8
   

Social Security?

 
 
Cycloptichorn
 
  1  
Reply Wed 17 Sep, 2008 09:01 pm
@okie,
okie wrote:

The stock market at least has some value, some collateral, some assets, something the ious in the trust fund do not have. They are worthless pieces of paper, with no money to back them, only a promise based on what somebody else will pay into the fund in the future, right?


Oh really?

A lot of people had their money in AIG or Lehman bros or other places, who saw their 'collateral and assets' vanish into nothing. What would have happened if people's retirement funds were invested there? The same thing, wouldn't you agree?

Some will argue that we will not be able to place the SS funds in such 'high-risk' stocks, and that they would be safer. If this is the case, then it's fundamentally false to compare the rate of return of SS with the rate of return of the Dow or other general stock market indexes. The element of risk and reward is crucial to the performance in these markets, and removing it will remove the upside profit of that risk. Suddenly privatization looks much less attractive.

If private accounts are allowed to be used, who will manage those accounts? We're talking about opening up a new account for pretty much every adult in America and investing that money into the market. Who will run this process? What staff will handle this? Will they be a for-profit group, or are we going to grow the size of the government? Theoretically, the Republicans propose having some control of those accounts; who is it you call when you want to change your investment? There are no projections which accurately show how much money this would cost, and I never hear it mentioned as part of the pro-privatization argument.

Cycloptichorn
Finn dAbuzz
 
  3  
Reply Wed 17 Sep, 2008 11:47 pm
@Cycloptichorn,
Quote:
A lot of people had their money in AIG or Lehman bros or other places, who saw their 'collateral and assets' vanish into nothing. What would have happened if people's retirement funds were invested there? The same thing, wouldn't you agree?


This argument is utterly specious.

It is so unlikely as to be impossible that any personal retirement fund serving as an alternative to conventional SS would have been invested entirely, or even in large measure, in AIG or Lehman Bros stock.

Your original argument clearly contemplated the ignorant view that personal investments brokered by Lehman Bros et al are in imminent danger of busting. This simply is not the case, and it appears you have recognized same since you now want to focus on funds invested in Lehman Bros et al stock, yet that is no more likely than your original contention.

Yes the stock market has been rocked recently, but do you really believe that this is a permanent, or even long lasting (years) condition?

(If it is then retirement options will be the least of our worries)

If one had their personal retirement fund invested in the stock market, they would be in trouble if they decided to retire tomorrow, next week or next month, but it's hard to imagine anything more than a handful of people who absolutely must retire in this short term time frame.

The market will rebound sooner than later.

Frankly, anyone that has their personal fortune invested in a single company's stock (let alone the stock of AIG or Lehman Bros) is either an idiot or so sophisticated a trader they would never have allowed these company's tumbles to wipe them out.

There was never any possibility, what-so-ever, that private retirement funds as an alternative to SS would be permitted carte blanche in investment choices. None at all, and I defy you to find evidence that the Bush Administration ever advocated same.

What is rich here is that you, obviously, thought you hit a home run with this thread.

What is amazing is that you are arguing on.





Cycloptichorn
 
  0  
Reply Thu 18 Sep, 2008 12:33 am
@Finn dAbuzz,
Quote:


Your original argument clearly contemplated the ignorant view that personal investments brokered by Lehman Bros et al are in imminent danger of busting.


No, it did not. I never said any such thing.

Finn, you being against an idea is akin to a high-value endorsement of that idea. Truly.

The fact is that, even as you admit, some would lose out. It might be a small percentage of people - as you put it, those who 'must retire' right now. You also admit that those who put their funds entirely or in large part in one company would be 'idiots.' Finn, that's the whole point. Idiots would invest their money unwisely. Right now, idiots lose their money in the stock market. Some of them would lose their money under Bush's plan. The point of SS is that nobody loses their money, no matter how dumb they are.

As I said before - if retirement fund alternatives are not allowed to be invested in common stock, then comparing them to the overall market performance is apples and oranges.

Quote:

Yes the stock market has been rocked recently, but do you really believe that this is a permanent, or even long lasting (years) condition?


Yes, I do believe we are entering a protracted period of problems. We are in unprecedented territory and it's not at all clear how the next few months will go, let alone the next few years. The financial outlook is not rosy, no matter who wins the White House. Not the sort of situation that one would want their retirement funds to be in any sort of play whatsoever.

Cycloptichorn
0 Replies
 
Cycloptichorn
 
  0  
Reply Thu 18 Sep, 2008 12:47 am
@Finn dAbuzz,
Finn dAbuzz wrote:


There was never any possibility, what-so-ever, that private retirement funds as an alternative to SS would be permitted carte blanche in investment choices. None at all, and I defy you to find evidence that the Bush Administration ever advocated same.


Well, you will note that I did not claim anything close to 'carte blanche.' But the funds most certainly would have been invested in the sorts of stocks which have declined precipitously, and AIG for example would have been an ideal candidate -

Quote:
Personal retirement accounts would be invested in a mix of conservative bonds and stock funds. Guidelines and restrictions would be put in place to provide sound investment choices and prevent individuals from spending the money in these accounts on the lottery or at the race track. Workers would be permitted to allocate their personal retirement account
contributions among a small number of very broadly diversified index funds patterned after the current TSP funds.

• Like TSP, personal retirement accounts could be invested in a safe government securities fund; an investment-grade corporate bond index fund; a small-cap stock index fund; a large-cap stock index fund; and an international stock index fund.


http://www.whitehouse.gov/infocus/social-security/200501/socialsecurity.pdf

First link at the top of google, 1 minute of research, Finn. Please try and do a little better in the future. It is quite obvious that you didn't bother to look and see what Bush had proposed at all before you wrote this.

Cycloptichorn
0 Replies
 
Robert Gentel
 
  3  
Reply Thu 18 Sep, 2008 01:13 am
@parados,
You cherry picked your numbers parados. You are comparing the markets with only a subset of Social Security scenarios and portraying it as representative of Social Security on the whole:

Your Source wrote:
Social Security's inflation-adjusted rate of return is only 1.23 percent for an average household of two 30-year-old earners with children in which each parent made just under $26,000 in 1996.


Directly below that is:

Quote:
Low-income, single African-American males born after 1959 face a negative real rate of return from Social Security. For every dollar he has paid into Social Security, a low-income, single African-American male in his mid-20s who earned about 50 percent of the average wage, or $12,862, in 1996 can expect to get back less than 88 cents. This negative rate of return translates into lifetime cash losses of $13,377 (in 1997 dollars) on the taxes paid by the employer and employee.


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

Using one of the best case scenarios to make a case that Social Security outperforms the free markets is disingenuous and Social Security simply does not have the return you claim it does.
Robert Gentel
 
  2  
Reply Thu 18 Sep, 2008 02:06 am
@Cycloptichorn,
Cycloptichorn wrote:
You still don't get it. It's not a problem with SS, which is how you and others here have presented it.


You are willing to go to great lengths to portray the implosion of Social Security as non problematic just to find a way to describe yourself as being right? I guess if you get up on a soap box and ignorantly challenge people to have the "guts" to respond you need to maintain the dismissive charade. Laughing

If you want to pretend it's not a problem that's fine, but I find a system predicated on the notion of the future generations being able to pay for the current retirees inherently problematic. Sticking the future generations with the tab is not going to work forever. If the demographics don't support it and it starts going cash flow negative it's simply no longer viable and that is exactly the case we are experiencing.

You are basically spinning the cash flow negativity as not being a problem with Social Security itself but that's utter nonsense. Without that cash flow negativity there'd be no discussion about Social Security to have and it is precisely because of the cash flow negativity that it will go bankrupt under its current structure.

You readily admit this fact (that it's going to go bankrupt as it's currently structured), and your response is to simply portray it as non-problematic in the short term (using the kind of thinking that got us where we are: "it's the future's problem!"). Social Security is simply not viable in the foreseeable future. If we all agreed with you and made no change to social security it would still go bankrupt within our lifetimes. And you acknowledge even this yet just spin it as not being a problem inherent to Social Security.

Utter nonsense! Social Security is going in the red because of it's inherent structure and without something being done there's no way to pay for it when I retire. There is an inherent problem with Social Security regardless of whether or not privatization is the right way to address it.

Quote:
I understand your arguments and have understood the whole time where you are coming from;


Bullshit. You had no idea what I was talking about when I spoke of the forecasted date at which the cash flow goes negative and told me if I didn't bring you a link you'd not consider it true.

Then you looked it up, and once you realized what I was talking about you simply decided that it wasn't a "problem" so you still get to be right. Now you are trying to make like you understood what I said all along and claim that what you challenged is just not the "real problem". Laughing

Quote:
...but it's not accurately targeting the real problem. It's a problem with the Federal government having bills coming due. SS doesn't need to be reformed to solve this problem; the federal budgetary process does.


You are basically saying it's not a problem because the budget should just be realigned to pay for it. That ignores that it's structured in a fundamentally flawed way that will generate increasingly negative cash flow.

No matter how you spin it, Social Security is going to go bankrupt within our lifetimes unless drastic change is made. If you keep pretending there's no problem you are actually aiding your worst nightmare.

Quote:
That's why the whole 'privatization' thing was a sham. It won't fix the problem. It will in fact remove MORE funds from the system, exacerbating the budget problems. It was nothing more then an attempt to kill social security and get rid of the safety net we've enjoyed for years.


It may not be the best way to solve the problems, but it's no "sham". We are going to start going in the red very soon, and without changes the fund will be exhausted before you and I can retire. The privatization proposal was elective, where young people would have the option of direction some of their funds to private retirement savings. It gives people the option to opt out of the scheme and not stick the future with the tab and that reduces the money borrowed from the future a bit even though we still need to figure out how to pay the currently building tab this can help reduce this burden on the future taxpayers.

You are absolutely right that privatization alone won't solve the cash flow negativity (but nobody serious thought it would alone), and there is a big bill to pay already on our tab. Much more needs to be done to address it ranging from decreasing the benefits paid out (raising retirement age is just one way of doing this) to allocating new funds for it (by raising taxes or by taking from existing budget items) but at the very core of the system we need to stop promising retirement that is contingent on future earners being able to keep up with the system as it is or future generations finding a way to rearrange their budgets to make up the differences. I prefer a phasing out of the current system toward a future system that has both private and public options and no matter what solution is taken the less time there is to implement it the more likely it will be that the safety net won't be there at some point. The sky is not falling yet but pretending there's no problem will mean that it will.

There are a lot of arguments you can make against the privatization but if you expect to just point at the current market downturn as proof positive that you are right then all it takes to refute your nonsensical argument is to point at an example of the government mismanaging this kind of money and that's not hard to find. But you take into much dafter territory by claiming that there's not a Social Security problem and that it's a big "sham". We have a ticking time bomb that goes in the red within a decade and that goes completely bankrupt before you and I can retire and you are the first person I've ever seen try to spin it as not a serious problem inherent to Social Security's structure of counting on the future generations to foot the bill.

You really want to kill Social Security? Then pretend there's no problem till the fund is completely exhausted and let fiscal conservatives "starve the beast" when there are even fewer options to deal with it due to the even larger tab that the "non problematic" negative cash flow will generate.
Cycloptichorn
 
  0  
Reply Thu 18 Sep, 2008 08:38 am
@Robert Gentel,
Quote:
Utter nonsense! Social Security is going in the red because of it's inherent structure


This is untrue.

SS, if it was allowed to act in the way it was created, would have been socking away how much extra per year? 100 billion? 200? If that money was allowed to mature, to grow interest over time, instead of being stolen by the Federal government to pay current account deficits, there would be no 'going into the red'. Not for a long, long time. For we would have every dollar which is currently in the form of an IOU, plus interest. This is how SS is inherently designed to work.

The US government does not allow SS to work in the way it was designed. We steal the money so our deficits don't look as bad.

Imagine another scenario - you have a kid. The kid is saving money up for college. You are having a hard time making ends meet, so you start pulling money out of the kid's college fund and replacing it with IOUs.

Several years go by, and you get used to doing this. Then, college time comes around, and the IOUs come due; you then blame the kid for expecting you to pay up? That's the exact position that you and others are taking: stating that the US government IOUs were never seriously meant to be paid back, and now that we are facing the possibility of having to pay back the debts we incurred, we ought to change the program instead of doing so!

Hell with that!

SS does not go red 'within a decade.' It has money socked away against a rainy day, and has been operating at a profit, for decades, exactly against this eventuality. The government jacked that savings, and now will have to pay it back. You don't seem to understand this fact.

Cycloptichorn
parados
 
  0  
Reply Thu 18 Sep, 2008 08:45 am
@Robert Gentel,
So, a household earning $52,000 with 2 children isn't the average in the US?


I see you think I should have assumed all households were 20 year old low income African Americans.

From Heritage-
Quote:
Social Security's inflation-adjusted rate of return is only 1.23 percent for an average household of two 30-year-old earners with children in which each parent made just under $26,000 in 1996.

As far as I know the average American household has 2 kids. (1.7 is closer but no family can have 1.7 kids.) The average income in an American household is about $52,000. Do you have information to show that isn't about the average?

I didn't cherry pick anything Robert. I took the numbers that Heritage used to figure their average household. If you don't like their numbers than find the return somewhere else that you like better. Don't accuse me of cherry picking when you are the one that is cherry picking by claiming I didn't consider low income single African Americans as my average.

Average is NOT a best case scenario. It is the average. Heritage didn't inflate it's numbers. I specifically chose them because they probably did everything they could to deflate the number to make their argument for privatization. I also didn't cherry pick the dates for my 10 year market. I picked the close of the previous day. It was even an UP day on the market.
Cycloptichorn
 
  0  
Reply Thu 18 Sep, 2008 09:07 am
@Cycloptichorn,
Okay, just to clarify -

When I say 'not going into the red anytime soon' I'm referring to SS's ability to totally pay out their outlays each year. SS will still be taking in capital, so the amount of extra monies needed to meet the shortfall - which may or may not occur by the end of the next decade, depending on demographics - will be quite small at first. If SS was allowed to keep it's surplus all these years, there wouldn't be a problem. Period. If we would honor the IOUs that we gave out in good faith, there wouldn't be a problem. Unfortunately many here seem to think that honoring those IOUs is the wrong thing to do, and instead we should privatize the program.

Those who champion this approach would fundamentally change the nature of SS, for some WOULD lose money. This is antithetical to the entire point of SS in the first place.

I think the problem is that every jackass with a few bucks in the market thinks that they could do a better job of investing then SS does; and many of them are right. Just as many of them are wrong. I've shown that the plan presented by Bush most certainly did involve the option of placing your money in harm's way, and it's likely that many would have done exactly that. SS is not supposed to be an efficient money-making device, it's supposed to be a redundant one!

Cycloptichorn
0 Replies
 
okie
 
  2  
Reply Thu 18 Sep, 2008 09:47 am
@Cycloptichorn,
Cycloptichorn wrote:


Okie, if you misuse a tool, is it the tool's fault? The government replaced the money, the SS fund, with IOU's over the years, and you blame social security for this?

Cycloptichorn

Yes, its the tool's fault, because the tool was not only misused, it was intentionally designed to be misused. The misuse was planned. The design of the tool was faulty.
Cycloptichorn
 
  1  
Reply Thu 18 Sep, 2008 10:06 am
@okie,
okie wrote:

Cycloptichorn wrote:


Okie, if you misuse a tool, is it the tool's fault? The government replaced the money, the SS fund, with IOU's over the years, and you blame social security for this?

Cycloptichorn

Yes, its the tool's fault, because the tool was not only misused, it was intentionally designed to be misused. The misuse was planned. The design of the tool was faulty.


No, it most certainly was not. Social Security was not designed to have the trust fund jacked and replaced with IOUs. Perhaps you can show evidence that it was designed that way?

Cycloptichorn
0 Replies
 
cicerone imposter
 
  1  
Reply Thu 18 Sep, 2008 10:19 am
@Robert Gentel,
Robert G, It really depends on who is benefiting from social security; most of us who live longer than blacks benefit much more, because of longevity. For example, I've taken more out of social security than I've paid into it, and most who live long enough do. On top of that, we get Medicare which subsidizes about 80% of our medical bills in old age when we most need it.

For example, I was diagnosed with prostate cancer last year, and received eight weeks of radiation treatment. The "average" cost for such a treatment can run from about $35,000 to $50,000; it cost me less than $300 on my co-pays.

There was a time when most blacks did not benefit from social security, because their longevity was below the age for benefits. Most paid into the system, but they died before they received any benefits. It has improved a bit for blacks, but many still pay into it without any benefit.

0 Replies
 
georgeob1
 
  4  
Reply Thu 18 Sep, 2008 10:25 am
@Cycloptichorn,
Cycloptichorn wrote:

Okie, if you misuse a tool, is it the tool's fault? The government replaced the money, the SS fund, with IOU's over the years, and you blame social security for this?

I want you to explain how it is the fault of the program, that the decision was made to spend the excess money on the general budget instead of saving it in the fund. And how much would that money have gained in interest, even at the super-low rates SS is known for, instead of being replaced by IOUs which are weaker in value then when they are issued?

The government has engaged in scandulous and fraudulent behavior - both parties - and yet, you blame the program for this. I'd like to hear you expand on this.

Cycloptichorn
Well you are partly right, though you do contradict yourself. Social Security is an inanimate object, a tool as you describe it. It has no will, virture or vice of its own. Instead it has only the attributes of the government that created it and that operates it. In other posts you refer to the "intended purpose" of Social Security. Intended by whom??? The truth is there is no such thing. Social Security was the creation of a government and legislators who had a wide variety of intentions in mind, most of which have been expressly violated by subsequent acts of their successors.

That is the essential point here. This government program - like all others - will continue to manifest all the characteristics of the government which created and which continues to modify it. It is quite meaningless - and useless - to argue about unspecificed abstractions of what Social Security "once was" or "should have been", given that it remains the political plum it always has been.

Parados earlier argued that in the decade from 1998 to 2008 the appreciation of the S&P 500 was slightly less than that received by Social Securirty beneficiaries. In the first place he happened on a very fortuitous decade, one which included the collapse of both the dot com and the recent housing bubbles in the market. Almost any other period would have yielded a very different result. More importantly he omitted the fact that a large fraction of Social Security beneficiaries don't live to collect the "average" benefits - they die well before they even get back a large fraction of what they contributed. Moreover, unlike capital investments, the principal is not theirs to control, use, or bequeath.

In addition Parados' referenced calculation of the return on Social Security "contributions" did not include the employer paid tax which amounts to half of the monies collected. Cyclo's contrary assertions notwithstanding these are a powerful disincentive to employment that harm working people throughout their lives.

For anyone, rich or poor, a balanced investment portfolio would almost always yield a much better economic outcome. The problem is that large numbers of people don't take a long view of such things, and are probably better off with the government taking a big slice of their earnings , and levying additional taxes on their employers, throughout their working lives -- and then returning a portion of the monies collected to them when they do cease working.

However, for you to assert that this really is a good deal for prudent, thinking people; or that you have a right to the property of others merely because you assert they are "very rich" reveals that you place your peculiar concepts of social justice and your own avarice above reason and common sense.

I don't think that anyone here is suggesting the abolition of Social Security, or even its complete transformation to a provatiozed investment. The Bush proposals really did address a serious issue that still remains with the present system. They would have encouraged, but not force, people to transfer some of their forced savings into diversified private accounts. The Democrats rejected it all out of hand, refusing to consider any aspect of the plan or any even partial adoption of the Bush proposals, blindly asserting that there is no demographic problem with the present system.

However, you yourself implicitly acknowledge the existence of the problem in your insistence that "the very rich" be taxed to the extent of 8% or so of their incomes over $96K , and your acknowledgement that additional increases in the age requirements for benefits will be required.
Cycloptichorn
 
  1  
Reply Thu 18 Sep, 2008 10:42 am
@georgeob1,
Yes, the program is not perfect; but, do I need to point out to you that no program is perfect? No system has withstood the test of time without modification and change?

Quote:

For anyone, rich or poor, a balanced investment portfolio would almost always yield a much better economic outcome. The problem is that large numbers of people don't take a long view of such things, and are probably better off with the government taking a big slice of their earnings , and levying additional taxes on their employers, throughout their working lives -- and then returning a portion of the monies collected to them when they do cease working.


And you have hit the nail on the head perfectly here. SS does not exist in order to provide efficiency to our system; it exists to provide redundancy. See, those stupid folks - those who can't take a long-term view - don't just go away, and if they lose their funds, they create a huge drag on our society.

What you describe is akin to the problem of having children of many different levels of intelligence and ability in school. Do you teach to the smart kids at their level, the dumb kids at theirs, or an average in-between? SS is the average, not a device intended to allow those who are good at investing to make a high rate of return.

I would support Bush's plan IF it were in addition to current SS funding, NOT if it takes money out of the current system. This would only exacerbate the funding problems and speed them up tremendously.

You state:

Quote:
The Democrats rejected it all out of hand, refusing to consider any aspect of the plan or any even partial adoption of the Bush proposals, blindly asserting that there is no demographic problem with the present system.


This is incorrect. The truth is that the American public rejected it out of hand. Remember that in 2005, you had a recently re-elected president, with 'political capital' to spend, and a Republican controlled House and Senate. How exactly did the Democrats stop this from happening? They could not have stopped the debate from going forth if they had tried. There certainly was a big enough Republican majority to push the plan through the house. That never happened, because the individual members of Congress saw how amazingly unpopular their idea was with the American public.

A poll from 2005 -

Quote:

Poll: Bush's Social Security Plan is Tough Sell
President's Job Approval Steady, But Most Americans Don't Like His Social Security Plans

Analysis by GARY LANGER
March 14, 2005

President Bush's Social Security road show is playing to a tough audience: Not only do most Americans oppose his effort to revamp the retirement system, but nearly six in 10 in a new poll also say that the more they hear about it, the less they like it.

In the midst of a 60-day drive by Bush to build public support for his Social Security initiative, this ABC News/Washington Post poll shows no movement in Bush's direction. Americans oppose his plans by 55 percent to 37 percent, and the intensity of sentiment is against him: Those who are "strongly" opposed outnumber strong supporters by a 2-to-1 margin.

Just 10 percent rate Social Security as the top priority for Bush and Congress, placing it last of five issues tested. Only 35 percent approve of Bush's handling of the issue, a career low. And by a 12-point margin, 49 percent to 37 percent, the public better trusts the Democrats in Congress to handle Social Security, unchanged since Bush began the policy push in mid-January.


Bush's Social Security Proposals
Support 37%
Strongly 16
Somewhat 21
Oppose 55
Strongly 35
Somewhat 20

The results run counter to the administration's claims that fuller information will turn opinion its way. In fact, opposition to the president's plan is as high among people who feel well-informed about it (half the public) as among the less well-informed. And while opposition is highest and strongest among older Americans -- who wouldn't be affected -- the plan is weakly received down the line. Middle-aged adults oppose it by about a 20-point margin; those under 30, by nine points.


There was no demographic of Americans who approved Bush's idea. Not even majorities of Republican voters approved it.

I think what you saw here was a basic mistrust of the Republican party to handle this issue. It isn't as if the American people haven't heard your party talking for years about how wasteful SS is, how it's a 'ponzi scheme' <snort>, how you would do away with it if you could. They fully realize that Republicans would LOVE to do away with SS. That's why there is no trust on this issue to let them reform it.

You state

Quote:

However, you yourself implicitly acknowledge the existence of the problem in your insistence that "the very rich" be taxed to the extent of 8% or so of their incomes over $96K , and your acknowledgement that additional increases in the age requirements for benefits will be required.


That's right, I do admit that some changes will have to be made. Some changes are made to every government program. I don't understand what is so startling about this position, and I also don't think it's accurate to claim that the Dems have consistently maintained that no changes would ever have to be made.

Cycloptichorn

on edit:

It also seems to me that history has proven, that those who are good stewards of their monies and can make smart investments are not held back by Social Security. They are not prevented from achieving financial security and stability later on in life. I don't see how this burden, paying into what essentially amounts to a retirement insurance fund, holds anybody back. For top investors, SS is chump change next to the kind of money that they throw around.
0 Replies
 
parados
 
  0  
Reply Thu 18 Sep, 2008 11:43 am
@georgeob1,
Quote:
Parados earlier argued that in the decade from 1998 to 2008 the appreciation of the S&P 500 was slightly less than that received by Social Securirty beneficiaries. In the first place he happened on a very fortuitous decade, one which included the collapse of both the dot com and the recent housing bubbles in the market.

No, it wasn't a fortuitous decade. It was the last decade. There are other 10 year periods that would show the same thing. The 70s being one.
DOW Jan 1970 -744
DOW Jan 1980 - 865
BEFORE inflation.
We all know that inflation in the late 70s was some of the highest in US history.

Quote:
In addition Parados' referenced calculation of the return on Social Security "contributions" did not include the employer paid tax which amounts to half of the monies collected.
Perhaps you missed this under their list of methodology
edit: I also stated in my post that it included BOTH employer and employee.
Quote:
Both the employee's and employer's share of payroll taxes are included in the calculations.


Yes, over 30 years the market will normally return better than SS. But there have been more than one 10 year period where the market has stagnated when compared to inflation. However, you have to remember that the majority of investors get less than the average market return. Average is a word with meaning. You are correct that a large number of people die before they get the average benefits in SS but a large number of people also get more than the average benefits. In fact almost as many get MORE than the average benefits as get less.

What happens with privatization is you still need a safety net. The majority of people won't lose money but there will be a minority that does lose money and some will lose most of their money. What do you propose the government should do for someone that buys an annuity from an insurance company, like AIG for instance, and then that insurance company goes bankrupt from bad investments? The person didn't make a bad investment. They made what seemed like a really good investment with a stable company. Sure a lot of states have a fund to pay off when an insurance company can't but it it could be a reduced amount.

The main problem I see with privatization is regulation. Without regulation it becomes a way for unscrupulous investment "professionals" to make a lot of money at the expense of future retirees. Even with regulation there will be instances where people will lose quite a bit of their money. It may be rare but with 300 million people it will happen.
0 Replies
 
Robert Gentel
 
  2  
Reply Thu 18 Sep, 2008 11:54 am
@parados,
parados wrote:
So, a household earning $52,000 with 2 children isn't the average in the US? I see you think I should have assumed all households were 20 year old low income African Americans.


Nonsense. I said nothing of the sort and was showing you that the source you used to dispute Social Security's return rate with George does not say that Social Security returns what you said it does. The numbers you describe is for a specific demographic only.

Quote:
As far as I know the average American household has 2 kids. (1.7 is closer but no family can have 1.7 kids.) The average income in an American household is about $52,000. Do you have information to show that isn't about the average?


If you are going to make claims about the return rate of Social Security, you can't just pick the return rate of the "average" household and you need to get the average return rate parados.


Quote:
I didn't cherry pick anything Robert. I took the numbers that Heritage used to figure their average household.


And then you tried to extrapolate that data into what Social Security's overall return rate is. Yes, you cherry picked the data.

Quote:
If you don't like their numbers than find the return somewhere else that you like better.


No, I'm happy just pointing out the intellectual dishonesty of your numbers. I have no dog in the dispute you had with George except for that bit of deceit.

Quote:
Don't accuse me of cherry picking when you are the one that is cherry picking by claiming I didn't consider low income single African Americans as my average.


I said nothing of the sort. You are just lying now. I did not advocate that the low income African American demographic should be your average. But if you want to make a claim for what the return rate of Social Security is you need to factor in those kinds of returns, not just the specific demographic you are touting as representative of the return rate for Social Security.

Quote:
Average is NOT a best case scenario. It is the average.


Average what? The average household's return rate doesn't equal the average return rate for Social Security. They aren't the same numbers.

Quote:
Heritage didn't inflate it's numbers. I specifically chose them because they probably did everything they could to deflate the number to make their argument for privatization. I also didn't cherry pick the dates for my 10 year market. I picked the close of the previous day. It was even an UP day on the market.


So? You still cherry picked a single demographic's return rate and portrayed it as Social Security's overall return rate.
Robert Gentel
 
  2  
Reply Thu 18 Sep, 2008 12:09 pm
@Cycloptichorn,
Cycloptichorn wrote:

Quote:
Utter nonsense! Social Security is going in the red because of it's inherent structure


This is untrue.


False. Social Security is structured in a way that it will have negative cash flow and eventually exhaust it's funds built from the positive cash flow.

This is simple FACT no matter how you want to spin it.
Quote:

SS, if it was allowed to act in the way it was created, would have been socking away how much extra per year? 100 billion? 200? If that money was allowed to mature, to grow interest over time, instead of being stolen by the Federal government to pay current account deficits, there would be no 'going into the red'.


False. There would be going into the red.

Quote:
Not for a long, long time.


Now you are saying it just won't happen for a while, when you earlier try to claim that there's nothing inherently wrong with Social Security and that claiming it would go into the red is untrue.

Now it's not untrue, just far away? Make up your mind.

Quote:
For we would have every dollar which is currently in the form of an IOU, plus interest. This is how SS is inherently designed to work.


Even under this design, the negative cash flow will completely bankrupt the system at some point. This is an inherent problem with Social Security.

Quote:
The US government does not allow SS to work in the way it was designed. We steal the money so our deficits don't look as bad.


Complaining about the government raiding the trust fund does nothing to change the basic fact that as Social Security is structured if the government did not do so the fund would still completely exhaust itself at some point under negative cash flow.

No matter how you spin it, Social Security is on a path to complete insolvency as it is structured. This is an inherent problem with Social Security.

Quote:
Several years go by, and you get used to doing this. Then, college time comes around, and the IOUs come due; you then blame the kid for expecting you to pay up?


This scenario is wholly unrelated to the real structure of Social Security. In this scenario merely not borrowing from the fund solves all. Social Security is in no such scenario, not borrowing from the fund would merely extend the viability of the program but it still reaches a date at which the fund is completely exhausted.

Quote:
That's the exact position that you and others are taking: stating that the US government IOUs were never seriously meant to be paid back, and now that we are facing the possibility of having to pay back the debts we incurred, we ought to change the program instead of doing so!


Bullshit. The position I am taking is that Social Security is structured in a way that guarantees it's complete insolvency. It's just a matter of when.

Complaining that the fiscal policy is going to make that happen sooner rather than later does nothing to detract from the claim that Social Security is structured in an inherently flawed way that will collapse even if the practices you blame were non-factors.

Quote:
SS does not go red 'within a decade.' It has money socked away against a rainy day, and has been operating at a profit, for decades, exactly against this eventuality. The government jacked that savings, and now will have to pay it back. You don't seem to understand this fact.


I understand it perfectly well. You know damn well I am talking about cash flow negativity that is forecasted to start within a decade and are claiming it's false based on when the fund will be completely exhausted. We already went over this very specifically so I know this is willful on your part.

Now here's what I'd like to see you try to understand:

You claim there's no problem with Social Security, but even if all your arguments about borrowing from the trust were not a factor the program would collapse under the years of forecasted cash flow negativity.

Is that correct or not? Without any changes to the inherent structure of Social Security (such as outside funding from elsewhere in the budget) , will it go bankrupt?

YES. So there's an inherent "problem" with Social Security that you are denying Cyclo.

Cycloptichorn wrote:

Okay, just to clarify -

When I say 'not going into the red anytime soon' I'm referring to SS's ability to totally pay out their outlays each year. SS will still be taking in capital, so the amount of extra monies needed to meet the shortfall - which may or may not occur by the end of the next decade, depending on demographics - will be quite small at first.


You like moving the goal posts don't you? You know I am talking about the negative cash flow. You know that the negative cash flow is an inherent problem to Social Security that will exhaust the fund at some point unless Social Security is changed or it is funded differently.

These are inherent problems with Social Security, and pretending the problem only starts when Social Security is no longer able to "pay out their outlays each year" is to say that the coming hurricane is only a "problem" when it hits you and you die.

That kind of head-in-the-sand viewpoint is stupid enough if you just aren't paying attention, but you go much further and claim explicitly that there's no inherent problem. You do so in obvious error.
Cycloptichorn
 
  0  
Reply Thu 18 Sep, 2008 12:22 pm
@Robert Gentel,
I don't care if you want to decide you meant 'negative cash flow.' That's a stupid way to look at it.

Let's say that I work hard and save up 3 million dollars over the course of my life. I then retire at the age of 50. At that point, I no longer have income from my job and I am spending my savings to stay afloat. I spend far less then the amount I have in savings.

While I would have 'negative cash flow,' would anyone describe me as 'in the red?' Hardly. That term is commonly used to describe a situation in which one has more debts then they do assets, including cash flow. The term used to describe less cash coming in then going out is negative cash flow, which of course not what you said at all.

Quote:
This scenario is wholly unrelated to the real structure of Social Security. In this scenario merely not borrowing from the fund solves all. Social Security is in no such scenario, not borrowing from the fund would merely extend the viability of the program but it still reaches a date at which the fund is completely exhausted.


Yes, but how far off is that date? Remember that SS would have a cushion of hundreds of billions, if not trillions, of dollars saved up over the last 50 years if we hadn't been taking that money. How much interest would have been garnered on those funds? How long would it allow us to continue the program? We don't know. But it's surely false to say that the program would be in imminent danger of collapse; it would undoubtedly be far healthier then it is today, and even today we have 30-40 years before it gets into serious trouble.

I fundamentally disagree with your characterization of this issue, and you also seem to have a habit of declaring 'facts' much in the same way Bill was earlier in the thread.

Quote:

You claim there's no problem with Social Security, but even if all your arguments about borrowing from the trust were not a factor the program would collapse under the years of forecasted cash flow negativity.

Is that correct or not? Without any changes to the inherent structure of Social Security (such as outside funding from elsewhere in the budget) , will it go bankrupt?



YES. So there's an inherent "problem" with Social Security that you are denying Cyclo.


I have never claimed that SS is a perfect program, inviolate, pure, and Godly. It does not stand as a paragon of how all programs should be ran. It is not a shining example of accounting greatness. I have claimed that there will be changes necessarily made to the program as time goes on. But privatization does nothing to address those problems, exposes people to risk, and acutally increases the problems with SS that we see. The whole push to privatize SS is a sham and nothing more. There is no actual evidence that privatization will solve the underlying problem - or perhaps you have some you could present?

At the end of the day, I do rest quite assured that SS will not be privatized anytime soon; while we can disagree as to the merits of SS, and as to what should be done about it, you know as well as I do that my position has prevailed for the time being and SS will not be privatized in any way under the next administration, no matter who gets elected. It's more profitable for us to discuss ways to fix it without taking that step, then to get bogged down in discussion of a hypothetical which we both know isn't going to happen.

My original post in this thread stands firm: if we had gone forward with privatization, some would have lost some money and some would have lost a LOT of money, in our recent problems, which look to continue into the future for some time. This is a problem, and one that was brushed off by virtually every pro-privatization advocate in this thread; but none have successfully countered that claim with evidence to the contrary. Finn attempted to do so, but was shown to be incorrect.

Cycloptichorn
Robert Gentel
 
  2  
Reply Thu 18 Sep, 2008 12:38 pm
@Cycloptichorn,
Cycloptichorn wrote:

I don't care if you want to decide you meant 'negative cash flow.' That's a stupid way to look at it.


It's the inherent problem Cyclo. Without the negative cash flow there would be no issue to discuss with Social Security. Portraying Social Security as not having the "real problem" by ignoring this is stupid.

Quote:
While I would have 'negative cash flow,' would anyone describe me as 'in the red?'


Cyclo. Answer this simple question: Without changes to Social Security's payouts or it's funding will Social Security be able to pay its obligations when we retire?

No, it won't. You know perfectly well that it will go into the red under any meaning of the term and you know perfectly well that it's forecasted to do so during our retirement age.

Quote:
Hardly. That term is commonly used to describe a situation in which one has more debts then they do assets, including cash flow. The term used to describe less cash coming in then going out is negative cash flow, which of course not what you said at all.


Spin spin spin spin Cyclo. Under your definition of the term, will Social Security go into the red in our lifetimes Cyclo? Yes it will.

Quote:
Yes, but how far off is that date?


First acknowledge that Social Security has a "real problem" that is inherent to its structure and not something you can blame on the rest of the government spending entirely.

Now as to when the total meltdown would happen you know as well as I do that it's forcasted to do so right around when you and I are retiring.

Quote:
Remember that SS would have a cushion of hundreds of billions, if not trillions, of dollars saved up over the last 50 years if we hadn't been taking that money.


Ok, now you want to change the rest of the facts on the ground to just put off the date.

Yes, if the money were not borrowed it could survive longer, but even then there is an inherent problem in Social Security that puts it on a collision course with complete bankruptcy.

Quote:
How long would it allow us to continue the program? We don't know. But it's surely false to say that the program would be in imminent danger of collapse; it would undoubtedly be far healthier then it is today, and even today we have 30-40 years before it gets into serious trouble.


"Healthier" is not the same as not having a "real problem" Cyclo. Keep the goalposts where you already moved them.

Quote:
I fundamentally disagree with your characterization of this issue, and you also seem to have a habit of declaring 'facts' much in the same way Bill was earlier in the thread.


Disprove one then. I can understand why you'd like to portray my arguments as lacking factual accuracy, but all you are doing now is arguing about their interpretation, you haven't shown a single falsehood in fact of mine.

Quote:
I have never claimed that SS is a perfect program, inviolate, pure, and Godly.


Dear lord! You aren't going to get away with moving the goalposts to say that you were merely claiming it is not perfect. You claimed that the negative cash flow wasn't a "real problem" to Social Security.

Given that the negative cash flow is going to completely bankrupt Social Security at some time how can you argue that it's not a "real problem" that's inherent to Social Security?

That is what we are discussing, not whether or not Social Security is "a perfect program, inviolate, pure, and Godly". Rolling Eyes

Quote:
It does not stand as a paragon of how all programs should be ran. It is not a shining example of accounting greatness.


Nobody's talking about that Cyclo. Let's stick to the part where you claim it doesn't have a "real problem".

Quote:
I have claimed that there will be changes necessarily made to the program as time goes on. But privatization does nothing to address those problems, exposes people to risk, and acutally increases the problems with SS that we see.


Whether or not privatization solves the problem has nothing at all to do with your characterization of not having a "real problem" Cyclo.

Let's stick to that till you acknowledge the problem before we talk about ways to solve it.

Quote:
The whole push to privatize SS is a sham and nothing more. There is no actual evidence that privatization will solve the underlying problem - or perhaps you have some you could present?


I've never claimed it would, and have explicitly said I don't think it will. But you are moving the goal posts.

Acknowledge the inherent "real problem" before we talk about ways to solve it.

Quote:
It's more profitable for us to discuss ways to fix it without taking that step, then to get bogged down in discussion of a hypothetical which we both know isn't going to happen.


I'm not the one bogged down in this, I'm the one telling you to stop diverting from your brain fart.

Social Security has a real, inherent problem. Admit it.

Quote:
My original post in this thread stands firm:


I wasn't talking about your original post Cyclo, I'm talking about the ones where you claim Social Security doesn't have a "real problem". Let's keep track now please.

Quote:
... if we had gone forward with privatization, some would have lost some money and some would have lost a LOT of money, in our recent problems, which look to continue into the future for some time. This is a problem, and one that was brushed off by virtually every pro-privatization advocate in this thread; but none have successfully countered that claim with evidence to the contrary. Finn attempted to do so, but was shown to be incorrect.


Cyclo, I am Robert I am discussing with you your brainfarts about how Social Security does not have a "real problem". I am not Finn and have not once tried to claim that privatization would solve the problem here.

So let's get back to your nonsense you are doing everything you can to avoid:

Does Social Security have a "real problem" inherent to its structure?

I'm not going to argue solutions with you if you won't even acknowledge the problem.
Cycloptichorn
 
  0  
Reply Thu 18 Sep, 2008 12:53 pm
@Robert Gentel,
Quote:
Does Social Security have a "real problem" inherent to its structure?


No, it does not have a problem inherent to its' structure. You cannot brow-beat people into agreeing with you without providing evidence to back up your position. IF SS had been, or even if we started RIGHT NOW, to allow the program to work in the way it was intended - that is, allowing the excess funds to add up and gain interest instead of stealing them and using them to add to the general fund - it would cover it's outlays for the known future. You seem to be arguing that the program cannot continue into infinity, so therefore it is inherently flawed. But no program is designed to work into infinity! All have to be changed over time in one fashion or another. This doesn't mean that the programs are inherently flawed. Our system of taxation will not support the government into infinity, so it's 'inherently flawed.' Our budgeting process will eventually collapse, so that must be 'inherently flawed' as well. Nonsense. Programs can have a reasonable time-frame of viability, at which point we can decide whether to tweak them or get rid of them in order to keep them going. It would seem that people are more in favor of tweaking SS then getting rid of it.

I mean, christ. When SS was invented, what was the average lifespan? 65? Now it's 77-81. The program has to pay out more then it originally did to keep the average person alive. The lifespan goes up, the age of benefit payout has to go up as well. It's the actuarial version of 'indexing for inflation.' This isn't an inherent problem with the program, it's a shifting dynamic of our human condition, and one which requires the program to change as well.

Our governmental budgeting system has far more problems then Social Security does. When we decided to put the SS trust fund into gov't bonds, the expectation that those bonds HAVE to be paid back should have been there. Apparently for many, that expectation did not exist. This is not a problem with the tool, it's a problem with the way we have decided to use the tool.

The 2017 date as a 'serious problem' for SS is a joke. It is not the date when SS has a problem. It's a date when the bills come due for the Federal Government. You are blaming the wrong people for the upcoming event.

Cycloptichorn
 

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