Is Paul O'Neill right about Social Security?

[Hamlette]

THIS is what we should do about Social Security: At the same time we acknowledge that it is the most successful domestic program in American history, we should also admit that Social Security, in its present form, is unsustainable. And then we should come up with a plan that is different than what President Bush and most of the pundits are proposing.

We should ask ourselves what would be a worthy aspiration for the financial security of retired Americans in the years ahead. My answer is that we should establish a process that will produce a substantial annuity for every American at retirement age.

By substantial, I mean at least $1 million. In order to create a real, fully financed annuity of this size, people must begin saving when they enter the work force. The saving needs to be continuous, and it needs to be left intact so that compound interest can work its magic.

We can do this. We already have a process in place that requires that we give the government 12.4 percent of our income in the name of Social Security.

http://www.nytimes.com/2005/01/16/opinion/16oneill.html?hp

I'd like answers to why SS is not sustainable in its present form and I'm not sure he fixes the "problem".

The problem as I see it is, I've been putting money away into SS so when I retire I'll have some medical and some money. I won't be able to get at all of it at once, it will make payments to me monthly so I don't end up destitute and a drag on society.

Under O'Neill's plan it seems like the government will invest the money in index funds (not sure I object to that, if the index funds go down, we all go down together) and will be used to purchase for us an annuity to guarantee payment during our life time?

How is that different from the government taking the trillion dollars he proposes, investing it in index funds and paying it to social security when the 18-35 year olds get old enough?

The "problem" we are facing now is that the federal government stole my "savings" (the social security I invested over an above what was necessary to pay current seniors.)

How does O'Neill's plan solve that problem?

(I mostly like O'Neill so am tempted to listen to him. After all, Bush fired him because he wouldn't go along with Bush's disasterous tax cuts.)

[teryang]

1. O'Neill wants to destroy Social Security

He said so publicly after he was first appointed.

[Cooley Hurd]

3. In his book, he said one of his first priorities was to protect SS...

:shrug:

[papau]

17. O'Neil sees a tax increase to repay bonds and that is evil - so he saves

SS by avoiding that tax increase on the rich.

I rather like the fellow - but one needs to know what his priorities are!

:-)

[No Mandate Here.]

2. His main point, IMHO, was that the money

saved through SS is a "tax", and not a savings account. This is a semantic point we should raise and keep in the forefront. If we describe those funds as a savings account that is being maintained for us, and raise the maximum income level for contribution, then the debate will go no where.

*'s directive to the SS admministration to sell his agenda goes way beyond Armstrong Williams, and is criminal. I hope they stop this right now.

[Hamlette]

4. I'm confused

"If we describe those funds as a savings account that is being maintained for us, and raise the maximum income level for contribution, then the debate will go no where."

I don't understand. To me it is more compelling that I thought my money was going into a savings account and would be there for me. How will the debate go no where if we call it a savings account and up the maximum income level?

I'm worried that we will not get reliable information. Paul Krugman is the only one I trust on this but O'Neill's idea has merit...if we are truly in trouble AND if they actually treat it like a savings account and not raid the trust fund...again.

[No Mandate Here.]

10. Sorry I melded two thoughts that should have been separate

They are framing the whole debate as allowing us to "keep our own money", and pay lower taxes. To me, SS is government mandated savings for retirement, which is a good thing, as it is apparent that, given the choice, a large percentage of Americans either can't or won't save as much money as we should. SS's investment history is pretty good, it's trust fund has been used to fund government bonds, and it is sound. It just could stand a bit of tweaking.

My second point is that the maximum income level for SS contributions is now about $ 87,500.00 Above this figure, income is no longer factored for SS investment. Imagine how much more income the system would have if this were raised on a regular basis, as well. If I understand correctly, this ceiling has been raised by Congressional action on a sporadic basis. (Was the last increase twenty years ago?) Why isn't this figure raised through indexing, as well? If the benefits are raised for inflation, why isn't this figure changed the same way?

[BansheeDem]

14. Some thoughts to go along with yours ...

As Democrats, we can have a real impact on the future of Social Security if we play it smart; and at the same time take back an issue that was ours to begin with. FDR would have been dead set against the indexing of benefits, and we should as well. But I think it could be argued that he might have been in favor of some partial privatization of the plan today.

I too would argue that partial privatization is not necessarily a bad thing as long as the fund is tied to indexed equities (like the Fortune or S&P 500) and managed like the THRIFT savings plans used by government employees. They can invest up to about 15 percent of their gross pay as a means to supplement their retirement. That plan has been in effect for nearly 20 years and has not lost a penny. The key is that the management of the fund is blind in that it is tied to a wide range of investments that hedge against each other and deliver albeit, a lower - but steady return; and much higher overall than Social Security.

Note: even though the government invests the revenue in indexed funds, we don't see the true return on that money like those that use the THRIFT savings plans.

I agree with your point that most Americans won't save enough on their own - so true. I also think that raising the cap on contributions is also a winner for the system. Finally (and once and for all) the funds should be fenced and not deposited into the general accounts as they are now. Social Security has never been a true and separate entity; it's about time that happens.


FDR's Message to Congress on Social Security
January 17, 1935

"In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."

[No Mandate Here.]

15. Thank you for this information.

You are much more well versed in this language than I.

I didn't realize that the word indexing had a different connotation. My point is that, if the benefits are tied to the cost of living, then the contribution ceiling should be, as well.

I use the illustration of house values.

In 1985, living in an $ 87,500 house was a good bit different than living in an $ 87,500 house today. Values change. Why doesn't the contribution level?

[BansheeDem]

20. We both agree ...

and as a matter of semantics; you did properly address indexing on the revenue side - so we agree on that as well. I wrote this reply here and at some other Social Security threads because I see a lot of my fellow Democrats taking a hard stand against any changes to the current system - especially partial privatization. They seem to think that the government will tell us how and in what to invest. Unfortunately, most of them have it wrong on that account. As I have tried to explain (and you as well) some tweaking of the system is quite necessary for it to survive in the long term. Modeling the voluntary portion after THRIFT savings would not be risky at all, and would allow much more flexibility to those that would benefit the most - middle and lower income earners.

[papau]

18. We are not in trouble-the rich whose tax cut we financed don't want to pay

back the loan represented by those Trust Fund bonds.

[two gun sid]

19. You are exactly right

Make the tax cuts permanent and destroy Social Security. Remember that lock box everyone thought was so funny. Not so damn funny now, huh.

[rzemanfl]

5. Whatever he said...

all that they would have to do is threaten to prosecute him for something and he'd change his tune and make all nicey-nice.

[Hamlette]

7. that's pretty harsh

he did not change his tune, he said he wish the media had not put some much emphasis on one phrase in his book "deaf man in a room full of blind people" (or vice versa) which I agreed with.

the book was much more damaging than that catch phrase.

The media destroyed Paul O'Neill's point, not the admin. And O'Neill didn't back down. The media told you he did, but if you listened to what he said, he did not back down.

Once again, that damned liberal media out there protecting Bush and company.

[rzemanfl]

9. Didn't the Bush attack dogs go after him for allegedly

leaking confidential info on "60 Minutes" and didn't he cave in to the pressure with nary a whimper? This despite his saying "what can they do to me? I am old and rich?" Of course my recollection of this is back from when I still trusted the news, so maybe I didn't see what I thought I saw.

[Hamlette]

22. of course they went after him but

he immediately pointed out that the documents were given to him when he left office. That ended the issue. I've not heard a peep about it since.

Yeah. They play dirty but O'Neill never backed down to the pressure. He might have purposefully backed out of the spot light but I don't blame him for that. It might be that his 15 minutes was up (when they couldn't smear him.)

[rzemanfl]

23. I fail to see the difference between backing down and

backing out. He sure didn't stick to his guns like Richard Clarke did when the sic'd the dogs on him. More to the point, when people start talking about money and magic at the same time I head for the door.

[lastknowngood]

6. This is a con! Right now SS is being stolen by the politicians

and given to corp America via contracts for services over and above the taxes taken by the government. O'Neil would just take out the politician and replace him with a corp executive. The corp executive would steal the money without providing any service. I know we're being screwed by the politicians, but if we get mad enough we can change them. We would have no control at all over the corp executive. Now do you get it? the new con by doing it his way, corps no longer need to go the politicians or provide any service to get your money. They then use your money as they please and "Enron" your ass any time they want to. All the laws are designed to protect corp criminals and ensure they are never held responsible. After they ram through "tort reform" class action law suits and the ability for individuals to sue for misuse of the funds will be very limited. It will be legal for them to steal it all and walk away without even discomfort.

[Hamlette]

8. how would the corporate executive steal the money

if you had it in an index fund?

All stock would have to go bust for that to happen.

Corporations have self interest to stay in business. The vast majority of them would do so, hence the index fund.

I hate big corporation influence as much as the next guy but since I've not seen a model of communism work, I think we are stuck with capitalism. We need to figure how to make it better meet the needs of the middle class, like FDR did.

[lastknowngood]

11. The government will be directing where you can put the money

and the corp execs are directing the politicians. Soon people will find that the "index funds" aren't keeping up with inflation and "demand" the right to direct their investments. The only thing keeping the stock market from crashing is the lie that the U.S. government will make good on it's bonds. The bond's are losing value via the loss of value of the dollar. Let's say your "investments" make 4% and inflation is 2.5% but the value of the dollar outside of the U.S. drops 5%, your loosing. The stock market is just another way to steal wealth from the many and move it to the few. It happened in 1929 and they want it to happen again. Remember only the poor and middle class suffered during the great depression, the rich were partying because labor and everything else was cheaper for them and the serfs had no rights or money. That is the plan and the same families are running the con.

[HuskiesHowls]

12. One thing you need to remember

The tax cuts that * wants to make permanent for the wealthy, and the Medicare "Prescripton Drug Bill" that pays for meds are much more of a deficit maker than Social Security could hope to be.
<snip>
Moreover, Social Security will contribute only modestly to the deficits the nation will face in the years after 2018. For example, the difference between Social Security benefit costs and Social Security non-interest revenues will account for less than 10 percent of the projected budget deficit in 2025. The Administration’s tax cuts, if made permanent, and the prescription drug benefit will cost five times more than Social Security in that year.
<snip>
http://www.cbpp.org/1-11-05socsec.pdf

[two gun sid]

13. Paul O'Neill is talking outta his ass

Back in 2001 O'Neill and Greenspan came up with this cockamamie idea to allow those under age 37 to 'invest' Social Security 'private accounts' into index funds, both bonds and equities. When they ran the numbers they found it would cost one trillion dollars in transition costs.

I wouldn't listen to a thing this guy has to say. Don't forget that when he was appointed Treasury Secretary he wanted to end corporate taxes and stop funding of Social Security. He also did not divest himself from the company he ran prior to his appointment, Alcoa.(After he promised he would). He collected a windfall of maybe 62 million before the press caught him.

[susu369]

21. Exactly -

Back in 2001, Jake Tapper did an outstanding story "Aluminum Sliding" regarding O'Neill's hide-and-seek game with divesting his stock. O'Neill never did give out the final details of the transaction.

Arrogance, IMHO.

[teryang]

24. Good points, the man has no credibility with me either

He did say he wanted to end corporate taxes and stop funding of Social Security.

How can people forget this. The guy is a reactionary.

[readmylips]

16. Chit, I learn more you guys/gals here than....

from printed media crooks.

What I can't understand is; the population of America has tripled but somehow the government is pushing the idea that baby boomers will be the largest population to enter social security, making it a death to social security. How can this be when there are three times more citizens than boomers?

If there is a change to social security, I don't trust bush nor his administration to make a change that benefits the average citizen. The rich Wall Street republicans are the only ones who will benefit, and it will be used the same as that moronic Faith Base crap that has given so much power to the religious nuts.