Bush plan to cripple SS

Taken from startribune.com

If they can find a way to fund outstanding obligations and I'm given the choice, I will chose to invest in my own private account.

Don't get me wrong here, because I am against the entire premise of SSI, because it is a poor persons tax, but eliminating SSI would totally skyrocket our ever expanding debt even more and take money away from MY generation.

Look at it this way, the MAXIMUM one pays into SSI stops when payroll hits $88K. That means almost 10% of the population pays nothing after making $88K. The government has constantly raided the kitty for SSI to fund other projects, this makes it not a savings plan, but a tax. A tax on people making less then 88K. Because of this, I am completely against it.

Now, we need to fund the elderly during the transition, so why don't we increase the cap from say 88K to around 500K. This would not only cover the $1trillion gap created by privitizing, but also keep coverages at their current level without decreasing coverage in the future.

This new system also fails to cover people in need of government assistance who do not pay into the system. Mentally retarted, disabled and others.

Hard to imagine I would agree with a Joe Republican on this issue, but I do. Especially about the SS tax cap on earnings, which I believe is actually $95,000. Anything over that is a free ride.

The SS tax is the most regressive on the books. It would be like capping a sales tax on any item costing more than $20,000. Buy a cheap car or a Mercedes and pay the same tax. What's the logic there, I wonder?

If they can find a way to stop WASTING BENEFITS on the "unwilling", possible there would be no issue here.

SS was never EVER designed to be the ONLY retirement program citizens should depend on.

I would NEVER support the "private account" concept. I do not TRUST the govt as a fiduciary of "my personal account".

If they want to allow personal account, then have the Employer and Employee allocation be given directly to the Employee to hold and invest in their OWN account.

woiyo,



I was under the impression that was how it would going to work in the first place.

So they are going to take some of your money and rather than just keep it for you to use later like the current system they are going to invest it for you? How is that helping people who are against the government having their money in the first place? I can see why you would be against it.

Gosh, what would happen if the market crashed?

Maybe the answer is to just do away with retirement tax in the first place and just keep ssi for people who are unable to work.

I think on the whole retirement money is good for people who otherwise are not good at saving money for their old age or who are not good at knowing what is a good stock and what is a bad stock. But maybe there should be a private business set up by private people just for those issues, even for poor people or those who do not make truck loads of money. Maybe that private business could be supported by the government, but not run by the government. That should make both sides happy, shouldn't it?

Wo wo wo! I find myself in agreement with woiyo! The way I see it, social security is a tax, and a minimal one at that. If you want to put money into a private account, you don't need the federal government to help you do that.

True. There are many ways the gov't can encourage private investing for retirement. The IRA is an example of that; it could be expanded. One way would be to make contributions to Roth IRAs tax deductible for everyone and untaxed when withdrawn.

There is no reason to mess with SSI the way Bush is proposing. Modest tweaks would save the system for many decades to come.

Social securtiy is probably the most successful governmental safety net enterprise ever created...and has withstood significant tampering for almost 70 years.

It is calamitous that this group of know-nothings intends to effectively eviscerate it.

Well...as I have said in several threads...we are getting what we asked for...in fact, begged for.

George Bush is almost devoid of ideas...and the few he has are about as detrimental to the Republic an any that have ever been offered.

We are getting what we deserve!

'George Bush is almost devoid of ideas...and the few he has are about as detrimental to the Republic an any that have ever been offered.'

Why is the idea of allowing an individual to chose if they'd like to take part of their SS withholdings and invest it in a private account considered 'detrimental to the Republic?'

Well you can refer to what George Bush is doing as "...allowing an individual to chose if they'd like to take part of their SS withholdings and invest it in a private account'...if you choose, neue...

...but I prefer to call it f*****g with the most successful safety net program ever divised in this country.

In fact...I prefer to call it "a bunch of incompetent, simplistic thinking, jerkhoffs unnecessarily and inappropriately f*****g with the most successul safety net program ever divised in this country."

And as you can see...

...if one conceives of it as "a bunch of incompetent, simplistic thinking, jerkhoffs unnecessarily and inappropriately f*****g with the most successul safety net program ever divised in this country"...

...the case for it being detrimental to the Republic is made prima facie.

Others disagree with you and feel we need to make some modifications to SS, your perceptions notwithstanding.

But to get back to my original question.....why not allow me the choice of where I'd like to invest my withholdings? We know you prefer the system as it's set up now. Great. Wonderful. Outstanding. Check the "Leave mine 'as is'" box.

Why shouldn't I have the choice to do something different?

Because SSI is not an investment account, it's a tax. Not that putting it in the stock market could be much worse than leaving it where Congress can get at it, but the fact is that the people who advocate private accounts really don't want the social security system at all. I'm not going to make the effort to divert, what, $100 a year to a private account where they can charge me fees, where the government controls it, and where the money still isn't really mine.

For me, though I like the idea of encouraging savings through other vehicles than SSI, this amounts to bankrupting the SSI system and diverting the contributions not to the individuals who paid in, but to corporations in the form of investment. There was a time when I believed that corporations would be more responsible than the government, but Enron, World Com, and others changed all that. I prefer to kiss my ssi tax money goodbye, never expect to hear from it again, and make my own arrangements for retirement.

'I prefer to kiss my ssi tax money goodbye, never expect to hear from it again, and make my own arrangements for retirement.'

Sadly, me too. I was hoping there would be a way to salvage at least some of that money that comes out of my check every week. If I have the choice of it dying before I retire and somebody trying to do SOMETHING to help it....I choose the later.

I think there are probably other ways to save it. How about passing a law that Congress cannot borrow from the trust fund? We seem to be able to find money for just about everything else we want to do, we ought to be able to properly fund social security.

I'd love that Duck. That should have been the way it was done to begin with...although I know SS was never intended to be the retirement vehicle it turned in to...

Even still, I'd love to invest that money, that over time becomes significant, in something that will bring a little better return.

Not sure why you think I am against making "modifications to SS"...except that you seem intent on taking as simplistic an approach to this issue as possible.

Some modifications are needed.

I am not againt them...but I am against doing the equivalent of throwing the baby out with the bath water.



For the same reasons I prefer not to allow people to choose what uses the government can and cannot make with their tax money.

Because if we allow that...the system falls apart.

I will follow up this post with an editorial from today's New York Times that does an excellent job of outlining the reasons why this idea...is harebrained.

From today's New York Times

January 3, 2005
EDITORIAL
The Social Security Fear Factor


If you've lent even one ear to the administration's recent comments on Social Security, you have no doubt heard President Bush and his aides asserting that a $10 trillion shortfall threatens the retirement system - and the economy itself. That $10 trillion hole is the basis of the president's claim last month that "the [Social Security] crisis is now." It's also the basis of the administration's claim that the cost of doing nothing to reform the system would be far greater than the cost of acting now.

Well, the $10 trillion figure is the closest you can get to pulling a number out of the air. Make that the ether. Starting last year, as the groundwork was being set for the emerging debate, the Social Security trustees took the liberty of projecting the system's solvency over infinity, rather than sticking to the traditional 75-year time horizon. That world-without-end assumption generates the scary $10 trillion estimate, and with it, Mr. Bush's putative rationale for dismantling Social Security in favor of a system centered on private savings accounts. The American Academy of Actuaries, the profession's premier trade association, objected to the change. In a letter to the trustees, the actuaries wrote that infinite projections provide "little if any useful information about the program's long-range finances and indeed are likely to mislead any [nonexpert] into believing that the program is in far worse financial condition than is actually indicated."

As it often does with dissenting professional opinion, the administration is ignoring the actuaries. But that doesn't alter the facts or common sense. If the $10 trillion figure is essentially bogus, so is the claim that Social Security is in crisis. The assertion that doing nothing would be costlier than enacting a privatization plan also turns out to be wrong, by the estimates of Congress's own budget agency.

Over a 75-year time frame, Social Security's shortfall is estimated by the Congressional Budget Office at $2 trillion and by the Social Security trustees at $3.7 trillion, a manageable sliver of the economy in each case. If the shortfall is on the low side, Social Security will be in the black until 2052, when it will be able to pay out 80 percent of the promised benefits. If it is on the high side, the system will pay full benefits until 2042, when it will cover 70 percent.

Contrary to Mr. Bush's frequent assertion that Social Security is constantly imperiled by political meddling, it has in fact been preserved and improved by political intervention throughout its 70-year history, most significantly in 1983. The system could - and should - be strengthened again by a modest package of benefit cuts and tax increases phased in over decades.

Instead, the administration wants workers to divert some of the payroll taxes that currently pay for Social Security into private investment accounts, in exchange for a much-reduced government benefit. To replace the taxes it would otherwise have collected - money it needs to pay benefits to current and near retirees - the government would borrow an estimated $2 trillion over the next 10 years or so and even more thereafter.

In effect, the administration's plan would get rid of the financial burden of Social Security by getting rid of Social Security. The plan shifts the financial risk of growing old onto each individual and off of the government - where it is dispersed among a very large population, as with any sensible insurance policy. In a privatized system, you may do fine, but your fellow retirees may not, or vice versa.

In any event, doing well under privatization is relative. Congress's budget agency analyzed the privatized plan that is widely regarded as the template for future legislation and found that total retirement benefits - including payouts from the private account plus the government subsidy - would be less than under the present system. The amount available from the privatized system was less even after midcentury, when the current system is projected to come up short.

It should come as no shock that individual investors might not do as well as hoped. The stock market's historical returns - some 7 percent a year - are predicated on a hypothetical investor who bought an array of stocks in the past, reinvested all dividends, never cashed in and never paid commissions or fees. That's not how investing works in the real world. An especially grave danger is that investors would withdraw their funds before retirement, a pattern that is pronounced in 401(k) plans. It would be politically very difficult to refuse people access to accounts that were sold to them on the premise that they - not the government - would own them.

The Congressional Budget Office analysis also likely understates the costs to individuals of privatizing Social Security. The borrowing that would be needed to establish private accounts could lead to higher interest rates, a weaker dollar and slower economic growth. It is also likely that future tax hikes would be required to cover the interest payments on the additional national debt.

The only hands-down winner would be Wall Street, as fees to manage millions of accounts poured in. (Those fees, not incidentally, would come out of your return.) Current stockholders would also stand to benefit, as increased demand pushed up stock prices, giving existing owners a gain at the expense of newcomers who would be forced to buy high. The affluent, who could afford professional investing advice, would also be advantaged, even though everyone would be taking the same risks.

The zeal over privatization is fueled by the belief of Mr. Bush and his supporters that free-market fixes are appropriate for virtually every problem. That faith is misguided. For a society to be functional and humane, it's not enough that some people have a chance to be rich in old age. Rather, all old people must have the dignity of financial security, and that requires universal coverage.

Social Security is the core tier of old-age support, replacing about a third of preretirement income for a typical retiree and providing inflation-proof income for life - a feature not available in private accounts. Its purpose is not to supplant other retirement investing, but to provide a crucial safety net. Anyone who wants to maintain his or her standard of living into old age must also amass substantial personal savings and investments. To introduce the same risk into the core tier of benefits that already exists for the bulk of one's retirement savings would be as unfair as it is unwise.

If Mr. Bush were not so serious about privatizing Social Security, his urgency would be silly. Compared with other challenges looming for the government, it's a non-problem. The shortfall in the Medicare hospital insurance fund is two to three times the size of the Social Security shortfall, and that fund is projected to be insolvent some two to three decades before Social Security. Taken together, the costs of the Medicare prescription benefit and of making the tax cuts permanent - Mr. Bush's two main domestic initiatives - are 5 to 8.5 times larger. And his hair is on fire over Social Security?

One of the most distressing aspects of the debate over Social Security privatization is that it distracts from more pressing issues and obscures better solutions to the problem of secure retirement. A future editorial will discuss new strategies to increase private savings outside of Social Security that draw on market theory and behavioral economics and are more promising than rehashing the same tired formula of tax-sheltered savings accounts. In the meantime, however, Mr. Bush and his supporters will be pursuing their idée fixe of privatization. It's bad policy. And it's bad politics, too, driven by reflex, ideology and special interests, and sustained by conformism that masquerades as party discipline. Lawmakers who still value their right and obligation to think for themselves - and to act in the best interest of their constituents - must champion solutions that will build on Social Security, not undermine it.

That's a good point, Frank. I would love it if I could set aside my tax dollars that would have gone to the war and instead donated to my favorite peace charity, but I'm not allowed to do that.