| Author | Message | ||
     Mark Fuhrman Citizen Username: Mfpark Post Number: 1026 Registered: 9-2001  |
Nice to meet you also, Tom. After reading about your life and assorted ramblings on-line, it felt like I was meeting an old friend. I am not so sure it is the holidays that is stopping them from responding--I think it is because they do not have a good answer. And I very much agree with you that the SS debate is much more symbolic than current--but what a great legacy to leave our children if we can make it more stable now rather than waiting for the crisis. | ||
| Southerner Citizen Username: Southerner Post Number: 35 Registered: 2-2004 |
Tom and Mark, You guys are obviously good guys and very intelligent. Personally, I haven't done any big time research on this and I sure am not going to take the time to google some articles and do a point by point counter rebuttle. You guys would probably eat me alive even if I tried. Can't we just agree that hardworking intelligent Americans can disagree? I know that no matter what I post that I am not going to change your mind, and I know you're not going to change mind. I'm sure we have all come to our conclusions not based on a single article but over a lifetime of experiences and general educating of ourselves. I respect and understand your arguments but I respectfully find myself on the other side of this issue. My initial point was that a lot of people factored this issue into their vote and we expect the politicians who were elected to follow through. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 4900 Registered: 1-2003  |
Actually, if you knew me, you'd know that I listen. Not only that, I concede people's points, and I also let people sway my opinion, if the arguments have enough merit. It's OK to bow out, if you like, but it's a shame you seem to be saying that you don't want to examine the merits of the arguments. It seems that you decide whom to trust, and you care less about whatever comes out of their mouths. Republicans pay lip service to distrusting government, but your trust of your party is disconcerting. You don't have to do googling to read the links I provided. Yes, it's partisan, and yes, I'm sure it has flaws. If you can find them, more power to you. If you can't find the flaws, no one will send you back north for conceding the points that Krugman and Tobias raise. You'd be a bigger man for it.  | ||
| Mark Fuhrman Citizen Username: Mfpark Post Number: 1029 Registered: 9-2001 |
Tom, well and succinctly put. May I add that I am not advocating a position on this, I am asking for those who do advocate a postion to please enlighten me. I am willing to be convinced, which is why I read the Tobias articles, and will gladly read other points of view when presented. So far, the Tobias articles seem spot on to my understanding of economics (which is both practical and theoretical). Those who think privatization can work--please let me know where Tobias is wrong. I welcome learning from you. | ||
| Southerner Citizen Username: Southerner Post Number: 36 Registered: 2-2004 |
Tom, Sorry I disagree with you and am thus not a bigger man. I guess because I choose not to go on a point by point account of this issue that I therefore cannot offer an opinion. I have indeed "examined the merits of the arguments" and have simply come to a different conclusion than you have. If you note I have never said your opinion is wrong or invalid. We are both interested in trying to fix a problem but by different methods. I don't appreciate your second paragraph description of myself. It is inaccurate but it appears you have painted me with your brush so what can I do. | ||
| wharfrat Citizen Username: Wharfrat Post Number: 1483 Registered: 6-2001 |
January 3, 2005 EDITORIAL The Social Security Fear Factor If you've lent even one ear to the administration's recent comments on Social Security, you have no doubt heard President Bush and his aides asserting that a $10 trillion shortfall threatens the retirement system - and the economy itself. That $10 trillion hole is the basis of the president's claim last month that "the [Social Security] crisis is now." It's also the basis of the administration's claim that the cost of doing nothing to reform the system would be far greater than the cost of acting now. Well, the $10 trillion figure is the closest you can get to pulling a number out of the air. Make that the ether. Starting last year, as the groundwork was being set for the emerging debate, the Social Security trustees took the liberty of projecting the system's solvency over infinity, rather than sticking to the traditional 75-year time horizon. That world-without-end assumption generates the scary $10 trillion estimate, and with it, Mr. Bush's putative rationale for dismantling Social Security in favor of a system centered on private savings accounts. The American Academy of Actuaries, the profession's premier trade association, objected to the change. In a letter to the trustees, the actuaries wrote that infinite projections provide "little if any useful information about the program's long-range finances and indeed are likely to mislead any [nonexpert] into believing that the program is in far worse financial condition than is actually indicated." As it often does with dissenting professional opinion, the administration is ignoring the actuaries. But that doesn't alter the facts or common sense. If the $10 trillion figure is essentially bogus, so is the claim that Social Security is in crisis. The assertion that doing nothing would be costlier than enacting a privatization plan also turns out to be wrong, by the estimates of Congress's own budget agency. Over a 75-year time frame, Social Security's shortfall is estimated by the Congressional Budget Office at $2 trillion and by the Social Security trustees at $3.7 trillion, a manageable sliver of the economy in each case. If the shortfall is on the low side, Social Security will be in the black until 2052, when it will be able to pay out 80 percent of the promised benefits. If it is on the high side, the system will pay full benefits until 2042, when it will cover 70 percent. Contrary to Mr. Bush's frequent assertion that Social Security is constantly imperiled by political meddling, it has in fact been preserved and improved by political intervention throughout its 70-year history, most significantly in 1983. The system could - and should - be strengthened again by a modest package of benefit cuts and tax increases phased in over decades. Instead, the administration wants workers to divert some of the payroll taxes that currently pay for Social Security into private investment accounts, in exchange for a much-reduced government benefit. To replace the taxes it would otherwise have collected - money it needs to pay benefits to current and near retirees - the government would borrow an estimated $2 trillion over the next 10 years or so and even more thereafter. In effect, the administration's plan would get rid of the financial burden of Social Security by getting rid of Social Security. The plan shifts the financial risk of growing old onto each individual and off of the government - where it is dispersed among a very large population, as with any sensible insurance policy. In a privatized system, you may do fine, but your fellow retirees may not, or vice versa. In any event, doing well under privatization is relative. Congress's budget agency analyzed the privatized plan that is widely regarded as the template for future legislation and found that total retirement benefits - including payouts from the private account plus the government subsidy - would be less than under the present system. The amount available from the privatized system was less even after midcentury, when the current system is projected to come up short. It should come as no shock that individual investors might not do as well as hoped. The stock market's historical returns - some 7 percent a year - are predicated on a hypothetical investor who bought an array of stocks in the past, reinvested all dividends, never cashed in and never paid commissions or fees. That's not how investing works in the real world. An especially grave danger is that investors would withdraw their funds before retirement, a pattern that is pronounced in 401(k) plans. It would be politically very difficult to refuse people access to accounts that were sold to them on the premise that they - not the government - would own them. The Congressional Budget Office analysis also likely understates the costs to individuals of privatizing Social Security. The borrowing that would be needed to establish private accounts could lead to higher interest rates, a weaker dollar and slower economic growth. It is also likely that future tax hikes would be required to cover the interest payments on the additional national debt. The only hands-down winner would be Wall Street, as fees to manage millions of accounts poured in. (Those fees, not incidentally, would come out of your return.) Current stockholders would also stand to benefit, as increased demand pushed up stock prices, giving existing owners a gain at the expense of newcomers who would be forced to buy high. The affluent, who could afford professional investing advice, would also be advantaged, even though everyone would be taking the same risks. The zeal over privatization is fueled by the belief of Mr. Bush and his supporters that free-market fixes are appropriate for virtually every problem. That faith is misguided. For a society to be functional and humane, it's not enough that some people have a chance to be rich in old age. Rather, all old people must have the dignity of financial security, and that requires universal coverage. Social Security is the core tier of old-age support, replacing about a third of preretirement income for a typical retiree and providing inflation-proof income for life - a feature not available in private accounts. Its purpose is not to supplant other retirement investing, but to provide a crucial safety net. Anyone who wants to maintain his or her standard of living into old age must also amass substantial personal savings and investments. To introduce the same risk into the core tier of benefits that already exists for the bulk of one's retirement savings would be as unfair as it is unwise. If Mr. Bush were not so serious about privatizing Social Security, his urgency would be silly. Compared with other challenges looming for the government, it's a non-problem. The shortfall in the Medicare hospital insurance fund is two to three times the size of the Social Security shortfall, and that fund is projected to be insolvent some two to three decades before Social Security. Taken together, the costs of the Medicare prescription benefit and of making the tax cuts permanent - Mr. Bush's two main domestic initiatives - are 5 to 8.5 times larger. And his hair is on fire over Social Security? One of the most distressing aspects of the debate over Social Security privatization is that it distracts from more pressing issues and obscures better solutions to the problem of secure retirement. A future editorial will discuss new strategies to increase private savings outside of Social Security that draw on market theory and behavioral economics and are more promising than rehashing the same tired formula of tax-sheltered savings accounts. In the meantime, however, Mr. Bush and his supporters will be pursuing their idée fixe of privatization. It's bad policy. And it's bad politics, too, driven by reflex, ideology and special interests, and sustained by conformism that masquerades as party discipline. Lawmakers who still value their right and obligation to think for themselves - and to act in the best interest of their constituents - must champion solutions that will build on Social Security, not undermine it. A previous editorial, "How to Save Social Security," is available online at nytimes.com/opinion. Copyright 2005 The New York Times Company | ||
| malone Citizen Username: Malone Post Number: 258 Registered: 5-2001 |
What you have here is a fundamental difference of opinion between "Nanny-staters" and "capitalists". The Nannystaters believe that people are better off with the government taking care of everyhing, and Capitalists want free reign to do everthing on their own. But here's the point. Forget the trust fund. It doesn't really exist. It's about as real as Al Gore's lock box. There is no pool of money sitting in an account somewhere. The only thing that exists in the fictitious trust fund is a giant IOU from the U.S. Govt. As soon as benefits exceed intake, the USGov has to pay, and at that point its either raise taxes, cut benefits, or borrow more. Unless some fundamental changes are made today. The capitalists cant stand the idea that we woudl raise taxes, and the Nannystaters cant stand the idea that we wouldn't. got it? | ||
| Mark Fuhrman Citizen Username: Mfpark Post Number: 1054 Registered: 9-2001 |
Malone: Your analysis is simplistic. The question is what fundamental changes to make, either today or in the future when they are forced on us. From what I can see (especially in the Tobias link) there are ways to change Social Security today that would be less drastic, and appear to be more likely to succeed, than privatization. I am still waiting for someone to give a reasoned rebuttal of the Tobias points Tom linked above. | ||
| malone Citizen Username: Malone Post Number: 259 Registered: 5-2001 |
Not so simplistic. Tobias "solutions" involve exactly what I said in the third paragraph of my previous post. Extending the age for full benefits sounds a lot like cutting benefits. Raising the FICA tax to 1% on higher income sounds a lot like raising taxes. But Tobias misses the fundmental problem in that he is focused only on what happens when the "trust fund" runs out. The need for the government to come up with cash will occur just beyond the point that the trust fund reaches its maximum (i.e, when FICA tax receipts fall below disbursements). Put another way, even if there are minor adjustments made to extend the timeframe the "trust fund" will last, the amount in the "trust fund" will still need to be funded. Thus proveth, you can fool some of the people............. | ||
| Mark Fuhrman Citizen Username: Mfpark Post Number: 1056 Registered: 9-2001 |
Correct, Bush is doing just that, fooling some of the people all of the time. This is not the critical issue that he is making it out to be. With some tinkering we can extend it out and pay attention to more pressing problems today (and, if it is too much to ask, have a real thoughtful discussion on how to replace SSI in the now more distant future). | ||
| Rastro Citizen Username: Rastro Post Number: 569 Registered: 5-2004  |
Except that the government has "borrowed" those funds. They are as much an obligation of the government as any federal bond that the the Feds issue. Of course the government wil have to repay that money (the surplus) when it is needed ("when FICA tax receipts fall below disbursements"). The gov't had no problem taking the money when there was a surplus, they shouldn't have a problem returning it when there's a shortfall. That's not to say that I think the gov't should fund all SS obligations. I do think SS needs to be reformed. But to imply that it's ok for the gov't to take the money and not repay it doen't make fiscal sense. | ||
| cjc Citizen Username: Cjc Post Number: 2956 Registered: 8-2003 |
I've been led to believe by some that the money we have is by the grace of our wonderful government. And besides, surely some people who are 'owed' that money 'really don't need it' (another phrase I've been taught). Tell those people to eat sheet....cake. | ||
| Rastro Citizen Username: Rastro Post Number: 574 Registered: 5-2004 |
They might believe that. I don't. All I'm saying is that SS was never supposed to be part of the general fund, and it's not ok to borrow the money and not repay it. | ||
| Tom Reingold Supporter Username: Noglider Post Number: 4996 Registered: 1-2003 |
Southerner, sorry for insulting you. I definitely didn't mean to do that. I was just hoping to discuss the issue, in a friendly way. | ||
| wharfrat Citizen Username: Wharfrat Post Number: 1484 Registered: 6-2001 |
Stopping the Bum's Rush By PAUL KRUGMAN The people who hustled America into a tax cut to eliminate an imaginary budget surplus and a war to eliminate imaginary weapons are now trying another bum's rush. If they succeed, we will do nothing about the real fiscal threat and will instead dismantle Social Security, a program that is in much better financial shape than the rest of the federal government. In the next few weeks, I'll explain why privatization will fatally undermine Social Security, and suggest steps to strengthen the program. I'll also talk about the much more urgent fiscal problems the administration hopes you won't notice while it scares you about Social Security. Today let's focus on one piece of those scare tactics: the claim that Social Security faces an imminent crisis. That claim is simply false. Yet much of the press has reported the falsehood as a fact. For example, The Washington Post recently described 2018, when benefit payments are projected to exceed payroll tax revenues, as a "day of reckoning." Here's the truth: by law, Social Security has a budget independent of the rest of the U.S. government. That budget is currently running a surplus, thanks to an increase in the payroll tax two decades ago. As a result, Social Security has a large and growing trust fund. When benefit payments start to exceed payroll tax revenues, Social Security will be able to draw on that trust fund. And the trust fund will last for a long time: until 2042, says the Social Security Administration; until 2052, says the Congressional Budget Office; quite possibly forever, say many economists, who point out that these projections assume that the economy will grow much more slowly in the future than it has in the past. So where's the imminent crisis? Privatizers say the trust fund doesn't count because it's invested in U.S. government bonds, which are "meaningless i.o.u.'s." Readers who want a long-form debunking of this sophistry can read my recent article in the online journal The Economists' Voice (www.bepress.com/ev). The short version is that the bonds in the Social Security trust fund are obligations of the federal government's general fund, the budget outside Social Security. They have the same status as U.S. bonds owned by Japanese pension funds and the government of China. The general fund is legally obliged to pay the interest and principal on those bonds, and Social Security is legally obliged to pay full benefits as long as there is money in the trust fund. There are only two things that could endanger Social Security's ability to pay benefits before the trust fund runs out. One would be a fiscal crisis that led the U.S. to default on all its debts. The other would be legislation specifically repudiating the general fund's debts to retirees. That is, we can't have a Social Security crisis without a general fiscal crisis - unless Congress declares that debts to foreign bondholders must be honored, but that promises to older Americans, who have spent most of their working lives paying extra payroll taxes to build up the trust fund, don't count. Politically, that seems far-fetched. A general fiscal crisis, on the other hand, is a real possibility - but not because of Social Security. In fact, the Bush administration's scaremongering over Social Security is in large part an effort to distract the public from the real fiscal danger. There are two serious threats to the federal government's solvency over the next couple of decades. One is the fact that the general fund has already plunged deeply into deficit, largely because of President Bush's unprecedented insistence on cutting taxes in the face of a war. The other is the rising cost of Medicare and Medicaid. As a budget concern, Social Security isn't remotely in the same league. The long-term cost of the Bush tax cuts is five times the budget office's estimate of Social Security's deficit over the next 75 years. The botched prescription drug bill passed in 2003 does more, all by itself, to increase the long-run budget deficit than the projected rise in Social Security expenses. That doesn't mean nothing should be done to improve Social Security's finances. But privatization is a fake solution to a fake crisis. In future articles on this subject I'll explain why, and also outline a real plan to strengthen Social Security. Copyright 2005 The New York Times Company | ||
| ashear Supporter Username: Ashear Post Number: 1619 Registered: 5-2001 |
There there is this: Kinsley's Proof That Social Security Privatization Won't Work By Michael Kinsley MY CONTENTION: Social Security privatization is not just unlikely to succeed, for various reasons that are subject to discussion. It is mathematically certain to fail. Discussion is pointless. The usual case against privatization is that (1) millions of inexperienced investors may end up worse off, and (2) stocks don't necessarily do better than bonds over the long run, as proponents assume. But privatization won't work for a better reason: It can't possibly work, even in theory. The logic is not very complicated: 1. To "work," privatization must generate more money for retirees than current arrangements. This bonus is supposed to be extra money in retirees' pockets and/or it is supposed to make up for a reduction in promised benefits, thus helping to close the looming revenue gap. 2. Where does this bonus come from? There are only two possibilities-- from greater economic growth or from other people. 3. Greater economic growth requires either more capital to invest or smarter investment of the same amount of capital. Privatization will not lead to either of these. a) If nothing else in the federal budget changes, every dollar deflected from the federal treasury into private Social Security accounts must be replaced by a dollar that the government raises in private markets. So the total pool of capital available for private investment remains the same. b) The only change in decision-making about capital investment is that the decisions about some fraction of the capital stock will be made by people with little or no financial experience. Maybe this will not be the disaster that some critics predict, but there is no reason to think that it will actually increase the overall return on capital. 4. If the economy doesn't produce more than it otherwise would, the Social Security privatization bonus must come from other investors, in the form of a lower return. a) This is in fact the implicit assumption behind the notion of putting Social Security money into stocks, instead of government bonds, because stocks have a better long-term return. The bonus will come from those saps who sell the stocks and buy the bonds. b) In other words, privatization means betting the nation's most important social program on a theory that cannot be true unless many people are convinced that it's false. c) Even if the theory were true, initially, privatization would make it false. The money newly available for private investment would bid up the price of (and thus lower the return on) stocks, while the government would need to raise the interest on bonds in order to attract replacement money. http://www.latimes.com/news/opinion/sunday/la-oe-kinsley19-proof,0,7948674.story | ||
| Mark Fuhrman Citizen Username: Mfpark Post Number: 1066 Registered: 9-2001 |
Ouch! That last point by Kinsley is pretty damning for privatization!!!! | ||
| ffof Citizen Username: Ffof Post Number: 3187 Registered: 5-2001  |
I think that's the Bushies point, though. They want SS to fail. You know, time for big Dem gov handout to cease. | ||
| cjc Citizen Username: Cjc Post Number: 2960 Registered: 8-2003 |
For starters, I believe Kinsley's first assumption is false. 1. "To "work," privatization must generate more money for retirees than current arrangements. This bonus is supposed to be extra money in retirees' pockets and/or it is supposed to make up for a reduction in promised benefits, thus helping to close the looming revenue gap." Kinsley's "current arrangements" doesn't generate or provide enough/more money as it is now. It's a false choice to say that privatization doesn't give the same benefits as the current system, because the current system can't sustain itself and pay the benefits it promises. Also, point #4 on "the bonus will come from those saps who sell the stocks and buy the bonds" doesn't make sense. Depending on one's age to retirement and market conditions, you aren't necessarily a sap to buy bonds -- corporate, foreign or US government. Myself -- I don't plan on having a big piece going long at 63. "If the economy doesn't produce" -- that can happen periodically, but we average through it all something like 2.6% or more. We're not Europe, which continually raises taxes to prop up a system of welfare and pensions and through the very taxation that limits it's growth. And the last point -- if too much money is flowing into stocks and driving up their valuations, the government won't have to raise interests rates through the ceiling for it's bonds to attract capital as the money will go to bonds simply because stocks are overpriced. | ||
| Rastro Citizen Username: Rastro Post Number: 576 Registered: 5-2004 |
cjc, agree completely on the last point. If stocks are overvalued, then bond rates will go down. If the return in the capital markets is too low, money tends to flow to bonds. Therefore, if stocks are overvalued, people will sell stocks and buy bonds. This will increase the price of bonds, and lower the yields. New bond issues should be able to take advantage of this by selling new onds at lower rates. However it does make sense that pouring money into the markets will have a significant affect on the markets themselves. The people who will make the most money are those that have blue chip stocks before all this money pours into the market. IMNSHO, those are the stocks that people will want to put heir money into, and the more demand there is, the higher the prices will go. If this goes through, all my money is going into DIA and SPY. Then when things settle down, I'll move to a more balanced strategy. |
