POL: State of the Union

[Tekneek]

This is a con. I'm not sure why so many people are wanting to do this, but it doesn't sound like anyone other than Uncle Sam is really going to make any money off of it.

[JPhillips]

Tekneek: Amen. This is really about trying to find a way to avoid paying back the treasury bills that the SS trust fund has accumulated. So in effect I, and millions of other middle-class Americans, have been paying too much in payroll taxes for the past twenty years so that I could subsidize the general budget. Now when it comes time to pay me back they want to change the system.

[flere-imsaho]

Here's my "solution" to Social Security:

1. Continue benefits for anyone who lived through the Great Depression. Let's be gracious and say that's anyone born in 1940 or earlier. Fund these benefits through the current tax setup, but lower this percentage as necessary until it ends up at 0% when the last person dies.

2. Instead of limiting 401ks to $13,000/year (or so), drive it to 30%. I.e. you can now put up to 30% of your annual income in a 401k (same goes for 403bs, which are the non-profit versions of 401ks).

3. Instead of limiting IRAs to $3000/year (or so), drive it to 30%, in conjunction with 401ks (this is to address people who work for small businesses, when many small businesses can't afford to offer 401ks). So, bottom-line, you can put any combination of up to 30% of your annual income in a 401k/403b and an IRA.

4. Spend time fixing Medicare/Medicaid.

[Glengoyne]

Originally Posted by JPhillips

Duckman/Glen: Its from Atrios.blogspot.com. Yes, it is a liberal site, but what facts that were presented can you challenge....

It is the "spin" applied to "pieces" of the proposal that produced those "facts".

A lot of those are just pure fabrication, as the details of the proposed plan aren't there yet. The President says the accounts will be able to be passed on by inheritance. He is not going to opt for a plan where they are not. That would be pretty much moronic, and could be the death blow to his plans. This is part of his "ownership society" plan...I don't think government ownership of such accounts would fly. So I don't buy your bloggers take on it.

The three percent that keeps being thrown around. As I understand that part of the plan. You're actual social security benefit will be reduced by the amount earned by you're private account up to that 3% cap. You are still getting the full amount of your private account. It is just that the Social Security benefit you receive will be lower than if you didn't have the personal account. Overall you are still better off than with just Social Security alone, well assuming that the RoI of your total investment in the Private account exceeded the 3% cap. If it doesn't, then you are simply stuck with the same amount you would normally have received in Social Security. The blogger makes it seem like that money is simply stolen by the government.

As for your assertion that the whole thing is just a scheme to skip paying out benefits to all of us currently paying in. That is just ludicrous. No one anywhere is talking about cutting off the benefits of anyone involved in the system now. If you are paying into Social Sec now, you will get your appropriate share of benefits paid back to you. I've read the blogger's site that advocates that opinion, and he is a lot more partisan than intelligent.

[CentralMassHokie]

Originally Posted by Glengoyne

It is the "spin" applied to "pieces" of the proposal that produced those "facts".

A lot of those are just pure fabrication, as the details of the proposed plan aren't there yet. The President says the accounts will be able to be passed on by inheritance. He is not going to opt for a plan where they are not. That would be pretty much moronic, and could be the death blow to his plans. This is part of his "ownership society" plan...I don't think government ownership of such accounts would fly. So I don't buy your bloggers take on it.

The three percent that keeps being thrown around. As I understand that part of the plan. You're actual social security benefit will be reduced by the amount earned by you're private account up to that 3% cap. You are still getting the full amount of your private account. It is just that the Social Security benefit you receive will be lower than if you didn't have the personal account. Overall you are still better off than with just Social Security alone, well assuming that the RoI of your total investment in the Private account exceeded the 3% cap. If it doesn't, then you are simply stuck with the same amount you would normally have received in Social Security. The blogger makes it seem like that money is simply stolen by the government.

As for your assertion that the whole thing is just a scheme to skip paying out benefits to all of us currently paying in. That is just ludicrous. No one anywhere is talking about cutting off the benefits of anyone involved in the system now. If you are paying into Social Sec now, you will get your appropriate share of benefits paid back to you. I've read the blogger's site that advocates that opinion, and he is a lot more partisan than intelligent.

Unfortunately, I don't think this is at all how the President's plan will work, at least not as it's understood by economists and congresspeople on both sides of the aisle.

A big reason for the President's push for privatizing social security is that the current administration wants to be able to use the trust fund to pay down the defecit without having to worry about being the ones who brought back elderly poverty. That's why each and every deficit number from the current administration is calculated as if the trust fund counts against the deficit.

With privatization, they can raid the trust fund and then blame the wave of elderly poverty on the market.

There are a billion and one bad things about the plan as it's been outlined in any number of documents (including the leaked proposal from the Republican Congressional retreat).

Since there are also a billion and one things more important and critical to the country than fixing an unbroken social security program, hopefully this will die a swift death and the government can move onto more pressing issues.

[Glengoyne]

Originally Posted by CentralMassHokie

...
A big reason for the President's push for privatizing social security is that the current administration wants to be able to use the trust fund to pay down the defecit without having to worry about being the ones who brought back elderly poverty. That's why each and every deficit number from the current administration is calculated as if the trust fund counts against the deficit.

With privatization, they can raid the trust fund and then blame the wave of elderly poverty on the market.

...

Yes elderly poverty, that is what this is all about. The evil Republicans are at it again. They want to steal all the money from the soon to be elderly and repay the Government's debt. That makes sense.

I don't want to go over my quota for rolleyes for this thread, but I think I got my point across.

As for the "meat" of the above assertion. The revenue generated by Social Security is used to pay Social Security's obligations to retirees. Anything left over has pretty much always been used to reduce deficit spending. T-bills are issued to Social Security Trust and later redeemed. So what you describe is business as usual for the Government, and not some "scheme" dreamed up by this administration.

[JPhillips]

Glen: First, the story in the Washington Post that mentioned annuities and which my info was based on has been changed to remove annuities. I'll be generous and say that the Post story was wrong and Bush never intended to base the new system on annuities.

As to the 3%, what really needs investigating is whether or not you are guaranteed a minimum return. What if my account only makes 2%? Will SS cover the difference or will I be SOL? So far nothing has been said on that. I also think that having the first 3% go to the government is going to severely reduce suport for the program, but maybe I'm wrong.

I completely disagree that this isn't about the trust fund bonds. The 2018-2020 date that keeps getting thrown around is the date when the trust fund bonds will need to start being repaid. Several supporters of privatization have used that date as when SS goes broke. It will only go broke if the plan is to default on billions in T-bonds.

Also, the White House is now being very clear that the privatization plan will do nothing to alleviate the solvency problem over the next 75 years. The breifer yesterday admitted to benefit cuts being necessary to bring SS into solvency. While I can't say with certainty that benefits will be eliminated, I do know that big supporters of privatization, CATO and Stephon Moore, would love to eliminate the program all together.

But the best piece of eveidence is still the info on Lindsay Graham's plan. That shows that the current legislation will result in less money after privatization than before.

[Glengoyne]

Originally Posted by JPhillips

...

As to the 3%, what really needs investigating is whether or not you are guaranteed a minimum return. What if my account only makes 2%? Will SS cover the difference or will I be SOL? So far nothing has been said on that. I also think that having the first 3% go to the government is going to severely reduce suport for the program, but maybe I'm wrong.

The info I have seen and heard related to the 3% "cap" says that the regular SS benefit would be reduced on a dollar for dollar basis up to the 3% of it's growth. That indicates to me, that if you earn less than 3%, say 2.5 percent...then your Regular Social Security benefit would be reduced dollar for dollar up to 2.5 percent. It doesn't "go to the government". That is just a manner of attacking the plan. It isn't the least bit true, but if you spin it properly people might buy it. It just doesn't stand up to scrutiny.

Originally Posted by JPhillips

I completely disagree that this isn't about the trust fund bonds. The 2018-2020 date that keeps getting thrown around is the date when the trust fund bonds will need to start being repaid. Several supporters of privatization have used that date as when SS goes broke. It will only go broke if the plan is to default on billions in T-bonds.

No where is anyone talking about not paying these bonds back. The key to understanding that is where they say that people who have been paying into the system, will not lose their investment. It isn't tricky. You just have to believe that the administration isn't planning to rip off just about every member of society.

Originally Posted by JPhillips

Also, the White House is now being very clear that the privatization plan will do nothing to alleviate the solvency problem over the next 75 years. The breifer yesterday admitted to benefit cuts being necessary to bring SS into solvency. While I can't say with certainty that benefits will be eliminated, I do know that big supporters of privatization, CATO and Stephon Moore, would love to eliminate the program all together.

Actually from where I sit, the White House isn't being very clear at all about that. I think they have been pretty much ignoring that aspect of the issue. It seems to me that any crisis is likely very far off in the distance, but that is no reason not to improve the program now.

[randal7]

Originally Posted by flere-imsaho

Here's my "solution" to Social Security:

1. Continue benefits for anyone who lived through the Great Depression. Let's be gracious and say that's anyone born in 1940 or earlier. Fund these benefits through the current tax setup, but lower this percentage as necessary until it ends up at 0% when the last person dies.

2. Instead of limiting 401ks to $13,000/year (or so), drive it to 30%. I.e. you can now put up to 30% of your annual income in a 401k (same goes for 403bs, which are the non-profit versions of 401ks).

3. Instead of limiting IRAs to $3000/year (or so), drive it to 30%, in conjunction with 401ks (this is to address people who work for small businesses, when many small businesses can't afford to offer 401ks). So, bottom-line, you can put any combination of up to 30% of your annual income in a 401k/403b and an IRA.

4. Spend time fixing Medicare/Medicaid.

Good solution. I'd add one thing:

3.5: Stop raiding my paycheck for SS and let me invest the money myself.

Also, I think the pres's proposal is no change for anyone born before 1950.

[chinaski]

Did you guys know - even if you make a assload of cash from investing your "SS money" under Bush's plan, you only get to keep set amount and anything over that you lose to the government. great plan.

Originally Posted by Washington Post

Here is how the personal account system would work under the Bush plan:

If a worker set aside $1,000 a year for 43 years, and earned 4.6 percent annually on investments, the account would grow to $221,552 in today's dollars. That money would be the worker's upon retirement and would probably be paid out in increments of $15,952 a year, according to calculations by the Center for Budget and Policy Priorities, a liberal advocacy group. A White House calculation showed a smaller payout.

But guaranteed benefits over the worker's lifetime would be reduced by approximately $151,990 -- the amount the worker would have contributed to Social Security but instead contributed to his personal account, plus 3 percent interest above inflation. The remainder, $69,562, would be the increase in benefit the worker would receive over his lifetime above the level he would have received if he stayed in the traditional system. That sum -- expressed as an annual payout -- would total $5,008.

But that benefit gain could be substantially smaller. The Congressional Budget Office, Capitol Hill's official scorekeeper, factors out stock market risks to assume a 3.3 percent rate of return and then subtracts 0.3 percent for expected administrative costs on the account. Under that scenario, the full amount in a worker's account would be reduced dollar for dollar from his Social Security checks, for a net gain of zero.

If investments earned less than 3 percent a year above inflation, a worker would do worse in total benefits than he would have done in the traditional system.

[Glengoyne]

Originally Posted by chinaski

Did you guys know - even if you make a assload of cash from investing your "SS money" under Bush's plan, you only get to keep set amount and anything over that you lose to the government. great plan.

You don't lose it to the government. You get all of the money out of your personal account. The deal is the Government doesn't PAY you Social Security benefits for the portion of Social Security that you didn't pay into. Your personal account makes up for that portion of your benefit. The 5k is gravy. It is money that you would never see under the current system. So tell me again. What is wrong with giving the person in the above example an additional $5k a year?

The above charge is a disengenuous argument against reform of the system.

[Dutch]

The 5k is gravy is exactly right. It's a potential benefit over the top. It's money that instead of rotting in a government coffer, was earned by growth in private business economy.

If the 3% is not met by the private sector stocks and bonds, chances are good, the goverment isn't going to have the money to meet the balance under the current SS plan anyway.

It's voluntary anyway.

That way Republicans can use it and Democrats don't have to. And when the economy booms, the Democrats can bitch about the rich getting richer and when the economy collapses, the Democrats can yell in glee and push for communism, or whatever their platform is these days.