You need to finish my sentence Ken. Your observation falls into the politcally tone deaf part of my description.

Did someone hold a gun to her head and tell her not to invest for herself? My point is we were all sold a bill of goods, my own parents included. I asked my parents (who are alos retirement age) why they did not plan for their own retirement and the answer was because the government promised them they would be take care of. I do not want to end up like my parents or your mom either. I want to be responsible for my own retirement and well being. Social security is NOT the answer. I also do not want those currently in retirement to lose what they worked their entire lives for either. But the definition of stupidity is doing the same thing over and over agin and expecting different results.

Another bit of info from Neal Boortz.







WHY ARE LEFTISTS SO DEATHLY AFRAID OF SOCIAL SECURITY PRIVATIZATION?

Of all the reforms proposed by George Bush during his second term, nothing seems to cause Democrats to hyperventilate quite so much as his plans for Social Security. If you truly understand the collectivist and anti-individualistic mentality of the left this will come as no surprise.

Just what is Bush proposing? Is it truly as hideous and ugly as the Democrats portray it? Will it be the end of our country; the end of life as we know it in America. Hardly. Bush simply plans to allow "younger workers" (however that may be defined) to take some of the money that the government confiscates as Social Security payroll taxes and put that money in a private account. This account would be owned by the individual. Government can't take it away. If the individual dies before retirement the account goes to his family, not to the government. He earned that money. It's his. It remains his. What, pray tell, is so horrible about this idea?

For Democrats, the issue is control. There is a huge segment of our society that is or will be almost totally dependent on Social Security benefits when they reach retirement age. These people would be shocked to learn that they have absolutely no irrevocable right to any benefits at all. You get those benefits if the politicians want you to get those benefits. Politicians can, without any legal recourse on your part, decide to delay your retirement age. This idea is floated often as a solution to the coming Social Security economic crunch. The motive here is to delay the retirement age so that more old Americans will actually die before they can get any of their money back, or so that they'll collect benefits for a shorter period of time before they go Tango Uniform. That money, you see, isn't yours. Oh yeah ... you worked for it. But before you could even get your hands on it the government snatched it away. And, no again. That money is not resting safely in any Social Security account or trust fund.

When the politicians got their hands on that money they call a Social Security "contribution" they used a part of it to cover the checks there were writing that particular month to Social Security recipients. The rest of it? Gone. Spent. Every single penny of it has been spent. Not invested as a private pension plan would do. They spent it all. Squandered might be a better word.

You will hear Democrats say that we can't partially privatize Social Security because it would be too expensive. What they mean is that if the person who paid the money is actually allowed to put that money into a private account, that money won't be there for the government to spend on its various vote-buying programs. If our politicians had been doing what basic decency mandated all along .... taking Social Security tax and actually setting them aside in the names of future recipients ... there would be no problem with partial privatization today. But nooooooo. That money had to be spent. There were votes to buy and citizens to be made dependent on government handouts! You can't invest in the future of our retirees when there are elections to be won.

Here's an interesting little factoid you might enjoy. Virtually every State has some sort of law that regulates insurance companies. If some private entrepreneur moved to any State in the union and started marketing a retirement and disability plan modeled after Social Security he would be arrested and jailed. No state government would allow such a scheme to exist. It does exist though. It exists as Social Security and it exists because the Imperial Federal Government exercises a monopoly on the use of force. The money is seized from the working man by force, and benefits will be granted, increased, decreased, denied or delayed as the federal government -- or as the politicians see fit.

What in the world can possibly be wrong with allowing a person to actually own a part of their Social Security account? How does this hurt Democrats so badly? In general, Democrats and liberals are hurt whenever a citizen becomes financially independent. Democratic political power is built on a foundation of dependency on government. This dependency is then used as a weapon when elections roll around. Think back as far as you like, and you won't be able to remember one presidential election where Democrats didn't tell the voters that their opponents, the evil Republicans, were going to "destroy" Social Security. Now just how in the world are the Democrats going to be able to convince voters that the evil Republicans are going to take away their private accounts? Truth is, they can't. No more than they could convince voters that Republicans were going to take their checking accounts.

Individuality and independence are poison to collectivist politics. The Democrats must do all they can to prevent those who will depend on Social Security from ever enjoying a sense of independence.

"why is SS projected to spend its way through several trillion dollars in its trust fund over the next 40 years?"
because that's what it was designed to do. The changes in 1983 made it a 'pay-in-advance', not a 'pay-as-you-go' system. The SS fund was raided to allow for huge tax breaks for the wealthy. That's not a SS problem, that's a public policy issue.

"You are correct in that privitization by itself will not help this huge intermediate term cash flow problem that you don't seem to think exists. That is probably because it is not designed to do that. Long term it will certainly help since its returns could not possibly be worse than the current system. "
No, it won't help at all, it will make things worse. Funding the transition will cost between 1 and 2 trillion, by the Administration's own account. That's trillion, as in one-eighth of the total current deficit. It will not bring greater returns, because even if the hypothetical 'better returns' of the stock market transpire, they will be entirely consumed by the higher administrative fees. See my earlier posts.

"Keep in mind that if you want to remove the SS income ceiling, you are talking about increasing marginal tax rates on those earners by over 15%, counting the "employers" contribution. If you want to increase marginal tax rates from 36% to 51%, that is fine, but argue for it on its merits."
The merit is that it saves SS at a much much lower cost than any of the alternatives. It's one of a large number of alternatives, not the only possibility. Since the wealthy benefit more than the poor from the social stability of good government, it's not unreasonable to expect the wealthy to pay more for it.

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

Doug, no matter how I draw it to your attention, you refuse to address the huge negative cash flow projected over the next few decades. You have no way to finance that cash flow, so you pretend it doesn't exist. The flip side of the coin is pretending that moving to an economy with two workers per retiree is not a problem either.

Your statement about administrative fees is just drinking Koolaid. Funny, my S&P 500 fund operates at a fee for my individual account of a fraction of one percent. By your logic, individual investors do not make money on balance. That is just nonsense.

If you want to raise tax rates five times as much as Kerry or Clinton even dreamed of, fine, just say so. Wrapping a SS flag around serves only to obscure.

Lose the SS jargon, and just come out and say that you want to take us back to the tax policies we abandonned after Carter including 70% marginal tax rates. Debate the issue on those terms and justify those tax rates on the economy.

The changes in 1983 made it a 'pay-in-advance', not a 'pay-as-you-go' system. The SS fund was raided to allow for huge tax breaks for the wealthy. That's not a SS problem, that's a public policy issue.

B.S. Throught the 80's, 90's and 00's, every dime of FICA collected has gone right out the door to pay for social programs, defense, and pork. Furthermore, if there was a trust fund and it held, in cash, every dollar from every tax cut from 1983 forward it wouldn't pay SS benefits for six months. Either you are selling an agenda or you truly don't understand the numbers.


That's trillion, as in one-eighth of the total current deficit. It will not bring greater returns, because even if the hypothetical 'better returns' of the stock market transpire, they will be entirely consumed by the higher administrative fees. See my earlier posts.

A trillion is an eighth of the total debt. It is many times the current deficit. Can the world market absorb another trillion of US securities? I don't know. It could be a problem unless we cut spending in other areas.

Your earlier posts refer to Chile as an example of huge admin costs. I have no idea whether your numbers are correct, but you left out one detail - Chile's system works. Actual cash is accumulating and Chileans will be able to retire without relying on government handouts.

Since the wealthy benefit more than the poor from the social stability of good government, it's not unreasonable to expect the wealthy to pay more for it.

More B.S. Those who win trophies benefit more from triathlons than us BOPers so should they pay more? The benefits from Social Security are incredibly skewed toward lower incomes. I think that is how it should be and would favor means testing the wealthy out altogether. But the argument that the wealthy somehow benefit more from government handouts than those receiving them is a crock.

" pretend it doesn't exist. "
It doesn't exist. The numbers according to the CBO show that it doesn't..
http://www.cbpp.org/6-14-04bud.htm

"resolving this unfunded liability has a cost of only about 1% of GDP (in terms of permanent increases in payroll revenues or reduction in benefits) if action is taken now."
http://www.roubiniglobal.com/

"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."
http://www.nytimes.com/2004/12/07/opinion/07krugman.html?oref=login&pagewanted=print&position=

Can you provide any numbers ? I have, at every step of the argument. I haven't seen any numbers or research on your side, only fine sweeping generalizations.

Admin fees are projected to be 5c in the dollar, and that's by the optimistic estimate of this plan's boosters. That is 5%. No honest estimate of the equity advantage can overcome this - that is, the difference between a return on stocks in private accounts, and the return on federal bonds, cannot overcome the 5% penalty of administrative overheads on the private accounts. That's a fact. What's your number ?

In the end, my opinion on this is worth as much as yours, that is, asymptotically tending toward zero..
But luckily we don't have to rely on my opinion. We can use standard accounting practice and look at the numbers. The numbers show clearly both that there is not a crisis, and that the shortfall can be addressed in many ways, not limited to tax increases.

Can you provide an analysis that refutes the CBO's conclusions ?

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

I guess I am not making myself clear. The problem is not the trust fund. It doesn't exist anyway. I offered earlier to just give it a few trillion in bonds just to make you feel good about it. The problem is cash flow. What happens to the government cash flow when SS starts sucking out $200 billion plus per year or whatever the God awful number is? Again, this is the flip side of two workers per retiree.

We haven't even gotten to Medicare yet. That is situation is far worse, and has been compounded now with that stupid drug benefit.

You could shut down the Defense Department and zero out all other discretionary spending and still not cover the problem.

I see part of your problem. You have been reading Krugman. You won't get much enlightenment there.

Your 1% of GDP number is over $110 billion per year, in addition to the negative cash flow out of the "trust fund."

What moron would pay administrative fees of 5% per year? I can put stocks in my IRA with a fee of about $100 per year at the expensive shops and zero at the discount shops. Do you mean 5% over the lifetime of the account? That might make sense.

If you think that you can solve the problem by doubling and tripling the tax burden of high income earners, you are just kidding yourself. I think you know this, since you won't take me up on the offer to advocate this directly.

Doug, I have to admit I was wrong about Krugman. You can get enlightenment on SS from him. You just have to go back to 1996 to get it.

Here was his vision of the SS problem then. It was right then, and it is more right now. His opinion seems to have changed though, mostly because of the party controlling the Whitehouse I wager.

------

But aren't Social Security and Medicare basically pension funds, in whichworkers' contributions are invested to provide for their retirement?

Hardly. A private pension fund that planned to pay the benefits these programs promise would be accumulating huge reserves. In fact, the so-called "trustfunds" are making barely any provisions for the future.

.... the Federal Government... is in fact living utterly beyond its means. While the present generation of retirees is doing very nicely, the promises that are being made to those now working cannot be honored.

....to avert the crisis ahead.....slow the growth in benefit levels, gradually raise the retirement age, impose limits on expensive terminal medical care that prolongs life for only weeks or days and -- last but not least -- raise taxes moderately now, rather than massively later.

....Something is bound to give -- but what?

Will retired boomers -- who will have even more political clout than today's smallish population of retired voters -- be willing to accept a sharply reduced standard of living? That is hard to imagine.

Will younger voters be willing to accept huge increases in tax rates to support the boomers in the style they have been promised? That is equally hard to imagine.

Or will the Government try to square the circleby simply printing the money it needs, creating runaway inflation? Surely that is inconceivable. Yet one or more of these unthinkable things will happen, because something must.

Some additional reading:

Texans without SS

overhead costs:

conservative/liberal viewpoints on SS:

hidden disbursement/collection costs of SS:

I also have to question the 5% overhead costs, the only way I see that is if you are rolling the switching costs into the admin cost. Financial companies will be slavering to get there hands on this for less than .5%.

A safety net is essential but as a younger worker I would much rather have my money going into the market as opposed to what it's doing now, which is going out the window (from my perspective).

the 5% is according to official White House estimates. If you don't like it, tell them.

which part of the math did I get wrong ?
historical returns on stocks, approx 8%
ditto for federal bonds, approx 4%
costs for 'private accounts', approx 5%
returns on 'private accounts' = 8-5 = 3% or 1% less than current.

That doesn't even take into account the facts:
1. stocks are way riskier - your retirement could be wiped out by a dotcom bubble or similar
2. putting vast quantities of retirement monies into the stock market will change the market

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

I read the links you posted but didn't see which one said it would cost 5% and where they get that number. I may have missed it though, if you could repost the link I'm interested in it. If you read the links I posted, at least one of them says the management/overhead costs shouldn't be more than 0.4%. Written by economists as well. Another talks about the hidden costs of SS fund which drops the total return on that "fund."

You're math is right based on what you just posted, but like Art and someone else said before that's not a real 4% return on those federal bonds, the money is spent as soon as it walks in the door. If the bank (here the SS "fund") doesn't have the money to lend out to businesses that will pay interest rates higher than what the bank's fee costs (the theoretical 4% here), then the bank is losing money. Since the bank has been giving the money to its partners (pork policies and other typical govt spending) there's no "compounding interest (re:return) with the few exceptions of policies that generate additional tax revenues through business growth.

1 - true, which is why the fund would need age diversification levels at the very least to hedge risk for investors closer to retirement

2 - true, and I think having more capital available for the american industrial entrepreneurial spirit could help this country continue to be a leader in various technologies.

I agree there is a crisis of debt coming. I just don't believe it's a SS crisis. The only way out of the crisis is to raise taxes - now, preferably, since later will cost more - and reduce spending. I see no evidence that anyone in the administration has even acknowledged this yet.

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

[reply]Doug, I have to admit I was wrong about Krugman. You can get enlightenment on SS from him. You just have to go back to 1996 to get it.[/reply]

nice try. However, a careful reading of that column reveals that it is conflating SS and Medicare. No-one is disputing that Medicare is a huge problem. SS however is not. Krugman is reliable as always.

Also note that the solution in 1996 was the same as it is now -
" slow the growth in benefit levels, gradually raise the retirement age, impose limits on expensive terminal medical care that prolongs life for only weeks or days and -- last but not least -- raise taxes moderately now, rather than massively later. We need not dwell on their sensible proposals, however, because there is not the slightest prospect that they will be put into effect ."

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

Take a look at a little economic history Doug. In the 80's, Reagan cut tax rates from 70% down to 28%. Income tax revenue to the government nearly doubled during his tenure, despite the tax cuts. My point is that even that enormous tax cut had basically no affect on income tax revenues, which continued to grow at roughly historic rates.

What possible logic can you use to think that swinging the tax rate from 36% up to say, 70% again is going to increase revenue? I will wager that overall you might actually decrease revenue. I can guarantee you that you will receive less tax revenue from me at the higher rates.

Your tax increase will net the government pennies on the dollar compared to what you would project, if they will net anything at all.

I just can't get you past the dollars to the underlying reality of two workers per retiree. I did my best, but I give up now.

Doug, you are killing me. Your point now seems to be that the unfunded trillions for SS won't kill the economy, but the unfunded trillions for Medicare will. You are going to have to explain this one to me since they look like the same subsidy, funded by the same taxpayers with dollars that look pretty similar to each other.

I mostly agree with his solution of 1996, especially the raise the retirement age. That goes directly to the two workers per retiree problem. Too bad he doesn't think that way anymore now that there is a Republican in the Whitehouse.

"Take a look at a little economic history Doug. In the 80's, Reagan cut tax rates from 70% down to 28%. Income tax revenue to the government nearly doubled during his tenure, despite the tax cuts. "

I call BS on this one. Reagan raised taxes on the poor and middle class, that's why the revenue increased. No mystery there. Most of that tax increase came from the increase in payroll taxes, aka the SS tax, cf the 1983 commission on SS where Greenspan advocated the payroll tax increase.

Reduce taxes on the wealthy, raise them on the working class. It's always been the Republican way.

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

"Your point now seems to be that the unfunded trillions for SS won't kill the economy, but the unfunded trillions for Medicare will. "

Yes, that's right. The trillions for SS are a smaller number of trillions than those for Medicare, which you'd know if you'd been paying attention. Follow the arithmetic. The numbers are big but they are still numbers. Try. Please.

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

http://www.theonion.com/...p?issue=4048&n=1

"

WASHINGTON, DC—President Bush signed an ambitious Social Security plan into law Monday that will allow citizens to bet a third of their payroll taxes on their favorite sports teams.

Above: Three sports fans hope to win big benefits before their retirement next year.

"It's time we gave the American people the chance to make some real money for retirement," Bush said, speaking from the new Office of Social Security and Pari-mutuel Wagering Building. "Some naysayers think the average citizen doesn't know how to handle his own money. When spring training starts next year, it's up to you to prove them wrong."

"It's your money," Bush added. "You earned it. You should be able to bet it on whatever team you want."

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"It is a good feeling for old men who have begun to fear failure, any sort of failure, to set a schedule for exercise and stick to it. If an aging man can run a distance of three miles, for instance, he knows that whatever his other failures may be, he is not completely wasted away." Romain Gary, SI interview

I was quite specific that I was referring to income taxes, not SS taxes. By memory the income tax revenue went from around $500 billion per year up to over $900 billion per year after the tax rate cut. That growth rate about matches historic rates.

The SS tax increase is not included in these numbers.

Now there you go Doug. We were having a nice conversation and you have to ruin it all by being condescending and calling me stupid.

Can't you guys get a new playbook? This one is really worn out.