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If you and George W. Bush had gotten your mutual wish prior to the virtual collapse of the Stock Market in '07/'08, which was brought about largely by Bush's profligate spending, tax cutting and the devious financial maneuverings of his "base," that privatized form of Social Security would have been totally wiped out.Personally, I would like to see SS be turned into a real pension fund that invests in stocks, bonds, real estate, etc[...]
The Social Security program is one of the best things to happen for working class Americans. It has been performing flawlessly for over seventy years and with some sensible adjustments in its administrative mechanism will continue to function indefinitely.
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On the other hand, telling someone because you planned well and don't need it, you have sacrificed all of your ssi fica for 45 years, well, thats bullshit too.
[...]
You need to understand that Social Security is insurance, not an investment portfolio.
Consider car insurance. We are forced by law to buy it but most of us never need it. I don't know about you but I've been paying for car insurance for over fifty-five years and I've never filed a claim. Should I feel cheated -- or fortunate?
Consider fire insurance. . .
So a means test for collecting Social Security payments is a sensible, reasonable proposition. If there were such a policy in place I probably would receive a hundred or two fewer dollars each month from Social Security but I wouldn't miss it. And if I were as well off as a couple of people I know I wouldn't be receiving a dime from Social Security but would still be living in absolute luxury.
Of course that scenario has a bit of a socialist ring to it, but the overall effect is no one suffers but a lot of people are saved from suffering the agonies of poverty. The bottom line being it makes for a better America.
The best response I have for this George W. Bush proposal is a line from a vulgar old joke, which goes. One of the three biggest lies ever told: "I just want to put the head in, baby."If you and George W. Bush had gotten your mutual wish prior to the virtual collapse of the Stock Market in '07/'08, which was brought about largely by Bush's profligate spending, tax cutting and the devious financial maneuverings of his "base," that privatized form of Social Security would have been totally wiped out.Personally, I would like to see SS be turned into a real pension fund that invests in stocks, bonds, real estate, etc[...]
The Social Security program is one of the best things to happen for working class Americans. It has been performing flawlessly for over seventy years and with some sensible adjustments in its administrative mechanism will continue to function indefinitely.
That is total bullshit. First, Bush proposed that 10% of your SS be invested. That left 90% going the present SS.
Yes. I have heard of dollar cost averaging. It is a method of investing which is supposed to be relatively safe. But if you know about it, and if an ignorant know-nothing like me has heard about it, it's safe to assume that dozens of high-power Wall Street investors who are no longer with us, Lehman Brothers for one, knew about it, too. What happened to them?Second, the loss when the market declined would have been more than made up as it recovers. Have you ever heard of 'dollar cost averaging'?
Is that the actual situation today? Or is that a Glenn Beck speculation?When you have 15 workers contributing to SS for every recipient, SS works fine. With only 3 contributing and the boomers retiring, it will take a helluva lot more than 'adjustments.'
One's total assets and income at the time of retirement.[...]
On the other hand, telling someone because you planned well and don't need it, you have sacrificed all of your ssi fica for 45 years, well, thats bullshit too.
[...]
You need to understand that Social Security is insurance, not an investment portfolio.
Consider car insurance. We are forced by law to buy it but most of us never need it. I don't know about you but I've been paying for car insurance for over fifty-five years and I've never filed a claim. Should I feel cheated -- or fortunate?
Consider fire insurance. . .
So a means test for collecting Social Security payments is a sensible, reasonable proposition. If there were such a policy in place I probably would receive a hundred or two fewer dollars each month from Social Security but I wouldn't miss it. And if I were as well off as a couple of people I know I wouldn't be receiving a dime from Social Security but would still be living in absolute luxury.
Of course that scenario has a bit of a socialist ring to it, but the overall effect is no one suffers but a lot of people are saved from suffering the agonies of poverty. The bottom line being it makes for a better America.
How would the means test be determined? Net worth or income or both?
Auto and fire insurance already operate on what might be called a reverse means test, i.e., when you file a claim you are paid on the basis of actual damage and how much is needed to replace things.If we means test FICA, since it is an insurance policy, why don't we means test auto and fire insurance. The rich can pay the premiums, but will be denied the claim, since they can afford it, and the premiums will go down for the rest of us.
Perhaps we can means test life insurance payouts. If the beneficiary of a policy is 'rich' the mere fact that the premiums were paid in good faith should not matter.
Let me know if these ideas fit your agenda.
Social Security has been operating flawlessly for over seventy years, which is an eminent example of bureaucratic competence, but here you come with a Glenn Beck Special doom scenario.Social Security should be privatized because it is not sustainable at the federal level. It would last a lot longer if it was restricted to its original purpose of providing a small supplemental pension to the elderly and if it was not spent even before it hits the treasury on whatever the Congress chooses on any given day. But as many members have competently pointed out, the federal government does not manage the fund competently and should not manipulate the stock market with it.
It was a bad idea with good intentions and resulted in unintended negative consequences as so many ideas do when the government is involvd.
Far better to turn the concept of social security over to the individual states and the citizens of the United States.
If you and George W. Bush had gotten your mutual wish prior to the virtual collapse of the Stock Market in '07/'08, which was brought about largely by Bush's profligate spending, tax cutting and the devious financial maneuverings of his "base," that privatized form of Social Security would have been totally wiped out.Personally, I would like to see SS be turned into a real pension fund that invests in stocks, bonds, real estate, etc[...]
The Social Security program is one of the best things to happen for working class Americans. It has been performing flawlessly for over seventy years and with some sensible adjustments in its administrative mechanism will continue to function indefinitely.
You assume that it would be done honestly.
I don't carry that assumption.
Only one body of people more corrupt and self serving than a government - a body of people whose only incentive is to make money at any cost.
The average American was ripped off enough with 401k's...the great windfall to the stock market of the 1980's - whoohoo - money literally falling from the sky - and even better no one is paying attention to all this money!
Same would be true of SS
Every single state pension fund invests in stocks. Many national pension funds such as Canada and Norway invest in stocks. SS is not run like a real pension fund. It's ridiculous that it is not. There is not a single pension fund in the entire country that I am aware of that invests 100% in government bonds, and there are thousands of such funds. Yet SS does. It's bizarre.
Unlike 401ks, SS can be run as a defined benefit plan just as it is now where you get a fixed amount when you retire. The only difference is the composition of assets.
If you were to ask me if I think changes should made be to the SS system...because my intelligence is above a duck - of course I would say yes. Beginning with it should not be a slush fund for lawmakers to spend on non-emergency whatever.
Secondly END the usage of social security to pay "disabled" people money for nothing. I guarantee you there is probably not ONE single person you know that does not know someone claiming disability that is not disabled at all.
Disability should have to be proven every year, if not twice a year.
Third, social security funds should not be used to pay adoptive parents a decade of public money unless they NEED it.
I would do all of these things before I would entertain the thought of trusting some giant bureaucracy to invest $billions of dollars in a stockmarket that no longer reflects reality.
If you and George W. Bush had gotten your mutual wish prior to the virtual collapse of the Stock Market in '07/'08, which was brought about largely by Bush's profligate spending, tax cutting and the devious financial maneuverings of his "base," that privatized form of Social Security would have been totally wiped out.Personally, I would like to see SS be turned into a real pension fund that invests in stocks, bonds, real estate, etc[...]
The Social Security program is one of the best things to happen for working class Americans. It has been performing flawlessly for over seventy years and with some sensible adjustments in its administrative mechanism will continue to function indefinitely.
The collapse of the stock market was not because of Bush nor his spending.
Despite the collapse, stocks today are less than 15% from their all-time highs. That being said, your criticism misses the point. A pension fund such as SS is designed to exist over very long periods of time, not a few years. Over very long periods of time, the stock market is a much better generator of returns on capital than the bond market. Government bonds have earned about 5% a year for a century. Stocks have earned on average 10%, which includes several devastating crashes.
$100 compounded at 5% in 100 years will equal $13,149. $100 compounded at 10% over a century is worth $1,378,060, nearly 100x the amount invested at 5%.
Generally, with defined benefit plans - which is what SS is - if you die "too early" you will not receive all the benefits of what you put in. But if you live beyond your expected life span, you get more. That's because you receive a fixed annuity for the rest of your life when you retire (plus whatever other survivor benefits). However, unlike a defined contribution plan, where you control your own investments like a 401k, if you live "too long" and you run out of money, then you are in trouble.
FTR, participants in defined benefit plans generally do better than those in defined contribution plans. This is because defined benefit plans are run by investment professionals whereas defined contribution plans are run by individuals, most of whom know little about investing.
excellent point though.
If you and George W. Bush had gotten your mutual wish prior to the virtual collapse of the Stock Market in '07/'08, which was brought about largely by Bush's profligate spending, tax cutting and the devious financial maneuverings of his "base," that privatized form of Social Security would have been totally wiped out.
The Social Security program is one of the best things to happen for working class Americans. It has been performing flawlessly for over seventy years and with some sensible adjustments in its administrative mechanism will continue to function indefinitely.
The collapse of the stock market was not because of Bush nor his spending.
Despite the collapse, stocks today are less than 15% from their all-time highs. That being said, your criticism misses the point. A pension fund such as SS is designed to exist over very long periods of time, not a few years. Over very long periods of time, the stock market is a much better generator of returns on capital than the bond market. Government bonds have earned about 5% a year for a century. Stocks have earned on average 10%, which includes several devastating crashes.
$100 compounded at 5% in 100 years will equal $13,149. $100 compounded at 10% over a century is worth $1,378,060, nearly 100x the amount invested at 5%.
Even this is missing the point. Sure government bonds give you 5% return, and could give you 10000% return. However the money is not invested but spent, so the return in reality is 0 and all money gone. The return that you are getting is just taxed money. And someone must give that to you, so there is no real return.
Real investments generate real growth, that are not taken away from other people via taxes. Every bit of return you get via SS is just taxed money. Of course pension funds should be able to invest into governments, but not forced.
Chile's private SS system was an asset stripping operation that allowed Wall Street parasites like Citigroup to strip away 20 to 25 percent of workers' wages in fees to "manage" the money.Chile has a private SS system that appears to be the best in the world!
http://www.usmessageboard.com/3597485-post1.html
All the hoopla about Brazil being the leader of Latin America leaves out the fact that its a poor country, with a small middle class, high poverty and unemployment rates, with substantial debt and it is still very much a 3rd world country.
Chile by far is the most successful pound for pound country in Latin America. It is an emerging first world country. This country should be the model for America to follow when tackling our Social Security Crisis. And YES its a crisis. We are putting in 12% of our income and that money is drying up. The problem needs to be addressed before it sucks in the entire US economy. So what is the answer? Follow Chile, as 31 other countries have done. They have privatize the social security system and its created 10 fold greater returns and evaporated the Chilean debt crisis, which was similar to our crisis. Not to mention it created countless jobs.
Insanity is doing the same thing and expecting a different result. Keeping with the current social security system is the definition of insanity. Everyone sees the coming storm, but won't do anything to prevent it!
Private Social Security System Turns 30 - Investors.com
May 1 marks the 30 years since Chile became the first nation to privatize its social security system. By turning workers into investors, the move solved an entitlement crisis much like the one America faces today.
"I like symbols, so I chose May Day as the birth date of Chile's 'ownership society' that allowed every worker to become a small capitalist," wrote Jose Pinera, former secretary of labor and social security and the architect of this pension revolution. He is now a senior fellow at the Cato Institute in Washington, D.C.
What he designed has succeeded beyond all expectations
Instead of paying a 12.4% Social Security tax as we do here, Chilean workers must pay in 10% of their wages (they can send up to 20%) to one of several conservatively managed and regulated pension funds. From the accumulated savings, they get a life annuity or make programmed withdrawals (inheriting any funds left over).
Over the last three decades these accounts have averaged annual returns of 9.23% above inflation. By contrast, U.S. Social Security pays a 1% to 2% (theoretical) return, and even less for new workers.
Long-Term Boom
History shows that pension funds prudently invested in a diversified portfolio appreciate significantly over long periods of consistent saving. In 1981, the Dow industrials stood at 900; today, despite three market crashes, it's nearly 13,000.
In 2005, New York Times reporter John Tierney worked out his own Social Security contributions on the Chilean model and found that his privatized pension would have been $53,000 a year plus a one-time payout of $223,000. The same contributions paid into Social Security would have paid him $18,000.
The system is doable here, but does require citizen education and political resolve.
First, implicit debts must be made explicit, which most politicians abhor.
Chile decided to compensate workers for money already paid into the system, through "recognition bonds." It financed this via bonds, partial diversions of existing pension taxes, sales of state assets and spending cuts.
Its road was made even easier as economic growth from a system that encourages work, saving and responsibility filled government coffers with new streams of tax revenue.
Politicians for decades have raided excess workers' contributions intended to cover baby boomer retirees. They left IOUs, giving the program the right to other government revenue. But that means the Treasury has to issue even more debt.
Those political raids can't happen in Chile private accounts are legal property, a right Pinera embedded firmly into the 1980 constitution.
As for Social Security, even the IOUs are projected to run out in 2037. If nothing is done, payouts will have to be slashed 22%.
Private accounts could generate better returns to help offset likely benefit cuts.
Thirty countries have adopted a Chilean-style system
The collapse of the stock market was not because of Bush nor his spending.
Despite the collapse, stocks today are less than 15% from their all-time highs. That being said, your criticism misses the point. A pension fund such as SS is designed to exist over very long periods of time, not a few years. Over very long periods of time, the stock market is a much better generator of returns on capital than the bond market. Government bonds have earned about 5% a year for a century. Stocks have earned on average 10%, which includes several devastating crashes.
$100 compounded at 5% in 100 years will equal $13,149. $100 compounded at 10% over a century is worth $1,378,060, nearly 100x the amount invested at 5%.
Even this is missing the point. Sure government bonds give you 5% return, and could give you 10000% return. However the money is not invested but spent, so the return in reality is 0 and all money gone. The return that you are getting is just taxed money. And someone must give that to you, so there is no real return.
Real investments generate real growth, that are not taken away from other people via taxes. Every bit of return you get via SS is just taxed money. Of course pension funds should be able to invest into governments, but not forced.
What do you think Treasury bonds are? All government bonds - ALL government bonds, whether they are Treasury bonds or non-marketable government liabilities in the SS trusts - are claims on the government. What the government does with the money is irrelevant to the bondholder. The bondholder gets his coupon payment and whatever capital gain or loss on the bond. So to the buyer of the bond, the return is absolutely real because twice a year he is receiving a check from the government for the interest payment.
And no, you cannot receive a 10,000% return on US Treasury bonds.
Even this is missing the point. Sure government bonds give you 5% return, and could give you 10000% return. However the money is not invested but spent, so the return in reality is 0 and all money gone. The return that you are getting is just taxed money. And someone must give that to you, so there is no real return.
Real investments generate real growth, that are not taken away from other people via taxes. Every bit of return you get via SS is just taxed money. Of course pension funds should be able to invest into governments, but not forced.
What do you think Treasury bonds are? All government bonds - ALL government bonds, whether they are Treasury bonds or non-marketable government liabilities in the SS trusts - are claims on the government. What the government does with the money is irrelevant to the bondholder. The bondholder gets his coupon payment and whatever capital gain or loss on the bond. So to the buyer of the bond, the return is absolutely real because twice a year he is receiving a check from the government for the interest payment.
And no, you cannot receive a 10,000% return on US Treasury bonds.
It's not irrelevant what government does, because if they spend the money, they need to tax the same money back from the economy. So your kids have to pay in taxes for your retirement. Even if they on average receive all the money you paid in to the government, they still have to pay the interest - you can't have interests without savings without taking them from someone.
Thus the scheme is based on income transfer it is NOT a savings program that could ever generate any interest.
The returns were completely hypothetical.
Let's take a other approach:
You get 5% return on this government "investment". Every year you get the 5% return.
However every year you have to pay for 5% return of the other people via taxes.
Thus you get no return - it is impossible to get real return if money is spent and not invested. Sure there can be winners and losers though - those who got in early to SS being the winners, and those who got in now being the losers.
What do you think Treasury bonds are? All government bonds - ALL government bonds, whether they are Treasury bonds or non-marketable government liabilities in the SS trusts - are claims on the government. What the government does with the money is irrelevant to the bondholder. The bondholder gets his coupon payment and whatever capital gain or loss on the bond. So to the buyer of the bond, the return is absolutely real because twice a year he is receiving a check from the government for the interest payment.
And no, you cannot receive a 10,000% return on US Treasury bonds.
It's not irrelevant what government does, because if they spend the money, they need to tax the same money back from the economy. So your kids have to pay in taxes for your retirement. Even if they on average receive all the money you paid in to the government, they still have to pay the interest - you can't have interests without savings without taking them from someone.
Thus the scheme is based on income transfer it is NOT a savings program that could ever generate any interest.
The returns were completely hypothetical.
Let's take a other approach:
You get 5% return on this government "investment". Every year you get the 5% return.
However every year you have to pay for 5% return of the other people via taxes.
Thus you get no return - it is impossible to get real return if money is spent and not invested. Sure there can be winners and losers though - those who got in early to SS being the winners, and those who got in now being the losers.
It doesn't matter. Your argument is tantamount to saying that credit card receivables or car loans aren't investments because those are loans that finance consumption. They aren't "real" investments because they are merely transfering wealth from consumers to savers.
The government is no different. Government uses funds for both consumption - social programs, defense - and investment - infrastructure, education. There is a real return on government bonds. Government bonds are a call on economic growth. The taxes that are paid to finance the bonds are derived from economic growth, and the interest rate is a function of the rate of growth.
Yeah but the real return from car loans on DOES COME, from the guys purse who takes it, so he pays for it with work. If you want a return for your SS you thus have to work - but then you lose the return on your work - so it can't happen. Car loan is also different because it is MEANT to be income transfer between two parties. One of which wants the car so bad he can pay interest on it. SS on the other hand is meant to be investment program - where everyone supposedly get return (which is impossible - due to fact that without investment there can't be real return). Though SS is NOT supposed to even be investment program like it isn't. It is income transfer program - there are no returns as whole.
Yeah but the real return from car loans on DOES COME, from the guys purse who takes it, so he pays for it with work. If you want a return for your SS you thus have to work - but then you lose the return on your work - so it can't happen. Car loan is also different because it is MEANT to be income transfer between two parties. One of which wants the car so bad he can pay interest on it. SS on the other hand is meant to be investment program - where everyone supposedly get return (which is impossible - due to fact that without investment there can't be real return). Though SS is NOT supposed to even be investment program like it isn't. It is income transfer program - there are no returns as whole.
There are returns on government bonds as a whole because the economy grows as a whole. Government bonds are a call on the growth in the economy. Savers buy government bonds which are used for consumption and investment and are paid a return for their savings. Lending for consumption in the private market is no different. A car is a depreciating asset. It is consumption. Lending to buy a car is transferring savings to consumption, just as lending to the government is transferring savings to consumption. It is not relevant that something was meant to occur. What matters is that it happened. A bank lends depositors' monies to the buyer of the car, the car is consumed and the car buyer pays back the loan to the bank plus interest from the income he earns over time. A saver lends money to the government for his retirement, the money is consumed by the government and the bonds are paid back along with interest from the taxes generated by economic activity over time. It's the exact same dynamic.
Again like your text points out, THE CAR PAYER PAYS BACK the interest. Thus if you use this same logic to SS:
You give in the loan to government (The SS). However you = the government.
Government spends the money. You or someone else receives it.
You or someone else pay in for the interest of your SS. You may also pay interest of other people SS thus in the end the interest must equal 0, but there may be winners and losers.
The younger generations have to ALSO be taxed for the principle to pay it to you.
-> you get no return.
How it could work at least much better:
You give in loan to government (the SS).
Government does not spend the money, but invests it (this could be done via building a bridge and thus making people OK with more than otherwise taxes in the future or etc.).
You or anyone else does not have to pay the interest as the investment generates it.
-> You get a real return.
How it works in sane countries:
You give a loan to government (SS) (and lol ofc "forced to give").
Government has investment fund mandated to give best returns for the investments.
You get real return.
Also government bonds are not a call in the economic growth. They are call on government paying the debt and the currency remaining strong. Strong economy does not magically make things appear in government coffers. So although it is easier to tax people after growth, you still have to tax the money via inflation or plain taxing.
Again like your text points out, THE CAR PAYER PAYS BACK the interest. Thus if you use this same logic to SS:
You give in the loan to government (The SS). However you = the government.
Government spends the money. You or someone else receives it.
You or someone else pay in for the interest of your SS. You may also pay interest of other people SS thus in the end the interest must equal 0, but there may be winners and losers.
The younger generations have to ALSO be taxed for the principle to pay it to you.
-> you get no return.
The analogy isn't correct. The government also pays back the interest. The government acts as an intermediary between the saver and the borrower. It channels savings to consumption, and pays back the interest. Now, you can argue about the multiplier affects between public and private consumer lending. That's fair. However, the dynamics still remain the same.
In your analogy, I am not the government. I am separate from the government. My spending/savings profile will usually differ from the government. Your argument is tantamount to saying that if I am a shareholder in a bank, I shouldn't borrow from the bank because I'm just borrowing from myself. Of course, its just the opposite.
How it could work at least much better:
You give in loan to government (the SS).
Government does not spend the money, but invests it (this could be done via building a bridge and thus making people OK with more than otherwise taxes in the future or etc.).
You or anyone else does not have to pay the interest as the investment generates it.
-> You get a real return.
How it works in sane countries:
You give a loan to government (SS) (and lol ofc "forced to give").
Government has investment fund mandated to give best returns for the investments.
You get real return.
Also government bonds are not a call in the economic growth. They are call on government paying the debt and the currency remaining strong. Strong economy does not magically make things appear in government coffers. So although it is easier to tax people after growth, you still have to tax the money via inflation or plain taxing.
I've argued in this thread that SS should be like a real pension fund, which is what you are saying here. I agree. However, ALL pension plans have government bonds as a component of asset allocation. The difference between a real pension fund and SS is that government bonds are 100% of SS whereas they might be 10%-20% of a real pension fund.
