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September 16, 2006

Bush is going after Social Security again
Posted by Teresa at 08:10 AM * 48 comments

According to Josh Marshall, Bush is planning another attempt to abolish Social Security and replace it with “private accounts”.

I can’t do the subject justice right now, since I’m in a small hotel room with inadequate connectivity. Here are some short versions:

1. Social Security isn’t broken and doesn’t need fixing.

2. The story you’ve been hearing most of your life, about how Social Security is broken, or running out of money, and that there’ll be nothing left for you when you retire, IS A COMPLETE LIE. Spreading it has been the work of one of the creepiest and the longest continuously funded astroturf campaigns out there.

3. If “private accounts” were a sufficient way to guarantee that you don’t spend a short, miserable retirement eating cat food, Social Security would never have been invented.

4. Remember how when Bush first took the White House, we had a budget surplus, and he announced that that meant that taxes for the rich should be cut? And then, when the economy slumped and we had a budget shortfall, he announced that that meant that taxes for the rich should be cut? And now that those tax cuts and the cost of his war have driven the national debt to levels I frankly find terrifying, Bush thinks the answer is to cut taxes for the rich? Well, he’s like that about Social Security, too. No matter what happens, he thinks we ought to get rid of Social Security. He’ll lie like a carpet to get his way on this issue, just like he lied his way into an unjustified war with Iraq.

5. There are powerful and unendingly greedy forces out there that want to get their hands on the American worker’s retirement funds. They don’t care if you die poor and in misery.

6. Remember Enron? When their complex enormous fraud began to totter, management sold out of their own stock in the company, but left employees’ 401k retirement funds tied up in Enron stocks because it helped prop up the fraud a little longer. When Enron went down, it took their employees’ lifetime retirement savings with it.

The commercial financial market isn’t about protecting you. They’ll offer retirement savings plans, if they think they can make a profit on the deal; and as the price of doing business in that field, they’ll accept a certain amount of regulation aimed at keeping those investments reliable and safe. But for them, that’s a business consideration. Seeing that you have money when you retire is not their main mission. When the chips are down, they care no more about you than they care about any other investment.

Here’s the big difference: for rich people and rich corporations, investments are the extra money they gamble with. For most working citizens, the only real capital accumulations they manage in their lives are paying off the mortgages on their houses and saving for retirement. Big real-estate speculators can absorb the occasional deal that turns sour. We don’t gamble with our houses that way, because we live in them. The same goes for putting our central retirement funds into the commercial financial market. They don’t belong there. (Investing retirement funds over and above that basic amount is another matter. People can already do that, if they want.) Our basic retirement funds belong in Social Security, where they’re guaranteed by the U.S. Government.

It would not be a bad idea to write now to your elected representatives, and let them know that even trying to dismantle Social Security would be the biggest disaster of their unexpectedly curtailed political careers.

Comments on Bush is going after Social Security again:
#1 ::: Michael Weholt ::: (view all by) ::: September 16, 2006, 10:25 AM:

Hmm. I can't see to find the SocSec stuff at that Josh Marshall link...

#2 ::: Serge ::: (view all by) ::: September 16, 2006, 10:26 AM:

The Republican Party is NOT the friend of the People. Remember when they passed the Tax Payer Relief Act? That made it so complicated and lengthy to do my own taxes that I gave up and have had a pro deal with it since then. As for the Medicaid program, my staunchly Republican father-in-law recently realized what a disaster that turned out to be. Of course, I expect that, when the next Republican runs for President, he'll whisper sweet nothings into my in-law's ear and all will be forgotten.

#3 ::: Michael Weholt ::: (view all by) ::: September 16, 2006, 10:27 AM:

Ah. There is an "A" at the end of the link that shouldn't be there. Try this instead.

#4 ::: Edward Oleander ::: (view all by) ::: September 16, 2006, 10:30 AM:

The blame for any shortfalls in the Social Security fund falls squarely on the Republicans (or perhaps we should call them Republican'ts, as in can't let a successful social program just sit and BE successful). Republican-controlled Congresses have been stripping away (excuse me... "borrowing") the amazing surpluses generated by the program until the past decade. If they repaid those "loans" with even a modest interest rate, the fund would be fully funded ad infinitum.

The career bureaucrats who had started under Truman and risen through the ranks in the '50s fully understood the implications of the Baby Boom, and drafted regulations and influenced legislation to plan for the situation we have now. Then came Cowboy Ray-gun and his desire for some quick fixes to the deficits left over from the '73 Recession. The rest is history, with the current winners being short-thinking Robber Barons who think long-term planning is anything beyond the next quarterly earnings report. ...Sigh...

#5 ::: claire ::: (view all by) ::: September 16, 2006, 12:06 PM:

As one who is part of the last gasp of the Boomer wave I have caved in and just recently sent the dreaded AARP thing in. I am going to be one of those cranks with the pitchforks...


#6 ::: Lenny Bailes ::: (view all by) ::: September 16, 2006, 12:14 PM:

My impression was that Bush first got the bee in his bonnet over Social Security after visiting the Bureau of Public Debt, where he learned that the U.S. Government is obligated to make good on 400 billion dollars worth of Treasury Bonds -- money the Republicans had previously siphoned out of the Trust Fund.

Previous to that, he must have thought the money he was spending on the Iraq war (and not replenishing through taxes) was coming out of a magic hat. His response to the realization that the Federal Government needed to make good on the Treasury Bonds was typical:

"There is no trust fund, just IOUs that I saw firsthand, that future generations will pay," Bush said after inspecting the storage site. "Imagine – the retirement security for future generations is sitting in a filing cabinet."

His solution to that problem is similar to his approach to national security: deny reality, refuse responsibility for his own actions, attempt to neutralize the law, and embrace mystical Republican mumbo-jumbo (in this case: "Heh. Private security investment accounts, that's the ticket! Them stock brokers will take everyone's money and conjure it into paying off the Treasury debt.")

His belief that this will let him off the hook for cutting taxes and creating the Trust Fund debt is similar to his belief that waterboarding enough Muslim prisoners will allow him to avert future terrorist attacks.

#7 ::: Adam Lipkin ::: (view all by) ::: September 16, 2006, 12:34 PM:

for rich people and rich corporations, investments are the extra money they gamble with. For most working citizens, the only real capital accumulations they manage in their lives are paying off the mortgages on their houses and saving for retirement.

Actual quote from the September issue of Kiplinger's Personal Finance:

Q: Can I afford financial advice?
A: You don't have to be rich to get your questions answered. For a couple hundred dollars, you can find out whether you have the right investment mix or if you're saving enough for retirement. For $1000 to $2000, you can get more comprehensive advice.

I look forward to the day when I can afford to plop down a grand or two for financial advice. Because last I checked, having that sort of disposable cash is pretty damned close to what I'd call "rich."

(My subscription to Kiplinger's is free, incidentally, and worth every penny).

#8 ::: Adam Lipkin ::: (view all by) ::: September 16, 2006, 12:37 PM:


Stupid pre-caffeine failure on my part to read the preview page. I'd used BLOCK, instead of BLOCKQUOTE, but pretend that everything from "Q" to "comprehensive advice" is italicized.

#9 ::: Paula Lieberman ::: (view all by) ::: September 16, 2006, 12:39 PM:

AARP management all played catamite to the Schmuck regarding health care and drug company extortion.

AARP membership seems to have about as much influence on AARP lobbying as the membership of the Boston Computer Society did on the BCS Board of Directors' actions, which included dismantling BCS. What I think of the BCS Board of Directors' actions, would be intemperate even for me to leave an auditable record of.

#10 ::: Samantha Joy ::: (view all by) ::: September 16, 2006, 02:11 PM:

#6 - In that very same speech, the President repeatedly urged people to invest in a "conservative mix of bonds and stocks", even though Treasury bonds are the "IOUs [...] stacked in a filing cabinet" that he excoriated in the first part of the speech.

That's when I turned it off.

#11 ::: Bob Oldendorf ::: (view all by) ::: September 16, 2006, 02:42 PM:

They're playing a rhetorical shell game.

SS is NOT - most emphatically NOT - a retirement investment.
It's insurance. What part of "security" don't they understand?

IF you are part of the populace that can AFFORD to invest for your retirement, well good for you: you can afford to view SS not just as insurance, but also as a low-yielding investment.

If you are part of the the MAJORITY of the population, you need SS as an insurance against old age - AND against the possibility of disability.

The republicans are forever attempting to blur that distinction, AND to make people think that - because it's a sub-optimal retirement investment - that we should all be handing our SS deductions over to stockbrokers instead, for them to play with. (And, of course, for them to take commissions on.)

It's just crazy. A third of the country lacks a bank account, and the republicans assume that everyone is in a position to be making canny investments for their retirement. (Well, everyone who matters in the republican world, I guess.)

But why anyone who works for a living would ever support them has always been a complete mystery to me.

#12 ::: P J Evans ::: (view all by) ::: September 16, 2006, 03:10 PM:

Has anyone ever gotten Shrub to understand that IRAs are personal retirement accounts, or that most of us are going to be lucky if we can retire, let alone retire with a fat pension at 62, the way he will?

These are rhetorical questions, since he's so out of touch with our reality that if it bit him, he'd call out rubber bands and paper clips as WMD.

#13 ::: Lee ::: (view all by) ::: September 16, 2006, 03:15 PM:

This is a little off-topic, but I ran across this article while net-surfing, and I'd really like to hear P&T's take on it. To me, it sounds like a plausible answer to several questions that have been plaguing many of us, including "Why would anyone who works for a living ever vote for them?" and "Why do they think their marriages need 'protection' from gay people?"

#14 ::: Fragano Ledgister ::: (view all by) ::: September 16, 2006, 03:57 PM:

One of the things I emphasise to my American government students is that Social Security and Medicare payments are not taxes. Rather, they are forced savings which are returned with interest. If people think of Social Security as funded by a tax, they are more likely, I think, to be hostile to its preservation.

#15 ::: beth meacham ::: (view all by) ::: September 16, 2006, 03:57 PM:

I don't think it's a matter of Junior Evil understanding or not understanding the nature of Social Security. It's about all that money sitting there in T-Bills instead of being in the hands of his friends, where they can rake off fat commissions.

It's all about making the rich richer.

#16 ::: CaseyL ::: (view all by) ::: September 16, 2006, 05:09 PM:

"It's all about making the rich richer."

Remember the movie "A Big's Life"? The ants work hard to save up for the lean times, and every year the grasshoppers show up to steal it all.

The GOP is the grasshoppers. Every time the government does something that makes life a little easier for the "little people," the GOP sweeps in to confiscate what's been saved and give it to the upper 5%.

It really started in the 1980's. Beside the shift in taxation to the middle class, and the change in corporate governance laws that really shafted everyone for the benefit of the wealthy and well-connected, the 80's also saw the biggest theft of taxpayer dollars ever. That was the S&L "bailout" which ruined small banks and investors, but made sure the folks on top (including, particularly, Neil Bush) walked away with hundreds of millions of taxpayer dollars in their pockets.

Fast forward to 2000. The federal budget has been balanced (thanks in part to tax reform that restored upper-tier taxes), and is projected to run surpluses. Social Security and Medicare are reasonably assured of being fully-funded, thanks to the surpluses (remember Gore's "lockbox"?) AND - very important - thanks also to an increase in SocSec taxes, enacted at the urging of no less a person than Alan Greenspan, who says we have to build up the SocSec Reserve in anticipation of the coming demographic bulge.

So Social Security is funded to an unprecedented degree. The Trust Fund is worth maybe a couple trillion dollars - most of which will go to the working and middle class.

The GOP, which has hated SocSec since its inception, doesn't see the Trust as a promise made to ordinary Americans. The GOP doesn't even understand the concept of "a promise made to ordinary Americans." What the GOP sees is another opportunity for one hell of a sweet scam - one even bigger than the S&L bailout - and one the GOP (and its big-money supporters) feels damned well entitled to.

The entitlement is the big factor here. The GOP and its sponsors been thinking happy thoughts about getting their hands on all that money at least since Bush took office. They're almost cross-eyed with resentment that it isn't already in their pockets.

They came to power with a wish list. Tax cuts: check. Further relaxation of regulations and limits on corporate consolidation: check. Diversion of tax monies to cronies: check.

The diversion of the Social Security Trust to cronies is a big item on the wish list not checked off yet. And it's the biggest single item, the biggest single source of set-aside taxpayer money ever, and they haven't stripped it yet.

There's no way Bush will leave office and the GOP lose its single Party rule of the country before the Trust Fund is stolen.

If Congress stands firm (and it might), I wouldn't be at all surprised to see Bush try "privatizing" SocSec by executive fiat.

#17 ::: Lizzy L ::: (view all by) ::: September 16, 2006, 07:24 PM:

If Congress stands firm (and it might), I wouldn't be at all surprised to see Bush try "privatizing" SocSec by executive fiat.

CaseyL: you might be right, but I think if Bush did or tried to do that, there really might be some version of a revolution in this country. Remember, we vote for the House members, all of them, every two years. (All hail the Founders who put that in the Constitution!)

The thought of SocSec going away terrifies me, since I am one of those folks who is going to need it. (AND Medicare. But that's for another thread. Medicare is dangerously close to insolvent. Social Security is fixable.)

#18 ::: Marilee ::: (view all by) ::: September 16, 2006, 08:23 PM:

Claire, I refuse to join the AARP. They lobby about things which they don't ask the membership about.

#19 ::: Zander ::: (view all by) ::: September 16, 2006, 09:07 PM:

One of the main reasons for the existence of government is to protect the poor from the rich. Comes under "promote the general welfare." Clearly, the only sensible kind of government to vote for is one that does that. There are more poor people than rich people.

It's a mystery to me (or rather I wish it was) that the Republican Party even exists, let alone that it keeps getting voted in.

#20 ::: shadowsong ::: (view all by) ::: September 16, 2006, 09:41 PM:

it seems to me that many people want to think they're rich and well-off, which means they favor the republican party because that party helps out the people they want to be.

the republican party exists because the people it helps out are rich and have a lot of power, sure... but the reason they get voted into power is because of all the people who *want* to be rich and therefore act as if they were.

#21 ::: Greg London ::: (view all by) ::: September 16, 2006, 10:24 PM:

In this particular topic, Bush is a complete shill. The real force behind this is #5, the big investment companies that want to get their hands on your SS money, invest it, and scrape their commissions off the top.

#22 ::: Bob Oldendorf ::: (view all by) ::: September 16, 2006, 11:32 PM:

Greg London #21 The real force behind this is #5, the big investment companies that want to get their hands on your SS money, invest it, and scrape their commissions off the top.

Oh, it's even simpler than that:
When a trillion dollars of SS money gets dumped on the stock market, every single person who holds a stock portfolio today will see the value of their portfolio surge upwards.

The investor class, of course, includes at least 99% of Congress.
If they vote to privatize SS, they personally will be enriched.

Lee at #13, thanks for that article. This a similar explanation of red/blue morality, from a psychologist's perspective: Jonathan Haidt interview

#23 ::: Lizzy L ::: (view all by) ::: September 17, 2006, 12:00 AM:

Lee @ 13: thank you for that link; very thoughtful and interesting.

#24 ::: Mark DF ::: (view all by) ::: September 17, 2006, 12:43 AM:

I'm continually amazed that they can actually sell the idea of "private retirement accounts" as a good thing. At the risk of generalizing, I think most people don't have the first clue about investing. I am fortunate to have a private retirement account. It's funded by a windfall from an old job. It's professionally managed by a major investment institution, which I switched to five years ago. I switched because prior to that the equally major investment institution I was using managed to lose 40% of it. I'm still not back to the level the fund was at over ten years ago. Where would I be if this happened when I was retired and had to live off it? At that point, how much time could I afford to wait for it to bounce back---while I'm drawing down on it? If this were my only retirement option, I would freak out.

#25 ::: Bob Oldendorf ::: (view all by) ::: September 17, 2006, 02:57 AM:

Mark DF: At the risk of generalizing, I think most people don't have the first clue about investing.

I'd say that's fair. For one thing, exactly half of investors do worse than average. In George Bush's Social Security-free world, you can be sure that the underperforming portfolios won't be those of the rich.

More to the point:
One American household in eight does not have a checkbook.
One American household in ten does not have any sort of bank account.

George Bush thinks they should be putting their SS money into a "private retirement account" - that is, the most pressing need they have is to get a better return on their retirement investments.

The man has never given any thought at all to the actual needs of the most vulnerable Americans. He insults them every time he talks about the subject.

#26 ::: TomB ::: (view all by) ::: September 17, 2006, 03:57 AM:

Old age and disability insurance is a good idea even if everyone saved for their retirement, because we never know how long we're going to live. Social Security allows us to make reasonable plans for our retirement and not fear that we might live longer than we expected.

#27 ::: Joe Crow ::: (view all by) ::: September 17, 2006, 04:29 AM:

One of the main reasons for the existence of government is to protect the poor from the rich. Comes under "promote the general welfare." Clearly, the only sensible kind of government to vote for is one that does that. There are more poor people than rich people.

That's a fairly optimistic view of the nature of government. See, from my perspective, government exists primarily to protect the rich from the poor, and to protect the rich from each other. Yeah, occasionally enough of the poor will get their shit together to potentially threaten the rich and then some of the rich will use the government to slap some sense into their fellow rich folks and convince them to throw a few more crusts over the railings to pacify the poor folks standing outside with pitchforks and torches. It even usually works (see FDR and Bizmarck), but the rich have short memories, and within a few generations the whole thing starts over again. We're just in one of those periods where the rich folks have forgotten what a rampaging mob of starving peasants looks like, and not enough of the poor folks remember where the pitchforks and torches are.

See, poor folks generally don't vote, and if they do, they generally vote how they've been taught to. Middle class folks (the few that are left) vote with their aspirations, not their class awareness, because they've been taught pretty carefully to ignore any sense of class awareness. Rich folks vote with their wallets and their donations. That's why we still have voting. Because it doesn't change much, and what it does change is within very carefully limited parameters. And it allows the rich to point at the results and say "Well, you voted for this, it must be what you want, right? Quitcherbitchen, prole."

But, y'know, I'm an anarchist, so I'm probably a bit biased.

#28 ::: Martyn Taylor ::: (view all by) ::: September 17, 2006, 05:41 AM:

Just a thought. Have you ever noticed that you never see Mr Bush in the same room as Baroness Thatcher?

Think about it. You can't have our real queen so we've given you the mad woman who thought SHE was queen. She, too, believed that only rich people like her/him paid taxes and that taxation was therefore wrong.

Have a look at your last pay slip/tax assessment to see whether s/he was right.

As a philosophical argument this is known as 'generalising from the particular' - assuming that your personal experience is universal. It happens a lot. Even us good, intelligent, informed guys do it, and it is (almost) always wrong. It is definitely a very insecure foundation for a national policy on anything.

A national system of SS is more efficient and cheaper than any system of private arrangements. It also does not put nearly as much money into the wallets of self selected advisers.

You really want to WHY s/he wants it abolished? Read that last sentence carefully.

#29 ::: Nancy Lebovitz ::: (view all by) ::: September 17, 2006, 01:00 PM:

You're contrasting an absolutely secure Social Security with uncertain individual investments, but Social Security is maintained (or not) by a series of human decisions. This isn't a matter of government being Just Awful, it's that it's made of people--just like businesses or families or charities.

I don't know what the best method is for the most people (including the most poor people) to have secure old ages, but piling up 15% of almost everyone's income in one place where it can be conveniently stolen isn't the obvious longterm winner.

#30 ::: Randolph Fritz ::: (view all by) ::: September 17, 2006, 01:53 PM:

Nancy, the same government that protects (or doesn't protect) social security protects (or doesn't protect) the financial system. Historically, social security has been better protected than the financial system and it's not too difficult to see why--there are a lot more voters directly involved with the social security system.

I can't quite you think that SS "[piles] up 15% of almost everyone's income in one place"? Because that's not so.

#31 ::: Bruce E. Durocher II ::: (view all by) ::: September 17, 2006, 02:44 PM:

Martyn Taylor:

Just a thought. Have you ever noticed that you never see Mr Bush in the same room as Baroness Thatcher?

I assumed it was because Thatcher had some standards...

#32 ::: fidelio ::: (view all by) ::: September 17, 2006, 03:15 PM:

A few weeks ago, I saw my financial adviser, also known as my brother-in-law the stock broker. While admiring my high mobile great-niece (his granddaughter), we also talked briefly about the new investment options my 401k offers, and he gave me his perspective on both Social Security and retirement savings generally. In a nutshell, the safest retirement investment is an annuity--returns are limited, but are guaranteed. From his perspective, Social Security is an annuity with some advantages over one from an insurance company--the overhead (for salaries and other compensation for its employees, advertising, and other administrative costs) is much lower (if you don't believe that, compare the salaries for the people involved, starting at the very top) and a couple of drawbacks, these being that you can't voluntarily change the amount you allocate (preferably to increase it) and the whole thing is vulnerable politically, which is sometimes of less concern than it is at others.
His reaction to the suggestion of converting Social Security into private accounts uses language unfit for his granddaughter's tender ears--especially since she's at the parrot stage.

One of things we need to remember about the attitude of earlier generations toward the Social Security program is that it was set up by people who had seen good planning and careful saving comme to naught in the Great Depression--not just for a few people, but for hundreds of thousands. The people who worked to carry it forward to our time either shared that experience, or had been raised by people who had also vivid memories of that failure of planning and saving. There are, no doubt, people who could invest the same amount of money more profitably, just as there are those who wouldn't bother to make any effort to save at all. Social Security is supposed to be there as a guaranteed basic annuity for all participants--whether retired or disabled--and to provide for dependents and survivors. We need to keep the image of the basic annuity in mind when we look at it, I think, because it makes it easier to evaluate how well the whole thing functions, and what changes and adjustments might be required to keep it as that basic, reliable annuity.

#33 ::: Lizzy L ::: (view all by) ::: September 17, 2006, 04:00 PM:

One would think -- this one thinks, anyway -- that having lived through the dotcom bust, most Americans between the ages of say, 25 and 60 would be a trifle wary of handing Social Security to the folks who gave us and all those nifty and creative companies which have disappeared so completely that I cannot even remember their names.

The folks who remember the Great Depression, if they're still handling their own finances, are looking for their pitchforks and torches...

#34 ::: TomB ::: (view all by) ::: September 17, 2006, 10:48 PM:

The sock-puppets think it would be wonderful to bring back

#35 ::: j h woodyatt ::: (view all by) ::: September 18, 2006, 01:13 AM:

Teresa writes: "When Enron went down, it took their employees' lifetime retirement savings with it."

This is not entirely true. While many of my coworkers were invested totally in Enron and were wiped out when the company cratered. Some of us were not complete idiots. The only thing I lost was the otherwise completely ephemeral "value" represented in my employee incentive stock options (and related instruments) that were never above water when they were vested in the first place. None of that was in my 401K account.

I left Enron in May 2001 and rolled pretty much my entire 401K, including the matching funds, into an independent IRA. Of course, I was one of the annoying gits in the employee meetings who openly laughed out loud when the HR people talked about the option to keep our 401K money entirely in Enron shares. There were probably a lot of other organizations who didn't have a cynical bastard who would do that, and I suspect that's how so many Enron employees got fished in.

May 2001 was long before the actual crash event sequence, but the insider trading had been in the public record for months. I'm not a super genius (as checking out my comment history here will no doubt reveal), yet I somehow escaped the scenario Teresa describes. I would have been very badly damaged if I had voluntarily let the Enron crooks gamble away my 401K money. It didn't have to happen to everybody. The people who did see their 401K accounts eviscerated were not entirely blameless— much like a lot of people currently upside-down on their option-ARM, interest-only home mortgages on waterfront condos in San Diego are not entirely innocent.

All that said, Teresa's points are exactly spot on. The only other thing I would add is that the astroturf campaign to convince us that SS won't be there when my generation retires has been so successful that it has an aspect of self-fulfilling prophecy to it: some of us believe that SS won't be there when we retire, not because it's broke, or because the debt is unsustainable, but because the opponents of the SS program will eventually succeed at the 70-year political campaign to do away with it.

Remembering Enron is good advice, but it's more subtle than that. Unlike with the Enron scenario, people who voluntarily shift their retirement funds into "private" accounts will actually be contributing to the instability of the Social Security system that those who don't make that shift are relying upon.

#36 ::: Meg Thornton ::: (view all by) ::: September 18, 2006, 03:14 AM:

This scares me. It scares me because the Garden Gnome in the Lodge we have as Prime Minister is likely to try and drag Australia along behind the US. He's already working on our unemployment benefit system (he's got a bit further to go before the unemployed have six weeks to find either a new job, or a reliable paper route) and on our medical system. If he can dismantle things like superannuation and/or the age pension, he'll be laughing.

The rest of us, however, will be asking silly questions like "how much does it cost to emigrate to Vietnam these days?"

#37 ::: Seth Gordon ::: (view all by) ::: September 18, 2006, 11:11 AM:

Social Security is an annuity with some advantages over one from an insurance company

Don't forget that Social Security returns are indexed for inflation, while annuities, as far as I know, are not. If you remember the 18% inflation of the seventies and the dot-com bust....

#38 ::: Marilee ::: (view all by) ::: September 19, 2006, 03:23 AM:

Seth, my SS COLAs almost never pay for the increase in the Medicare premiums, much less anything else. I'm not on a fixed income; I'm on a decreasing one.

#39 ::: Tully ::: (view all by) ::: September 19, 2006, 09:07 PM:

SS isn't insurance. And it isn't an investment. It's a pay-go entitlement program which is also a partial social safety net. One in which (mostly due to demographics) the promises made by the politicians will eventually exceed the funding available. The blame for that runs clear back to FDR, and absolutely everyone gets a share.

"Privatization" options formed two of the three options submitted to Clinton in 1997 by his own commission. The first bill to incorporate private accounts into the SS system was introduced into the Senate in 1998 by that arch-conservative Daniel Patrick Moynihan. It was essentially the same as the Bush proposal.

SS isn't broken, but unless the financing shortfalls of the system are addressed it will require future tax increases, benefit cuts, additional borrowing, or some combination thereof to maintain solvency. The correct financial assessment tool for reform proposals is a straight Net Present Value (NPV) valuation. How do you maintain the safety net while not increasing the liabilities?

For a real nightmare, take a close look at Medicare financing and health care cost trends. The disability insurance program is in cash-flow deficit NOW, and Medicare Part A is on the brink. Drawing down on "trust funds" does not change the source of the funds--general revenues.

The politicians (ALL of them) exaggerate the issue for their own purposes. One simple fact to consider is that "loaning" money to yourself is just creating more political promises, without supplying the means to fulfill them. The "trust funds" are an accounting fiction. The money to pay ALL benefits in ALL of the programs ultimately comes from general revenues. Money to pay shortfalls in current program revenue can ONLY come from future tax increases, benefit cuts, additional borrowing, or some combination thereof. That's the bottom line, regardless of your party or politics. We oughta spend less time pointing fingers and more working on an applied reform.

#40 ::: Jean ::: (view all by) ::: September 25, 2007, 03:32 PM:

Why do they kept saying that there are not enough children to pay our social security when they are more children in scholls now than ever.

#41 ::: P J Evans ::: (view all by) ::: September 25, 2007, 03:37 PM:

Jean - if they're in school, they're not paying into SS. It's future payers they're looking at.

#42 ::: Jean ::: (view all by) ::: September 25, 2007, 03:41 PM:

Well soon they will be out and paying in to the system.

#43 ::: Jose ::: (view all by) ::: February 09, 2008, 11:27 PM:

Social Security is administered by the Federal Government-Employers pay 50%-Employees pay 50%-Bush's plan was to give everyone the choice to take 5% of your social security invested funds (For every $100.00 in earned income the 5% comes out to be approximately 35 cents).When someone dies and their childred are over 25 years old and not disabled, all the money you put into the Social Security system stays in the system and nothing is left for your heirs. Social Security earns approximately 1.5% rate of return on your savings.If you opted to invest 5% of your Social Security yourself, don't you think you could get a better rate than 1.5%, and when you die you would have something to leave to your childred.This is basic economics, something that is not taught in school.

#44 ::: Serge wonders about the childred ::: (view all by) ::: February 10, 2008, 12:24 AM:

When someone dies and their childred are over 25 years old and not disabled

"The Childred" sounds like the title of a Roger Corman movie.

#45 ::: Terry Karney ::: (view all by) ::: February 10, 2008, 12:31 AM:

Jose: No, he was allowing them to remove 33 percent (the present contribution is 12 percentage points, he would have allowed them to sequester four of those 12).

So that's a little more drastic.

As Krugman points out, there is a blatant shell game: 1/3rd of the present income goes away. But the present expenses don't drop.

Second, if the market does so poorly that the SSA can't keep up, then the private players aren't going to make those huge returns.

If the market does that well, the increase all levels of income will more than fund SS, and there's no need to change it.

If you take fees, taxes (on capital gains; or the higher rate at tax-deferred) and the risk, the odds are the SSA will be a better bet.

But it was a nice troll of talking points in a long dead thread.

#46 ::: Serge ::: (view all by) ::: February 10, 2008, 12:42 AM:

Terry Karney @ 45... One of my guiding principles in life is that, if a Republican politician says something is going to be good for me, I'd better check for bear traps in my shoes. Remember the Tax Payer Relief Act? Up to then, I had always done our own tax returns myself. Then the TPR happened and a section of the calcs that used to take 5 minutes used up a whole day of my life and left me with a headache, jsut so that I could save $5. As I had no wish to go thru that again, ever since I've had a professional take care of everything. And I pay him over $300 to do it.

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