Exodor's wish is granted!

[Tareeq]

Can I request a separate thread on the SS privatization plans? I'm curious about the ramifications of the plan, but I don't want to further derail this pot thread. (FWIW, I support privatization but worry about how it will affect the ability of SS to remain solvent).

That wasn't so hard!

A selection of greatest hits:

The bit that "liberals" dissaprove of is the mentality where, despite a large amount of information being known about a substance, rational adults are still not legally entrusted with the choice to take it. So it is with pot.

I take it then that you favor permitting taxpayers to invest their share of government retirement funds in the markets?

I take it then that you favor permitting taxpayers to invest their share of government retirement funds in the markets?

I'm not sure I understand the question.... I'd have to know more (ie. anything at all) about what such a fund is and how it's run and paid for.

I'm referring to what we would call "privatizing social security." I don't know what you call the government pension to old people in Britain, but in America there's a movement in favor of allowing individuals to direct the investment of a portion of these funds for their own benefit. "Liberals" vehemently oppose it, in part because they feel that the taxpayers who fund this retirement scheme lack sufficient intelligence to make sensible investment decisions.

Since there's no shortage of information about markets and investments, I take it that you would support allowing responsible adults to make such choices for their own benefit, correct?

Also, what's with the "you"? I thought this thread was about "liberals"...

Since you presumed to speak for them, I ask you, O Oracle of Liberalism. Who else should I ask?

I take it then that you favor permitting taxpayers to invest their share of government retirement funds in the markets?

I always thought one of the liberal agenda's talking points was to legalize the mari-ju-wanna. They're using generally conservative arguements because it's way more fun to use political judo than your own stuff. And as an added bonus, I think conservative arguements will serve better to convince Antonin "Bull Dog Killah" Scalia. But I'll leave all that fun stuff to people who actually know what they're talking about (like Tareeq).

I'm pretty ambiviliant about privatizing social security. I'm personally not very concerned. As a Finance major who also interned at a brokerage firm, I have a pretty good handle on how to invest in the "non-jumping out of windows" style. I'd probably just stick all that extra scratch in index funds and sit on it.

But you just know some people are going to dump all their cash into one stock (with is atrociously stupid), or start gambling on the market, lose all their money, and start whining about how social security should be reimplemented. So I guess I'm in favor of privatization. Who among us now is depending on social security as a primary source of income in the future?

But you just know some people are going to dump all their cash into one stock (with is atrociously stupid), or start gambling on the market, lose all their money, and start whining about how social security should be reimplemented. So I guess I'm in favor of privatization. Who among us now is depending on social security as a primary source of income in the future?

And this is what is so stupid about the politicians. They have a perfect opportunity to 1) increase the savings rate of the nation, 2) begin to eliminate the most regressive tax in America, 3) put the Federal Government on better financial standing. Yet, instead they bicker, piss and moan, and use it fo their own little agenda.

Solution? Allow partial funneling of Social Security to municipal and government bonds ONLY. I get a real interest rate (instead of US government magicked er calculated inflation rate), the government(s) get a cheaper source of funding, and the savings rate of the nation rises providing extra capital.

How hard was that?

But you just know some people are going to dump all their cash into one stock (with is atrociously stupid), or start gambling on the market, lose all their money, and start whining about how social security should be reimplemented. So I guess I'm in favor of privatization. Who among us now is depending on social security as a primary source of income in the future?

Solution? Allow partial funneling of Social Security to municipal and government bonds ONLY. I get a real interest rate (instead of US government magicked er calculated inflation rate), the government(s) get a cheaper source of funding, and the savings rate of the nation rises providing extra capital.

How hard was that?

Not hard at all

Because that's the solution that makes the most sense, it will never be implemented. I can't see it happening. I'm pretty sure the brokerage firms have a small hand in this at least. Munis and Gov bond only = no commisions.

I'm referring to what we would call "privatizing social security." I don't know what you call the government pension to old people in Britain, but in America there's a movement in favor of allowing individuals to direct the investment of a portion of these funds for their own benefit. "Liberals" vehemently oppose it, in part because they feel that the taxpayers who fund this retirement scheme lack sufficient intelligence to make sensible investment decisions.

Since there's no shortage of information about markets and investments, I take it that you would support allowing responsible adults to make such choices for their own benefit, correct?

You would indeed, then, be correct. However, I suspect the point at issue will be whether there really is good information out there about markets and investments. I mean, it's not like it's immediately obvious where to stick your funds for maximum return. If it was we'd all be millionaires. Any company trying to get you to invest is far from likely to be offering you unbiased advice about where to stick your money.

If the requirement merely is to get people to understand that doing this with their finances is placing them at risk, then yes, I think that's a reasonable expectation to make of the public. But then again, only two things are infinite...

As for what "liberals" think; well, the group was poorly defined to start with...

Have at it!

Edit: and it actually was pretty hard, based on the edits.

[Little Raven]

I like to thank Tareeq for going through all the trouble to create this thread. And what better way to repay his kindness than to attempt a minor derail with my first post?

One of the quotes that didn't make the cut was this:

Or reject the government collecting retirement funds at all. What a scam, anyway.

I confess that I'm somewhat ignorant about the original reason SS was created. Was it simply a measure designed to be a vote-winner among elderly voters? Or did the nation have a significant social problem introduced by people who were failing to adequately prepare for their retirement?

In short: How much do we really need SS?

[The Preacher]

<didn't make greatest hits>

<except for Padre condemning my definition of liberal> x2

[Exodor]

Shit, if I'd have known I'd have wished bigger.

(Thanks, Tareeq!)



Now, to my central question - how do the privatization plans address the basic weakness of SS - that is, it can only continue to make payments as long as the young-in's pay in?

If we allow private SS investment, how can the system remain solvent without the support of the next generation?

[LordMortis]

I'd be sad for not making the grade, but I opine a lot while providing few talking points.

Though I must sary Tareeq did make himself the center of 2/3's of the greatest hits. Hmmm...

[SuperHiro]

Now, to my central question - how do the privatization plans address the basic weakness of SS - that is, it can only continue to make payments as long as the young-in's pay in?

If we allow private SS investment, how can the system remain solvent without the support of the next generation?

Alright, keep in mind I have done little to no research on the actual plan, I'm just thinking what if a certain amount of SS taxes suddenly stopped coming in. I'm also assuming that you have to option to "buy" into the system.

For the most part, a good chunk of the baby boomer generation already have some sort of retirement plan. So if the young-uns stop paying up, I would think the impact would be minimal. The only people it'll REALLY shaft are the low income baby boomers. Oh and it'll shaft the current population of retired folks also.

I think the system remains solvent because you will get less people "buying" into the system. So with the decrease in funds, there will also be a decrease in payees.

I'm thinking this system can work but it's going to hurt a lot in the beginning.

[The Preacher]

If we allow private SS investment, how can the system remain solvent without the support of the next generation?

CATO's answer is to split the contribution: you get to invest your half but the company's payment goes towards the current system.

For more details:

http://www.socialsecurity.org/pubs/ssps/ssp-32es.html

[Defiant]

I confess that I'm somewhat ignorant about the original reason SS was created. Was it simply a measure designed to be a vote-winner among elderly voters? Or did the nation have a significant social problem introduced by people who were failing to adequately prepare for their retirement?

In the 1930s? Especially after the stock market crash? Yes.

Whether that still applies today, I dunno.

Now, to my central question - how do the privatization plans address the basic weakness of SS - that is, it can only continue to make payments as long as the young-in's pay in?

From what I understand, the 2%(?) that's "privatized" is voluntarily put towards a retirement fund that is untouchable (like Gore's "locked box").

[noxiousdog]

The current plans floating around allow only 15% or so to go to 'privitization'

And Lord Mortis: SS is the biggest scam in the history of the United States.

It's regressive: It's funded equally by everyone until $87,000. At that point the 'rich' no longer pay and a smaller and smaller overall percentage of their pay goes to SS. To be fair, their 'withdrawl' will max out around $65K or so, so really they are doing 100% subsidizing of everyone else for 1/3rd of their contribution.

It's a waste of capital. The return on SS is cost of living increases - at best-. Assume, working for 45 years and a 3% inflation rate, with a lifetime average salary of $25,000. That gives an approximate Social Security value of $301,000. Assume instead, that same money is put in something as simply as T-Bills at an average-low 5% interest rate. $491,000. That's 66% MORE money people would have at retirement. (note: The above is based on expected payout of SS)

For those that worry about funding current payouts, we'll do what we always do. Borrow more money, or increase taxes. We don't seem to have any problem funding wars in Iraq or prescription drug benefits. I don't know why it would be any different with SS obligations.

[Exodor]

For those that worry about funding current payouts, we'll do what we always do. Borrow more money, or increase taxes. We don't seem to have any problem funding wars in Iraq or prescription drug benefits. I don't know why it would be any different with SS obligations.

Wait a bleedin' second!

So the fiscally responsible thing to do is divert money from a huge government program and make up for that shortfall with "borrow more money or increase taxes"?


This is why I'm suspicious of SS reform...

[Kraken]

Who among us now is depending on social security as a primary source of income in the future?

Me. Of necessity -- not by choice -- I figure that SS will provide around half of my income if I live long enough to collect it. I have been under- and unemployed for most of the past 3 years, and still counting. At my age, I should be saving aggressively for retirement. Instead I have lost 3+ years. Combine that abysmal IRA performance during that time, and retirement at age 66.5 looks like a pipe dream.

Wait a minute, pipe dreams go back in the pot thread, don't they?

[noxiousdog]

For those that worry about funding current payouts, we'll do what we always do. Borrow more money, or increase taxes. We don't seem to have any problem funding wars in Iraq or prescription drug benefits. I don't know why it would be any different with SS obligations.

Wait a bleedin' second!

So the fiscally responsible thing to do is divert money from a huge government program and make up for that shortfall with "borrow more money or increase taxes"?


This is why I'm suspicious of SS reform...

Instead we should continue to waste money in a system d00med to failure? Life spans are going to continue to increase and birth rates will continue to fall (for the forseeable future, and the alternative is even worse). At some point there cannot mathmatically be enough workers to support the system.

[gbasden]

Speaking as a somewhat moderate liberal, I'm all in favor of a partial privatization plan - assuming they don't screw it up as badly as they did the Medicare Prescription Drug Benefit. I'm highly suspicious given this crowd that there will be some pretty steep administration fees by the big Wall Street brokerage firms.

[Exodor]

Instead we should continue to waste money in a system d00med to failure? Life spans are going to continue to increase and birth rates will continue to fall (for the forseeable future, and the alternative is even worse). At some point there cannot mathmatically be enough workers to support the system.

Of course not.

But fixing the system with an "oh, well, we'll just raise taxes to cover any shortfalls" attitude is no fix at all, is it?

[noxiousdog]

Of course not.

But fixing the system with an "oh, well, we'll just raise taxes to cover any shortfalls" attitude is no fix at all, is it?

As opposed to what?

We know there is going to be a shortfall. The questions are 1) how long will SS eligibility be delayed, 2) how much of a shortfall is there going to be, and 3) how long will the system be broken?

Personally I like the Cato method. I'll gladly give the Feds the 6.75% they get from my employer and never see a dime of it, if they'd just let me keep the 6.75% from my paycheck. However, I can see where our society would have issues with that.

[Zarathud]

From an earlier thread.

2. Saving accounts = Income tax deferral for those with disposable income. A long-standing Republican long-term Social Security fix, which was first implemented as the 401(k) retirement plan. The plan would be to expand the amount set-aside for retirement plans and allow self-insurance by setting aside money in a health savings account. The idea is simple: take your own money, set it aside in special accounts to grow in the stock market tax-free. You pay income tax when you withdraw the money after retirement or no income tax to pay health care costs (you get no health expense deduction, however).

Three criticisms of savings accounts:
- You need to have extra income to shelter by depositing in these funds. Those in the low-to-middle class often do not have the disposable income to set aside in these funds.
- Historical returns on tax-sheltered 401(k) accounts generally do not match the market. The money managers charge fees and appoint junior or mediocre money managers to handle these funds (star investors quickly get promoted to high-worth private client portfolios).
- Accounts are subject to market fluctuations. Recent retirees have found their 401(k)s dry up as a result of the stock market downturn.

[Zarathud]

If we allow private SS investment, how can the system remain solvent without the support of the next generation?

The Social Security system (OASDI) will be insolvent even with the full support of Generations X and Y due to the demographics -- fewer people supporting more retirees. Alan Greenspan's February 25, 2004 testimony to Congress:

In 2008--just four years from now--the first cohort of the baby-boom generation will reach 62, the earliest age at which Social Security retirement benefits may be claimed and the age at which about half of prospective beneficiaries choose to retire; in 2011, these individuals will reach 65 and will thus be eligible for Medicare. At that time, under the intermediate assumptions of the OASDI trustees, there will still be more than three covered workers for each OASDI beneficiary; by 2025, this ratio is projected to be down to 2-1/4. This dramatic demographic change is certain to place enormous demands on our nation's resources--demands we almost surely will be unable to meet unless action is taken.

The only saving grace might be that a lot of Baby Boomers will end up working longer than expected because their 401(k)s -- basically a tax-favored early private "supplement" to Social Security -- went sour in the dot-com bust. If you lose 25-30% of your stock portfolio right before you're about to retire (which can happen even with a fully diversified portfolio), you'll never have enough money to realistically make that money back during your lifetime. Based on that experience (and Oct. 19, 1987), further privitization of Social Security may be even a bigger boondoggle.

The overall economic picture is grim when you look at how Social Security and Medicare expenses are expected to become a signficiant part of the US GDP. As Alan Greenspan testified:

Today, federal outlays under Social Security and Medicare amount to less than 7 percent of GDP. In December, the CBO projected that these outlays would increase to 12 percent of GDP by 2030 under current law, using assumptions about the growth of health-care costs similar to the intermediate assumptions of the Medicare trustees; when spending on Medicaid is added in, the rise in the ratio is even steeper.

Frankly, I'm certain that the US will be forced to pass some sort of broad-based consumption tax (which Newt Gingrich supported back in 1984) to find enough money to pay for Social Security/Medicare. We know that there's not going to be enough money to satisfy EXISTING commitments. The decrease in payors will happen soon (even without privitization), and the decrease in payees won't happen for a long time. Privitization just speeds up the catastrophe, and the eventual new tax to pay for Social Security. Just like interest rates, taxes won't remain low forever.

[Poleaxe]

For those that worry about funding current payouts, we'll do what we always do. Borrow more money, or increase taxes. We don't seem to have any problem funding wars in Iraq or prescription drug benefits. I don't know why it would be any different with SS obligations.

Wait a bleedin' second!

So the fiscally responsible thing to do is divert money from a huge government program and make up for that shortfall with "borrow more money or increase taxes"?


This is why I'm suspicious of SS reform...

One thing to remember is that any money diverted is actually a prepayment of money that will have to be dispersed at some point anyway. No matter how you slice it, SS is going to have a shortfall. Shouldn't we choose the shortfall that also involves reform of the system?

[Exodor]

One thing to remember is that any money diverted is actually a prepayment of money that will have to be dispersed at some point anyway. No matter how you slice it, SS is going to have a shortfall. Shouldn't we choose the shortfall that also involves reform of the system?

Obviously.

But a reform that includes a "oh, we'll just raise taxes" provision strikes me as particularly worthless.

How about this - reform the system in such a way that will reduce the shortfall as much as possible, even if that includes a tax increase or a cut in benefits?

Of course, that will never happen because it's political suicide - so instead we get half-assed reform and a system sliding further into the red.

[noxiousdog]

But a reform that includes a "oh, we'll just raise taxes" provision strikes me as particularly worthless.

How about this - reform the system in such a way that will reduce the shortfall as much as possible, even if that includes a tax increase or a cut in benefits?

Of course, that will never happen because it's political suicide - so instead we get half-assed reform and a system sliding further into the red.

A raise taxes provision is 'worthless', but instead we should include a tax increase?

I don't get it.

[Exodor]

A raise taxes provision is 'worthless', but instead we should include a tax increase?

I don't get it.

Reforming the system without planning to make it solvent = worthless


Reforming the system to make it solvent (either through tax increases or benefit cuts = actual reform

you said:

For those that worry about funding current payouts, we'll do what we always do. Borrow more money, or increase taxes. We don't seem to have any problem funding wars in Iraq or prescription drug benefits. I don't know why it would be any different with SS obligations

You seem to be proposing we "fix the system", only we leave it broken and somehow make up for the shortfall later. That's not reform - although it is business as usual in Washington these days.

[noxiousdog]

You seem to be proposing we "fix the system", only we leave it broken and somehow make up for the shortfall later.

You have me confused with somebody else. I propose we 'fix the system' by eliminating it. I can see the value in a forced savings plan, but I see negative value in SS.

[Tareeq]

Reforming the system without planning to make it solvent = worthless

As presently constituted the system isn't solvent. It never has been. Every penny of SS revenue is spent as soon as it comes through the door, either on pension and disability checks or as discretionary spending. That which is spent with general revenue is reimbursed to the system as a treasury bond. An I.O.U. There's no lockbox, and couldn't be as the system exists. The government's not going to deposit the money in a bank account or bury paper bills in a hole.

Those bonds will have to be paid one day, while social security continues. That will be done by raising taxes, lowering benefits, raising the retirement age, or a combination of the three.

[Poleaxe]

One thing to remember is that any money diverted is actually a prepayment of money that will have to be dispersed at some point anyway. No matter how you slice it, SS is going to have a shortfall. Shouldn't we choose the shortfall that also involves reform of the system?

Obviously.

But a reform that includes a "oh, we'll just raise taxes" provision strikes me as particularly worthless.

How about this - reform the system in such a way that will reduce the shortfall as much as possible, even if that includes a tax increase or a cut in benefits?

Of course, that will never happen because it's political suicide - so instead we get half-assed reform and a system sliding further into the red.

I understand what you are saying, but the whole program is structurally unsound. It's a ponzi scheme.

Repubs would like to move the whole program to individual savings accounts, but are forced to shoot far lower because of politics. But every percentage point of total that we move to private hands reduces the amount that will be owed later on.

The problem is how do we pay off the group that gets screwed in the reform. My answer would be that we slowly change to individual savings accounts over the course of many years and that the beneficieries caught in the middle will have to accept smaller payouts while some belt tightening in the fed budget (including defense) makes up the difference elsewhere. What we don't need is higher taxes which slow the economy and cause greater hardship on the poor.