Bush plan to cripple SS

So if there are to be cuts in S.S. payments does that mean the money that comes out of my check will be reduced as well? Or, if there is to be no more S.S. by the time I retire am I going to get back the money I paid into the fund? Why should I be paying into a fund that isn't going to benefit me in the future? I realize that the "contributions" I'm making now are benefiting current/future retirees but at what point is the gov't going to stop taking it from my check because the program is insolvent?

No and no.



Your current contributions won't benefit anyone in the future. They are paid out within short order of the time they are collected.

Why should you be paying in if you won't collect? So that the people currently collecting can continue to do so. There isn't much for other reasons.

I agree. I didn't mean to imply that current retirees benefits be lost, no way. But if there is to be no more S.S. when I retire doesn't it make sense that I should be keeping the money to provide for my retirement instead of contributing to a system that's going to be nonexistent when I retire?

Rand P you will continue to pay in because your government is holding you up at gunpoint literally. You would go to prison for the same thing.

They rob from me to care for the retirees and then rob the retirees to care for themselves and their endeavors. It would be funny if it weren't so serious.

What's with the Rand P? Something you're trying to tell me?

IMO, this is what is the major push behind SS reform by those under age 40 or so. Those who are older than 60 or so, for the most part, don't really seem to care that you won't collect as long as they can get theirs now. The idea that younger people don't forsee SS as existing when it comes time for them to collect doesn't seem to be believeable to the older generations.

Social security can be fixed with minor repairs to the system if we had a government that wanted to repair it instead of destroying one of the most successful public systems devised. But since it was a democratic government who instituted it the republicans want to destroy it. After all it was started by a communist. Franklin Roosevelt.

or maybe it's because the older people have already paid their money...with no choice in the matter I might add...and now they want back what they've already given.....doesn't seem too unreasonable...

The average SS beneficary right now gets back everything they paid in within the first 4.5 years they collect.

Beyond that, the proposals for reform don't effect what anyone currently collecting (or near retirement) would get for benefits so they'd continue to get back exactly what they'd get with the system as it sits right now. That doesn't seem unreasonable either.

The system is working.

It ain't perfect.

It definitely has to be fixed.

But anyone who thinks that what Bush is proposing is a "fix"...probably also thinks the move to invade Iraq was brilliant; that the Iraqi war is going smoothly; and that democracy and peaceful bliss is just around the corner over there.

The Bush "fix" for Social Security is DISASTER.

Commentary: "Economic Scene: A Weekly Column"
from the December 27, 2004 edition

One man's retirement math: Social Security wins

By David R. Francis | Staff writer of The Christian Science Monitor

At the heart of President Bush's plan to sell Social Security private accounts is a simple notion: You're always better off investing your retirement money than letting the government do it. By doing it yourself, you can stow some money in the stock market, and over the long run will get a better return on that investment than today's Social Security system offers.
The idea is broadly accepted. That's why the administration's plan to partially privatize the system sounds appealing to many. But that better return won't always happen.

Just ask Stanley Logue of San Diego.

For 45 years, the defense-industry analyst paid into the system until his retirement in 1994. But with all the recent hoopla over reform, Mr. Logue, a Massachusetts Institute of Technology graduate, decided to go back and check his own records. Would he have done better investing his money than the bureaucrats at the Social Security Administration?

He recorded all the payroll taxes he paid into the system (including the matching amount from his employer), tracked down the return the Social Security Trust Fund earned for each of the 45 years, and then compared the result with what he would have gotten had he been able to invest the same amount of payroll tax money over the same period in the Dow Jones Industrial Average (including dividends).

To his surprise, the Social Security investment won out: $261,372 versus $255,499, a difference of $5,873.

It's an astonishing finding. The DJIA represents blue-chip stocks. Social Security invests in US Treasury bonds. Over long periods of time, stocks have consistently outperformed bonds. So, you would think that Logue's theoretical stock investments from 1950 to 1994 would have surely outpaced the return on government bonds.

The fact that they didn't illustrates one of the hard truths about stock investing: Timing matters.

Although Logue started pouring money into Social Security in the 1950s and early 1960s, some of the best years for stocks, he hadn't accumulated a lot of money.

So the gains of his theoretical stock portfolio would have been limited.

By the time he had substantial sums, the market swooned for long periods. From 1965 to 1982, for instance, the DJIA made no progress. Logue retired before the real run-up in stocks in the latter half of the late 1990s.

So the real lesson from his analysis is that any pension plan based on stock investments carries extra risks.

Advocates of privatization point out - correctly - that Logue's analysis compares theoretical stock returns with what the Social Security Trust Fund earned - not what he himself would get from the system.

From that perspective, the investment approach looks better, they argue. Over the long run, a typical worker can expect to earn 4.6 percent a year (after administrative costs) on a diversified portfolio of stocks and bonds and only about 2 percent or less from Social Security, according to federal estimates reported by Michael Tanner of the Cato Institute, long a proponent of privatization. Hypothetically, someone earning $30,000 annually would at the end of a 40-year career receive nearly twice as much under the investment approach ($344,000) than with Social Security ($185,000).

Who's right: Logue or Mr. Tanner?

The debate hinges considerably on what people want their retirement system to be. Social Security has always been an insurance program. It was never intended as an investment scheme. So everyone - retirees, the disabled, widows, and orphans - receive guaranteed monthly income. The "return" on their Social Security contributions depends largely on how long they live. Those in their 90s have enjoyed superb returns. Those who don't live as long benefit less.

Private accounts, by contrast, involve far more variability, both sides agree. Individuals who enter and exit the market at the right times would undoubtedly do better under privatization.

But under Britain's privatized pension system, so many retirees are doing so poorly at this moment that a commission warned this fall that widespread poverty among the elderly may be returning, which could require massive new government spending.

Presumably, President Bush's plan would offer the choice to meld insurance and private investment: much less guaranteed income in return for the opportunity - and risk - of earning more in the markets.

"Because financial asset returns are volatile, benefits under a personal account system would fluctuate," notes Bill Dudley, an economist at Goldman, Sachs & Co., a New York investment bank. "On a risk-adjusted basis, the privatized account ... becomes much less compelling."

There are other problems with private accounts. Administration expenses of the present Social Security system are minuscule compared with the size of the benefits provided. The Bush administration so far has provided no details on its private accounts plan. But if these are handled by Wall Street, the fees could be sizable, dissipating some of the return from investing in stocks. Logue takes no account of such expenses in his analysis.

Further, administrative costs and difficulties for private business could be large as companies, big and small, try to deduct the right amount from a payroll and put it into a private account in a timely fashion.

A study by the Congressional Research Service (CRS) notes some complexities: 650,000 employers go out of business or start new businesses each year. More than 4 million employers have 10 or fewer employees, often having record-keeping problems and errors. About 12 million to 15 million individuals are self-employed and presumably would have to send money directly to a private account.

So the complexities of change are substantial. If the extra return from privatization is not very advantageous, "why even consider changes that all agree would be very disruptive?" asks Logue.

The Iceberg Cometh

By PAUL KRUGMAN

Published: January 11, 2005
Last week someone leaked a memo written by Peter Wehner, an aide to Karl Rove, about how to sell Social Security privatization. The public, says Mr. Wehner, must be convinced that "the current system is heading for an iceberg."

It's the standard Bush administration tactic: invent a fake crisis to bully people into doing what you want. "For the first time in six decades," the memo says, "the Social Security battle is one we can win." One thing I haven't seen pointed out, however, is the extent to which the White House expects the public and the media to believe two contradictory things.

The administration expects us to believe that drastic change is needed, and needed right away, because of the looming cost of paying for the baby boomers' retirement.

The administration expects us not to notice, however, that the supposed solution would do nothing to reduce that cost. Even with the most favorable assumptions, the benefits of privatization wouldn't kick in until most of the baby boomers were long gone. For the next 45 years, privatization would cost much more money than it saved.

Advocates of privatization almost always pretend that all we have to do is borrow a bit of money up front, and then the system will become self-sustaining. The Wehner memo talks of borrowing $1 trillion to $2 trillion "to cover transition costs." Similar numbers have been widely reported in the news media.

But that's just the borrowing over the next decade. Privatization would cost an additional $3 trillion in its second decade, $5 trillion in the decade after that and another $5 trillion in the decade after that. By the time privatization started to save money, if it ever did, the federal government would have run up around $15 trillion in extra debt.

These numbers are based on a Congressional Budget Office analysis of Plan 2, which was devised by a special presidential commission in 2001 and is widely expected to be the basis for President Bush's plan.

Under Plan 2, payroll taxes would be diverted into private accounts while future benefits would be cut. In the short run, this would worsen the budget deficit. In the long run, if all went well, cutting benefit payments would reduce the deficit.

All wouldn't go well; I'll explain why in another column. But suppose that everything went according to plan. Even in that unlikely case, privatization wouldn't even begin to reduce the budget deficit until 2050. This is supposed to be the answer to an imminent crisis?

While we waited 45 years for something good to happen, there would be a real risk of a crisis - not in Social Security, but in the budget as a whole. And privatization would increase that risk.

We already have a large budget deficit, the result of President Bush's insistence on cutting taxes while waging a war. And it will get worse: a rise in spending on entitlements - mainly because of Medicare, but with a smaller contribution from Medicaid and, in a minor supporting role, Social Security - looks set to sharply increase the deficit after 2010.

Add borrowing for privatization to the mix, and the budget deficit might well exceed 8 percent of G.D.P. at some time during the next decade. That's a deficit that would make Carlos Menem's Argentina look like a model of responsibility. It would be sure to cause a collapse of investor confidence, sending the dollar through the floor, interest rates through the roof and the economy into a tailspin.

And when investors started fleeing because they believed that America had turned into a banana republic, they wouldn't be reassured by claims that someday, in the distant future, privatization would do great things for the budget. Just ask the Argentines: their version of Social Security privatization was also supposed to save money in the long run, but all it did was move forward the date of their crisis.

A responsible administration would reverse course on tax cuts and the botched 2003 Medicare drug bill, both of which pose much greater threats to the government's solvency than the modest financial shortfall of the Social Security system. But Mr. Bush has declared his tax cuts inviolable, and he says that his drug bill will actually save money. (The Medicare trustees say it will cost $8 trillion.)

There's an iceberg in front of us, all right. And Mr. Bush wants us to steam right into it, full speed ahead.

There have been commentaries written that Bush is creating a sense of crisis about SSI in the same way that he built momentum for the Iraq War.

If you like the game plan for Iraq, you'll love the Bush plan for SSI...

Fear and a gullible public is this administrations weapons of choice.

I thought all Texas Republicans were bought and paid for Bush supporters, which they generally are - Today I got a petition in the mail from Sen. Kay Bailey Hutchison, meant to help stop the Bush SS scheme. I signed and returned it. Kay went up a few notches in my estimation after that.

This is at the LA Times today:



Boolsheet.

This is from the Social Security Administration's own FAQ page:



The full Trustees Report makes it clear that even these numbers are based on fairly dour economic projections. So if our Utah farmer Josh lives to be 100, he'll still be getting payments. In the very worst case, still substantial ones.

And this isn't some half-unknown situation where maybe David Kay has to go in and prowl around for a year before we know that boolsheet is indeed, boolsheet.

This is obvious boolsheet right now. Fresh, steaming, and straight from the president's mouth. Ready for consumption by a gullible public (thanks, au1929). Served up with a smiling face by our corporate media.

And it's being used to try to turn the most successful social program in the history of the United States into a handout to Wall Street.

Of one thing I am certain. If Bush and his corporate friends manage to steamroll this thru congress, it will be time for me to increase my holdings in the stock market. That is where the money will be.

Thank you, PDiddie.

That was a terrific post.

I'm gonna guess that enough Republican Senators will see through this horrible, horrible idea...and squash it.

The House probably will pass it...but even there enough sanity may prevail to prevent serious damage.