No, you addressed the remark accurately. You think SS should be a welfare program. The logical consequence is that those who save for their retirement get nothing. Those who spend every dime collect in full.

I don't like this at all. I don't think SS should be a welfare program or even that it should be a progressive program at all. It should be a pension program. Payments should be directly proportional to contributions.

I acknowledge that this philosophy crashes into the cold reality that we have spent every dime contributed to the program, there is no real trust fund, and we are probably so far in debt that there may be no other way out. That reality doesn't mean I have to like it though.

It should be a pension program. Payments should be directly proportional to contributions.

In the first place, what business has the government got being a universal pension plan? Hardly a conservative idea, Art.

In the second place, that kind of solution is at odds with the original goal of the program, which was to reduce poverty among the elderly. It stands to reason that most of the elderly are poor were also poor throughout much of their lives.

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"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."

No, mandating retirement savings is not a conservative idea, at least not historically. A real pension plan would probably be called extreme right wing now though. Objectively SS is a liberal program. It forces people to provide for themselves against their will. I also happen to agree with that idea, regardless of political label.

Any forced pension plan will reduce poverty among the elderly. SS has certainly done that. If you want a welfare program to reduce poverty, fine. Propose a welfare program. I don't see that such a program should have anything to do with SS though.

Again, I concede we are probably so far in debt my ideals may not be workable.

   

I think your first paragraph is off the mark. By definition I view SS as a welfare program, NOT a retirement program. If Art saves for retirement, then by definition he does so outside the confines of SS. Your retirement savings are yours and yours alone. I don't care how you do it, its inmaterial to me. But if you save it, then it is yours to keep.

People expect SS to fix their retirement woes the way things are now. If SS isn't the primary means for a well-off retirement system then no one will bank on it acting as such. If you know that in my SS system you will only get (say) $30k/year in benefits, well, then if you have expenses above that then you better find a way to fix the situation (cut expenses, adjust lifestyle, get a part-time job, get help from family). I envision a system that is heavy on compassion, but not without limits. In my system that shouldn't happen because there'd be no basis for people to get more than a predetermined amount.

A pension program is great for a retirement system. But if you want a system that will help the poor, the elderly and the indigent then you don't want them to rely on a pension program. And that's why we disagree I think.

And I hope you don't like the fact that money is being spent on things it wasn't meant for. I've said it before, and several people have disagreed with me before (maybe even you), but I think the heart of what people are really debating for SS right now is the accounting side. We wouldn't be discussing this issue if we weren't spending SS tax $'s on non-SS expenditures. But maybe that's a good thing, because it means we might fix SS.

Objectively, your view of SS today as a welfare program is probably more accurate than mine. Again, that doesn't mean I have to like it now, and it doesn't mean I have to like Bush's proposals that make it more like welfare than ever. I temper that opinion with political and economic reality, on a good day.

Ma and Pa Kettle, when they get their SS check, don't think they are collecting welfare. As an exercise to the reader, explain this to Ma and Pa Kettle while you are running for office. See how many votes you get.

No offense taken. I'm happy to generally call myself a liberal, given what I think liberalism has given this country. I'm also a liberal with a degree in economics, an MBA (and studying for the CFA), and a background in investment banking, so I like to make sure the numbers all work and the scenario analysis all done before I agree to something.

This is not an issue of just quibbling over varying growth rates. The growth rates discussed are those required to maintain purchasing parity for the nominal dollars being discussed. As you know, inflation erodes a dollar's buying power. Inflation is typically denoted by changes in the CPI over time, so that in an inflationary environment it requires more dollars to buy the same basket of goods. That's what these increases are designed to ensure. The progressive indexation idea by Pozen gradually adjusts this from the wage index to CPI, depending on income. Wage growth has typically outpaced CPI by about 1.1% annually. So over time, and especially long periods of time, the difference between income indexed to wages and income indexed to CPI becomes pretty dramatic (the power of compounding). However, since at least CPI guarantees buying power, this is something. But people retiring would be in for a rude awakening as their benefits would be far below their wage experience, and certainly far below in nominal dollars what they are currently promised. So with no ambiguity it would be a benefit cut.

As for the private accounts issue, which Bush seems to be running away from, I'm not sure your comparison of those retirement plans and the spotty notions of private accounts I've heard is valid. First of all, from what I've heard, these private accounts would be more similar to 401Ks than any pension fund you've described. In addition, I'm not sure whether the pension funds you've described are defined contribution or defined benefit - since most pension funds are defined benefit, then I'll assume that.

Defined benefit plans are large sums of capital designed to be invested, where the returns and employer contributions pay out a defined benefit stream, which is predicted based on actuarial projections. With size and scale, it benefits from being large enough and cross-collateralizing so that in any individual year, individual people have almost no risk of not being paid out. By contrast, a personal account, or for that matter a 401K, it's every man for himself. If that market does well, then great. But if the market tanks right before your retirement, then you're screwed and you've got no cushion. And it's this investment risk that is fundamentally problem.

You can point out that in the long run the market does reasonably well - depending on whose stats you read, anywhere between 7% and 11% maybe. However, in any 20 year period, the market has real meaningful volatility. And nobody I know gets to retire only when the market is doing well.

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"They who would give up an essential liberty for temporary security, deserve neither liberty or security" - Benjamin Franklin
"Don't you see the rest of the country looks upon New York like we're left-wing, communist, Jewish, homosexual pornographers? I think of us that way sometimes and I live here." - Alvy Singer, "Annie Hall"

I don't think you want to view SS as a welfare program. Historically it has not been, and from the lower through the middle classes it has represented a pretty significant portion of people's retirement income.

If these cuts go through as planned, then SS will essentially be a welfare program, because obviously those rich who haven't yet abandoned it will, and the middle class which gets squeezed out of the program will as well. Then it will primarily be a program for indigent elderly.

That's fine if that's what we want it to be. However, the recent experience of this country is that politically speaking, it tends to beat up on the poor and indigent, portraying them as lazy leeches, suggesting that programs which help them are useless transfer payments which ought to be stopped. And as I mentioned above, you can start counting the days until some enterprising politician, likely Republican, starts trumpeting how SS is an abused welfare system for Cadillac driving elderly. And given how much of society has been squeezed out of it, it will be very difficult to prevent it from being killed altogether.

Compassion for the less-fortunate is one of those things that I don't think has been in political fashion for some time, and I don't think it's just quite about to come back.

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"They who would give up an essential liberty for temporary security, deserve neither liberty or security" - Benjamin Franklin
"Don't you see the rest of the country looks upon New York like we're left-wing, communist, Jewish, homosexual pornographers? I think of us that way sometimes and I live here." - Alvy Singer, "Annie Hall"