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Innisowen
Citizen
Username: Innisowen
Post Number: 497
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 8:21 am: | 
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Should we pronounce that as "woe, woe" or "wo-ah,wo-ah"? |
Wendyn
Supporter
Username: Wendyn
Post Number: 1400
Registered: 9-2002
| | Posted on Thursday, February 24, 2005 - 8:41 am: |
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cjc, I don't think you understand my posts.
I have no problem with privatized SS accounts allowing for greater investment opportunities.
I have a problem with Bush creating fear over a SS crisis, and then proposing a plan that will not only NOT FIX THE CRISIS, but cost way too much money to implement at a time when there are many other more immenent crises to deal with (see Innis' post).
It is like me saying that I don't have enough money to pay my mortgage, but I'm going to take out a loan to put an addition on my house because it would be really great to have more space.
Oh and thanks to my husband who has a career in fiancial operations, our investments (mutual funds, IRAs, 401Ks, 529s, and some stock) are doing quite well. He is thinking about buying real estate as well, although I am not keen on that idea in the current market. |
cjc
Citizen
Username: Cjc
Post Number: 3189
Registered: 8-2003
| | Posted on Thursday, February 24, 2005 - 8:57 am: |
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Wendyn -- we're talking past each other here I guess. If you don't view personal accounts as part of the overall fix for retirement in addition to a modified SS system that reduces liabilities in proportion to the gains of the personal accounts -- and it's those unfunded liabilities that are the problem here -- then you're left with borrowing or tax hikes which I guess you think we can't afford. It's the difference between 3.7 Trillion to kick the can down the road for Social Security only to have to raise taxes again later, or fixing it with those same trillions by allowing people to fund their retirement using higher returns via personal accounts and stop depending entirely on the pay-as-you-go morass we're currently in.
It's not a crisis for you, that's clear, but what about those retiring after 2042 like my kids who will see 77% of what you'll receive if they're lucky? |
Chris Prenovost
Citizen
Username: Chris_prenovost
Post Number: 355
Registered: 7-2003
| | Posted on Thursday, February 24, 2005 - 9:01 am: |
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I wonder what would happen to this argument if the stock market tanked. . . ? |
Bobkat
Supporter
Username: Bobk
Post Number: 7710
Registered: 5-2001
| | Posted on Thursday, February 24, 2005 - 9:02 am: |
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It is looking more and more like either fixing SS for the next 75 years or going with the private accounts is going to be a wash. Each will cost around $4,000,000,000. Is it worth the uncertainty of private accounts when there is no financial savings?
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Wendyn
Supporter
Username: Wendyn
Post Number: 1401
Registered: 9-2002
| | Posted on Thursday, February 24, 2005 - 9:34 am: |
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cjc, I am not the only one who doesn't view personal accounts as part of the primary fix for SS...
http://www.whitehouse.gov/infocus/social-security/
http://www.msnbc.msn.com/id/6906269/
The President himself has said:
- There is a Social Security crisis. We are running out of money and reform is needed
- We should allow people to fund their retirement using higher returns via personal accounts
- Personal accounts will allow greater investment flexibility, raise the investment risk, and NOT FIX PROBLEM #1
I am not a politician, finance reformer nor Social Security expert. I have no suggestions as to how to solve the immenent crisis.
I simply think private accounts are putting the cart before the horse. Work on fixing the current problem first. Then work on giving people options as to how to invest. I don't understand how you think private accounts will all of the sudden allow your kids more than 77% of their entitlement. I would think it might lower that number because the government's money will go toward creation of private accounts rather than fixing the problem that there isn't enough money to go around to begin with.
Hey at least your kids will beat mine, they start their retirement around 2066.  |
Innisowen
Citizen
Username: Innisowen
Post Number: 499
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 9:50 am: |
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Bobkat:
I believe that the numbers in your most recent posting ($4,000,000,000)may need another comma and a couple-three zeroes to represent the cost of one type of fix. Would that it only cost $4BN. The Bush administration spends that much in a week or two in Iraq, so they could always scrape up that amount. |
Innisowen
Citizen
Username: Innisowen
Post Number: 500
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 9:58 am: |
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Chris:
If the stock market tanked, we probably wouldn't be having this conversation. Just as we wouldn't have had a similar conversation on October 20, 1987, or after October, 2000, when the Internet stock run-up began to run out of steam. A number of analysts believe that this past year's gains will be offset by mediocre to poor performance in the coming three year cycle (no tanking by any means, but simply mediocre returns).
Once most people who are in the market today (often for the first time) tire of seeing their assets get battered a few times, I believe that they will grow skeptical of magical fixes and "gee-whiz ownership society" blather.
A 21st Century nation with respect for itself should have sets of solutions and safety nets that really work, not rhetoric and hastily contrived, banal appeals to the "American way." |
cjc
Citizen
Username: Cjc
Post Number: 3190
Registered: 8-2003
| | Posted on Thursday, February 24, 2005 - 11:52 am: |
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Wendyn -- I don't know how else to explain it for you so you will understand it. Fixing the problem first means massive tax hikes that will continue with the system in it's current form to the point that we'll be like Europe which is groaning under the strain of it all. You need some way to get growth into the system, and the only way to do that is with investments -- the very kind of investments that are doing well for you, Innisowen, me and the investor class of this country. |
Innisowen
Citizen
Username: Innisowen
Post Number: 507
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 12:10 pm: |
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So many of us talk about Europe, "groaning under the strain of it all..." Europe is a group of different countries still, each with different sets of issues, vs the US, which is one country, with a patchwork of internal problems. It may call itself the European Union and its members are moving towards integration of many functions and laws, but to make a statement that basically says "Europe is one thing or another" is politically naive.
I'm not saying European countries are without their social, economic, and demographic problems, but it's narrow-minded to make a broad assumption that what bedevils Germany is the same thing that bedevils Norway, Finland, Portugal, Spain. Or that what bedevils members of the European Union is the same beast that bedevils non-members.
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Chris Prenovost
Citizen
Username: Chris_prenovost
Post Number: 358
Registered: 7-2003
| | Posted on Thursday, February 24, 2005 - 12:19 pm: |
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Innisowen: I could not agree more.
CJC: This is an entirely manufactured crisis. You may recall that Bush inhereted a $300 Billion budget surplus when he took office. And promptly threw it away. Good, true Republicans believe in reducing the federal debt, not running it up to the ceiling. There would be no crisis in Social Security if the 'deficits dont matter' crowd of fiscal yahoos had not ruined this country's finances. |
Wendyn
Supporter
Username: Wendyn
Post Number: 1406
Registered: 9-2002
| | Posted on Thursday, February 24, 2005 - 12:29 pm: |
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cjc, you might want to let the President know that privatized accounts will help the overall SS crisis, because in his words they seem mutually exclusive.
And you are right, I don't understand. If your privatized account makes 20%, and that 20% helps pay for retiree's benefits now, and the market goes down, who pays for your 20%? Aren't we in the same boat?
Again, I am pretty limited in my financial skills. But even my extremely fiscally conservative husband (republican until last year) thinks Bush's SS plan is a waste of money and won't fix the underlying problem. |
Michael Janay
Citizen
Username: Childprotect
Post Number: 1607
Registered: 1-2003
| | Posted on Thursday, February 24, 2005 - 12:41 pm: |
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It is looking more and more like either fixing SS for the next 75 years or going with the private accounts is going to be a wash. Each will cost around $4,000,000,000. Is it worth the uncertainty of private accounts when there is no financial savings?
In a word, YES.
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Rastro
Citizen
Username: Rastro
Post Number: 735
Registered: 5-2004
| | Posted on Thursday, February 24, 2005 - 12:41 pm: |
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Wendyn,
Though I don't fully agree with the way private accounts are being handled, I think it's important to stem the bleeding before starting the surgery. The only way I can see to migrate to private accounts and still ensure that current and near-future retirees will get benefits is to do what seems to be proposed. I say “seems to be” because there haven't been ANY specifics of what the President's plan will be.
If we try to "fix" SS without moving to private accounts at the same time (or before), we'll just have more people who's retirements need to be taken into account when "fixing" SS. This way, the government can say "if you're under x years old, don't expect any benefits (but you'll have a "fully vested" account to make your own investments in pre-approved instruments). If you're between x and y, you can expect some level of reduced benefits(and a small private account that you can manage, again wihtin the limited instruments that are approved), and if you're older than y, you get full benefits (but no private account).
Now that the problem has been contained, it can be "fixed."
Note that I keep putting fixed in quotes because I really don't think that is the President's ultimate goal. Privatization is the goal, and once that happens, I wonder if he'll have the interest or will to move to kill the rest of SS.
One thing that no one seems to want to address, however, is "How the market will absorb all this new money?" All it will do is drive up stock prices. How does this drive the economy? It's the other way around. The economy drives the markets. Yes, some people will make money because stock prices will go up. But whenever stock prices go up simply because of demand for the stock, and not because of an increase in the underlying investment (company), you end up with a bubble, and eventually a crash.
Finally, I wonder who will be buying all the debt that we plan to take on to finance either fixing SS or moving to private accounts. At some point, the credit well runs dry. |
Innisowen
Citizen
Username: Innisowen
Post Number: 508
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 12:46 pm: |
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If the demand for stock goes up so precipitously when, if, or as privatized accounts are set up, will there be enough stock issues around to meet all the interested buyers' needs and wants? Or will we let people short the stock, or write covered or uncovered calls? More commish to the Street, extremely higher risk to the account holder... |
Rastro
Citizen
Username: Rastro
Post Number: 736
Registered: 5-2004
| | Posted on Thursday, February 24, 2005 - 12:51 pm: |
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Chris,
While I have no love for this President, one thing I don't fault him completely for is the disappearance of the budget surplus. Whether you believe that the surplus was real or manufactured (as some conservatives claim), it disappeared when the economy tanked. The federal budget went up when revenues went up. Then when revenues declined (or didn't increase at the rate expected), it was not possible to cut the budget sufficiently to match the change in revenue expectations. I'm not saying he's blameless, just that it's tough to lay all this on his doorstep.
Wendyn,
The 20% that your account makes would be yours. I don't believe the intent is for you to invest your contributions, to then have them go back into the SS system and pay for current retirees. The idea is that you get to invest the money however you see fit (within the limited set of investments the government approves), and then get to keep it (or use it to buy an annuity) when you retire.
Hey, I have another question for the pro-PA crowd. What if I want to reitre early? Do I have to give up part of my account as a penalty? And will I have to pay taxes on the unearned income (I always love that phrase "unearned income." It implies making money through investments is somehow not earned) that my investments generated? |
Michael Janay
Citizen
Username: Childprotect
Post Number: 1610
Registered: 1-2003
| | Posted on Thursday, February 24, 2005 - 1:00 pm: |
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Rastro,
Hey, I have another question for the pro-PA crowd. What if I want to reitre early? Do I have to give up part of my account as a penalty? And will I have to pay taxes on the unearned income
The odds are that you won't be able to touch your account until you hit a certain age, or die (when it would be willed to your heirs). If you want to retire early now, you still have to wait until 65 to get SS. I doubt that would change signifcantly. Of course this is all speculation since no "plan" has been formalized.
As for taxes, who knows? SS benefits are taxed now. Hopefully there will be options for Roth IRA style accounts, but who knows? |
themp
Supporter
Username: Themp
Post Number: 1530
Registered: 12-2001
| | Posted on Thursday, February 24, 2005 - 1:01 pm: |
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http://www.workingforchange.com/comic.cfm?itemid=18597 |
Rastro
Citizen
Username: Rastro
Post Number: 737
Registered: 5-2004
| | Posted on Thursday, February 24, 2005 - 1:02 pm: |
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Innisowen,
That's what I mean when I say the price of stocks will be inflated by demand for the stock itself, not because of an increase in the value of the underlying company that the stock represents. When there isn't enough stock to cover demand, prices for the stock go up. But if the underlying company doesn't do anything to make itself more valuable, it's a false valuation. That is, there is nothing justifying the value that the market is putting on the company. That's when you get tulip-mania, bubbles, and crashes. |
Wendyn
Supporter
Username: Wendyn
Post Number: 1407
Registered: 9-2002
| | Posted on Thursday, February 24, 2005 - 1:18 pm: |
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Rastro, thanks for the explaination. Still struggling to understand...
So the my 20% investment profit would be in a specific account that would not be touched (like what people think happens now but doesn't)? And I thought the President's plan specified that no one will have reduced benefits. Am I wrong?
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mrosner
Citizen
Username: Mrosner
Post Number: 1728
Registered: 4-2002
| | Posted on Thursday, February 24, 2005 - 1:33 pm: |
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Here is a link to an article in the Washington Post that compares several plans including GWB's. It does show what cuts are being considered.
http://www.washingtonpost.com/wp-srv/business/daily/graphics/alternatives_022405 .html?referrer=email&referrer=emaillink |
Rastro
Citizen
Username: Rastro
Post Number: 739
Registered: 5-2004
| | Posted on Thursday, February 24, 2005 - 2:44 pm: |
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Wendyn,
It dependes on how you define "reduced benefits." Perhaps the Bush plan would guarantee the current level of benefits. So if you're whiz-bang investment strategy doesn't work out, you'd have a safety net. or perhaps there is faith that the markets will absolutely give a better return than what SS provides, so any redcution in the x to y crowd's benefits would be expected to be made up by the gains that private accounts are expected to make.
I do know that the intent of private accounts is to give you control over your own money. Exactly how that plays out, I don't think anyone can predict.
Mark,
The problem I see with that graphic is that it is as vague as Bush's plan. There is no detai labout how much borrowing, or how much taxes would increase. It's tough to compare a plan that might raise taxes by $4 trillion with one that raises taxes $500 billion if all we know is both will raise taxes. Otherwise, I think it's good to see what people are considering. |
mrosner
Citizen
Username: Mrosner
Post Number: 1729
Registered: 4-2002
| | Posted on Thursday, February 24, 2005 - 2:48 pm: |
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Rastro: I know - all the plans are vague. I only know that the benefits will be cut one way or another and the taxes will increase to pay for those reduced benefits.
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Innisowen
Citizen
Username: Innisowen
Post Number: 509
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 3:01 pm: |
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Rastro: I agree with the content of your post about driving up the price of an attractive (sought after) stock, which may have nothing to do with the intrinsic value of the products or services of the underlying company.
To my mind, that is the essential story of the Internet stock run-up of 1997-mid-2000. Sapient, marchFIRST, Scient, IXL, Viant, and god knows how many other essentially empty companies saw their prices sky-rocket, even after their business models and business results were called into question. |
Rastro
Citizen
Username: Rastro
Post Number: 741
Registered: 5-2004
| | Posted on Thursday, February 24, 2005 - 3:14 pm: |
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geez, marchFirst. I loved that one. Named their company after the day they opened for business (or was it the day they formed?)
My biggest concern is that the stocks that will be hardest hit will be solid companies that get seriously overinflated.
As Ive said many times before. As soon as privatization looks likely, all my money is going into indexes and blue chips. Unfortunately, I think it will be like shooting fish in a barrel. |
Innisowen
Citizen
Username: Innisowen
Post Number: 510
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 3:36 pm: |
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Rastro:
Careful there. I worked for marchFIRST and tried to help integrate all three previous consulting firms constituting the new company, into one harmonious cackling, eructating entity. I saw the company go public, go to chapter 11, and then chapter 7, all within 14 months. Talk about a ride... |
Rastro
Citizen
Username: Rastro
Post Number: 743
Registered: 5-2004
| | Posted on Thursday, February 24, 2005 - 3:45 pm: |
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ridiculous thread drift
Innisowen,
I had interviewed with them, and gave up in the middle of the interview when the person I was talking to couldn't answer simple questions about the strategic direction of the company without spewing ridiculous levels of marketing hype and throwing every buzzword you could imagine. At the end of the interview, I told them that I didn't think I'd be a good fit for them. I don't think they quite knew what to say. |
Innisowen
Citizen
Username: Innisowen
Post Number: 511
Registered: 3-2004
| | Posted on Thursday, February 24, 2005 - 4:10 pm: |
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Your experience is quite consistent with that of most interviewees. Some came on board, like me, because they made me "an offer I couldn't refuse," and the business challenge of helping them to integrate several separate companies, was fascinating and a natural fit for me. However, they very quickly started to drink their own Kool-Aid, and it was only a matter of time before the defecation hit the oscillator, "as they say." |
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