Re SS: Where is this guy wrong?

[tim_duncan2000]

Amid the applause, there were a few boos for President George W. Bush during his State of the Union address. Most came from Democrats when the president spoke about reforming Social Security.

But as TV cameras panned the room, even as most Democrats could be seen sitting on their hands, a few did clap as President Bush set out his principles for reforming the system, including offering the creation of voluntary personal accounts for younger workers. And there should have been: After all, it was a Democrat's idea.

No, not, the Democrats Bush mentioned while talking about Social Security -- John Breaux, Tim Penny or the late Sen. Daniel Patrick Moynihan -- but one he quoted in conclusion.

Franklin Roosevelt, the same man whom Bush quoted as saying that "each age is a dream that is dying, or one coming to birth"; the same man who gave birth to Social Security in the midst of recession; also said, in his Message to Congress on Social Security on Jan. 17, 1935:

"In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities that in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."

Those are the same principles Bush is upholding today, and those Democrats who booed Bush derided them with the same exhalation of breath.

As the new Washington Examiner editorialized in its first edition:

"Consider this: If we let a worker earning a $24,000 invest all his and his employer's Social Security taxes in a modestly performing basket of stocks and bonds, he could retire with a nest egg worth more than $875,000. Social Security, by contrast, promises him benefits worth only $292,230. In effect, Social Security will rob this worker, and millions like him, of half a million dollars."

Another Democrat had figured that out long ago. Sam Beard, who was a staff assistant to Robert F. Kennedy in the 1960s and founded the National Development Council to help low-income communities, authored articles about turning poor workers into "Social Security Millionaires" by allowing them to gradually put their Social Security contributions into private accounts.

http://www.techcentralstation.com/020305H.html

This makes sense to me. What am I missing?

 

[Huckleburry]

While privatizing social security is a nice idea it has yet to work in country that has tried it. Chile (whose system we use as an example) is still paying billions of dollars to their elderly because of mismanged funds. Social Security is actually pretty efficient if it is allowed to work. The problem is that it gets raided to pay for other things.
Cheers
Huck

 

[dilloduck]

Oh crap--we get to hear the old Gore mantra of "lock box "

 

[ScreamingEagle]

Oh crap--we get to hear the old Gore mantra of "lock box "

Here is the "lock box" or "intergenerational trust" argument which does bring up the good question of how exactly are we going to pay for the huge baby boomer group which may not be helped a whole lot by the new privatization? I don't think the boomer problem is a reason NOT to start the privatization - SS is going to be in the red only 13 years from now (2018) anyway. It's just too bad that the privatization didn't get started about 30 years ago for this big group which will probably have a negative effect on our national economy when it hits the fan.

Raiders Of The Lock Box
November 17, 2004

Robert Reich argues that the basic concept of Social Security is one based on trust—which is why the spectre of future generations placing money into private accounts breaks that trust and raises the question of where the money will come from for the next retiring generation. Bush's guarantees that he won't change Social Security benefits for current retirees is highly unlikely under a privatization plan. Refer to the Institute for America's Future campaign to protect Social Security for more information on Social Security privatization and ways to fight it.

Robert B. Reich is the Maurice B. Hexter Professor of Social and Economic Policy at Brandeis University, and was the secretary of labor under former President Bill Clinton.

There have been, and will be, equally dumb ideas emanating from the Bush administration, but privatizing Social Security surely will be in the qualifying round for the first prize.

Start with the irrefutable fact that Social Security is a pay-as-you-go system. The payroll taxes of today’s workers go to today’s retirees. And when today’s workers retire, they’ll be supported by the next generation’s payments into Social Security. In other words, Social Security is a compact between generations, based on trust. I pay into Social Security to support my parent’s generation in their retirement because I trust that my children’s generation will pay into Social Security to support my generation in our retirement.

If their Social Security payments are diverted into their own private accounts, their money won’t be there for my generation’s retirement. The compact will be broken.

It’s theoretically possible for the federal government to bail out my generation by drawing on general tax revenues. But that won’t happen because there won’t be any spare revenues. The federal budget deficit, already over $400 billion this year, is projected to be more than $5 trillion over the next ten years.

To make matters worse, my generation of boomers, born between 1946 and 1964, is huge. It’s so big, in fact, that our payments into Social Security have been more than enough to pay the retirements of my parents’ generation. But instead of investing the surplus, the federal government has been using the extra funds to pay for the war in Iraq and everything else the government’s doing. Remember the Social Security lock box? Well, boomers, I hate to break it to you this way, but the lock box has been raided. This means we’re doubly dependent on the next generation’s Social Security payments. If those payments are diverted into private accounts, 76 million boomers are in deep doo doo.

Quite apart from it breaking the intergenerational compact and being unaffordable to boot, privatizing Social Security would expose retirees to huge risks. Anyone who wants to put away some extra savings—over and above your Social Security payments—into a private investment account can do so right now. The whole point of Social Security is to spread the risk, so you don’t end up with no retirement savings if you’ve made bad investments, or if you’ve been caught in the down-draft of a bad economy. Anyone ever hear of a bear market? That’s why it’s called Social "Security." Duh.

On all grounds, a terrible idea—which is no guarantee it won’t become law.

http://www.tompaine.com/articles/raiders_of_the_lock_box.php

 

[sagegirl]

While privatizing social security is a nice idea it has yet to work in country that has tried it. Chile (whose system we use as an example) is still paying billions of dollars to their elderly because of mismanged funds. Social Security is actually pretty efficient if it is allowed to work. The problem is that it gets raided to pay for other things.
Cheers
Huck

Huck, I agree completely, the fact that SS has been raided to pay for alot of other programs (just like the airport tax that Reagan locked up to offset spending , if you fly, you pay this tax and the funds are being lent out) SS could be self sustaining and serve its purpose.
The congress plays a deceptive smoke and mirrors game of making some program look less costly in the first place by taxing in some other area to get the funds to "loan" to sustain it....alot of this is pork barrel stuff, government contracts, esp military, they know if they spew enough crap that it gets so thick there is no way to do a legitmate accounting. The new budget stinks...it is almost 500 Billion dollars over expected revenues, it is a increase in spending of over 8 per cent, and doesnt include the cost of war in iraq....absolutely no credibility..... it does include cuts in medicad, amtrak, some education grants, farming subsidies, and IT DOES NOT INCLUDE ANY REVENUES PUT TOWARD THE COST OF PRIVATIZING SOCIAL SECURITY. and he is still going to cut the deficit in half????????? The contradictions are all over the place. You really cant have it all. I think Bush would do well to come clean on the fiscal thing.