Social Security?

@fishin,

What is false here is your strawman argument.
i am not sure about the present day SS.
But ima cock sure/ quite sure that I had posted one thread with all the american links both in A2k and in Abuzz.
But i am disgusted, demotivated and depressed to cross swords with any A2k Members.

0 Replies

We lost a "huge" amount of money yesterday and for year-to-date, but as everybody knows that's always relative to the one using that term. It's "huge" for most Americans - like over $10,000 in one day's trading, but not a "huge" percent of our total portfolio. For YTD, it's over $50,000; that's huge even for us!

1 Reply

@cicerone imposter,

I have lost 20% of my stock investments. I am not sure about my other 401k investments but I believe that they will be drasticly affected. I want to thank Bush and company for the reduction in my standard of liveing. Dident Mccain say he agreed with Bushes policies.

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@Cycloptichorn,

Cycloptichorn wrote:

Okay Conservatives,

Who amongst you will have the guts to come into this thread and admit that if SS funds had been allowed to be privatized - er, 'private accounts,' sorry, almost used the real name for your plan - a huge amount of that money would now be gone. Vanished. Much of it would have been invested in the same sort of securities that have brought the market crashing down over the course of this year. What would the effects have been, upon the elderly and others? I can't see anything positive coming out of it.

Who amongst you will admit that it was a stupid plan, and one that was designed to make Wall Street rich off of the profits of millions of 'private accounts,' and to hell with those who lost all their money?

Anyone?

I doubt it.

McCain is still pushing this same, goddamned stupid plan. As if people needed another reason to vote against him. I expect Obama to make an issue out of this before the end of the campaign.

Cycloptichorn

Why do you suppose "guts" are required to oppose the nonsense you post? All that is required is a bit of historical data and some elementary arithmetic. The market today is down about 20% from its October 2007 high. However it was then about 40% above its level just three years earlier. The net rate of return on payroll deductions for social security is well below the average for any ten year period in the last 70 years, and perhaps beyond.

Cyclo also ignores the demographic collapse that still confronts the present Social Security system. It dwarfs any of the largely transient setbacks we see in the stock market and the banking system.

Why one could become so emotionally wound up in this rather elementary misunderstanding of a relatively simple problem in finance and economics is itself an interesting phenomenon. I wonder if Cyclo will have "the guts" to actually think about it.

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@georgeob1,

I would like too point out that the only fund that hasent lost value for me is soc sec. All the other funds I count on for my retirement have taken massive hits. Not that most of you would be impressed with my portfolio. I was able to live in the manner I have most of my life. Now I am not so sure. At 73 I dont know if I will be around long enough for the recovery all the economists say will come if you dont panic.

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@georgeob1,

Quote:

Why do you suppose "guts" are required to oppose the nonsense you post? All that is required is a bit of historical data and some elementary arithmetic. The market today is down about 20% from its October 2007 high. However it was then about 40% above its level just three years earlier. The net rate of return on payroll deductions for social security is well below the average for any ten year period in the last 70 years, and perhaps beyond.

Did you really believe this when you said it? I didn't, so I did some checking.

This from the Heritage Foundation includes personal and employer contributions in the calculation.

Quote:

Social Security's inflation-adjusted rate of return is only 1.23 percent for an average household of two 30-year-old earners

http://www.heritage.org/Research/SocialSecurity/CDA98-01.cfm

Note that is adjusted for inflation.

The NON adjusted rate of return for the DOW the last 10 years from Sept16, 1998 to yesterday was 3.5%
Sept 16, 1998 - 8098
Sept 16, 2008 - 11059

The inflation adjustment for the last 1o years is .8473
(I used this one that is estimating from 2004 on... http://cost.jsc.nasa.gov/inflateGDP.html )
That means adjusted for inflation the Dow went from 8098 to 9370 with a return of only 1.65% While 1.23% is below 1.65% I wouldn't consider it well below.

(I didn't include dividend yield but I also didn't include costs for management. The median dividend yield seems to be about 2.75%. Fund costs can run slightly less than 1% to 3%. If we call it 1.5% that means the DOW returned about 4%. One could consider 1.23% to be well below 4%.)

But the DOW is only 30 stocks. Lets use something larger like the S&P since that is a common tracking mutual fund.
S&P
Sept 16, 1998 - 1018
Sept 16, 2008 - 1213
That is 1.97% return before inflation
But again we have to adjust for inflation to get a comparison to the SS rate.
Adjust the 2008 figure for inflation and we get the market at 1027 which means a 0.1% return adjusted for inflation over those 10 years. The average dividend yield for S&P stocks is about 2.05%. Let's assume a simple 1% cost of management. That means the S&P would have returned 1.17% over the 10 year time period at the same time that SS was returning 1.23%.

Since we did both of those, lets see what the Nasdaq 100 did over the 10 year period.
Nasdaq
Sept 16, 1998 - 1689
Sept 16, 2008 - 2207
Adjusted for inflation - 1869
A return of 1.1% with inflation.
Average dividend yield .5%
With a 1% management fee the return was .6%

I would have to say that the rate of return on SS might be below some markets and 10 year periods but it isn't below the return on all markets for every 10 year period.

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

Okay Conservatives,

Who amongst you will have the guts to come into this thread and admit that if SS funds had been allowed to be privatized - er, 'private accounts,' sorry, almost used the real name for your plan - a huge amount of that money would now be gone. Vanished. Much of it would have been invested in the same sort of securities that have brought the market crashing down over the course of this year. What would the effects have been, upon the elderly and others? I can't see anything positive coming out of it.

Who amongst you will admit that it was a stupid plan, and one that was designed to make Wall Street rich off of the profits of millions of 'private accounts,' and to hell with those who lost all their money?

Anyone?

I doubt it.

McCain is still pushing this same, goddamned stupid plan. As if people needed another reason to vote against him. I expect Obama to make an issue out of this before the end of the campaign.

Cycloptichorn

You know little or nothing about finance.

1 Reply

@georgeob1,

Parados pointed out quite nicely above your arithmetic errors. When you adjust for inflation, the market doesn't perform near as well as you propose it does.

The problem, George, is that people can't ride out the markets forever once they start drawing on SS, and there are losses associated with putting your funds in a risky situation. SS does not lead to losses, even though you might wish to gain higher profits then the rate of return it provides. You don't have a very good conception of what 'Social Security' means; it's not 'Social Investment.' It isn't meant to maximize your profits. It's meant to avoid losses.

There is no demographic collapse that confronts SS. It is at this time more viable then our actual government, which runs giant deficits every year. The whole thing is a scare scenario designed to funnel money into privatizatio .

I note that you didn't have the 'guts,' or call it whatever you wish, to admit that people would have lost money. You gloss over this like it doesn't matter. It does matter.

Cycloptichorn

1 Reply

@Miller,

More then you, friend.

Cycloptichorn

0 Replies

@georgeob1,

I'm going to "shock" georgeob here, because I'm going to agree with him. The US stock market has outperformed every form of investment including gold. For the long-term, there is no better investment than stocks.

Yes, the market is now down, but I have faith that the stock market will recover what we have lost in the past year or so. We "must" have faith in our economy and the world economy, or we're all doomed to a very long period of depression - longer than the one in the late twenties and thirties of the past century.

However, there is one exception to social security that is better for the majority, because it ensures some funds during their retirement. Even when many companies provided 401K's with matching funds during the past three decades or so, many did not participate, but instead spent most of their income without saving for retirement. For those folks, a government plan for social security would be a huge benefit. It has always been the general rule that most should save for their retirement that will provide about 75% of pre-retirement income. Because many failed to save, many are now working beyond retirement age out of necessity.

Medicare is another government program that is necessary for the majority of Americans. Without it, many would have no health insurance when most need it most - in old age. Even with Medicare, many can't afford the 20% co-pays, and refuse health care.

These are issues that needs to be addressed, and more information provided to workers at a very early age.

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@Cycloptichorn,

Cycloptichorn wrote:

There is no demographic collapse that confronts SS. It is at this time more viable then (sic) our actual government, which runs giant deficits every year. The whole thing is a scare scenario designed to funnel money into privatization .

I do not understand what Cyclo may mean by the above statement (or if it has any meaning at all). A couple of salient facts;

1. Social Security is NOT an insurance scheme in the usual sense of the term. Indeed, if an insurance company were to attempt to sell annuities based on the Social Security structure, it would be prosecuted for fraud for peddling what in effect is a Ponzi scheme in which postulated future revenues from sales masquerade as return on investment.
2. Social Security is instead a government-operated wealth transfer system that takes money from current workers in the form of taxes on workers and employers, and gives it to retired workers (with a large fraction disappearing to support a huge SS bureaucracy).
3. The ratio of contributors to beneficiaries of this system has been falling as the demographics of the country change with falling birth rates and increasing life expectancy (dramatically increasing the number of years average beneficiaries collect from the system). We will soon have to choose between raising taxes on current workers to levels that will adversely affect employment and the performance of our economy (thus harming everyone), or reducing benefits, either directly or by raising the age at which they can be collected.

I don't mean to suggest the system does no social good - rather that it is not without costs and potential adverse effects. If I were like Cyclo I might say that "he doesn't have the guts to admit that". However, I know that no guts at all are required in such matters - merely a little thought and intellectual honesty will do nicely.

1 Reply

@georgeob1,

I found your error -

Quote:

We will soon have to choose between raising taxes on current workers to levels that will adversely affect employment and the performance of our economy (thus harming everyone), or reducing benefits, either directly or by raising the age at which they can be collected.

You are correct that adjustments will have to be made to the system. You are also correct to point out that the age which SS can be collected will have to go up. This makes sense, as people are living longer and have much longer productive periods in their life then they used to; it is likely that medical technology will extend this in the decades to come.

You are incorrect when you say that raising the taxes will 'adversely affect employment.' Bull, I say. You have no data to back this up; it is merely a partisan talking point. Raising the cap on SS taxes will not only inject more money into the system, it will help end the practice of hiding as much money as possible above the 96k mark in order to save company SS taxes, and therefore be a net gain for nearly all employees in the nation - save the very rich, of course, who will be hurt by this.

Your answer to this question is no different than any Republicans' dire warnings about the effects of raising taxes: generic scare scenarios with no actual data to back them up. And it's false to say that SS faces a 'demographic collapse.' No system the US runs under is designed to work in perpetuity. ALL systems have to be re-examined and re-balanced over time. SS is no better, nor worse, compared to other governmental programs and systems. It is in no danger of collapse. The whole thing was a scare scenario designed to lead to privatization.

I mean, listen to you guys! "If something isn't done, why, the system will have financial problems - in 30 to 50 years!" C'mon. Our economic system is having bigger troubles then this right now. SS is hardly the biggest of our worries at this time, and it was never anything but a sham issue.

Of course, this is why it was massively unpopular in America; it went nowhere in Congress; and the privatization of SS will continue to go nowhere, no matter who gets elected.

Cycloptichorn

3 Replies

@Cycloptichorn,

Cycloptichorn wrote:

I found your error -

You are incorrect when you say that raising the taxes will 'adversely affect employment.' Bull, I say. You have no data to back this up; it is merely a partisan talking point. Raising the cap on SS taxes will not only inject more money into the system, it will help end the practice of hiding as much money as possible above the 96k mark in order to save company SS taxes, and therefore be a net gain for nearly all employees in the nation - save the very rich, of course, who will be hurt by this.
Cycloptichorn

If you don't think a company paid payroll tax amounting to about 8.6% of payroll is an economic disincentive to employment, then there is no basis on which you can have an intelligent discussion of the subject with any rational person.

I refered to the possibility of an increase in the taxes paid by both employers and employees. You evidently believe this should occur in the form of lifting the cap on taxes on incomes above $96K, presumably for both employer and employee. Moreover you appear to imply that this alone would sufficiently address the problem, without any further increase in the age at which benefits are paid (this is the Democrat position). Further, you imply that those earning over $96K are "very rich". Are these unsubstantiated assertions anything more than the political cant and 'partisan talking points" that you accuse others of putting forward?? Do you have any data to "back up" these rather remarkable assertions? I doubt it.

I might be tempted to consider lifting the payroll cap if the benefits to those so affected were raised proportionally. That however isn't in your apparent plan. What you advocate is merely an ever-increasing government-mandated transfer of wealth from those who work to those who don't. OK so far, but you then go on to insist it will have no impact on economic activity. At this point you enter a new world of political fantasy.

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@georgeob1,

I blame the current problems of the social security system on our congress for not reacting to the changing demographics, the benefits, and social security taxation.

Without changes, problems for the future only increases diametrically.

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@Cycloptichorn,

So cyclops, how sound is an investment that has already been spent pretty soon after being invested, with the only basis for return on your investment being other people that will be investing in the future, more or less like a Ponzi scheme? At least if you invest in stocks, mutual funds, bonds, cds, whatever, you have some tangible value, hopefully, if your investment is sound, and certainly you would get something back. The only hope of getting anything back from the Social Security system is based upon a promise, a projection of future income, but not based upon any present value, as the money is being spent on other retirees checks.

1 Reply

@georgeob1,

georgeob1 wrote:

Cycloptichorn wrote:

I found your error -

You are incorrect when you say that raising the taxes will 'adversely affect employment.' Bull, I say. You have no data to back this up; it is merely a partisan talking point. Raising the cap on SS taxes will not only inject more money into the system, it will help end the practice of hiding as much money as possible above the 96k mark in order to save company SS taxes, and therefore be a net gain for nearly all employees in the nation - save the very rich, of course, who will be hurt by this.
Cycloptichorn

If you don't think a company paid payroll tax amounting to about 8.6% of payroll is an economic disincentive to employment, then there is no basis on which you can have an intelligent discussion of the subject with any rational person.

I refered to the possibility of an increase in the taxes paid by both employers and employees. You evidently believe this should occur in the form of lifting the cap on taxes on incomes above $96K, presumably for both employer and employee. Moreover you appear to imply that this alone would sufficiently address the problem, without any further increase in the age at which benefits are paid (this is the Democrat position). Further, you imply that those earning over $96K are "very rich". Are these unsubstantiated assertions anything more than the political cant and 'partisan talking points" that you accuse others of putting forward?? Do you have any data to "back up" these rather remarkable assertions? I doubt it.

I might be tempted to consider lifting the payroll cap if the benefits to those so affected were raised proportionally. That however isn't in your apparent plan. What you advocate is merely an ever-increasing government-mandated transfer of wealth from those who work to those who don't. OK so far, but you then go on to insist it will have no impact on economic activity. At this point you enter a new world of political fantasy.

George,

How can you expect to be taken seriously when you write stuff like this:

Quote:

Moreover you appear to imply that this alone would sufficiently address the problem, without any further increase in the age at which benefits are paid (this is the Democrat position).

Did you even read my post? Did you somehow miss this whole paragraph:

Quote:

You are also correct to point out that the age which SS can be collected will have to go up. This makes sense, as people are living longer and have much longer productive periods in their life then they used to; it is likely that medical technology will extend this in the decades to come.

?

I am not 'implying' anything even close to what you wrote. I specifically wrote that the age of retirement would have to rise. Completely wrong there, my friend. I wrote the exact opposite of what you said I 'implied.'

Yes, I believe that those who earn more than 96k a year are 'rich.' But that doesn't really address my point. Those who make, say, 115k a year, pay SS taxes on 96k of that and nothing after that. If you make them pay it on all of their income, it represents only a tiny increase in their (and the company's) total tax burden.

On the other hand, the very rich - those who make 500k a year, a million, more - will see their taxes rise considerably. One of the prime factors in hiding money from the Taxman has always been the SS cap, I don't have to point out this basic fact to you; these people, the 'very rich,' will be impacted by the rise in SS. To which I say, tough titty. They'll get along just fine, it isn't as if they are going to suddenly lose their houses or cars or retirement or health insurance. These people aren't riding the edge of viability in any fashion.

You implication that those who are not rich 'don't work,' and that SS is a transfer of wealth to some sort of lazy class, is risible, truly. It is an elitist attitude and not one you should be proud of.

Yes, we are going to have to raise the retirement age at some point and yes, the cap on SS is going to be raised as well. 100k is an artifact of an earlier day and has not kept up with inflation in the slightest.

The only people who companies will be at a disincentive to employ, by raising the bar on the taxes, are upper management and those who already make well above 96k a year. No big loss and certainly not something which will negatively affect the average worker, who earns far less. In fact, it will probably act as an incentive to stop hiding salaries above that level, for there will no longer be any benefit to the company to do so.

Cycloptichorn

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@okie,

okie wrote:

So cyclops, how sound is an investment that has already been spent pretty soon after being invested, with the only basis for return on your investment being other people that will be investing in the future, more or less like a Ponzi scheme? At least if you invest in stocks, mutual funds, bonds, cds, whatever, you have some tangible value, hopefully, if your investment is sound, and certainly you would get something back. The only hope of getting anything back from the Social Security system is based upon a promise, a projection of future income, but not based upon any present value, as the money is being spent on other retirees checks.

Okay, Okie: can you tell me anyone who hasn't gotten their money back, from their investment in Social Security? Do you know anyone for whom the system said 'sorry, we made a bad investment, your money isn't there?'

No?

Also, I don't think you actually know what a 'Ponzi scheme' is. I think you have heard various right-wing ideologues spout that talking point, and here you are faithfully regurgitating it, but it isn't correct at all.

Quote:

Some free-market economists, such as Thomas Sowell, and the Cato Institute[30] have argued that national social security systems, such as the Social Security system in the United States and the National Insurance system in the United Kingdom, are actually large-scale Ponzi schemes. In economic terms, these pension systems are often referred to as "pay-as-you-go" or unfunded national pension plans.

Sowell and others point out that, under these national systems, incoming payments, made up of taxes and/or other kinds of non-voluntary "contributions," are neither saved nor invested. Instead, current contributions (from one set of individuals, due benefits at a later time) are used to pay for current benefits (to another set of individuals). The critics of Social Security say that as North American demographics trend toward more pensioners and fewer workers this "pay-as-you-go" system has begun to show its inherent flaws. Therein lies the basis for the Ponzi scheme metaphor: that the system relies on a steady flow of new contributors, just as a Ponzi scheme relies on a steady flow of new "investors."

Nevertheless, retirement programs run by national governments are significantly different from a typical Ponzi scheme in a number of ways:

* Retirement systems, like Social Security, are not blatantly fraudulent. In a genuine Ponzi scheme, the perpetrators falsely claim that there is some business that generates the promised revenues. In Social Security, people know where the money comes from, and actuaries supply written predictions of future cash in-flows and out-flows.
* Retirement systems promise a stipend to the country's retired persons, not the quick and exorbitant profits to current investors that Ponzi schemes invariably offer.
* Retirement systems rely on the taxing power of the state to ensure continuous funding, as opposed to voluntary investor contributions.
* Retirement systems are in many ways insurance rather than investment systems. A person who dies before retirement gets no money back (regardless of what he/she paid in). Someone who lives to a very old age continues to get payments regardless of the amount of money he/she has paid in.

The U.S. Social Security Administration provides the following response[1] to the "Ponzi scheme" accusation as applied to a pay-as-you-go system like Social Security:

There is a superficial analogy between pyramid or Ponzi schemes and pay-as-you-go insurance programs in that in both money from later participants goes to pay the benefits of earlier participants. But that is where the similarity ends. A pay-as-you-go system can be visualized as a simple pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end. ... As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system and so it is not a pyramid or Ponzi scheme.

If the demographics of the population were stable, then a pay-as-you-go system would not have demographically-driven financing ups and downs and no thoughtful person would be tempted to compare it to a Ponzi arrangement. However, since population demographics tend to rise and fall, the balance in pay-as-you-go systems tends to rise and fall as well. ... This vulnerability to demographic ups and downs is one of the problems with pay-as-you-go financing. But this problem has nothing to do with Ponzi schemes, or any other fraudulent form of financing, it is simply the nature of pay-as-you-go systems.

http://en.wikipedia.org/wiki/Ponzi_scheme#What_is_and_is_not_a_Ponzi_scheme

Please - do some research before writing posts like this. Please.

Cycloptichorn

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@Cycloptichorn,

Cycloptichorn wrote:

SS is hardly the biggest of our worries at this time, and it was never anything but a sham issue.

I'm amazed that anyone's trying to discuss this seriously with you. They don't need "guts", just a lot of patience (more than I possess at least).

2 Replies

@Robert Gentel,

Robert Gentel wrote:

Cycloptichorn wrote:
SS is hardly the biggest of our worries at this time, and it was never anything but a sham issue.

I'm amazed that anyone's trying to discuss this seriously with you. They don't need "guts", just a lot of patience (more than I possess at least).

What do you mean? Are you implying that my position is not a serious one?

In this week of all weeks, when our financial and banking system has been shown to have some serious underlying problems, how can one claim that a potential shortfall in a program, 30-50 years from now, is an imminent danger? And one that must be addressed in a precipitous fashion, which is exactly what Bush and McCain would like to do?

Cycloptichorn

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

You are incorrect when you say that raising the taxes will 'adversely affect employment.' Bull, I say. You have no data to back this up; it is merely a partisan talking point. Raising the cap on SS taxes will not only inject more money into the system, it will help end the practice of hiding as much money as possible above the 96k mark in order to save company SS taxes, and therefore be a net gain for nearly all employees in the nation - save the very rich, of course, who will be hurt by this.

I have no idea whether it would or wouldn't affect employment and don't really care. But if you think raising the cap will somehow impact the "very rich" you're just blowing smoke. A large portion of income for the "very rich" isn't taxable under social security. It isn't earned income.

And of course, if the rest of the system is allowed to remain intact then eliminating the cap doesn't solve anything other than give a short-term boost to the SS balance sheet. Rasing the cap (under the existing system) will also raise the benefits paid so those same people that have the most earned income right now will also have larger SS checks in their future. Being that the average person collecting SS gets back everything they've paid in during their lifetime in under 4 years that means a long term negative effect for the overall system.

Quote:

No system the US runs under is designed to work in perpetuity. ALL systems have to be re-examined and re-balanced over time. SS is no better, nor worse, compared to other governmental programs and systems. It is in no danger of collapse. The whole thing was a scare scenario designed to lead to privatization.

This is pretty funny coming from you. Every time adjustments are suggested to the SS system it's you that screams "They're trying to take your social security away!". That's been the scare tactic used by Democrats for decades.

And there is a huge difference between how SS is managed and other government systems are managed. Changes to other systems are mandated based on specific and (fairly) well defined indicators. Many changes to SS (like the age for full eligibility) have no automatic link to life expectancy. Instead, the law has to be changed which creates a huge political debate every time it comes up.

Quote:

I mean, listen to you guys! "If something isn't done, why, the system will have financial problems - in 30 to 50 years!" C'mon. Our economic system is having bigger troubles then this right now. SS is hardly the biggest of our worries at this time, and it was never anything but a sham issue.

lol In light of the screaming/crying going on right now about how no one paid attention to what was going on with the housing market it would appear that you are arguing against yourself here. Which is it? Should we be looking at future problems and addressing them before they manifest themselves or should we ignore them and wait until they become a crisis?

If you think that the problems we have right now are bigger than what we'd have if SS fails you are delusional.

0 Replies

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