A theory on the privatization of Social Security - Am I way off?

[clem_c_rock]

It is truly remarkable how the issue of Social Security privatization is being pushed and sold as a crisis of impending doom when the facts suggest otherwise.

Is is possible the Social Security funds have been depleted for Neocon wars far more than is being reported.

The sudden push for privatization of S-Security is a desperate
attempt by the Bush administration to ignite the stock market
and stave off an impeding economic disaster and hide the fact
of how much money the Neocons have REALLY stolen
from the social security reserves.

Just a theory. Any thoughts?

[brainshrub]

1. Interesting hypothosis. (nt)

[shoelace414]

2. I think it's as simple as they have no empathy

so they don't understand what it means to have no money or little money and living from paycheck to paycheck.

since they made so many millions in their lifetime and it was so easy, why doesn't everyone else do that?

[Name removed]

9. Deleted message

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[gumby]

18. Bush stole the election. period.

It doesn't reallly matter how many "real" people voted for him.

[Bridget Burke]

20. Gosh, is that how folks get rich?

Tiny investments in the stock market--which always does so well! I didn't get an "estate" from my father--he didn't live that long--but we got SS payments until grown. It helped.

Yes, capital will move into the market. So the CEO's can get bigger bonuses & open more plants overseas.

And the working poor can pay for all their own health care, as well. It's the Ownership Society!

The poorly digested lumps are quite identifiable in your regurgitated mess....

[ProfessorGAC]

21. Nice Two Dimensional Theory

Not partcicularly insightful, though, as it lacks any vision. What happens to the market when a whole lot of extra money goes into it with no actual increase in the value of the investment instruments?

Think about that for a while. (It's actual fairly simple economics, but one needs to look past simple percentages and IRA's and 401k's etc.) If you don't draw a different conclusion than the simpleminded one you've already drawn, you're probably beyond hope.
The Professor

[Jim Lane]

27. The RW rationalization is even weaker than you suggest

I agree with you that, if "a whole lot of extra money" were to go into the market, it wouldn't actually produce the kind of expansion and job creation that privatization advocates tout.

There's a more glaring flaw in their theory, though. Any diversion of Social Security tax receipts into private accounts would have to be financed by borrowing. For example, in 2004 the Social Security surplus of about $150 billion was invested in Treasury notes. If, instead, the $150 billion had been in private accounts, looking for investment opportunities in the stock market or elsewhere, then the federal government would have had to go into the capital markets to finance an additional $150 billion in debt (beyond what it actually financed). That would sop up investment that could otherwise have gone elsewhere. The net impact on total investment is zero, except for a possible decrease if brokers' fees and commissions take more of the investment money than they do now, or if the creation of "personal accounts" causes participants to do less saving on their own than they're doing now.

[ProfessorGAC]

28. I Agree

The point i'm making though is not a macroeconomic one. (I published a paper in 1987 or 1988 on the negative leverage of excessive gov't borrowing on the overall economy in the medium and long term. So, i am absolutely on your side in this.)

However in the ultramicro, the plan is not even good for the individual investor it intends to "help". The end result will be a massive market overvaluation in which the return will be only illusory. When it comes time to collect, (say if one is 30), in 35 years, the market will have undergone at least 5 corrections to maintain price/value par. The investment will be worth less than the money put into it at that point. That's my point to the less economically knowledgeable.

This doesn't help stabilize SS. It doesn't provide benefit for younger workers. It's just an excuse to hyperborrow and then use that excuse in 10 years for major slashes in social programs. It's the major building block of the "starve the beast" strategy.
The Professor

[The White Tree]

22. I think you need a reality check.

Here you go. Read this article:

<http://www.nytimes.com/2005/02/01/opinion/01krugman.html?incamp=article_popular_3>

It's by Paul Krugman of the New York Time. I would trust his knowledge of economics a little more then yours. Care to take his challenge.

[prolesunited]

31. And can you explain

why there were so many seniors living in abject poverty before SS if this was just so easy?

And, yes, the corps will be hiring more people — in India and China!

On edit: Are you rich or just a sucker?

[Last Lemming]

3. Yikes

New Zealand is nice this time of year I hear

[StClone]

4. I suggested that before and some say the IOU's

Have gutted the SS already.

[Liberty Belle]

5. No, it's been planned for years by the neocons,

as a means of looting Social Security funds before they destroy it.

Biggest beneficiaries are the major brokerage firms and the financial institutions who will administer the private funds.

Bush's two biggest campaign donors in 2004 were Merrill Lynch and Morgan Stanley. The financial industry was the single largest category of donors overall.

This is payback, pure and simple.

[Stirk]

6. I suppose it's possible, but conservatives have been pushing

for Social Security privatization for years. Even some of our more DLC-flavored Democrats have been pushing for it.

Personally, I think it's being pushed very hard right now because the Bush Administration knew it would be very unpopular. They put it off until after the election, so they could cram this fraud through without consequences. But their time is limited- and Bush's approval rating is dwindling from Nixonian levels to Vlad the Impaler levels pretty damn fast.

The Republicans will really show their hand in the days following the SotU. They'll milk the Iraqi election propaganda-fest that we just witnessed, along with the typical SotU bump to push this SS scam hard.

[Johonny]

7. But it's not

I've not seen a single poll that shows that it a popular policy. Which is why he has never tried hard to push it in his first 4 years.

[12345]

8. Well, there are $9 billion missing from Iraqi reconstruction, and

$2.3 trillion missing at the Pentagon, why not social security?

There's no doubt that privitization benefits Wall Street. It also seems like all of that money could do a lot to stabilize the market if the economy collapses under the weight of our enormous debt.

I think you're on to something.

[BurtWorm]

10. No. They have been wanting to murder SS since the New Deal birthed it.

Although dumping billions into the SE is probably the carrot on the stick for the SS assassins.

[markomalley]

11. It goes back farther

Reagan used the trust fund to bankroll his deficits. Its been used for that purpose ever since.

[dweller]

23. yep, and then comes along 2018

and the payback begins.

"But there was a twist: Knowing that the baby boomers would begin retiring around 2010, Mr. Greenspan recommended raising payroll taxes
by much more than was needed to pay benefits at the time. The surplus would be used to buy Treasury bonds, which could be redeemed
when the boomers retired and payroll taxes were no longer sufficient to fully fund retirement benefits.

This is where the second twist comes in. Because the surplus payroll taxes were handed over to the federal government (in return for
Treasury bonds), this meant ordinary income taxes could be kept low. After all, the federal government has a fixed need for money, and if it
gets excess money from payroll taxes it can afford to keep income taxes lower than they'd otherwise be.

But the payroll tax is a flat tax, paid disproportionately by low and middle income workers. The income tax is a progressive tax and is paid
disproportionately by high earners.

So this was the implicit bargain in the reforms recommended by Greenspan and signed into law by Reagan: From 1983 to 2018, low- and
middle-income earners would pay excess payroll taxes. This allowed income taxes to be kept low, and primarily benefited high earners.

Then, beginning in 2018, instead of raising payroll taxes to pay for baby-boomer retirement benefits, Social Security would begin selling its
bonds back to the government.

To pay for those bonds, income taxes would be raised - high earners would begin paying higher income taxes."

source: http://www.csmonitor.com/2005/0127/p09s01-coop.htm


there's your 'crisis' . . .

dp

[The White Tree]

24. That would seem to explain why Bush opposes rasing the payroll tax cap

Which I think I read somewhere would probably make the crisis go away completely.

[markomalley]

29. You're right

and it is terrifying. With most of our creditors already cashing in their dollars for Euros even as we speak, there won't be anybody willing to finance the debt. There are no politicians courageous enough to increase the taxes necessary to help pay it back, so the only other choice is to ***print more money*** -- when that happens our economy will literally sink to third world status.

Folks...get ready. 2018 is not a hard and fast date. It could happen as early as 2010. You had better protect yourselves when it happens 'cause it's going to be really ugly!

[papau]

12. I suspect real reason is to never pay back payroll surplus that

financed tax cut for the Rich under Reagan and again under W -

If 4 Trillion of new borrowing in next 10 years, the starve the beast folks that want to end Gov involvement in anything besides national defense will have folks used to gutting any and all social programs, with no thought of paying off National Debt bonds (meaning no new tax on the rich to raise money for bond repayment) as we struggle to come up with the money for interest on the debt plus defense.

[illflem]

13. My understanding is the feds borrow SS money

and are obligated to pay it back with interest. This is one of the ways the SS coffers make money rather than just sit there collecting no interest.

[Wwagsthedog]

14. Just for the record

The fact is that the Social Security "Trust Fund" was eliminated in the '60s by the LBJ administration and a Democratic Congress. To mask the massive deficits caused by the Viet Nam war, SS funds were coupled with the "General Fund" for reporting purposes. Just imagine what the USA balance sheet would look like if surplus SS money was sacrosanct. In reality, we have been living in the red almost forever. What * and his minions plan to do is abrogate SS payments because "we're broke".

[K-W]

15. No, they just plain hate social security.

Because they want to eliminate populist governing.

[Justpat]

16. Noam Chomsky on privatization:

"Eliminating social programs has goals that go well beyond
concentration of wealth and power. Social Security, public schools,
and other such deviations from the "right way" that the US military
power is to impose on the world, as frankly declared, are based on
evil doctrines, among them the pernicious belief that we should care,
as a community, whether the disabled widow on the other side of town
can make it through the day, or the child next door should have a
chance for a decent future. These evil doctrines derive from the
principle of sympathy that was taken to be the core of human nature
by Adam Smith and David Hume, a principle that must be driven from
the mind. Privatization has other benefits. If working people depend
on the stock market for their pensions, health care, and other means
of survival, they have a stake in undermining their own interests:
opposing wage increases, health and safety regulations, and other
measures that might cut into profits that flow to the benefactors
on whom they must rely, in a manner of feudalism."

from his book Hegemony or Survival, page 119-120

I agree with his assessment. It rips through the bullshit that the
right wing spews out on a daily basis regarding the imminent danger
of SS going broke.

[lawladyprof]

17. On Hardball last night, McClain touted these private acc'ts as

teaching young people to "rely on the stock market rather than the government" (pretty much a direct quote). I replied (to the TV) somewhat tartly that "we'd been there, done that in 1928."

[K-W]

19. Translation:

Bow before your new corporate lords because government cant save you now.

[Cleita]

25. You are right. They have their hands so far down in the SS

cookie jar that they don't break the jar they will be stuck.

[The White Tree]

26. This thought just occurred to me.

It may not only be a stock market issue that this relates to in terms of trying to get the market higher. From what I've read most people don't expect this to affect the market that much. But what they may be looking to do is use the money they will borrow to fund this plan to also finance the deficit in order to make it look like Bush will meet one of his other "promises" which is to reduce the dept by half by 2009.

This would be kind of like when you refinance your house and the refinancer asks if you need any extra cash for anything like home improvements, pay bills, take a vacation. They could probbly very convieniently bury extra borrowing within whatever bill was used to fund social securit privatization in a way that allows them to spew those endless talking points that aren't really lies but are always full of half truths.

[Mr. Grieves]

30. Hmmm...

I wouldn't say that a cover-up by social security is their main goal. The problem with this theory is that social security under the Bush changes are going to fuck up benefits more then help them, and create a wider rich to poor gap as the poor wont know how to privately (IT IS PRIVITIZATION, damn treacherous republicans) invest. As far as the economic desaster, a crisis will only be caused by the S-S plan - otherwise the debt that Bush has pushed us in has to tax the rich hard, and I mean Hard. Instead of a coverup, I think Bush is just trying to help out his corporate goonies (to whom the benefits shall slide) and meanwhile dupe the black vote, by saying they all die younger so the system is unfair. Stupidity.