Argument against privatizing Social Security (in 30 words or less)

[scottxyz]

If the stock market is going to grow fast enough to make privatization worthwhile, then the ecomony will also be growing fast enough to keep the current system solvent.

(This is the "Privatizers' Catch-22" Krugman talked about.)
http://www.nytimes.com/2005/02/01/opinion/01krugman.html?oref=login

[WLKjr]

1. Why gamble a sure thing?

I don't trust the stock market enough to gamble a sure thing away.

[really-looney]

5. Not so easy in thirty words but...

A humane society assists its elderly to live with dignity, not just the rich but those who lived hard, worked hard, and tried but did not earn enough to live in retirement.

[cthrumatrix]

31. Here: The plan says if you earn less than 3% avg return over

"x" number of years ....you get nothing back.

[reallygone]

57. Progressive?

The Congress, the President, and all Federal employees have their retirement in the same program proposed by the President. Are all us "Progressives" in favor of doing nothing instead of seeking "reform"? Back home we call that a "stick-in-the-mud".

We call for the Federal Medical care program to be "made available to all Americans", but we gasp at the prospect that the Federal Retirement plan will be made available? Don't let dislike for Bush and Republicans blind us from a vision of the future.

Over the last 20 years, including the messed up economy in 2001-2003, the stock market has averaged 8% return per year. The Fed Govt. borrows our SS money (the money deducted from your check each payday) and gives you a return of 1.5% ("oh, but its guaranteed!" --- only for the next 35 years, then everyone starts taking HUGE cuts).

A wise man once said "you can't work yourself rich, you must invest".People at the bottom aren't making enough to put in a 401K or an IRA, that's why Democrats say these "are programs for the rich". We all put money into SS (including the poor), why can't the little guy use this to establish his own account?

Funny thing is, the poor and minorities typically die sooner than rich white folk. That means the money they poor and underpriviledged contributed is used to fund the rich guys SS check.

You want to oppose SS reform and still call yourself "Progressive"? Gimme a break! You are just hiding your head in the sand.

[WLKjr]

58. ?RIECHWING NUTJOB?

do some research, and I don't mean on rush's web toilet, or fauxes newstainment. And then start telling that to all those people who are getting SS right now, and I don't mean the ones YOU PEOPLE think are getting something for nothing. Start by telling this BS to a 70 yr old woman down the street from you or to a physically handicapped person you know and explain to them why you think SS is such a bad idea.


Wanna fight this one out? Let's go!

[reallygone]

63. Progressive? LOL

The 70 yr old lady, the handicapped person, the homeless guy, the single mother, etc. all will have the option of staying in the current plan and getting all the benefits promised (until 2042 when the moeny starts to run out and then they will get 70%+). That's the beauty of choice!

For the thinking person, with a 100+ year of history of the bond and stock funds, during any 10+ year period of time (Including the depression years), the stock market has averaged over 7% growth AFTER INFLATION (10% minus the inflation of 3%). Take ANY 10 year period!

The Federal government pays 1.5% to SS on the money it borrows from the SSA deposits. You get none of that. You get only what they give you until you die. None of the money is yours. And if they cut benefits in the future, yours will be cut as well. Since our population is aging, living longer, and having smaller families, there are fewer people paying for SS for people that are retired. That money will run out and benefits will have to be reduced (unless you can start a huge baby-boom).


You wanted research. Here you go!
Charts - http://www.internet2.edu/~shalunov/stock-market/
Calculator - http://www.moneychimp.com/features/market_cagr.htm
Background - http://money.howstuffworks.com/stock.htm

[WLKjr]

79. Reading material

Okay, here goes. Did you know that you only pay into social security with the first 90,000 you make?



Here's some stuff for you to read!
Economists - http://www.iea-macro-economics.org/ss-priv.html
Graphs (same site) - http://www.iea-macro-economics.org/graph.html

This one is a good one too. Gives comparisons

Numbers & Charts (since you like them so much)-http://www.cepr.net/publications/facts_social_security.htm

and if you really want to go to the source and learn some stuff -
http://www.ssa.gov

I'm not trying to be a smart ass, I just really want to know and see how you know this will work out for you in 60 years, or do you really care?

[hector459]

96. ENRON!!!

eom

[Cleita]

2. Great Britain has realized that Maggie Thatcher's

privatization scheme has thrown so many elderly Brits into poverty and thousands left with no investments at all that their government is considering adopting a system like our present Social Security system to fix it. Now why would we want to adopt their failed system?

Uh, that's more than thirty words but it's why we shouldn't to it.

[ferg]

3. Even assuming a poor economy...

Even assuming a poor economy, Social Security can pay 90% of benefits for all generations, young and old, forever.

(And if the economy does normally, Social Security can pay 100% of benefits.)

[scottxyz]

8. Assuming a poor economy,

Social Security will pay 90% benefits - and privatization will probably pay 10%.

[googly]

4. In my own case, I started contributing into social security in

1962 (yeah I am giving my age away LOL). I have contributed
over $160,000 into the system over the years. And now my
social security benefit is $1400/month. If I had the option
in 1962 to put 1/3 of my contributions into a total stock
market fund such as the Russell 5000 index fund, based on
ACTUAL stock market results, I would have accumulated a nest
egg of $700,000. On that amounttoday you can get an annuity
paying $3300/month or more depending on options selected.

So my monthly pension would have been 2/3x1400 + 3300 =
$4233 /month instead of the $1400 /month I am getting.

[Doremus]

16. You're assuming they will let you keep it all

You forget all the fees and expenses involved with piratization. The brokerage houses aren't going to do the work out of the goodness of their hearts and a big chunk of 'your' investment will go to pay them.

Of course, once they've plundered the system for whatever they can they will declare SS 'unsalvageable' and get rid of it.

The thought of all that money and all that money to be saved later has them literally salivating. Why do you suppose they're so intent on ramrodding it through? Surely not because they care about senior citizens. LOL

[reallygone]

60. "Think before you speak"

That is what my mom always told me.

The proposal for these accounts will be (explicitly in the State of the Union message) modeled after the Federal Govt Retirment system. I am in that system. We pay only 1% in fees, and the Feds cover all the advice, stock picking, mangaement, accounting etc. You won't pay any "broker fees", transaction fees, or any other hidden costs.

Two more points:
1. - It will be voluntary which means you can keep your traditional SS account, but I can opt to use the new system (which I will).
2. - You will be able to choose from several limited plan options (the Federal System has five funds you can pick from which range from 100% secured guaranteed federal securities, to a riskier small company fund that can fluctuate), but all funds have grown over 6% per year (even on the most secure funds) except the newest fund which has only been available the last couple of years.

http://www.tsp.gov/rates/monthly-history.html

[googly]

69. There are dozens and dozens of mutual funds charging less than

1% in management fees each year based on your assets.

If the fund returns 8%, you are still 7% ahead. Compare
that with what the government gives you on your payroll
taxes...in the range of 1 to 2%.

The old saying "No risk no reward" is very true. I think
taking risk on 1/3 of your payroll taxes makes sense.

[bunkerbuster1]

73. Fine. Go for it.

In Chile. It's worked so well there.

[reallygone]

78. Wonderful Chile?

If you want to learn about the Chile system that is similar to what is proposed for SS, here are resources:

http://www.owlnet.rice.edu/~poli354/Chile/970321_Pensions.html
http://www.cato.org/testimony/ct-jr073101.html
http://www.findarticles.com/p/articles/mi_m1571/is_n45_v13/ai_20035438
http://www.ncpa.org/pub/st/st271/st271c.htm

[bunkerbuster1]

84. You're quoting the fucking CATO institute?

mmkay. Nice seven-year-old cite, as well.

People have been reamed nine ways to Sunday in Chile. Here's a recent story of the "Wonderful" system they have there:

http://www.nytimes.com/2005/01/27/business/worldbusiness/27pension.html?ex=1264482000&en=42c98585c86afe88&ei=5090&partner=rssuserland

Chile's Retirees Find Shortfall in Private Plan

By LARRY ROHTER

Published: January 27, 2005

<...>

Under the Chilean program - which President Bush has cited as a model for his plans to overhaul Social Security - the promise was that such investments, by helping to spur economic growth and generating higher returns, would deliver monthly pension benefits larger than what the traditional system could offer.


<...>

Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees that may have soaked up as much as a third of their original investment - are failing to deliver as much in benefits as they would have received if they had stayed in the old system.

Dagoberto Sáez, for example, is a 66-year-old laboratory technician here who plans, because of a recent heart attack, to retire in March. He earns just under $950 a month; his pension fund has told him that his nearly 24 years of contributions will finance a 20-year annuity paying only $315 a month.

"Colleagues and friends with the same pay grade who stayed in the old system, people who work right alongside me," he said, "are retiring with pensions of almost $700 a month - good until they die. I have a salary that allows me to live with dignity, and all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981."

[AirAmFan]

91. You're comparing apples and oranges. SS is NOT AN INVESTMENT,

without GUARANTEED benefits. It is DEFINED BENENFIT SOCIAL INSURANCE, already fully funded for DECADES when you retire.

And what if, after Wall Street management fees, "the fund" averages MINUS eight percent a year during the decade before you plan on retiring? As the MoveOn ads say, you'll be experiencing something new: "the WORKING retirement", if you're lucky enough to find someone who'll hire you when you're an old geezer.

[Name removed]

17. Deleted message

Message removed by moderator. Click here to review the message board rules.

[K-W]

18. A sign of a problem gambler.

If only I'd played that hand, id have been rich.

The prizes are shiney, the risks are unnacceptable and to think that the value of our corporations is going to grow forever is to be an idiot.

[reallygone]

64. Grow forever!

Its not that one company will grow, its that new ones will start up. We have about 5,000 years of history to back up that prediction. Every year there are more companies, and the best of them grow. The buggy whip guys went out of business, but the buggy builders went into autos, which spawned mechanics, gas stations, oil exploration, muffler systems, etc.

Space exploration, undersea mining, bio-technology, etc will spawn new companies that wil grow and cause the stock market to grow. Don't just oppose everything because the guy who thought it up is someone your/we despise. One of the wisest persons I ever met told me "never be afraid to steal someone else's good idea and make it your own." As Progressives. we should be out in fron on this issue, and we are letting Bush steal the credit for it. This issue will decide the next Presidential election, and I am scared we are handing it over to the Republicans for 8 more years unless we change course quickly!

[BillZBubb]

20. Baloney!

Your numbers are a crock, but that aside you cannot base future market projections on past performance. Just because in the past, the market return would exceed the Social Security payout is no guarantee that it will in the future. A few more years of the Chimperor and you can be sure it wouldn't.

The fact the Social Security has a guaranteed real return and offers other protections as a bonus makes it the kind of safe, secure system needed for old age INSURANCE.

You want to play the market, fine, do it with your discretionary income.

[googly]

46. My understanding is that you have the option of NOT chosing

the stock market option. In other words if you prefer
the curent method, you can stay in it as is. So you
are NOT forced to take the risk of stock market if you
do not wish to. Personally, I would be against a forced
requirement into the stock market of even 1/3 of our
payroll taxes.

I agree completely that stock market is risky, but all
we have is historical results, and going back 120 years,
the stock market as a whole has returned something in the
range of 8-10%. The current social security system returns
are much smaller. And the worst part is if you die before
retiring, you lose everything you put in.

[BillZBubb]

53. More baloney!

Stock market returns of 8-10% are not real returns. When adjusted for inflation and transaction costs they are much lower. Plus, those returns have what is called "survivor" bias. Remember, the market averages dump poorly performing stocks and replace them with stocks with better outlooks. That heavily skews the averages upward.

Secondly, most people wouldn't invest in the "average market". At least half would have returns BELOW the average, many far below. So, when those people retire, who's going to help them out? Maybe you agree with the Repugs that it would just be their tough luck for making bad decisions?

Social Security, on the other hand, offers a REAL (after inflation and transaction cost) return of about 3%. It also provides survivors benefits that you so conveniently ignore.

Social Security is both INSURANCE and retirement income. It is a great program that doesn't need to be messed up and it's a bargain.

[reallygone]

66. Check please!

Check your data. In the 1980's the market was at 4,000. Today it is over 10,000. A 150% increase. Also, after inflation and fees, the market average is over 7%.

Check this data:

http://www.moneychimp.com/features/market_cagr.htm
www.aimrpubs.org/ap/issues/v2002n1/pdf/p0020035a.pdf

[googly]

67. The only place general public should be advised to invest is in

a index fund based on something like the Russell 5000.
That type of fund is very broad based, minimizes risk,
and always moves with the market. The 8 to 10% long term
returns are FAR FAR better than what your social security
taxes are earning for you towards retirement.

If I were the government designing this system, I would NOT
allow individuals to pick anything except a broad based index
fund. Very few non-index funds beat the index funds over time.

[reallygone]

68. What about the "average joe"?

You say "use discretionary income". I can do that. Many at the lowest rungs on the income scale have little or no such discretionary funds. They don't get to choose the option you are offering.

What I like most about the proposal is that it makes it possible for every American, regardless of income, to begin to own a piece of the pie. It is not restricted to only the rich, land-owning class. Anyone can choose to opt-=in or opt-out.

Choice, that's democracy. That's Progressive. People who say "don't fix it" are conservatives by definition. Personally, I'm from the reform wig of the Progressive party, not the "Who need indoor plumbing? Let's do it like Great-Grandpa did and haul water from the well in a bucket."

I don't call it insurance when they say, "in the future, there will not be enough to go around, so we will reduce your entitlement every year so that everybody at least gets something." Under the proposal, if I die early, my grandson gets my private account. Under the old-fashioned SS program, only my son/daughter would get anything, and then only until they are 18, but my grandkids get NOTHING (my wife has her own entitlement and doesn't need mine). THE ONLY WAY TO WIN IN THE CURRENT SYSTEM IS TO DIE YOUNG!

[AirAmFan]

28. WRONG! You'd be getting LESS THAN what you're getting NOW

if *'s proposed reform had been in place instead of the current Social Security system!

But thank you for daring to share your personal situation. It is very instructive for all of us.

Your calculations leave out some very important components.15 percent of FICA is for disability insurance. Even though the "reform" would likely raise the premium for disability, let's be generous to * and assume the proportion remains the same. That takes $23,232 off your $160,000.

The 4 percentage point cap on the "voluntary" part thus would leave you at least 25 percent in the defined benefit part of the system, so take off another $33,549.

Finally, Wall Street "management fees" would take off 20 percent of the remainder. Your investment principal is now cut in half, to $82,575,

You haven't given us enough details about your assumed rate of return to go much further on solid ground. But you get to keep only the excess return over 3 percent a year. That should chop off at least half of your assumed return.

Let's say the part of your investment accumulation you are allowed to keep falls to a generous $240K, which would buy an annuity of about $1100 a month.

The drain from all the money now going to private accounts, brokers, and insurance companies should cause at least a 40 percent cut in the guaranteed benefit, which would drive it down to $840 a month.

So your benefit under *'s "reform" would now be about 0.75 ($1100) + 0.25 ($840) = $1035, A 35 PERCENT CUT FROM WHAT YOU'RE GETTING NOW UNDER SOME VERY GENEROUS ASSUMPTIONS.

More realistic assumptions, and adjustment of your assumed return for the STOCK MARKET RISK you would have borne most likely would leave you with LESS THAN HALF OF WHAT YOU"RE GETTING NOW!

[googly]

48. Are you sure you have personal experience in stock mutual funds

investing? My IRA and 401-k are invested in several stock
mutual funds and I am paying less than 1% management fees in
every one of them.
And yes, I am aware of the disability component, and that we
pay 12.4% in payroll taxes and additional in medicare taxes.
My understanding is that the proposed stock market option is
for 4% or less than 1/3 of the total payroll tax.

I am fully aware that stock market returns are not guaranteed.
We can only go by average historical returns going back over
100 years and they are in the 8-10% range. At that rate, your
money doubles every 7 to 9 years.

I also want the stock market option to be OPTIONAL. Those who
like the current system should be allowed to stay as is. The
others who chose to go with the stock market option will have
their benefits reduced by the 4%/12.4% ratio.

Incidentally the proposal Bush is touting actually is close
to what senator Moynihan's task force proposed some time ago.

[reallygone]

81. Whoops! You lost a decimal.

Wall Street wouldn't have 20% management fees. The program would be run like the Federal Civilian Retirement System called the "Thrift Savings Plan". The management fees are 1%.

http://www.tsp.gov/features/chapter01.html

[AirAmFan]

85. UK experience: Management & marketing fees ate up 43% of ROI

under ACTUAL privatization, not your hypothetical privatization.

We were using different bases for percentages. Diamond used the flow of deposits into the fund. You were using ACCUMULATED VALUE, wrongly, I'm afraid. That 1.4 percentage points (underestimate) gets taken out EVERY YEAR. Over 40 years, it adds up to double digits. Here's a percentage figure that's much more easily interpreted:

From http://www.socsec.org/publications.asp?pubid=325 :

"From the standpoint of the system as a whole, privatization would add enormous administrative burdens. Instead of the current trust fund accounts, the government would need to establish and track many small accounts, perhaps as many accounts as there are tax-paying workers.147 million in 1997.

Many workers accounts would be so small that they would be of no interest to profit-making firms. The average taxable earnings of a worker is roughly $25,000 (in 1997, the last year with complete data, the average taxable earnings of the workers who paid into the system was $22,400). Two percent of $25,000 comes to $500 per year. Francis X. Cavanaugh, who supervised the thrift savings program for federal employees.a program that privatization advocates often point to as a model.argues that the costs of administering so many small accounts would overwhelm any benefits to be gained from the stock market. For example, he estimates that the government would need to hire 10,000 highly trained workers just to oversee the accounts and answer questions from workers. <2>

Experience in the United Kingdom offers a warning about what the future could bring regarding management costs. Workers there have been allowed to open private accounts starting in 1988, since which time management fees and marketing costs among financial intermediaries have eaten up an average of 43 percent of the return on investment."

[AirAmFan]

34. Also, are you married? Did you use the correct single-premium

annuity rate in converting your $700,000 accumulation into a $3300 monthly benefit, or did you cut your wife out of any income should you die before her?

Social Security does not forget about wives and dependents. Annuities from insurance companies charge extra for coverage of surviving spouses and surviving dependents; Social Security does not. This factor could easily reduce your "privatized" monthly benefit by AN ADDITIONAL ONE-THIRD TO ONE-HALF, unless you want to leave survivors with no income.

[AirAmFan]

92. Also, does that $3300 monthly annuity have an INFLATION ESCALATOR?

Social Security DOES compensate for inflation.

I'm pretty sure the purchasing power of your $3300 is subject
to the RULE OF 72:

12 percent inflation for 6 years cuts the purchasing power in
half, to $1650 a month in todays $.
9. . . . . . . . . . . . . . . . 8
6 . . . . . . . . . . . . . . . 12
4 . . . . . . . . . . . . . . . 18
x . . . . . . . . . . . . . . . 72/x

What if you live to be 100 after you retire, and Dubya's $5
trillion spending spree (so far) ignites 18 percent inflation
again?  You won't even be able to affor catfood.

[meow2u3]

6. Does "Honor thy father and thy mother" mean anything to the piratizers?

If Poppy and Barbara Bush were suddenly to become impoverished, would Dumbya let them rot on the streets?

[Cleita]

9. I wouldn't be surprised.

I once worked for a nursing home chain and some very rich people put mama in the homes, which were paid for by SS. Some didn't contribute anything to their parents care and these facilities were very bare bones. One guy, who was a self-made multi-millionaire, wouldn't buy his mother dentures. They weren't covered by Medicaid then. Poor woman couldn't eat very well but her son didn't care.

If George HW and Babs fell into bad times and lost their fortunes, I wonder if *W or Jeb or the rest of the wastrels would support them? I think they should start worrying about that.

[BrklynLiberal]

10. In a word........youbetcha.

[SammyWinstonJack]

27. In a heartbeat. n/t

[Bigmack]

30. Thank you...

.. for that visual. Barbara the Bag Lady... scrounging thru dumpsters. An unshaven Poppy with layers of clothes looking for some cardboard for his bed tonight. I needed something to cheer me up after Dumbya's SOTU last nite.

[burn the bush]

7. if u let us make our own decisions of the investment of our money....

most of us will screw up and end up broke anyway. Then the gov is still going to get stuck paying for us.

[reallygone]

65. Yeeeoooowwwwww!

Are you saying "Gee, I can't make good decisions, so let the government make the decisions for me."? We Democrats and Progressives haven't sunk to that level have we? OMG, no wonder we lost the last election!

For those people like you (most of which are CONSERVATIVE explaining why they lap up what other people like RUSH tell them) who CANNOT figure things out for themselves, you can keep your SS program unchanged. Just give ME a choice. I have enough confidence in myself to believe that I can make better decisions than some bureaucrat in D.C.

By the way, you might ask somebody else what you think next time before you post. They can tell you what to write and that will make you happy. :silly

[burn the bush]

70. don't know where you are coming from and don't know why you

think that I am being conservative. I am just stating the truth. Most people will not make good decisions and will end up broke in the end. That's not to say that some people can't do well in the stock market and make good decisions. However, you can rest assured that the govt will have their friends from wallstreet ready to sign all of these people who don't know what to invest in. They will help you for only a minor fee. That way, the bushco gets a share of almost everyones social security.

furthermore, i don't feel my post needed your insults. You are trying to start shit. Please express your opinions without insulting me for the hell of it.

[reallygone]

76. Touchy!

OK. No insults. The Federal Retirement System is now based upon employees contributing part of their check to a savings plan and the government matches a protion of the contribution. Employees can select from one of five mutual funds that are broadly based index funds. Congressmen and Administration employees have the same kind of plan. You have highly limited options and these are designed to reduce risk while still permitting some degree of choice.

If its good enough for Bushco, the politicos on Capital Hill, and all Federal workers, seems like there is sufficient reason to let the rest of America benefit from the same program.

People in private industry also use a similar program by investing in IRAs or 401Ks. The only people that are left out are the people at the bottom end of the income spectrum because they don't have the money to invest. I say they should be allowed the option of putting some of their SS into the same plan that Rummy gets to put his money into!

What's the problem with the above? Isn't that Progressive? Doesn't this protect those who are too stupid to make good decisions on their own? And if they are nervous, they can choose to take the original program and not have the private account and get their guarantees of reduced benefits in 2042!

I think America is about choice. I think Democrats and Progressives should represent the reform party. I think Americans are smart enough to make their own good decisions. I think Americans making their own good decisions is what made (and makes) this country great.

Now tell me again. What philosophy do you embrace?

[lawladyprof]

11. 1929

[AirAmFan]

12. We want our FICA taxes to keep paying for retirement benefits for us and

for the next generation, NOT FOR BIG PAYOFFS TO INSURANCE COMPANIES AND WALL STREET BROKERS!

See http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x3046059
for an explanation.

[LaPera]

13. Letting the republicans have even one penny of SS open to

investment, they will have their foot in the door, to destroy SS through the courts in years to come. All the republicans really want is their foot in the door, to destroy SS as they have vowed to do for 70 years!

[AgadorSparticus]

14. i don't want SS in the hands of greedy corporations who will bury

my benefits under an avalanche of paperwork, legal mumble jumble, superfluous fees, and run of the mill harassment.

ok. i'm one word over. :shrug:

[moondust]

15. Stocks are already overvalued. n/t

[against all enemies]

19. Money for seniors, not for wall street.

[opihimoimoi]

22. With SS as it stands now::::You are gaurenteed to recieve bennies

if qualified at 63 or 65, whatever the age is.

With Private involment...it is not gaurenteed... meaning, yes, you can make more, but also you can less, or worse, get hardly anything....like thos Enron folks.

[jdj]

21. If we pull out of Iraq we save 8 Million dollars an hour.

We take that 8 million dollars/hr and put it into the SSI trust fund.

We keep the fund solvent, save lives, give the Iraqis back their dignity and get our reputation back. Whatta deal!

[opihimoimoi]

23. No shit.....

[jazzjunkysue]

41. I vote YES!!!

[Inte11ectual]

95. Lets ask Bush real nicely!

[amjucsc]

24. A haiku (more or less)

The plan costs too much
Accounts cannot plug the hole
Dem sweep in oh-six

[AirAmFan]

25. *'s SS 'reform plan' is: NO INSURANCE COMPANY LEFT BEHIND!

See http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x1560924
for details.

[Blue_Roses]

26. three words

the Great Depression--history is bound to repeat itself if we don't learn from our mistakes. This is a huge gamble and pile of lies. FDR is rolling over in his grave about now.

[Lydia Leftcoast]

29. In Chile and the UK

they're finding that people under the privatized system are doing worse than people under the publicly funded system.

[Cleita]

33. Exactly.

See my post #2 above. This was aired on CBS news yesterday by Dan Rather about Great Britain looking to change their system to our present system to fix it. I mean is or isn't our system in crisis?

[jazzjunkysue]

32. 4 words: Bankrupt companies, dishonest brokers.

I have a master's degree, and I sure as hell don't know how to choose stocks. If they were a sure thing, no one would ever buy or sell. If they were a sure thing, why wouldn't brokers just invest and stop trying to get your money in commissions? Buying stocks is to casinos as boxing is to shoving: Just more on the line. Less stable. This is insanity, and the most difficult thing to believe is that the republican's are ready to ruin their good name on testing this Hindenberg. It can't fly. Period. Bush doesn't give a crap if it fails, but the republikans should. They should care more about their party. It shows what lousy legislators republicans make.

[pompano dem]

35. Privatization is a great idea

I have been arguing for years that it would be great to identify each persons contribution and segment it like a 401k. If you take a person maxing their ss tax every year, that is about $10,200($85,00 x 12%), from the age of 30. Assume a risk-free return over that period of 5.5% compounded quarterly. At the age of 65 that person will have $1.5 million in their account. That person can take out 5%year($75,000) without even touching the principle and at the end of their life there will be something greater than $1.5 mill. Now, the government can allow passing all of that to kids, lovers whatever, or they can take some % reinvest to assure the solvency of the system due to some taking out more than they put in due to the fact they didn't make much. My point is a system described above is far better than what we have now. I will never see $1.5 mill or $75,000/year from the current system.

The issue that needs to be debated is whether some portion should be eligible to invest in the equity markets. It is very easy to argue that the pool should have some exposure to equities given that the equities markets have outperformed every other investment over the last 50 years. The equity markets have averaged about 9% per annum. In fact the risk of the equities markets is very low with proper diversification. The only time it is risky is when things don't go right at the wrong time. That issue doesn't really exist for the government b/c it doesn't die. The government only cares about average returns over long periods of time.

If the accounts I talked about above had a 50% exposure to equities via pooled index funds and the government offers a guaranteed return of 5.5 and the government reinvests the gain above that to help those with lesser incomes the system could work. By the way annuities and insurance companies make their living this way. If you notice most of them have been around a very long time.

[jazzjunkysue]

38. "Assume a risk-free return" Welcome to planet earth. Gamble with your own$

[reallygone]

82. That's what I want to do! Let me have a choice!!!!! n/t

[Viva_La_Revolution]

98. So, if 1/4 of eligible people fall for this...

and their taxes are taken out of the fund that currently pays benefits (3 to 1 recipient), how much sooner than 2045 will they have to cut benefits to make up for the loss?

[AirAmFan]

40. What about the MEDIAN worker, not the upper tail of the wealthiest?

Also, even for the wealthy employee at the earnings cap, your calculation is making the same mistakes identified in post #28:

(1) Only 10.6 percent of earnings is taxed for retirement (the rest goes for disability). Health insurance lobbyists may drive up the current 15 percent taken off the top of FICA payroll taxes for disability insurance even further.

(2) 20 percent of FICA would go for Wall Street "management fees", according to Prof Peter Diamaond of MIT, the world's foremost authority on the economics of Social Security privatization.

(3) You're assuming away restrictions on privatization even the Bush maladministration wants on privatization, including a 4 percent cap on the amount of earnings going into private accounts, and the current system's recapture of the first 3 or 3.3 percentage points of returns to privatized accounts.

(4) Your presumed "riskless rate of return" is way above what SSA actuaries and the CBO consider sustainable for future decades. "Treasury rate" would be more accurate than "riskless rate", since the enactment of the proposed "reform", on top of Dubya's 5 trillion spending spree (so far) means Treasury will have to default on "Trust Fund" bonds to al least some extent.

(5) Also, your presumed rate of return for equity investments has that same degree of "hype", and in addition does not appear to be risk-adjusted.

(6) You're not taking into account the effect of siphoning off private accounts on the remaining defined benefit system. All of FICA and the "Trust Fund" already is spoken for. Who's going to sit still and allow the wealthiest earners to take retirement benefits away from current retirees and from others who benefit from the current arrangement?

[reallygone]

83. Reality Check!

(1) Only 10.6 percent of earnings is taxed for retirement (the rest goes for disability). Health insurance lobbyists may drive up the current 15 percent taken off the top of FICA payroll taxes for disability insurance even further.

Bogus. The amount taxed for disability payments would still be collected and available. The rise in health care costs over the last 20 years has not increased the premiums for the disability insurance since it does not pay the health costs (those are paid by medicare/medicaid), it only pays the SS income payments.

(2) 20 percent of FICA would go for Wall Street "management fees", according to Prof Peter Diamaond of MIT, the world's foremost authority on the economics of Social Security privatization.

Bogus. The Federal "Thrift Savings Plan (TSP)" is the foundation of retirement for every federal employee and this is the model for reformed SS. The management fees are 1%.

(3) You're assuming away restrictions on privatization even the Bush maladministration wants on privatization, including a 4 percent cap on the amount of earnings going into private accounts, and the current system's recapture of the first 3 or 3.3 percentage points of returns to privatized accounts.

Bogus. The Congress (signed by the President) makes law and will set the caps and determine the restrictions for SS investments. Adequate restrictions will be imposed because the Democrats will insure they are present and the legislation must have Democrat support to pass.


(4) Your presumed "riskless rate of return" is way above what SSA actuaries and the CBO consider sustainable for future decades. "Treasury rate" would be more accurate than "riskless rate", since the enactment of the proposed "reform", on top of Dubya's 5 trillion spending spree (so far) means Treasury will have to default on "Trust Fund" bonds to al least some extent.

If you assume the U.S. will default on the national debt, no plan, including SS, will provide protection. The current SS payment entitlement can be changed on a whim by Congress. It is not yours. It is not gauranteed. Your own private account would be yours! Under the proposal, you can opt to keep the presnet system, or opt to set up a private account. Under the private account you will have limited choices, and at least one of those will be government securities (Treasury bonds) which is considered "riskless" since they are backed p by the full faith and credit of the U.S. (that is currently a 3%+ rate but may well rise). Stock funds return in excess of 7% after inflation.


(5) Also, your presumed rate of return for equity investments has that same degree of "hype", and in addition does not appear to be risk-adjusted.

Bunk. The rate is "risk adjusted" by determining the average return over a number of years (typically 5 or 10). For all stocks, the return is an average of 7% after inflation. Returns for "safer" investments are lower, but do not fluctuate much from year to year. Returns for "riskier" returns are higher, but fluctuate more from year to year (i.e. they may be down when you retire). You can hedge this by investing in "riskier funds" until you are within 5-10 years of retirement and then switch to "safer" funds. Use this calculator to look at history of market returns.
http://www.moneychimp.com/features/market_cagr.htm

(6) You're not taking into account the effect of siphoning off private accounts on the remaining defined benefit system. All of FICA and the "Trust Fund" already is spoken for. Who's going to sit still and allow the wealthiest earners to take retirement benefits away from current retirees and from others who benefit from the current arrangement?
You are ignoring the fact that this money is owed to the SS fund anyway. The government must begin to put the money into the fund starting in 2018 no matter what happens. The Fed will have to increase revenues or reduce spending to accomplish that objective at some point. The current proposal suggests spreading that pain out over more years by starting now, and this will have the added benefit of permitting future retirees to establish private accounts that will return more than SS will be able to pay after the "trust fund" (what the Feds already owe SS) runs out in 2042 (or 2052, depending on whose projection you want to use).

[pompano dem]

86. Bill Clinton on Social Security Reform

Therefore, in addition to saving Social Security and Medicare, I propose a new pension initiative for retirement security in the 21st century. I propose that we use a little over 11 percent of the surplus to establish universal savings accounts--USA accounts--to give all Americans the means to save. With these new accounts Americans can invest as they choose and receive funds to match a portion of their savings, with extra help for those least able to save. USA accounts will help all Americans to share in our Nation's wealth and to enjoy a more secure retirement. I ask you to support them.

[AirAmFan]

88. Big Dog proposed incentives for NEW SAVING, 'IN ADDITION'

to freeing up borrowing power so Congress can repay the trillions in Trust Fund bonds when needed to pay future benefits. Read the first sentence of your own post.

There's a big difference between that and STEALING the Trust Fund to lavish it on insurance companies and Wall Street brokers.

[AirAmFan]

87. You have not addressed the MAIN POINT of my post:

The example of alleged returns to which I responded was geared to a highly-paid worker right at the earnings cap, which is rapidly approaching $100,000 a year. This is IRRELEVANT to the average (MEDIAN) worker.

I'd be more inclined to respond to your other points more fully if you posted an example of purported returns for the MEDIAN worker, not the wealthy country-club suburban Republican. But, briefly,

(2) See post #85.

(4) There's an important difference between PUBLICLY HELD national debt and TRUST FUND bonds. If Treasury failed to pay PUBLICLY HELD debt when due, future attempts to sell bills and notes to the public would have to pay a risk premium, to compensate for a proven nonzero probability of further default. But the Social Security Act REQUIRES SSA to keep on putting all of FICA into non-publicly-traded Trust Fund bonds, regardless of the future risk of default. This is an ideologically-motivated "hole" in the pre-funding of Social Security, left in place by the extremist Alan Greenspan in his 1983 "Social Security Commission" recommendations to Ronald Reagan. See http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x1551877 , starting at post #5.

(6) The very fact you Republicans are discussing taking funds already fully pledged to retirees through 2042, and lavishing them on insurance companies and Wall Street under the guise of "privatization", indicates a plan to default on pledges already made. Your hero Dubya already has squandered $5 trillion of the borrowing power Bill Clinton freed up to try to put Congress in a better position to make good on the Trust Fund bonds after the FICA cash flow goes negative.

THE SAME MONEY CANNOT BE SPENT TWICE; THAT IS ARITHMETIC. Either it will go to the seniors and future retirees who already are relying on it, or you Republicans will default and use it for other purposes (and not necessarily "privatization"--that could just be the bait for a switch to financing for future wars and future "tax cuts" for the wealthy).

[AP]

36. After a lifetime of working to make America better, people should be able

to retire with dignity and without risk.

If the stock market weren't risky, we'd all be billionaires. We're not. There is risk in the market.

We're a nation of people who need social SECURITY when we retire.

[lostnfound]

37. 'Just a giveaway to investment bankers who are licking their lips' nt

[jazzjunkysue]

39. Damn straight. Shell game, with instant payoff for the brokers.

They looted the stock market until it crashed. Then they looted enron and worldcom. Then, we looted the middle east. Social security is next? In your dreams. It's called AARP. Even Bush can't stop AARP. CBS just declared *'s SS hijack dead. Move on. Nothing to see here.

[zann725]

42. Someone else also explained Employers will NO LONGER have to contribute 6%

to SS funds for each employee who chooses Private Investment account (who won't be contributing their 6% either).

This is interesting, and probably ALSO one of the main reasons Bush is pushing this...for all his corporate friends. This'll save them more money BIG TIME...by NOT having to contribute SS monies for a lot of employees (if not all one day).

The other part is clearly the extra monies for Wall Street.

None of it however is for the average citizen/worker Social Security recipient.

Sad day for Democracy.

[Donailin]

43. In what year will there be more seniors than non senior workers?

I mean, that's the whole argument, isn't it?

[bobweaver]

44. If it ain't broke, don't fix it.

[KG]

45. because SS is not broken.

[Zinfandel]

47. But, we haven't seen what Karl's up to...stay tuned...he's slick...

He will trick things around...Rove wants to go down in history as the fascist who destroyed Social Security, forever, what a coup.

Praise Karl! Will always remembered in fascist circles.

The Fascist Hall of Fame.

We have to believe and insist SS is sound for another seventy years...No buts!

Simply, because it is!!

[moondust]

49. Sinclair Broadcasting nutjob

Mark "Half-Truth" Hyman did his RW wacko opinion on SS investment accounts today (local TV outlet). In essence he said "Why not? Public retirement/pension funds are already investing in stocks every day and doing well."

He conveniently failed to mention what happened to the funds that invested in ENRON and WORLDCOM.

[Red State Rebel]

54. Do you realize our own Senators and Reps use this system?

If it's working for them then why is it bad for us? I read somewhere that 3 million government employees are on a retirement plan that is like this.

I personally trust myself to handle the money more than I do the government.

[Viva_La_Revolution]

99. I have a 401K with my company...

How is this program different? They should offer it for Government employees, or offer us the same thing, totally separate from SS. SS is insurance, not investment. They might spend their time on things that are in crisis right NOW, not focus on something that will be in crisis years from now.

[gmaki]

50. Sounds like the only way they can do Enron on a bigger scale.

When Ken Lay and his inner circle knew that Enron was going to collapse they pushed their own employees to invest their retirement savings in Enron stock while they sold, sticking them with worthless stock.

This could be the same thing only now it is Cheney and his inner circle realizing that the entire stock market is going to tank. So like Enron they get the entire populace to invest their retirement money in stocks while they sell, postponing and exacerbating the inevetible crash shortly thereafter.

It's the same scam on a much larger scale.

But that's just a theory.

[Zinfandel]

51. They are fucking lying! Republican Bush gives a fuck about SS?

Get seriously real. Republicans hate SS...That's their money, so get use to it.

And if Bush can break SS...He's a better knob job to the republicans than Reagan.

What do THEY have to lose, but fucking over the truly needy.

Good fascism at it's best.

[sweetheart]

52. Everyone gets old

And as you age, life costs more with medicine, assistance and care. In
a past time, we cared for our own family elders as they grew old, and
this care was not economically measured. In modern society, this is
not done, and the burden falls on the state. As private industry is
driven by profits, care will be shrewdly held back from its most expensive
recipients, the sick and the weak. As the costs of this care are
unavoidable, to call the funding "risk finance", which is what
corporate investment IS, is absurd. It is rather like national
defense, not something the public obligation can shirk.

Sorry, its hard to get the moral argument in 30 words.. i give up.

[MsTryska]

55. well......

Privatizing Social Security makes the working man fund the very corporations that are failing to give him a Pension and adequate health Insurance. it's another Savings&Loan scam.*

* took that form a c-span caller this morning.

[mainer]

56. If you're long-lived, you'll keep getting your Social Security check.

But if you've privatized your account, and your account runs out because you've hit 95 and lived too long -- bye bye checks!

Long-lived Americans get way more out of social security than they every paid in -- or could ever hope to accrue in the stock market.

[txaslftist]

59. We can't afford it. Our kids can't either. n/t

[realFedUp]

61. Plenty of ways to invest money without messing with Social Security plan

We have IRAs, 401ks, stocks, bonds, mutual
funds, real estate, jewels, artwork etc.

All this can be done on our own already.

[leftofthedial]

62. it ain't broke

don't "fix" it.

[Tactical Progressive]

71. We already have private retirement accounts.

It's called - all the rest of your money besides Social Security.

Play the stock market with it.

Social Security is the base.

[googly]

74. What about those who can not afford additional savings to invest

in stocks? Every working person pays payroll tax. If
even the lowest earners can put money in stocks thru taxes
they are already paying, it gives them a chance to participate
in stock market which otherwise they can not afford.

[Tactical Progressive]

75. If you can't afford investment (risk) with an income

then the last thing you can afford is risking your retirement without one.

That is literally 'gambling with the rent'.

[reallygone]

77. risk vs reward

You are right to a degree. There is risk. But 100 years of the stock market suggest that the risk is minimal over time (over 5-10 years). The average gain is 7% per year after inflation.

I am encouraged to know that EVERY RICH PERSON I EVER HEARD OF WAS INVESTED IN THE MARKET, while every poor person I know was not in the market. You cannot work yourself rich. You have to invest. I am further encouraged because I know Rummy is invested in the same plan (the Federal Retirement System) that is being proposed for the reformed SS program. If its good enough for shrub and all his cronies, it sounds good to me. Let's face it, if nothing else, repukes know how to make money.

[googly]

93. Hear Hear....good post Reallygone

[eridani]

94. "Average" means sometimes there's a 15% gain--

--and sometimes there's a 15% loss. The gains and losses are cyclical. Give me one good reason why people who retire at the top of the cycle should live off of those who retire at the bottom of it.

[Viva_La_Revolution]

101. my granfather...

Started with nothing, a two room house, 7 kids. Same job, for 50 years he made a good living. Est. worth in 1980 - $1,000,000. Stocks, house, everything. After the crash - est. worth, $395,000. In 2000, his kidneys fail. Sold the cabin, and some stocks to pay for the medical bills. He passed in 2002. Grandma now lives on her small pension from the School district, and SS.

So, IF you can find the money to invest, it's possible that you MIGHT come out ahead. If you put it in a savings account, short of the entire civilization coming to and end, you are GUARANTEED to have something.

[googly]

72. Partial privitaztion is good but I don't understand how that helps

in saving the social security system. Historically, stocks
have returned much higher returns than any fixed return investment.

However, let us say that you sign up for 1/3 in stocks and the
rest 2/3 in regular social security as it is now. Now your 1/3
portion will most likely make your pension larger, but if the
government still has to pay you 2/3 of the benefits out of the
only 2/3 it is collecting, how does the government benefit to
save social security?

[ProfessorGAC]

80. Because It's A Republican Idea

They have yet to show they have a clue apropos economics and fiscal policy. No reason to believe they've figured it out now.

How's that?
The Professor

[hunter]

89. It's an insidious COMMUNIST PLOT to Nationalize American Industry!

Heh,

I thought of this while posting on another thread.

Can you imagine the uproar there would be if Bush said he supported the use of Social Security funds to BUY selected United States Businesses so that they could be managed by GOVERNMENT APPOINTED BUREAUCRATS???

[geniph]

90. It's Welfare for Wall Street, pure and simple

I love that Krugman article. It explains the situation better than any other I've seen recently.

[googly]

97. Why not a single senator or house rep is in social security?????

if it is such a great system? They ALL have a system which
allows them to make investments in stocks! Not only that
every federal employee and many state/local government
employees have private investment options and do so in huge
numbers.

Can some one explain why these people who make our laws do
not want to be in "OUR" system of social security? Why can't
we, the people have the same system as them?????

[gulliver]

100. Three Card Monte with the start-up costs.

Once again, as with all Bushist ideas, the free lunch is being paid with our kids' credit card.

I'll take my 2% out immediately of course. The money to replace what I take out will be added directly to the deficit.