: 7-2001 |
Am I the only one who thinks that Straw is Count Olaf? | ||
| cjc Citizen Username: Cjc Post Number: 2946 Registered: 8-2003 |
wharfrat -- the article I referenced at the top of the thread takes Krugman to task on his willful misrepresentations of what private accounts entail or would entail. "Given these numbers, it's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come. It's true that the federal government as a whole faces a very large financial shortfall. That shortfall, however, has much more to do with tax cuts - cuts that Mr. Bush nonetheless insists on making permanent - than it does with Social Security." Bush's tax cuts are the root of the problem with the Social Security shortfall? The FICA tax wasn't cut, and Krugman finds it perfectly reasonable for us to continue to raise taxes to fund a system that can't stand due to demographics and benefits promised except the public won't stand for it -- especially younger voters. That's 'moderate' to Krugman. On top of that, he implies we can just use general revenues to plug holes in Social Security, meaning that Social Security can't sustain itself unless you either raise taxes on everyone participating in it, or just raise taxes on the rich -- yeah, there's always that. | ||
| wharfrat Citizen Username: Wharfrat Post Number: 1465 Registered: 6-2001 |
You must have missed this part- But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year. Given these numbers, it's not at all hard to come up with fiscal packages that would secure the retirement program, with no major changes, for generations to come. It's true that the federal government as a whole faces a very large financial shortfall. That shortfall, however, has much more to do with tax cuts - cuts that Mr. Bush nonetheless insists on making permanent - than it does with Social Security. | ||
| Chris Prenovost Citizen Username: Chris_prenovost Post Number: 176 Registered: 7-2003 |
Gotta go with wharfrat on this one. Bush inhereted a $300 Billion dollar surplus. He turned it into a $455 Billion dollar deficit. Not because of the war, not because of the mini recession, but because of the tax cuts. Now, they want to 'reform' Social Security'. How, like they reformed the budget? That's a scary thought. Had the administration done nothing, the $5 trillion (yes, that's TRILLION) in federal debt we had in 2000 would have shrunk to below $4 trillion and shrinking further, instead of currently hitting $7 trillion and climbing fast with no end in sight. That's the main reason social security has a 'crisis'. The white house's attempts to 'save' social security are akin to shooting a person in the head, applying a band-aid on the blown-out brain matter, and claiming to have saved the shooting victim. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 4853 Registered: 1-2003  |
No middle or upper income person believes SS is enough to retire on. But many often do figure it into one of the many expected source of retirement income. SS (for retirement) is one of many legs. It's supposed to be the leg that has no risk. It's there no matter how imprudent or unlucky you are at investing. The privatizers want to move it into the risky category. That would make it no longer a safety net. SS is also for orphans and the disabled. How would you privatize that benefit? SS is also a regressive tax, since there is a cap. The more your income rises above that level, the smaller percentage of your income you are paying in. That doesn't seem right to me. In principle, those who are well off ought not to receive SS benefits. But they feel entitled, because they paid in, and they were told to expect the benefits. This is a sticky problem, because the people would not find a "means test" to be fair unless it took benefits from "other" people but not themselves. I think this is the main reason we don't have it. | ||
| Michael Janay Citizen Username: Childprotect Post Number: 1420 Registered: 1-2003  |
What if one of the "Private Account" options were a whole life insurance policy? Low risk, market returns, cash value, better survivor benefit. Disabled would move to welfare/medicaid. What if another Private account option were US Savings bonds? Theres very low risk there. Not to mention, why do we have to take care of the terminally stupid. I'm all for helping those who need it, but if you are too stupid to plan for your retirement and you lose all your money, why does the government have to bail you out? | ||
| Tom Reingold Supporter Username: Noglider Post Number: 4856 Registered: 1-2003 |
Because it's the Christian thing to do?  Who gets to decide "need"? Not everyone is endowed with intelligence or good judgement, and ain't no changin' that. | ||
| wharfrat Citizen Username: Wharfrat Post Number: 1466 Registered: 6-2001 |
Still waiting for cjc to identify the lies in Paul Krugman's columns on social security privatization. Meanwhile, this is an excerpt from the 12/17 column with a provocative link. "As the Bush administration tries to persuade America to convert Social Security into a giant 401(k), we can learn a lot from other countries that have already gone down that road. Information about other countries' experience with privatization isn't hard to find. For example, the Century Foundation at www.tcf.org, provides a wide range of links." | ||
| Rastro Citizen Username: Rastro Post Number: 526 Registered: 5-2004  |
MJ, you wrote "Not to mention, why do we have to take care of the terminally stupid." Because that's what the gov't told them we were going to do. Changing the rules so severely midstream isn't really fair. Not everyone has the capability to juggle investments. Many, even most, do. But a society, in some way, is responsible for taking care of its weakest. Tom, I think the reason I'm ok with the FICA payment being capped is that benefits are capped as well. No matter how much you make annually while working, you're not going to earn $100k on Social Security. So the payments are, in my mind, commensurate with what you put it. Not a direct relation, but correlated. | ||
| Mark Fuhrman Citizen Username: Mfpark Post Number: 1010 Registered: 9-2001 |
I'm still waiting to hear how we can change to privatization without tanking the economy. Michael Janay: Is it stupidity, or lack of opportunities? Say you make $50,000 a year as a janitor in a NYC office building. Good job, definitely needed by our society. And let's say you have two kids. How can you pay your rent, feed and clothe your family, and save for retirement living in this expensive city? That is not stupidity, it is reality. | ||
| Michael Janay Citizen Username: Childprotect Post Number: 1422 Registered: 1-2003 |
Mark, With the 12% the government takes away from you right now. Wouldn't it be better for the janitor to put 6 grand a year into a higher yield account that he owns and can then take the benefits of compounding interest? Lets say he's 30, 6 grand a year (what he and his employer is ALREADY paying to SS) for 35 years at a compounding rate of just 6% (which is pretty low, but lets say thats the average over the 30 years) will give him $754,841 at age 65. That nest egg will give him and his family about $36,000 a year in interest forever. Plus if he dies, his family get the whole nut. Sounds like a better system to me. And please explain how changing to a private system would effect the economy. It would probably increase national debt, but not more than there is already if you count SS benefits as debt (as they should be). It would infuse capital into the economy, and people would have more real savings and real assetts. And Rastro, the government never promised to help the stupid, it promised to help the needy. There is a difference. There is no reason that SS couldn't be private accounts that are secure enough to provide for everyone. Sure, markets can go up or down, but if the government mandated ages and maximum risk catagories it would be fine. Like if you are 20 you can put 80% into risk and 20% into growth but at 30 it changes to 70-30, and so on until you have a very secure portfolio at 65 or 70. |
