Social Security!

“dayhiker....thanks for your explanation.
It sounds like fun...I'll consider it. Between the kids schedule, grad school and all it might be too much.

Drama? Yeah....it seems so.”

“New article on latest blitz from the White House...

http://money.cnn.com/2005/01/04/news/economy/social_security/index.htm”

“first place I wouldn't believe Sen Frist. He ran on a platform for which he has failed to live up to.

Don't people realize that you should be saving anyway and not depending on SS to live on when you retire or try to retire”

“The Washington Post has a good article that explains the wage indexing/cost of living indexing biz that pedxing asked about earlier: Bush Plan Likely to Cut Initial Benefits”

“As atrios points out:

"It isn't just the initial level of Social Security benefits upon retirement which are determined by the wage index. The wage index is also what determines the income cap which sets the maximum income level upon which SS taxes are levied.

Cutting the rise in benefits without cutting the rise in the income cap is just another way to tax people of moderate incomes to pay for the tax cuts for the wealthy."”

“Unfortunately many people do NOT know that they should be saving on their own - and then cry that SS isn't supporting their lavish spend-spend lifestyle they had their whole lives (because they didn't save so had more money than they should have).

Its funny that Bush is about to try to convince everyone that there is a massive doom and gloom scenario ahead - and then the real truth is shown in the last 3 paragraphs of the article I posted:

"Many Democrats have said they think the White House is overstating the crisis in order to sell a long-standing GOP proposal, diverting some of the system into the private sector.

They note that the Social Security Trustees estimate the system may go into the red in little more than a decade, but it won't deplete its reserves until 2042, and even then recipients would still get 73 percent of the current benefit level.

A separate Congressional Budget Office analysis puts the date for the depletion of reserves at 2052, and says payouts after that would be 81 percent of the promised level."

So, no doom and gloom. Here we go again, Bush about to pull the covers over everyone's eyes again. I'm in favor of diverting a little of my money into a private retirement fund, but not at the expense of gutting the rest of the "functioning-just-fine-thank-you" system.”

“I would be saving money, if only I had a job. Thank you ekonomy.

(Sorry, had a really bad morning.)”

“The reason for the 10 year difference between the SS Trustees and the CBO is that the Trustees predicted more conservative economic growth. If the economy grows slowly, the stock market will stink and returns on private accounts will too. If the economy grows rubustly enough to generate the kinds of returns that the privatizers trumpet, there will be no SS shortfall for another 75 years, if ever.”

“Here's a good, in depth article about SS from The Economists’ Voice:
Confusions about Social Security”

“I saw where the AARP is finally wading into this.

Recall how everyone else was accused of fearmongering when they said the Republicans would attempt to privatize Social Security... at least partially... and how they denied it time and again.”

“Once again reading comprehension appears to be a problem. Isn’t it true that people hear what they want to hear?

I didn’t say you COULDN’T come JO. I have no control over that. Come on along, I’d love to run into you. About as much as I'd love to run into Charlie Manson.



A Tale of 2 Systems
By DAVID BROOKS

Published: January 4, 2005


Over the past 50 years, we've been having a big debate over two rival economic systems. Conservatives have tended to favor the American model, with smaller government and lower taxes, but less social support. Liberals have supported programs that lead to the European model, with bigger government, more generous support and less inequality.

I wonder if that debate is about to change. In the next few decades both models are going to confront a big test: aging populations. The U.S. model is going to be challenged by this problem, but the European model is flat-out unsustainable.

Populations in the U.S. and Europe are both aging, but Europe is aging faster. According to the O.E.C.D., the dependency ratio - defined as the number of people over 65 as a percentage of the number of people 20 to 64 years old - will rise to 37 percent from 22 percent in the United States by 2050. But it will go up to 52 percent from 26 percent in the European Union.

In addition, European public pensions are more generous and retirees are more reliant on them. To sustain these programs, European government spending will have to rise. According to the European Commission, demographic trends will push public spending up by five to eight percentage points of G.D.P. in the E.U.'s 15 richest members. In Germany, public spending on pensions will rise from an already huge level, 10.3 percent of G.D.P., to 15.4 percent by 2040. And that's after recent benefit cuts.

To pay for all of this, taxes will rise and public debt will increase. A Standard & Poor's survey predicts that France and Germany could see their public debt grow to more than 200 percent of G.D.P. by 2050.

Europe may find itself locked into a vicious circle: an aging population means more public spending, which means higher taxes, which means lower growth, which means higher unemployment, which means more public spending, which means more taxes and even lower growth.

The former Dutch prime minister, Wim Kok, recently released a scathing report that found that "the pure impact of aging populations will be to reduce the potential growth rate of the E.U. from the present rate, of 2 percent to 2.25 percent, to around 1.25 percent by 2040."

Already, high European taxes make the European model look obsolete. European and U.S. workers are about equally productive per hour worked. But Americans work 50 percent more than Germans, French and Italians. In the 1970's, Western Europeans actually worked more than Americans. But as taxes rose and incentives to work diminished, Europeans cut back their hours or dropped out of the labor force.

Some economists, like the Nobel laureate Edward Prescott, believe higher tax rates explain the drop in work. Others believe cultural preferences also played a big role. Either way, high taxes have made Europe less productive just as it needs high output to support its retirees.

Partly as a result, European economies have underperformed for a generation now. As Olaf Gersemann has pointed out, the U.S. economy has enjoyed an annual real growth rate of 2.9 percent over the past 25 years. That's 55 percent more than western Germany, 48 percent more than France and 39 percent more than the E.U. as a whole. Back in the 1970's, European standards of living were catching up to U.S. standards. Now American G.D.P. per capita is about 30 percent higher than Europe's and the gap, if anything, is getting wider.

Which brings us to the current moment. In Europe, everybody is aware of the problem, but the remedies are so bad that most countries avoid them. Meanwhile, we in the United States are embarking on our own debate over the future of Social Security. Many liberals are claiming that we don't need to fundamentally revamp our system because there is no crisis. To the extent that's true, it is because we have not been taking their advice for the past 50 years.

We have stuck with a low-tax, high-growth economic model. This gives us the resources and the flexibility to deal with the problems caused by an aging population without having to face, at least for now, the horrific choices that confront our friends across the Atlantic.

The question is: Will we leave our children a system as flexible, dynamic and productive as the one that was, fortunately, left to us? Or, by doing nothing, will we succumb to the same ineluctable pressures that now afflict Europe, and find that we are immobilized at the exact moment China and India are passing us by?”

“S.S. needs to be fixed.

Problem is that a Bush solution will probably be like Jeb's solution for the teacher's pensions in Florida.

He'll give $300 million of the money to Enron, lose his ass, then raise the money by taking tax money out of other accounts.”

“My dad is a pretty low spender, but he is able to live off social security and a very small pension. He doesn't touch any of his 401k or IRA money. In fact, he saves money.

If you have a paid off house and health insurance, social security does a pretty good job.

And I'd have to say that there is a pretty big constituency on this issue for the status quo. I don't think that older people will want Bush to mess with social security at all, even if the changes impact young people.

I think this will be like the Clintons on health care. Bush will pay a heavy price on this issue.”

“When SS was started the average person was anticipated to use the system for les then 14 years. The average now is 20-25 (with spousal benefits). If the retirement age were 69 before ANYONE could draw the problems we have wouldnt be(no need to change any contribution structure). As of now a plurality of people are retired for about 1/3 of their lives. The system wasnt designed as such.

SOURCE: NPR show talk of the nation yesterday, a former SS head I believe.”

“1/3 should be 1/4”

“True birch, but as I pointed out, there really isn't a problem. YES, payouts will be reduced for people currently in their 20's and 30's (to be in their 70's and 80's then). But only by 20-30% and only until the baby boomers die off. And this age group is already saving far more for retirement than older generations ever did, so the loss of SS won't hurt much, or at all. The small percentage of people who must rely on SS would need a boost for 20 years and that's the only "reform" that is needed. After 20 years the system will pick up and things will go back to normal.”

“There was an interesting panel on C-SPAN Friday -- they replayed it over the weekend -- that for the most part reinforced the Bush flim-flam aspect of all this, the Price vs. Wage Indexing angle and other issues already mentioned here.

Kenneth Apfel

Henry J. Aaron

Robert Greenstein


They recommended the report Uncharted Waters: Paying Benefits From Individual Accounts In Federal Retirement Policy, to be released by the National Academy of Social Insurance on the 26th. Be on the lookout for the National Press Club event to be aired on C-SPAN.

Other plans were mentioned as being not nearly as draconian as the current Bush offering. Among them, Robert Ball's plan and the Diamond-Orszag plan

Henry Aaron said that the brokerage industry, currently lobbying for the perceived windfall, ought to be careful what they wish for. What may well result from this could be millions of very small accounts with limitations on fees (to avoid the sort of scandal they had in Britain): an administrative nightmare with small returns.

Also recall that the Medicare problem is said to be twice as large and more imminent, thanks in part to the Bush drug plan. The hospital 'trust fund' could reach insolvency as early as 2019.


Regarding the tall tales being spun by the proponents about "The Impending Crisis," (sic) one panel member whipped out the classic quote from Daniel Patrick Moynihan:

"Everybody is entitled to their own opinion,
but nobody is entitled to his own facts."
”

“<bump>”

“"bump the la-la, bump it all night..." - Kix”

“Social Security FAQ

Read the amazing original 1983 plan for the Privatization of Social Security, written by Cato/Heritage.

Who\'s saving? Who\'s borrowing?
Savings is good for growing the economy; government borrowing slows it down. Social Security is saving, but that savings is being more than wiped away by the growing federal debt. That\'s the problem.


Is the Trust Fund safe? Not really. It is backed by government bonds, but the conservative Heritage Foundation claims it is not safe, because with the huge deficit, the (Republican?) Congress is unlikely to pay it back. See who has created the deficits.
Ironically, private accounts would run down the Social Security Trust much faster. In fact the so-called \"crises\" when interest it first needed from the Trust would occur immediately. Explanation of graph.






Why is Social Security important?
Social Security provides most of the elderly with their major source of income. For 20%, it\'s their only source of income. It also supports children who have lost a parent and provides most workers with their only source of long-term disability income (more info).


When will Social Security run into trouble?
Privatizers say 2018, but that\'s when Social Security has the most savings—over $3 trillion. The Social Security Administration says 2042. CBO says 2052. (more info)


How Much Trouble?
The Trust Fund could run out in 2042, but Social Security will still have all its FICA income and be able to pay retirees more in real dollars than it pays them now—just not as much as the higher level they are now promised. That\'s if we do nothing to fix if for 38 years.


But won\'t private accounts pay us much more?
No. Here\'s what the led privatizer economist on Bush\'s commission said: \"Many advocates of social security privatization argue that rates of return under a defined contribution individual account system would be much higher for all than they are under the current social security system. This claim is false.\" —Olivia S. Mitchell


Why can\'t I get more from Social Security?
Social Security has a large debt from the past. Current revenue must pay that past debt. Starting in 1940, Social Security paid more to those who retired after the Great Depression than they had contributed. In effect they received a high rate of interest. Then it also paid more to those who lived through the depression and World War II. Without this, millions would have retired in poverty.
Now Social Security must partially pay back those who funded those who came before. The only way to avoid this would be to cancel benefits that have already been paid for from the pay checks of today\'s workers and retirees. Private accounts won\'t be the great deal they are claimed to be, unless we cancel benefits already paid for. And that\'s what the privatizers are talking about when they say Congress and the President won\'t honor the Trust Fund.


http://zfacts.com/p/784.html”

“Here's a good editorial from the Star Tribune about Dubya's SS snow job.



Of all the lies -- let's call them by their right name -- that the Bush administration is spreading about Social Security, none is as vile as the canard Bush repeated last Tuesday, when he said, "African-American males die sooner than other males do, which means the [Social Security] system is inherently unfair to a certain group of people. And that needs to be fixed." That is an entirely phony assertion; it has been debunked by the Social Security Administration, by the Government Accountability Office and by other experts. Bush and those around him know that. For them to repeat what they know to be a blatant lie is despicable fear-mongering.

Bush didn't make up this phony line on his own; it comes from the Heritage Foundation, which a number of years ago did a study purporting to show that because African-Americans have a shorter life expectancy than whites, they get less in return for the taxes they pay into the Social Security system.

But when the Heritage study was examined by actuaries at the Social Security Administration and by the Government Accountability Office, serious methodological flaws and numerous bad assumptions were uncovered. For example:

• Heritage failed to factor in the progressivity of Social Security benefits; on a taxes-paid to benefits-received ratio, those with lower incomes get more back. Blacks tend to earn less than whites, and thus their Social Security benefits are larger in comparison to taxes they pay.

• Social Security is more than retirement benefits. It also includes survivor and disability benefits. Blacks benefit disproportionately from those programs. While blacks are 11 percent of the workforce, for example, they are 18 percent of those receiving disability benefits. Almost half the blacks receiving Social Security -- 47 percent -- are getting disability benefits or survivor benefits.

The Social Security actuaries found that Heritage had exaggerated substantially the amount blacks pay in Social Security taxes and low-balled the benefits they receive. "In fact," the actuaries said, "results from more careful research reflecting actual work histories for workers by race indicate that the non-white population actually enjoys the same or better expected rates of return from Social Security than for the white population."

The GAO reached the same conclusion. It said that, "In the aggregate, blacks and Hispanics have higher disability rates and lower lifetime earnings, and thus receive greater benefits relative to taxes [paid] than whites."

While Bush didn't mention Hispanics, he probably will, as Heritage did, with similarly misleading results. Both the GAO and Social Security actuaries found Hispanics, too, in the aggregate, benefit more than whites from the Social Security system. Hispanics actually live longer than whites, and thus the mechanism that links their future benefits to inflation (which the Bush administration wants to undo) is particularly important. Currently, as Hispanics grow older, Social Security makes up a more and more important element of their income.

Social Security is a complex program, so it's easy to tell outright lies or make misleading statements about it with little fear of contradiction from the general public. All Americans should be on notice that the Bush administration, in its drive to start dismantling Social Security, isn't telling the truth on several fronts.

The system is not in crisis; it has money to last for about the next half century, and even then, if nothing is done the required benefit cuts would still leave retirees better off than those getting benefits today. Pay close attention to this debate, and don't get snookered. The crisis in Social Security is no more real than the "crisis" that led the United States to war in Iraq.”

“Good opinion piece. I've said it before in this thread and I'll say it again - there is no crisis. The author has it right.

Even when the system "runs out of money" it will still be able to pay out about 70% of the expected payout from the current work force paying in. And that payout will be to a generation that actually saved for retirement (unlike most of the current generation), so the hit won't mean much except for the small percentage that must rely on SS for retirement. That is the only area that warrants an addendum of some sort.”

“"I don't really see what the big deal is about this. No one's existing benefits would be cut. If ya go talk to a financial planner of any skill level and compare what you can do with a balanced, diversified plan using the money that goes into SS and then compare it to the outcome SS would now provide it's clear we can make our money work better under our own control than the government can.

Or am I missing something?”

Nigal
12:06:45 PM
2/01/05



What does George mean when he says no benefits will be cut for current beneficiaries or those "near" retirement? No one really knows.

If the economy grows as much as the Soc-Sec Crisis crowd says it will, to get those advertised returns, the 'Crisis' they're trying to peddle disappears. Instead of needing more cash to eventually meet 100% of the outstanding obligations after 2042 (or 2052 according to CBO), the shortfall is pushed even further into the future.

If the economy fails to perform, the private accounts won't see those gains either.


I don't have all of my notes in front of me, but there's been LOTS of discussion about this on C-SPAN lately, from every angle... and from all points along the political spectrum.”

““What does George mean when he says no benefits will be cut for current beneficiaries or those "near" retirement? No one really knows.”

It seems to mean that benefits would not be cut for those already getting SS and those up to a certain point.

”If the economy grows as much as the Soc-Sec Crisis crowd says it will, to get those advertised returns, the 'Crisis' they're trying to peddle disappears. Instead of needing more cash to eventually meet 100% of the outstanding obligations after 2042 (or 2052 according to CBO), the shortfall is pushed even further into the future.

If the economy fails to perform, the private accounts won't see those gains either.”

Even at a modest gain it would still be greater than the returns from SS, would it not? I mean, we aren’t even going to get the full amount back that we put into SS will we? Do we even gain interest on our SS funds we put in? Just from what I know diversification is the key because when the market goes down the bonds go up. When the bonds go down the market goes up. It would seem the only thing that could jeopardize a private account would be a full blown collapse of the economy and in that case it really wouldn’t matter cause we’d all be screwed anyhow. And the likelihood of a total collapse is slim. Would not the extra flow of the private funds being poured into the market not serve to actually strengthen the market and economy?

I know, it’s a lot of questions.”

“I would like to know where it leaves someone my age...”

“Anything would be a greater return than SS. SS is there as insurance, NOT a retirement fund. The majority are supposed to rely on their own means for retirement, and anything from SS is just gravy on the top. Keep in mind that SS is also insurance in case you are disabled upon birth or later in life, or if your spouse dies and you relied on them for financial support.

Like life insurance, you don't really want to get any money back. It is insurance.”

““I would like to know where it leaves someone my age...”

”

“I am not talking about relying on the check for sole income. What I am saying is that, when I retire, I am supposed to get a certain amount of money monthly. If that is reduced by as much as a dollar, to account for someone else's investments or to give the financial industry a boon, then I am against it, lock, stock and barrel. What I retire on is my business. But, as for SS, what's supposed to be coming to me should be coming to me, period.”

“there is probably more money in SS now than 40 yrs ago. Then you didn't have 2 family incomes like you do now. So as long as you have both members of the family working money will be going into it.

I do have one pet peeve about SS though. It pays people who never worked a day in their life. I can understand someone getting SS if their spouse has died but not when both are alive.”

“I'm sure there would be safeguards for at leaste the minimum.

I see what you're saying about SS being insurance but even so, is it not better for us to have control of our own funds and at least get the most from it? I believe we can handle our own money better than the government. And I'm sure there would be provisions as to how the money can be invested too.”

“Tree, do you get that statement from SS. I think it comes once a yr that shows how much money you have paid into since you started working. I wish I could find mine to see what I am suppose to get every month once I retire (God only knows when that will be)”

“Then again Ewker the whole economy has gotten higher too. Plus by the time we retire we'll have to work to age 75.”

“The investments (wherever they're put) don't always go up, you know. It all depends on the timing. It doesn't take a 'full blown collapse'.

Lots of folks thought the market wasn't going to reverse any time soon before the dotcom bubble burst. They invested as if all the tried and true fundamentals suddenly lost all significance. The bubble popped and lots of older folks came back into the job market.

It's insurance -- it's a safety net.


I wonder where the money really goes sometimes...

For example, an economist on the tube yesterday (wish I could remember who) said that in 1980 the ratio of CEOs' compensation to that of the rank and file was 43:1. Nowadays it's more like 530:1.

I'm not totally convinced those jokers are worth it.”

“I hope I am wrong on this but I seem to remember that Federal employees will not get a choice. they have to go with the private accounts”

“The system will not need to reduce benefits for (estimated) 40 years. When the trust fund is depleted - the big "crisis" Bush wants us to cry over - the only difference is a 30% reduction for retirees at that time. All still paid from current workers. If you don't think you'll be around in 40 years don't worry about it. People that will be should already have the message today that they should be saving their own money for retirement and so won't be devastated when the SS checks are reduced.”

“But, when it comes to investing, who are you going to trust, Nigal. The financial industry has more than its share of greedy bastards who have led people astray with investments. Hell, I am working on some cases where the financial advisors have done things to people you wouldn't think anyone with a conscience could be capable of. Which leads me to the conclusion that these asswipes don't possess one. How are you so sure that a certain % of these ruthless f_cks aren't going to muddy the waters?
last edited: 2/01/05 12:07:58 PM”

“Yes, Ewker. I do get that...”

“I think it is about that time of the yr when they mail them out. Looking for last yrs as we type..lol”

“Ya have to do your homework TreeB. And remember, this is a VOLENTEREE plan, yes?”

“Ok, but where does that answer my question. Why is this such a good thing?”

“(...which was exactly what Spitzer was talking about yesterday at the National Press Club on C-SPAN..... though perhaps not quite as colorfully, LOL)”

“Ewker - you can request one today here:

https://s044a90.ssa.gov/apps6a/isss/main.html

Used to be you could get the info immediately online, but someone cried "security breach" and made us pull it off. Now you can only have it mailed to you.”

“Let's just toss those transition costs onto the National Debt with everything else... It don't matter none, no how! *VBG*”

“Since when did Social Security become a retirement plan? It's supposed to be a safety net for those who fall through the cracks over some economic misfortune. We're responsible for or own retirement, whether it's a company pension or your individual IRA account. The problem with our country right now is we have such a low savings rate (<1%) and high personal debt. People are spending like drunken sailors because they view SS as funding their retirement.

The people in most need of Social Security are not the ones who are going to get into asset allocation. Most of us should not even consider Social Security in our retirement planning; it's beer money.”

“"Why is this such a good thing?”

We control our own money.”

“So, that's all there is to it, Nigal? nothing more, nothing less?”

“Then, where does that argument that we're in a crisis come into the picture, based on your simplistic explanation, Nigal?
last edited: 2/01/05 12:17:26 PM”

“Nigal, what happens IF you lose all your money. Yeah I know that may not happen but what if. Who would ever think these people who win the lottery would file for bankruptcy a few yrs later. It can happen

another thing, if by some means you and your wife split up chances are she is gonna get half of what you have saved up. At least she couldn't touch the SS
last edited: 2/01/05 12:19:56 PM”

“There's a lot within this TreeB. Having control of your own money means a lot. You chose where it goes, what it does, ect. And the government doesn't have it. What more does one need?”

“I cited a concern above about unscrupulous investors. Nobody seems to want to tackle that question. If people like that enter the picture, then yes! I have serious concerns. You seem to think that anyone who is in business in America can be trusted, as long as they don't have anything to do with the government!”