My Social Security Rant

[midcan5]

The one thing that is solvent... too much.

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.

www.nytimes.com/2005/01/04/opinion/04krugman.html?pagewanted=print&position=

[UncleVinny]

many of you are falling for that party line crap - yes, the system is in need of fixes, but the fixes are not that bad.

A memo came out this week written by KKKarl Rove and his deputy Weber, indicating that the transition to private accounts would cost "between $1 and $2 TRILLION" (with a T!).

Some analysits (Krugman, Jan. 12) see the actual cost as high as $15 TRILLION (again with a "T") That's no chump change, and it's WAY more than the cost of propping up the current system. The "cure" then is many times more costly than the disease. So, don't you smell a rat?

So answer me: Why is Am. Assn. of Retired Persons (AARP) so opposed to it?
(CLUE: because 58 million retired Americans are smarter than George)

[Ian]

A memo came out this week written by KKKarl Rove and his deputy Weber, indicating that the transition to private accounts would cost "between $1 and $2 TRILLION" (with a T!).

Oh! I see! You put two (that's with a T!) Ks in front of Karl Rove's name. I guess this is your way of associating him with extreme right wing philosophies. Isn't that cute and clever! My, my, I'm impressed. So clever...

Some analysits (Krugman, Jan. 12) see the actual cost as high as $15 TRILLION

Paul Krug(communist)man(ifesto), since we're playing name games (it was a stretch, I'm sorry goddammit!), is a socialist so that figure isn't surprising. I have a novel idea, how about you support your ideas with sources other then socialists like Paul Krugman. Or maybe even try thinking for yourself. Seems the only one falling for party line crap is you my dear, misguided friend.

[Crash]

TNRighty;

Please read what I wrote, I did not "evaluate Bush's SS plan based on your (my) disagreements with his environmental policies or the war in Iraq..." I was just trying to make the point that the only reason Bush wants to 'reform' SS (even though it doesnt need it) is because his contributors stand to make huge profits from its privatization, which in turn equates to more contributions to his political war chest and slush funds.

Follow the money, see who is making a profit from Bush's foreign and domestic policies then you will begin to understand what this administration is all about. The correct term for this type of govt. is corporatism.

"Today, corporatism or neo-corporatism is used in reference to tendencies in politics for legislators and administrations to be influenced or dominated by the interests of business enterprises (limited liability corporations). The influence by other types of corporations, such as those representing organized labor, is relatively minor. In this view, government decisions are seen as being influenced strongly by which sorts of policies will lead to greater profits for favored companies...."

en.wikipedia.org/wiki/Corporatism

As far as your insults, I expect it from the radical-right, I ignore personal insults and chalk them up to too much radical-rightwing talk radio.

[TNRighty]

How does partially privatizing social security somehow line George Bush's pockets? I don't see it.

[Ian]

TNRighty said:

How does partially privatizing social security somehow line George Bush's pockets? I don't see it.

LOL, I don't know. It would seem that if anything its taking money away from this corrupt administration they're always harping on.

[midcan5]

Not sure anyone is reading the pieces, SS is not in trouble and may never be if handled properly. How is it we are worried about SS that may be in trouble 18 years from now and the deficit is ridiculous right now. See the link below for another view of investment.

www.csmonitor.com/2004/1227/p01s03-cogn.html

Who benefits if SS is turned into an investment option?

[TNRighty]

I don't normally post links, but this is a must read for all of you who think social security is humming along just fine.

www.nationalreview.com/nrof_luskin/luskin200501110842.asp

Who benefits if social security is turned into an ivestment option?

YOU DO! Not George Bush. YOU benefit from it. A dollar invested in a private mutual fund will net you more than a dollar "invested" in social security. The private market will give you a better rate of return on your money than social security will. ITS A FACT!

Not only that, if you own your retirement account, YOU decide when you can retire, not the government. If YOU own your own account, your wife and kids can take it over if you die prematurely. Under our current system, the government just keeps it. If the social security age is 63 and you die at age 62, too bad so sad. Uncle Sam wins, sucker. 40 years of tossing 14% of your income into social security and its all down the drain. And all of a sudden your wife is spending her golden years saying, "Welcome to Wal Mart, need a shopping cart?"

If you're younger than 40 and are depending on social security as your lone source of retirement income, I REALLY feel sorry for you. If the system remains unchanged its going down.

In a private account, the more you invest, the more you get in return. Under our current social security system we're having to raise taxes just to maintain the status quo....Hello???

[Crash]

TNRighty said:

YOU DO! Not George Bush. YOU benefit from it. A dollar invested in a private mutual fund will net you more than a dollar "invested" in social security. The private market will give you a better rate of return on your money than social security will. ITS A FACT!

Not only that, if you own your retirement account, YOU decide when you can retire, not the government. If YOU own your own account, your wife and kids can take it over if you die prematurely. Under our current system, the government just keeps it. If the social security age is 63 and you die at age 62, too bad so sad. Uncle Sam wins, sucker. 40 years of tossing 14% of your income into social security and its all down the drain. And all of a sudden your wife is spending her golden years saying, "Welcome to Wal Mart, need a shopping cart?"

If you're younger than 40 and are depending on social security as your lone source of retirement income, I REALLY feel sorry for you. If the system remains unchanged its going down.

In a private account, the more you invest, the more you get in return. Under our current social security system we're having to raise taxes just to maintain the status quo....Hello???

LoL! do you really think that you will have control of your own retirement money under a privatized system?? Think again. There will be brokers and fees and if the market takes a dip you will loose money. Is the stock market a safe place to put your retirement money? If you are really wealthy then it could be, if you can afford to loose it. But for most middle-class Americans who are already feeling the bite of neo-con 'trickle-down' economics, outsourcing and stagnant wages, they cant afford to take a chance with their money. The market is not a safe place for retirement funds for most middle income families. You will not be in charge of your money, a broker, or investment co. will, and you will pay them their fees whether your money makes a profit or not. It wont affect their fee.


If you think this new privitazition of SS is going to give you greater control of your money....think again, you will be paying greater fees, your money will not be safe and the main thing is - you will get less back when your time comes, if there is any left.

If you pay into SS and you die before you collect, that money goes to your family. Get your facts straight and quit drinking the kool-aide.

[midcan5]

Published on Tuesday, January 11, 2005 by the New York Times
The Iceberg Cometh by Paul Krugman

It's the standard Bush administration tactic: invent a fake crisis to bully people into doing what you want. "For the first time in six decades," the memo says, "the Social Security battle is one we can win." One thing I haven't seen pointed out, however, is the extent to which the White House expects the public and the media to believe two contradictory things.

The administration expects us to believe that drastic change is needed, and needed right away, because of the looming cost of paying for the baby boomers' retirement.

The administration expects us not to notice, however, that the supposed solution would do nothing to reduce that cost. Even with the most favorable assumptions, the benefits of privatization wouldn't kick in until most of the baby boomers were long gone. For the next 45 years, privatization would cost much more money than it saved.

Advocates of privatization almost always pretend that all we have to do is borrow a bit of money up front, and then the system will become self-sustaining. The Wehner memo talks of borrowing $1 trillion to $2 trillion "to cover transition costs." Similar numbers have been widely reported in the news media.

But that's just the borrowing over the next decade. Privatization would cost an additional $3 trillion in its second decade, $5 trillion in the decade after that and another $5 trillion in the decade after that. By the time privatization started to save money, if it ever did, the federal government would have run up around $15 trillion in extra debt.

These numbers are based on a Congressional Budget Office analysis of Plan 2, which was devised by a special presidential commission in 2001 and is widely expected to be the basis for President Bush's plan.

Under Plan 2, payroll taxes would be diverted into private accounts while future benefits would be cut. In the short run, this would worsen the budget deficit. In the long run, if all went well, cutting benefit payments would reduce the deficit.

All wouldn't go well; I'll explain why in another column. But suppose that everything went according to plan. Even in that unlikely case, privatization wouldn't even begin to reduce the budget deficit until 2050. This is supposed to be the answer to an imminent crisis?

While we waited 45 years for something good to happen, there would be a real risk of a crisis - not in Social Security, but in the budget as a whole. And privatization would increase that risk.

We already have a large budget deficit, the result of President Bush's insistence on cutting taxes while waging a war. And it will get worse: a rise in spending on entitlements - mainly because of Medicare, but with a smaller contribution from Medicaid and, in a minor supporting role, Social Security - looks set to sharply increase the deficit after 2010.

Add borrowing for privatization to the mix, and the budget deficit might well exceed 8 percent of G.D.P. at some time during the next decade. That's a deficit that would make Carlos Menem's Argentina look like a model of responsibility. It would be sure to cause a collapse of investor confidence, sending the dollar through the floor, interest rates through the roof and the economy into a tailspin.

And when investors started fleeing because they believed that America had turned into a banana republic, they wouldn't be reassured by claims that someday, in the distant future, privatization would do great things for the budget. Just ask the Argentines: their version of Social Security privatization was also supposed to save money in the long run, but all it did was move forward the date of their crisis.

A responsible administration would reverse course on tax cuts and the botched 2003 Medicare drug bill, both of which pose much greater threats to the government's solvency than the modest financial shortfall of the Social Security system. But Mr. Bush has declared his tax cuts inviolable, and he says that his drug bill will actually save money. (The Medicare trustees say it will cost $8 trillion.)

There's an iceberg in front of us, all right. And Mr. Bush wants us to steam right into it, full speed ahead.

[TNRighty]

In response to Crash's last post:

Yes, there are risks associated with investing in the private market, but its a risk I choose to take. No one is forcing me to put 18% of my check into my 401(k). I do that on my own accord. In Social security I have no choice, the government choses for me. I happen to have a problem with that. If you prefer government-provided security over the freedom to control your own finances, then you have surrendered a large piece of your personal and financial sovereignty to politicians. If thats OK with you, fine. Under the new SS proposals you would not be forced to invest anything in the private market, only the option to do so if you so desire.

The market fluctuates. You may make money today, you may lose money tomorrow. Again, that's a calculated risk. However, I'm sitting here looking at my 401(k) statement, and my investments earned an 11.3% rate of return over the last calendar year. If you're lucky you might get a 2% rate of return on social security over the lifetime of your taxable income. That's atrocious, flat out atrocious. If Merril Lynch, Schwab, Fidelity, or any other private mutual fund broker had a performance as poor as social security does, they'd go out of business. They would be considered an utter failure in the realm of long-term investing.

Lastly, of course brokers make money off of personal investments. They don't work for free. When you invest in a mutual fund like Fidelity or Janus, who do you think selects the individual stocks that make up your fund? Brokers do. You can if you want, but most people chose to let the brokers handle that. You are paying them for their economic expertise. Just like a car salesman, they earn a commission, a commission off the money they make for you. If you think that's so bad, go ahead and take your 2% return from SS. I have no problem making 10% and giving 2% of it to a broker who has made wise investments on my part.

Lastly, again. This may shock you, but you have no irrevocable right to receive any social security benefits whatsoever. That decision is not made by you because you don't control that money. The goverment does. You have absolutely no control whatsoever as to when you can receive your benefits or how much you can get.

If you think social security is so secure, answer for me a couple of questions.

1. Can you tell me when you will be able to receive SS benefits?

2. Where is the money you have been paying in SS taxes?

[MIMatt]

Crash said:

SS is solvent as it stands for another 50 yrs. (google Social security, solvent) If it starts to get into trouble it can be easily fixed by raising the level of taxible income from $89,000 to $100,000 or more. The only reason Bush wants to privatize SS is so his contributors can get their hands on the money and take their slice out of it. As with everything else in this administration, follow the money. Once you find out who is making a profit on SS, Iraq, lowered environmental standards, and every other action of this admin. then you start to realize the truth. Or you can listen to Limbaugh/Hannity and they can tell you what you should believe.

That's exactly what should be done. Some would call it a radical move, I call it solving the problem. It's one of the few things I have to disagree with the president on. And I am conservative for the most part.

[UncleVinny]

In the Sunday paper (Sac Bee, Feb 6, David Westphal) is an article on how Bush wants to dismantle the Social Security system, rekindling a debate that surronded the establishment of SS in the first place, in the 1930s. The focus of that debate was government assistance versus "individual responsibility."

Individual responsibility, of course, is one of those code words for "every man for himself" which has the effect of abandoning assistance for poor people - and here you can judge for yourself it that means poor black folks, Hispanics, etc.

I makes me wonder if there is any compassion at all in this so called "compassionate conservatism" or is it plain and simple selfishness, greed, and elitism with a new spin-doctor vocabulary. In the same paper, they discuss how Bush's budget for next year advocates slashing funds for local police departments, environmental protections, and heating fuel for the poor. Notice how the big companies, especially oil, get whatever they want, Bush spends our money on warfare, and then demands the states fund the increased costs for homeland security, while at the same time slashing funds for police? Makes a fella wonder.

[UncleVinny]

Here in the Western civilized world, there is an age-old question . . .

"Am I my brother's keeper?"

A lot of people, smarter than me, have concluded that ethically, morally, spiritually, the resounding answer is YES!.
So many people are afraid that that means they want to take all your money away.
But you have brothers - you don't give your money away to some brother who gambles or drinks it away. Rather, the wise use of your excess money could make a difference for someone who is on the borderline of poverty, and give them an education, for example, where they could earn more money.

I think if you could see how many elderly people have to choose between their life saving medicines and buying food, that you would appreciate both the value of a helping hand once in a while. "Every man for himself" is a backward, selfish, and morally bankrupt philosophy.

In one's own family, the wage-earning member gladly shares his wealth with the school-age child, the crippled sister, the aged grandparent, the hard-working spouse. Is it so much of a stretch then to consider our neighbors to be members of the famly of man? Sharing and caring for others is the spiritual quality that separates man from the animals and results in a more abundant society for everybody.

[TNRighty]

Vinny,

I don't give my money to a brother who gambles or drinks it away, but our government has no problem doing it. I can't tell you how many times I've seen someone at the checkout line use food stamps to pay for their groceries and then whip out a 50 to pay for a case of beer and a carton of cigarettes. My wife works as a labor and delivery nurse and has observed that roughly 3 out of 4 patients on TennCare are either unwed, tested positive for drugs or alcohol on the day of delivery, did not graduate high school, or a combination of the three. Money well spent, huh?

Our old people wouldn't have to choose between buying medicine and buying food if they were receiving a better return on their retirement investment than the miserable 2% they get from Social Insecurity. We should let that be a lesson as to what happens when you rely on government to care for you. He who giveth, also taketh away. Additionally, the partial privatization plan does not cut one penny from the benefits retirees currently receive, as crappy as they are.

That little bit you wrote about the wage earner gladly sharing his wealth with his family and then suggesting that all of mankind is in essence part of his family is total garbage. My family is my responsibility. Your family is your responsibility. Joe's family is Joe's responsibility. You have no right to have three kids and demand that I or government support them.

A government that seeks to provide for you everything you need is VERY dangerous. It breeds tyranny. This is especially true of Democrats (not that Republicans are exempt). The last thing a Democrat wants is for Americans not to need government to provide for them. They derive their power from the upper hand they get by subjugating people to their welfare policies, be it retirement, health care, or any other number of assorted welfare programs.

This government dependency mindset that has infiltrated our country drives me up the wall. When you were a little kid, how many times did your father tell you, "...Not while I'm paying your bills." Until you are financially independent from your parents, they call they shots. If your dad is making your car payment, he decides what kind of car you drive. If he's paying your rent, he decides where you live. Government is the same way. If you are under the care of government, government decides when, where, and how much. This especially true for social security and health care.

So your dad tells you one day, "Son, we've had a series of break-ins in our neighborhood so Im putting in an alarm system at the house. Its gonna cost about $500, so I'm gonna have to cut your rent and grocery fund." You're left with no other option than to go cry to your mom (or the nearest liberal) that your being able to eat and drive is more important than Dad installing the alarm system. "Mom, he's taking my money and spending it on an alarm system."

Sorry, that's not your money. Its Dad's money.

Get the picture?