Bush to Revive Social Security Tax Plan

[papau]

http://story.news.yahoo.com/news?tmpl=story&cid=544&ncid=716&e=4&u=/ap/20040116/ap_on_go_pr_wh/bush_state_of_union

Bush to Revive Social Security Tax Plan

By SCOTT LINDLAW, Associated Press Writer WASHINGTON -

President Bush will use next week's State of the Union address to try to revive a proposal that would allow younger workers to invest a portion of their Social Security taxes in the stock market, aides say.

His election-year agenda also calls for pressing Congress to make already-enacted tax cuts permanent, such as the elimination of inheritances taxes and reductions in capital gains taxes. Bush is considering whether to renew his push for a new kind of tax-preferred savings accounts that could be used for retirement, college, health care or other purposes. <snip>


Other officials said they expected Bush to renew his call on Congress to make his tax cuts permanent. <snip>

But Bush is unlikely to wade into such a polarizing issue at the starting gate of an election year, the conservative activist said.
Ken Khachigian, who wrote speeches for Presidents Reagan and Nixon, said Bush needs to defend his policies while "laying out a few new things to spice up the policy agenda so that he's not just sitting back."
"Without stooping to the same shouting you're getting on the Democratic side, give a very presidential response to the criticisms," Khachigian said he would advise Bush.

[mhr]

1. He Is Beginning To Sound Like A Broken Record - Cut Taxes, Taxes, Taxes

eom

[cthrumatrix]

2. this is all politics and election -- O'Neill's book outlines how he was

the advocate for trying to save social security -- private accounts etc....and there is a huge cost to this!

This is why he wanted to take the surplus and apply it to this program (to save soc sec). Shrub wanted tax cuts which ate away the surplus.

SO shrub will put this forth -- and negate to share the cost -- negate to say that his Treasury Secretary was fired for being the fiscally responsible one in the WH.

Shrub is just looking for votes -- all politics -- which the media will praise all night.

There is huge cost to this - Greenspan/O'Neill calculated that anyone age 37 and above was the cut off. Meaning those above have private accounts to invest ---now do you have any idea how much it costs to fund the set-up of those accounts?

It's not like they have a soc sec "pot of money" sitting there. O'Neill commissioned a report showing a $44 trillion gap in revenues received less expenses...the WH shelved the report.

Ask shrub about the report --- he's a deceiver.

[underpants]

3. $1 Trillion to fund the "bridge"

That is what Greenspan and O'Neill forecasted to implement the private accounts.

I finished it last night. O'Neill strikes me as a good man and truly a moderate. This country (especially with these yahoos in power) is much worse off to not have his service.

[cthrumatrix]

4. YEP --- do you think bush will share that..LOL

[Papa]

5. Something I've thought about but never seen anyone talk about

If you privatize part of SS, then there is HUGE investment into certain companies, large corporations that will be hand picked by the government. I can envision companies like Enron, Microsoft, World Com, Haliburton etc as being companies that would be on a list that someone could choose from to invest some of their SS money.

The problem I see is that if SS is privatized, what happens when one of these companies gets in trouble? (accounting problems, anti-trust laws etc). Do we really believe that the government would let the company go under or punish them thereby wiping out the investment of millions, or a hundred million citizens?

If I were a cut throat and the government approved my company as being eligible for SS investment, I would see that as a very very positive development. It's security from government intervention. You could play hardball with the government knowing that if they sank your large corporation or broke it up (like Microsoft) how it would impact the economy and peoples lives. Hell, even the judge deciding the case may have some of his Social security money tied up into that company or know that millions will lose money they need to survive.

Very bad idea in my opinion. I think this may be the real plan behind privatizing social security.

[BayCityProgressive]

6. of course it is

Republicans want to turn this country into a corporate dictatorship.

[underpants]

7. They mostly would be put into index funds

According to what I have read. But of course the details of this will not be told in a sufficient amount of time for the representatives to read and study it nor will the public be given time to read and study it and tell their reps what they think of it. That's the MO.

[aquart]

8. Yes, dear.

[cthrumatrix]

9. Here is the report on the $44 Trillion Gap -- reason for privatization

White House Shelved 44 Trillion Deficit Report?
By Peronet Despeignes of the Financial Times
May 30, 2003, 10:21



Thursday 29 May 2003

Study commissioned by O?Neill sees $44 trillion in red ink

The Bush administration has shelved a report commissioned by the Treasury that shows the U.S. currently faces a future of chronic federal budget deficits totaling at least $44 trillion in current U.S. dollars.

The study, the most comprehensive assessment of how the U.S. government is at risk of being overwhelmed by the ?baby boom? generation?s future healthcare and retirement costs, was commissioned by then-Treasury secretary Paul O?Neill.

But the Bush administration chose to keep the findings out of the annual budget report for fiscal year 2004, published in February, as the White House campaigned for a tax-cut package that critics claim will expand future deficits.

The study asserts that sharp tax increases, massive spending cuts or a painful mix of both are unavoidable if the U.S. is to meet benefit promises to future generations. It estimates that closing the gap would require the equivalent of an immediate and permanent 66 percent across-the-board income tax increase.

snip

http://www.chewinthefat.com/artman/publish/article_271.shtml
---------------------------------------------------------------------


AND the actual Federal Reserve Report Documenting the $44 Trillion!

http://www.ngiweb.com/FiscalReport.pdf

---------------------------------------------------------------------

This is a "ticking timebomb" that our government is avoiding. I listened to a one hour review of this issue today on the Financialsence.com saturday interview take a listen:

http://www.netcastdaily.com/fsnewshour.htm (the interview with Laurence Kotlikoff)

[recidivist]

10. You have got it backwards.

First a brief disclaimer and political note.

I am part of the pro-personal accounts minority at DU and am gratified that our numbers seem to be growing as the issue resurfaces from time to time. The same is true, btw, of school choice. On both these matters, I think the Democratic Party is making a huge mistake in letting the Republicans own the issue. More Democrats seem to be coming around, but we have a long way to go.

Both of these are "empowerment" issues that allow people to assert greater control over their own lives. Both allow people of modest means to exercise choices which the wealthy have long taken for granted. Both are issues on which the American middle class is rapidly shifting in a pro-choice direction. Both issues -- and school choice in particular -- are potential Republican wedge issues in urban and minority districts. It is enormously important that the Democratic Party get on the progressive side of these questions.

Now, as to why you have it backwards:

The question of individual vs. government control of investment accounts is not new. Very consistently, it has been the "privatizers" who have wanted to keep the accounts privately owned and controlled. They have generally wanted to limit the government role to broad oversight -- e.g., rules on diversification and avoiding excessively speculative investments. This would be akin to federal oversight of pension plans but would keep the feds out of direct stock picking.

It has been OPPONENTS of privatization, determined to keep all the money within the Social Security System and under federal control, who have wanted the government to own the funds and pick stocks. (They have been drawn into the discussion because of the obvious benefits of a fully funded retirement system based on real investment assets.) Bill Clinton toyed with this approach, and he has been echoed in recent years by a number of other national Democrats. This approach raises the "crony capitalism" types of problems you mention. This is, again, an area the Democratic Party needs to rethink.

[cthrumatrix]

11. The demographics (aging) leave little choice --- privatizing is only a

last resort.

The report above shows as more and more people age and retire...the burden get's bigger and the govt is "on the hook"

Privatization (funded at $1Trillion) establshes an account for each perosn over 37 yr old (all this according to greenspan/o'neill)

[underpants]

12. On Edit

UNDER 37, that was at that time.

I really don't have a problem with privatization. Without "oh woe is them" stuff about people making choices that they don't understand, this is a decision that people should be allowed to make. If they choose wrongly there are still some safety nets put in, if done the right way. The problem is that the time to have done this is not now it was 3 years ago. It sounds good but it really isn't an option right now, that's okay they know it won't pass they are just throwing it out there to say "Hey we tried" which makes no sense as they control the executive and legislative branches and call all the shots from one central command.

[cthrumatrix]

15. I am in favor of it -- as was O'Neill --- he tried to use surplus's to

cover and holdback on the 2nd tax cut --- and he was fired for being responsible.

And now you have shrub coming out with: moon,mars,marriage, church etc....costing billions

ANd the press stays MUM.............

[Mel]

18. Why the age 37?

Someone that's 38 can't retire until their age 67 and get the full SS benefits.
Why shouldn't they be able to participate if it's privatized?
That's 29 years worth of investing.
What about people that are Sole Proprietors?

I agree with another poster the GOP will ram it through without anyone in the public getting a chance to study the legislation and comment.

Just more refried boogie of their so called Medicare reform. I have little hope of them doing good for the people what I see is another golden egg for the corporatistas.

[cthrumatrix]

19. well my recollection from the book (others keep me honest)

It's that the 37 yrs olds are closer to retiremnt ---they have been contributing for some time --- so they have a "nest egg" that's owed to them --- so they will get their kitty (on a present value basis) to invest accordingly

the under 37 crowd pays into soc sec now...so they will just pay into their own account and the "new savings accounts" that bush will talk about --- like super Roth IRA's.

it has a few advantagesf for the market since younger people would invest over time --- provided the market is not a house of cards -- it might work.

So the $1 Trillion would be needed to fund these accounts --- the shit part is all this was knwon ahead --- and shrub has been spending like a drunken sailor and will propose more $$$ programs -- there is zero accoutabilty it seems

and the media goes -------- silent

[Mel]

20. that seems unfair

I'd rather not have privatization at all if that's the way it has to be the women in my family live to be over 100 and my 85 year old grandmother still runs her own business.

Your house of cards point is another aspect that bothers me as pointed out earlier.

If tons of people invested in certain companies and those companies go bankrupt they are out the money or people will whine for the government to bail them out (tax payers) and that would effect all the people counting the ones not involved in the privatization plan to bail those companies out. Separate but equal in the burden? I don't think so!

Also isn't there talk of getting to roll that egg over? I say if your 38 and want to take part you should be allowed or if you are 50 it wouldn't be that hard to keep up with the money you did invest...at least I wouldn't think so?

Bottom line is with the people we have in the Congress (and believe me I've watched in disgust) I just can't support this! They aren't going to do the fair thing and your right about the media they won't, they don't, cover this for the people.
Bush* lost his window of opportunity when he went on his spending spree. I don't see where they are going to get the money from?

[Papa]

16. clarify for me please

You said the opponents of privatization want the governement to own the funds and pick stocks. This reads to me like opponents of privatization have their own plan for privatization ....or are you saying that if privatization went ahead, oppenents would want to see this happen to lessen the ill effects they predict.

[cthrumatrix]

17. I'm sure there would be extremely conservative choices

from t-bills ..to low risk models for investment etc....

I have no argument with that....it's deception...there a ticking bomb and shrub is out spending like a madman and there is ZERO pushback from our congress/senate in this issue...they all know...the media knows.

[recidivist]

23. Per your request.

A wide range of options are available. The basic choice we're discussing here is between a tax-funded, pay-as-you-go system (the current S.S. system) vs. a fully funded system based on savings and investment. The latter has overwhelming advantages once fully phased in. The main difficulty is that we have the huge unfunded liability of the current, headed-for-bankruptcy system to amortize along the way. This can be done, but it makes the transition somewhat complex and much lengthier than would otherwise be necessary.

Once the decision to shift to a fully funded system is made, a second question arises. Should individuals own their own accounts, or should the government hold the assets in a collective pot and ladle out benefits according to a political formula? The latter approach appeals strongly to redistributionists. The former, however, allows individuals to accumulate substantial estates that can be passed on through their families; this, over time, would significantly alter the distribution of wealth in our society and is a prospect that especially excites me.

If individuals are allowed to own their own accounts, a third tier question arises. Should people be allowed to make their own investment decisions (subject to broad diversification and prudent investment rules), or should government hold each person's account in trust and play stock picker? The former is similar to conventional IRA or 401(k) arrangements in which people have very broad latitude to control their investment options and is, IMO, the way to go.

Some people, however, would prefer to let the government control your account and play universal stock picker. Mainly, I think, these are people who recognize that the funds held in trust will soon grow to massive size, and they would like the ability to redirect these funds to political ends. You can see some of the results of this approach in the scandals that have befallen some state or union-run pension plans that have allowed pols to dip a little too freely into the honeypot.

I hope this clarifies things a bit.

P.S. The politics of this issue are shifting rapidly. The diehard, "there's nothing wrong with Social Security that raising taxes won't fix" folks are increasingly isolated. Of the 15.3% Social Secuity tax, just over 10% funds the retirement portion of the program, which is all we are discussing here. Social Security thus takes over 10% of your lifetime earnings and ends up paying you a pathetic, barely poverty level stipend. This is ridiculous, and anyone with a financial IQ above that of a cabbage knows it. Not only do you get a pathetically low return on your money, you end up with no nest egg to pass on to your kids, and many people end up actually losing money. Raising taxes to keep the current system staggering along simply worsens an already bad deal. This is a STUPID way to run a pension system. It WILL be changed, the sooner the better.

As the party that invented Social Security, Democrats should be leading the charge to improve it, not get stuck insisting that mistakes made in 1935 can never be fixed because FDR is some sort of tin god. This is going to become an election-winning issue for the Republicans unless Democrats smarten up, and fast.

[0007]

14. Ah yes, nepotism and cronyism will be the rule of the day--

All the marking of a setup for a third world country.

[tom_paine]

13. Sure, they're in the home strech of their Big Thefts

A supine and Orwellian media, parasitized and weakened and useless except for Celebrity Trials. Actually, come to think of it, they cover THOSE just as lazily and stupidly as they do everything else.

[papau]

21. Amazing amount of mis-information on SS privatization on this thread

Daniel Patrick Moynihan, RIP, and I fought via letters/email over this - and I think I was correct since the committee did not end up recommending private accounts as a solution to SS.

Indeed, SS does not need a solution. It is solid to 2043, after which the Reagan retirement age of 67 needs to be increased to 70, or the wage base cap removed causing the rich to pay more (oh, the horror of that thought!).

The beauty of a inter-generational social insurance plan is the fact that it needs the least amount of funds on hand at any one point - and therefore has the lowest tax for the highest benefits. The $44 Trillion liab is over forever - which means it effectively does not exist during the next 50 years if you allow for a liability of 44 trillion plus 50 years interest to exist in 50 years. It need never be paid off. It is a scare - a threat - being used to rape Social Security.

The Dems in the 40's tried to build a SS fund just like private business would have - and the GOP stopped it crying Socialism by the back door (from book SS by Meyers) - indeed any advantage to equities can be had by investing the SS trust assets in equities - but that means SS could not fund the tax cut for the rich - meaning more borrowing to fund the deficit - meaning higher interest rates.

The Bush plan is to cut SS benefits more than that required to fund private accounts - thereby reducing the $1 trillion needed for the initial set-up of such accounts. The end result is lower SS benefits and Medicare, with the pro-GOP/rich political result of folks happy to reduce tax on the 99% of the income that the rich get that is called investment income - because they - the middle class - get a small reduction in tax also.

And we still add to the deficit, and those funds the rich are now stealing from SS as SS is used to fund general expenses like defense need never be repaid!

Currently the payroll tax is expected to be less than benefit outgo in 2017 and later, forcing SS to cash in some bonds, forcing the FIT to increase to bring in some cash to give to SS for those bonds - but this is a tax increase on the rich - they pay back what they have stolen - oh the horror!!!!

So we have this SS destroying private account plan so the rich need not pay back those monies!

If we want private accounts via payroll deduction, then a voluntary addition deduction - as was proposed by Clinton - is easy to set-up

and then you have private accounts and you do not screw old folks and social security.

But why do private accounts in an honest way, when you can screw folks so as to reward the rich?

[cthrumatrix]

22. In your logic...how do less people paying into SS cover the "elderly"

I think there is a plan to end both of these programs ...period.

Medicare has the "drug presription" gottcha -- whereby seniors have to LEAVE medicare to get the benefit. Lord knows the issues with that bill --- which nobody sees until 2006.

SS for those 37+ will have private accounts funded at a cost of $1 Trillion (whatever the final number)

And just maybe ...they use the O'Neill plan to justify the rev/expense timebomb of $44 Trillion

Either way...the repugs have done away with our social safety nets.

[recidivist]

24. With all due respect, Senator Moynihan was right and you are wrong.

I will limit my observations to a couple of points.

First, you state that Social Security in its current form has "the lowest tax for the highest benefits." This is simply wrong, and it is a fundamental issue. Leave aside the transition issues for a moment. Once fully phased in, a fully funded system will ALWAYS beat a pay-as-you-go system, and by a wide margin. It's not even close. Over the 40+ year time horizon of a typical working life, the average guy would do much, much better investing the same dollars into almost anything other than the current Social Security System. This is the most fundamental reason to shift to a fully funded system.

A system that saves and invests 10% of income over an entire working life will allow most people to easily sustain their lifestyles in retirement. It will make most of us financially independent. Social Security takes the same dollars and pays a pathetic, barely poverty-level stipend. That is not a difficult choice for me.

Secondly, Social Security doesn't give you an opportunity to build an estate. Upper income folks will use their IRAs and 401(k)'s for this purpose, but lower income people, as we all know, find it much more difficult to save. (Obviously some still do, so we have the occasional secretary who leaves three million dollars to the local cat shelter. It's not impossible, just much harder.) Anyhow, shifting to a fully funded system will allow EVERY worker to accumulate an estate. Do that for a couple or three generations, and we will have massively democratized the distribution of wealth.

Finally, a lot of people lose money in Social Security. This obviously includes anyone who dies before retirement or who doesn't live to the break-even point after retirement. That's a shame. It's also a pretty stupid way to run a pension system. If I die at 55, my retirement nest egg should go to my heirs. Under Social Security, it's a dead loss.

Senator Moynihan was not right about everything, but he was right about this.

[Kat45]

25. With all due respect, the private accounts screw the working poor

"A system that saves and invests 10% of income over an entire working life will allow most people to easily sustain their lifestyles in retirement. It will make most of us financially independent. Social Security takes the same dollars and pays a pathetic, barely poverty-level stipend. That is not a difficult choice for me."

You say "most" of us will be financially independent. I beg to differ with you reference to "most." For those who make such a small amount of money that they can barely pay their bills, 10% of their income would not be enough investment money to amount to much. Yes,social security payments are small, but for many of those who never were able to earn much money, that's all they have. Taking away this safety net will meanthat those who lose all their money in these investment accounts won't even have that samll amount of money.

"Anyhow, shifting t a fully funded system will allow EVERY worker to accumulate an estate. Do that for a couple or three generations, and we will have massively democratized the distribution of wealth."

"EVERY worker"?? Highly doubtful. Again, these same people with low incomes are not going to accumulate an estate with the piddling amount of money that will be invested. And I don't really care about "estates." I believe it's more important for everyone to have food and shelter, not for most people to have something to leave to their heirs, who can go to work themselves to earn money.

And what happens when the stock market tanks, which it inevitably does, at the wrong point in time for one's retirement. When the market went down in recent years, those of us with 401Ks went from seeming quite 'wealthy' on paper to not even having enough money left to amount to one year's income.


"Finally, a lot of people lose money in Social Security. This obviously includes anyone who dies before retirement or who doesn't live to the break-even point after retirement. That's a shame. It's also a pretty stupid way to run a pension system. If I die at 55, my retirement nest egg should go to my heirs. Under Social Security, it's a dead loss."

Sounds like you have an "every man for himself (and his family)" philosophy, which is the only philosophy of most republicans (as well as some democrats). I prefer the community approach in the sense of we're all in this together and it's important to take care of the poor among us. Wasn't social security devised so there wouldn't be large numbers of starving elderly in our society? IIRC, it was designed the way it is so that cries of 'socialism!' would not prevent it from passing.

[stevebreeze]

26. privatization is so bad it can never never never help SS

The math just rules out any kind of privatization scheme working.

first SS is solvent until 2043. In this year the youngest baby boomer's( you know the one's who's retirement supposedly is causing the strain on SS?)the youngest will be 79. Most boomer's will be dead and no longer receiving SS.

Any plan which diverts money into private accounts will not lengthen the time until SS runs out of funds it will in fact hasten the arrival of that day. If you are having trouble paying you mortgage do you take out another loan?

The baby boomer large bulge in the population likened to a giant rat being swallowed by a snake. Lets assume for a minute that we privatize SS in some way and now we are investing SS money into the stock market. For the time being since boomer's are at their likely peak earning potently we will invest the billions of dollars in SS surplus in stocks. Can not this large increase in stock investment fail to pump up the stock market through the simple effect of supply and demand. Now lets look a few years down the road as the boomer's start taking their retirement funds out of the stock market. Can the stock market fail to tank JUST AS those funds are most needed?

The best way to save SS is to let it be. SS is now in better financial health then it was in the 40's 50's 60's or 70's. Even if we fail to make any changes to SS until 2043, in that year it will be in exactly the same shape it was in in 1980.



I strongly recommend reading "SS the phony crises " by Dean Baker and Mark Wisbrot

Check out the SS pages on http://www.cbbp.org center for budget and policy priorities.
:kick: