Full Version: Social Security Reform
One of the main issues that Bush has said he intends to tackle during his second term is to reform social security. I found an outline of his detailed plan on the White House website. This information is dated Feb 28, 2002, so if anyone has anything more recent please share it.
This may shock many of you, but I actually agree with much of what he is trying to do here. But I really prefer if the government would step out of it altogether. If that means I lose my key to the liberal executive washrooms, then so be it
The main points of the plan are as follows (many more inside):
The main criticism of the president's plan that I have heard is that it exposes the American people to excessive risk. The New Yorker makes that case.
Questions for debate:
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
This may shock many of you, but I actually agree with much of what he is trying to do here. But I really prefer if the government would step out of it altogether. If that means I lose my key to the liberal executive washrooms, then so be it
The main points of the plan are as follows (many more inside):
QUOTE
Expanding Ownership of Retirement Assets: The tax relief legislation signed into law by the President provided almost $50 billion dollars of tax relief over the next ten years to strengthen retirement security. This landmark legislation raised the contribution limits for IRA and 401(k) accounts, allowed for additional “catch up” contributions for workers aged 50 and over, and speeded up the vesting process for employer contributions to 401(k) accounts. The President has also proposed to create, for the first time, the right for every worker to own assets within the Social Security system through personal accounts.
Ensuring Freedom of Choice: The President’s proposal would ensure that workers who have participated in 401(k) plans for three years are given the freedom to choose where to invest their retirement savings. The President has also proposed that choice be a feature of Social Security itself, allowing individuals to voluntarily invest a portion of their Social Security taxes in personal retirement accounts.
Creating a Society of Stakeholders: President Bush supports the creation of Individual Development Accounts, providing savings matches for low-income Americans to accounts that would grow tax-free. The President’s Social Security framework would also give all wage earners the opportunity to invest in financial assets, an opportunity that only half of Americans can now afford.
Ensuring Freedom of Choice: The President’s proposal would ensure that workers who have participated in 401(k) plans for three years are given the freedom to choose where to invest their retirement savings. The President has also proposed that choice be a feature of Social Security itself, allowing individuals to voluntarily invest a portion of their Social Security taxes in personal retirement accounts.
Creating a Society of Stakeholders: President Bush supports the creation of Individual Development Accounts, providing savings matches for low-income Americans to accounts that would grow tax-free. The President’s Social Security framework would also give all wage earners the opportunity to invest in financial assets, an opportunity that only half of Americans can now afford.
The main criticism of the president's plan that I have heard is that it exposes the American people to excessive risk. The New Yorker makes that case.
Questions for debate:
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
That would depend on what your definition of the work "risk" is.
Let's be real for a second. the ENTIRE social security system is at risk. Which is better? A risk that you take attempting to improve your lot in your leisure life? Or a risk you are just forced to take with it? I am almost 36 years old (Dec 31 is fast approaching, please send money ), and no one I know, my age or younger thinks that they will ever see a social security check. 
Is investment risky? It can be. But is the risk of loosing a small portion of your social security income not worth taking if the alternative is risking loosing all of it?
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
There is one BIG thing missing from the President's plan, means testing. I know this is a tough one for people to swallow. "It' my money" is what you'll hear from your elderly neighbors and family. However, that is simply untrue. Social Security is virtually a pyramid scheme. "Your" money went to support people that passed away long ago. The money you are living off of now is "my' money.
Does Senator Kerry or President Bush really need their Social Security checks after they hit 67? I doubt they would even notice it was gone. How many years could you add to the life of Social Security, as the system stands right now if you simply implemented means testing.
I think it is reasonable to ask those that have secured their future to give a little to secure the future of others that did not fair so well.
Secondly, it is missing the Repeal of the Income Taxes on Social Security benefits. The people in the most need of their social security benefit don't really pay taxes on it. The taxes withheld come back to them in their refund. Those that do pay them, do so because other sources of income moved them into a higher bracket. If means testing was instituted, those in the highest brackets of retirement income would no longer receive the benefit from Social Security. That leaves those in the middle. Regular Middle Class Americans who invested in their retirement but just did not do well enough to loose their Social Security Benefit. Removing this tax would Improve the quality of retirement life for the middle class, rather then using them to pay for the quality of retirement life of everyone else. They had to do it their entire working life, can't we cut them some slack in their silver years?
Third, we should repeal the taxes people have to pay on the money they take out of their retirement 401ks and the like after they retire. Tax deferment simply makes is so that you need more retirement dollars saved to have the income you need to retire they way you plan / hope too. The vast majority of these people were productive members of society, lets say thank you, not pay up.
Also, repealing the taxes on the money you take out of your tax deferred retirement account would be a good way to balance the implementation of means testing of social security. Those that loose social security because their retirement income was too high would benefit the most from this tax break. It might even help promote retirement savings, leading to even fewer people on the social security rolls. It might also lead to a much broader support of the concept of means testing best Social Security reform.
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
That remains to be seen. With the House and Senate stacked in his favor it will likely come down to public opinion. How much political capital will be gained or lost by holding this up in the Senate (assuming it ever makes it out of the campaign promises stages). If nothing else it should be fun to watch.
That would depend on what your definition of the work "risk" is.
Let's be real for a second. the ENTIRE social security system is at risk. Which is better? A risk that you take attempting to improve your lot in your leisure life? Or a risk you are just forced to take with it? I am almost 36 years old (Dec 31 is fast approaching, please send money ), and no one I know, my age or younger thinks that they will ever see a social security check. Is investment risky? It can be. But is the risk of loosing a small portion of your social security income not worth taking if the alternative is risking loosing all of it?2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
There is one BIG thing missing from the President's plan, means testing. I know this is a tough one for people to swallow. "It' my money" is what you'll hear from your elderly neighbors and family. However, that is simply untrue. Social Security is virtually a pyramid scheme. "Your" money went to support people that passed away long ago. The money you are living off of now is "my' money.
Does Senator Kerry or President Bush really need their Social Security checks after they hit 67? I doubt they would even notice it was gone. How many years could you add to the life of Social Security, as the system stands right now if you simply implemented means testing.
I think it is reasonable to ask those that have secured their future to give a little to secure the future of others that did not fair so well.
Secondly, it is missing the Repeal of the Income Taxes on Social Security benefits. The people in the most need of their social security benefit don't really pay taxes on it. The taxes withheld come back to them in their refund. Those that do pay them, do so because other sources of income moved them into a higher bracket. If means testing was instituted, those in the highest brackets of retirement income would no longer receive the benefit from Social Security. That leaves those in the middle. Regular Middle Class Americans who invested in their retirement but just did not do well enough to loose their Social Security Benefit. Removing this tax would Improve the quality of retirement life for the middle class, rather then using them to pay for the quality of retirement life of everyone else. They had to do it their entire working life, can't we cut them some slack in their silver years?
Third, we should repeal the taxes people have to pay on the money they take out of their retirement 401ks and the like after they retire. Tax deferment simply makes is so that you need more retirement dollars saved to have the income you need to retire they way you plan / hope too. The vast majority of these people were productive members of society, lets say thank you, not pay up.
Also, repealing the taxes on the money you take out of your tax deferred retirement account would be a good way to balance the implementation of means testing of social security. Those that loose social security because their retirement income was too high would benefit the most from this tax break. It might even help promote retirement savings, leading to even fewer people on the social security rolls. It might also lead to a much broader support of the concept of means testing best Social Security reform.
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
That remains to be seen. With the House and Senate stacked in his favor it will likely come down to public opinion. How much political capital will be gained or lost by holding this up in the Senate (assuming it ever makes it out of the campaign promises stages). If nothing else it should be fun to watch.
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
I agree in part. I don't think that we necessarily need to be protected from ourselves, but a society in which we place a great emphasis on consumption and that relies so heavily on consumer debt needs to be careful about what situation its members are in when they reach the age and condition of which people will no longer be able to work.
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
I love the idea of lowering the payroll taxes because they are what most americans pay the most of and they are regressive. It also shows the discrepancy between how things work for the very rich and how they work for the vast majority of Americans. The very rich devise tax shelters where they keep today's income and defer the taxes on that until years in the future. In that system, while the government waits for its money, the deferred taxes earn additional income for the person using the tax shelter and pay's the deflated tax dollar years in the future. Under Social Security, the average American pays taxes today for a benefit to be received years in the future while the government gets todays dollar and the "investor" gets income years down the road if they are alive to receive it. I say let's roll the whole system into the income tax and move forward from there.
I disagree with this plan which has been a staple of the president's agenda throughout his presidency in that it seems not to pay for itself. I mean it sounds great, just as the system that all Americans pay into is no longer feeding the government trough and it will become an escalating burden on the government, derail it. Under this system somehow seniors get their retirement supplement and todays young earners get a retirement account that they will own. Somehow a pay as you go system turns into a panacea where everybody gets what they want.
Social Security entails disability and support for dependent children as well. The baby boom is waiting for their returns from the system. And somehow we can afford to take the meager payments that will be going into and transfer the nature of the system into a real investment program. Let's not forget that although the war on poverty was generally deemed a failure, it moved a significant percentage of people, largely seniors, out of poverty. It did this primarily through the expansion of the Social Security system.
Show me the money. If this really works with growing deficits and tax cuts, then sign me up. But I don't see any credible studies showing that Bush's plan will hold water.
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
I disagree that we are just now hearing about this. He may have the political capital to pull off a reform of social security. Most people know that something needs to be done so anything might get passed. Also since it seems to be a miracle cure and we won't know for absolute sure that the plan will bankrupt social security until the future, it has a chance of getting through today.
I agree in part. I don't think that we necessarily need to be protected from ourselves, but a society in which we place a great emphasis on consumption and that relies so heavily on consumer debt needs to be careful about what situation its members are in when they reach the age and condition of which people will no longer be able to work.
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
I love the idea of lowering the payroll taxes because they are what most americans pay the most of and they are regressive. It also shows the discrepancy between how things work for the very rich and how they work for the vast majority of Americans. The very rich devise tax shelters where they keep today's income and defer the taxes on that until years in the future. In that system, while the government waits for its money, the deferred taxes earn additional income for the person using the tax shelter and pay's the deflated tax dollar years in the future. Under Social Security, the average American pays taxes today for a benefit to be received years in the future while the government gets todays dollar and the "investor" gets income years down the road if they are alive to receive it. I say let's roll the whole system into the income tax and move forward from there.
I disagree with this plan which has been a staple of the president's agenda throughout his presidency in that it seems not to pay for itself. I mean it sounds great, just as the system that all Americans pay into is no longer feeding the government trough and it will become an escalating burden on the government, derail it. Under this system somehow seniors get their retirement supplement and todays young earners get a retirement account that they will own. Somehow a pay as you go system turns into a panacea where everybody gets what they want.
Social Security entails disability and support for dependent children as well. The baby boom is waiting for their returns from the system. And somehow we can afford to take the meager payments that will be going into and transfer the nature of the system into a real investment program. Let's not forget that although the war on poverty was generally deemed a failure, it moved a significant percentage of people, largely seniors, out of poverty. It did this primarily through the expansion of the Social Security system.
Show me the money. If this really works with growing deficits and tax cuts, then sign me up. But I don't see any credible studies showing that Bush's plan will hold water.
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
I disagree that we are just now hearing about this. He may have the political capital to pull off a reform of social security. Most people know that something needs to be done so anything might get passed. Also since it seems to be a miracle cure and we won't know for absolute sure that the plan will bankrupt social security until the future, it has a chance of getting through today.
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
Everything in life is a risk. The idea of SS is a great one. however its implementation was seriously flawed in that there was no provision for better ideas. If SS is not updated it will fail. It can in no way meet the needs or even offer reasonable support to persons later in life. The return is pathetic. Invested in a mature and thoughtful plan one can easily leave the best that SS in its current form could provide far behind.
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
I like his plan. As for any changes for improvement I'll wait and see what might be offered. As is I would definetlely support it.
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
Yes he does. Those who will eagerly support this idea cross all political idealogies. He can very easily pass this and I expect those who protest will be very dissappointed in how much support it garners.
Everything in life is a risk. The idea of SS is a great one. however its implementation was seriously flawed in that there was no provision for better ideas. If SS is not updated it will fail. It can in no way meet the needs or even offer reasonable support to persons later in life. The return is pathetic. Invested in a mature and thoughtful plan one can easily leave the best that SS in its current form could provide far behind.
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
I like his plan. As for any changes for improvement I'll wait and see what might be offered. As is I would definetlely support it.
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
Yes he does. Those who will eagerly support this idea cross all political idealogies. He can very easily pass this and I expect those who protest will be very dissappointed in how much support it garners.
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
To answer my own question, I agree with the plan in theory and intent I just don't think Bush is going far enough. I guess you have to walk before you can crawl but I'd personally like to see social security abolished and see legislation requiring all employers to offer 401K plans and education on smart investing.
But, I suppose that is a little unrealistic and would probably be political suicide for the republicans. The main thing about Bush's plan that concerns me is - how is he going to pay for it?
Slate has an article worth reading and if they are right it doesn't look good.
In other words, they are going to borrow more money to pull this off and also take some of the interest from your private funds if it outperforms some arbitrary benchmark they set. To me that sounds very financially ignorant and irresponsible.
Greenspan and O'Neill favored a different route, much closer to what I would personally advocate:
It would result in some short term pain (i.e. lost benefits or increased taxes) but in the long term everyone would benefit.
It still keeps the government involved in your retirement, which I don't agree with but I guess it is better than nothing. I personally hope the President listens to Greenspan and not this creative accountant.
To answer my own question, I agree with the plan in theory and intent I just don't think Bush is going far enough. I guess you have to walk before you can crawl but I'd personally like to see social security abolished and see legislation requiring all employers to offer 401K plans and education on smart investing.
But, I suppose that is a little unrealistic and would probably be political suicide for the republicans. The main thing about Bush's plan that concerns me is - how is he going to pay for it?
Slate has an article worth reading and if they are right it doesn't look good.
QUOTE
During the 2000 campaign, candidate George W. Bush seemed particularly confident about his ability to pay for Social Security reform. Despite independent estimates that creating the kind of "voluntarily" private accounts he envisioned could cost more than $1 trillion, Bush consistently took the position that he could reform Social Security for free, without undermining promises to baby boomers anticipating retirement over the next several decades.
<snip>
Larry Lindsey, Bush's tutor on economics during the campaign and later chairman of the White House's National Economic Council, devised a scheme based on creative accounting principles. Essentially, it proposed that the government would issue substantial new debt to sustain old-style benefits. This debt would be serviced and paid down by confiscating revenues from the higher returns from those opting for new-style personal accounts.
<snip>
Larry Lindsey, Bush's tutor on economics during the campaign and later chairman of the White House's National Economic Council, devised a scheme based on creative accounting principles. Essentially, it proposed that the government would issue substantial new debt to sustain old-style benefits. This debt would be serviced and paid down by confiscating revenues from the higher returns from those opting for new-style personal accounts.
In other words, they are going to borrow more money to pull this off and also take some of the interest from your private funds if it outperforms some arbitrary benchmark they set. To me that sounds very financially ignorant and irresponsible.
Greenspan and O'Neill favored a different route, much closer to what I would personally advocate:
QUOTE
O'Neill and Alan Greenspan favored a more robust shift to private accounts, where the old system would stay intact for most Americans—they came up with a cutoff age of 37—and younger participants would be offered only a new system: private accounts available to invest in index funds, both of bonds and equities. This proposal, which would have acknowledged "transition costs" of approximately $1 trillion, got little traction.
It would result in some short term pain (i.e. lost benefits or increased taxes) but in the long term everyone would benefit.
It still keeps the government involved in your retirement, which I don't agree with but I guess it is better than nothing. I personally hope the President listens to Greenspan and not this creative accountant.
QUOTE(Cube Jockey @ Nov 11 2004, 05:57 PM)
But, I suppose that is a little unrealistic and would probably be political suicide for the republicans. The main thing about Bush's plan that concerns me is - how is he going to pay for it?
Ahh, CJ, I'll pull the conservative out of you yet!
Yes, this is exactly the question (as it should be for every single piece of legislation that so much as gets the slightest consideration for passage.)
However, in this particular case, I think it very important to understand exactly what that question means. Because, you see, the changes Bush suggests for Social Security are nothing more than redirecting the Social Security Surplus back into...well, Social Security. So, in essence, it shouldn't require any new funding whatsover. The problem of course, is that the Social Security Surplus doesn't exist, because its being spent on current non-SS activities. Those programs that are being funded with this never should have received those funds to begin with. So, there shouldn't be any big ruckus in taking the money back, right
(me, tilting at windmills again).Why bring this up? Well, because I see it as a way to force change in the system. At some point, barring radical change, we're all going to get shafted...being forced to pay excessive taxes for something that we've already paid taxes for. That's true whether you're Republican, Democrat, Green, Reform, whatever. If ever there was an issue we should all be able to unite around...it's this one. If we all stood up and told the government either fix it, or forget about us paying for it again...they'd fix it. Why we don't all do that is beyond me. So, rant aside, on the QFD.
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
Mindless rhetoric. You want to talk about exposing Americans to excessive risk? Examine leaving the system intact...what could be riskier than that?
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
Be requiring that the usage of existing Social Security Surplus funds for non Social Security expenditures stop immediately. Anything that doesn't address this will not solve the even more fundamental problem of complete lack of governmental integrity. Without that, what's the point of even trying to fix it?
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
Nope...not unless the country as a whole becomes much more aware of what the real problem is, and what will happen if its not fixed. Those consequences are many, many years down the road...our system places an extremely low priority on such issues. What would it take for him to get the necessary political capital? The country to become more educated on the issue, and therefore, across the board, DEMAND change. I don't see that happening...it's been an issue for almost 20 years now, and hasn't generated much steam yet.
Which brings up another question. By squandering the very taxes that are being collected currently to resolve this problem, the government is in fact stealing your money. There isn't any other way to look at it. Why aren't you incredibly upset about this? Esoecially when the solution that will be adopted is painfully obvious...when the need arises, they're going to steal some more. Why we continue to walk down that street, when we KNOW we're going to get mugged, again, completely baffles me.
I think to answer these questions- you need to go to the heart of what this program was created for in the first place -it was never intended to be the sole source of retirement income for anyone- but simply insurance in case of massive failure of the stock system, etc. Enron would be a great example of social security being the safety net for all those that lost thier other retirment savings in Enron.
Social Security was created after the great depression to insure those that saved wisely, but, to no fault of thier own, lost everything to an economic catastrophe would still have something to eat and not lose thier shelter.
I think THAT is where the reform needs to be- remove the extraneous disability for dependents etc from it, make it needs based.
Go back to what it was supposed to be- a safety net, and that is all.
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?[B]
The safety checks and balances created by the great depression have worked- the elderly have improved thier lot considerably under the "great society" reforms started by Johnson- okay, so this has worked, let's not throw out the baby with the bathwater. We ARE an ownership society, some safety valves to protect us from having horders of starving folks in economic catastophe, both large scale and small, is not a bad idea, nor is it anti-capitalist, nor is it harmful to the economy, in fact, in bad times, it will be helpful.
Quite frankly, this is a pure crap rhetoric politic speakism.
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
No- I just want to see it go back to being "insurance" only- and some education from Soc Sec to the public that this is NOT what you want to retire on- simply a supplement to whatever you already have, with an "X" dollar or tax bracket cap on it- If I am making 80K a year in retirement, I don't get the Soc Sec too.
However- incentives to start retirement accounts, lowering the age to 55 you can draw on them, tax free, to a certain income level, say around 300K per year, then mild taxation above that- is a great idea. Make it a hard tax shelter that is really geared towards rewarding low to middle income savings and retirement.
The one thing I Don't[B] want to see is individuals being allowed to monkey around and invest the social security part themselves- it is just rife for con-men and corporate rip offs. Keep soc sec seperate- just reward through tax incentives personal frugality.
Social Security was created after the great depression to insure those that saved wisely, but, to no fault of thier own, lost everything to an economic catastrophe would still have something to eat and not lose thier shelter.
I think THAT is where the reform needs to be- remove the extraneous disability for dependents etc from it, make it needs based.
Go back to what it was supposed to be- a safety net, and that is all.
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?[B]
The safety checks and balances created by the great depression have worked- the elderly have improved thier lot considerably under the "great society" reforms started by Johnson- okay, so this has worked, let's not throw out the baby with the bathwater. We ARE an ownership society, some safety valves to protect us from having horders of starving folks in economic catastophe, both large scale and small, is not a bad idea, nor is it anti-capitalist, nor is it harmful to the economy, in fact, in bad times, it will be helpful.
Quite frankly, this is a pure crap rhetoric politic speakism.
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
No- I just want to see it go back to being "insurance" only- and some education from Soc Sec to the public that this is NOT what you want to retire on- simply a supplement to whatever you already have, with an "X" dollar or tax bracket cap on it- If I am making 80K a year in retirement, I don't get the Soc Sec too.
However- incentives to start retirement accounts, lowering the age to 55 you can draw on them, tax free, to a certain income level, say around 300K per year, then mild taxation above that- is a great idea. Make it a hard tax shelter that is really geared towards rewarding low to middle income savings and retirement.
The one thing I Don't[B] want to see is individuals being allowed to monkey around and invest the social security part themselves- it is just rife for con-men and corporate rip offs. Keep soc sec seperate- just reward through tax incentives personal frugality.
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
From the New Yorker: "Social Security, Medicare, insurance—these are basically collective risk-sharing mechanisms. Rather than let each person run the risk of ending up destitute or sick, these programs pool the risk. Because the risk is shared, it can be managed, and people can be guaranteed a minimally acceptable outcome. In Bush’s brave new world, that guarantee will be eliminated."
Bush's "ownership society" is a euphemism for eliminating Social Security system as it currently exists. I think that would be a significant mistake. The category of US citizens who currently rely on SS won't disappear under Bush's proposal, just the structure and funding to support them in their need.
As I understand the problem, Social Security isn't in all that bad of financial shape. SS taxes are expected to exceed SS expenses for at least 12 years or so and with modest adjustments SS could continue for the foreseeable future.
The one real problem with SS is that we continue to spend the accumulated SS surplus on non-SS expenses (like the war in Iraq). Of course, the Bush budget deficit has made this problem worse.
The second and bigger problem is that folks combine the question of providing SS with the problem of Medicaid. Medicaid problem is one (important) piece of the overall Health Insurance problem in the US. Privatizing SS will kill the SS safety net and do nothing to address the very real problem of providing Healthcare for an increasingly aged population.
From the New Yorker: "Social Security, Medicare, insurance—these are basically collective risk-sharing mechanisms. Rather than let each person run the risk of ending up destitute or sick, these programs pool the risk. Because the risk is shared, it can be managed, and people can be guaranteed a minimally acceptable outcome. In Bush’s brave new world, that guarantee will be eliminated."
Bush's "ownership society" is a euphemism for eliminating Social Security system as it currently exists. I think that would be a significant mistake. The category of US citizens who currently rely on SS won't disappear under Bush's proposal, just the structure and funding to support them in their need.
As I understand the problem, Social Security isn't in all that bad of financial shape. SS taxes are expected to exceed SS expenses for at least 12 years or so and with modest adjustments SS could continue for the foreseeable future.
The one real problem with SS is that we continue to spend the accumulated SS surplus on non-SS expenses (like the war in Iraq). Of course, the Bush budget deficit has made this problem worse.
The second and bigger problem is that folks combine the question of providing SS with the problem of Medicaid. Medicaid problem is one (important) piece of the overall Health Insurance problem in the US. Privatizing SS will kill the SS safety net and do nothing to address the very real problem of providing Healthcare for an increasingly aged population.
QUOTE
1. Do you agree or disagree with the criticism that an "ownership society" exposes Americans to excessive risk?
I think an ownership society would be great! We don't have one. We have a debt society. The government is in debt, the people are in debt, and these conditions are worsening.
Meanwhile, job growth moves along like a river of molasses and there aren't very good visions for improving this trend. In fact, the lifestyles of Americans are heading toward significant downward moves in the world economy. Maybe we should come to own sturdy camping equipment?
Excessive risk has become a mindset with conditions as they are.
QUOTE
2. Do you agree or disagree with the President's plan (as defined above)? How could he improve it?
It's a great plan if everyone makes enough money to invest. I'm not confident that most people make this kind of money. Going by numbers I've seen from various places, the trend is for income to be reducing in real dollars, adjusted for inflation. More recently, folks have taken reductions in gross pay to find work of some sort. The average I've seen is a 20% reduction, and for my particular case, that turned out about true. But then I went through a couple years of zero income. That really puts a crimp on things.
Another trend is for the wealth to be continually moving upward. Well let's see, if wealth won't be moving downward through anything else, then I guess the plan could be improved by soaking the rich? Heard about a plan that would put a 3% SS tax on income over the present max of about $86,000 per year. When's the last time the SS max was adjusted for wealth moving upward and inflation? Can't remember this ever happening, but it must have happened.
The plan could also be improved by lock-boxing SS funds so they can't be spent on anything else. I doubt this is going to happen.
QUOTE
3. This plan dates back to 2002, and we are just now hearing about it, does the President have the political capital to pull these reforms off?
Maybe with control of Congress. Maybe not if enough people are against it -- it could threaten control of Congress in 2006.
I'm of the mind that enough people with fewer years ahead than behind have been slapped down financially over the past four or so years that the SS idea of 2002 might not fly. This could be an indication on how much faith people have retained in the markets and the ability to make future income. I'm surrounded by people with zero faith, so my take is skewed.
I think this plan would have probably flown in 1998. It could be too late for the market ideas due to the business cycle fluctuations, and of course due to fraud in the markets. Why would people who risked once and got burned want to risk again so soon? Last year at this time I was unemployed, freelancing, and bringing in a few hundred bucks per month that way. It's just too soon. Maybe in five or six years of steady employment, maybe even increasing income? Will that happen?
Who knows. I think most people have enough risk the way it is, and some are just shell-shocked on markets. Pushing more risk could bring a surprising reaction.
QUOTE(AuthorMusician @ Nov 15 2004, 04:46 AM)
It's a great plan if everyone makes enough money to invest. I'm not confident that most people make this kind of money.
This gets to the question of what Social Security is (and also one of the misperceptions about how it is funded). Is it a mechanism to insure that people save for retirement? Or is it a mechanism to take care of those that didn't? One of the reasons Social Security is a Holy Grail is that people think that its their money in the system...when it isn't. People also tend to think they're entitled to it for the same reason (that they're only taking out the money they put it), when in fact most people withdraw more money than they put in (even adjusted for interest). That's why the system is failing (when it was first started, the benefit age was about the same as the life expectancy...now it's some 25 years below it). This gets us to Cruising Ram's statements--CR, I actually agree completely with you...is that possible?
. I don't know which politician put forth the idea that Social Security was supposed to wholy provide for anyone's retirement, but we should figure out how that is, and send them the bill. It's Old Age Supplemental Income (OASI), not HAYNRO (Here's All You Need to Retire On). Getting this message out would do wonders for solving the very problem SS was created to fix, all by itself...by getting people to be more proactive in saving for their own retirement. Almost everyone has enough money to save for their own retirement, if they'd just get started doing it soon enough. Just $100/mo, invested properly, can provide significant retirement income--more than SS would provide. This concept is one of the benefits, for me, of the President's plan...in that it does make it your money.
I favor the idea of shifting from a regressive payroll tax funding entitlements for retirees to compulsory individual pensions. While I don't much like the idea of the government making anything compulsory, I'm enough of a realist to realize that this may be the lesser of several evils. Furthermore, realistically, we are not cold-hearted enough as a people to allow those who choose not to save for their retirement to starve without government assistance. Compulsory savings reduces the number of people we the taxpayers will have to support in their old age. Individual savings makes for the best lock-box, and is easily understood by most. I've seen several choices of investment offerred: IRAs, limited choice investments, and investment in a universal global mutual fund. I favor a portion (say 10-12% total, up to 90th percentile of income--$100,000 or so) combination of privately managed closely regulated defined-contribution pensions; disability insurance; and IRAs. 5% to the pension, in exchange for a COLA annuity upon retirement - able to be passed on to a spouse or surving minor child; 2% to disability insurance; and 5% to an IRA - able to be passed on to an estate. The pension would be managed professionally and competitively, under a strict regulatory framework, while the IRA would be under the individual's controls.
One thing to note is that the US stockmarket has grown by about 11.5% (less inflation) per year for the last 75 years or so. However much of this growth has been due to stocks trading at higher and higher P/E ratios, a situation that is not likely to continue indefinitely. However, this should not be viewed as detracting from the idea of a market based solution, but rather a realistic view of the idea that people are going to have to save a significant portion of their income over a significant portion of their lives in order to maintain income from savings through their retirement. I just used an excel sheet with a 5% total return on investments, 10% saved, and 2% per year wage increases. Such a set of numbers allow someone to retire with 100% of their spent income after 40 years of work.
One thing to note is that the US stockmarket has grown by about 11.5% (less inflation) per year for the last 75 years or so. However much of this growth has been due to stocks trading at higher and higher P/E ratios, a situation that is not likely to continue indefinitely. However, this should not be viewed as detracting from the idea of a market based solution, but rather a realistic view of the idea that people are going to have to save a significant portion of their income over a significant portion of their lives in order to maintain income from savings through their retirement. I just used an excel sheet with a 5% total return on investments, 10% saved, and 2% per year wage increases. Such a set of numbers allow someone to retire with 100% of their spent income after 40 years of work.
QUOTE(Hobbes @ Nov 15 2004, 06:21 AM)
QUOTE(AuthorMusician @ Nov 15 2004, 04:46 AM)
It's a great plan if everyone makes enough money to invest. I'm not confident that most people make this kind of money.
This gets to the question of what Social Security is (and also one of the misperceptions about how it is funded). Is it a mechanism to insure that people save for retirement? Or is it a mechanism to take care of those that didn't? One of the reasons Social Security is a Holy Grail is that people think that its their money in the system...when it isn't. People also tend to think they're entitled to it for the same reason (that they're only taking out the money they put it), when in fact most people withdraw more money than they put in (even adjusted for interest). That's why the system is failing (when it was first started, the benefit age was about the same as the life expectancy...now it's some 25 years below it). This gets us to Cruising Ram's statements--CR, I actually agree completely with you...is that possible?
. I don't know which politician put forth the idea that Social Security was supposed to wholy provide for anyone's retirement, but we should figure out how that is, and send them the bill. It's Old Age Supplemental Income (OASI), not HAYNRO (Here's All You Need to Retire On). Getting this message out would do wonders for solving the very problem SS was created to fix, all by itself...by getting people to be more proactive in saving for their own retirement. Almost everyone has enough money to save for their own retirement, if they'd just get started doing it soon enough. Just $100/mo, invested properly, can provide significant retirement income--more than SS would provide. This concept is one of the benefits, for me, of the President's plan...in that it does make it your money.The economic concept of small savings for a big retirement is "pay yourself first"-
to me, this should be compulsory education in our schools every year of school! My Dad, and in fact, all the patriarchs of my family, made a huge point of this my entire life- regardless of political persuasion.
The point was also well made of Soc Sec being used on the war in Iraq- totally despicable. This is the kind of thing that is harming Soc Sec- NOT because it is a bad program.
I am not giving MY children a trust fund or "grubstake" money when they are done with college- but I am giving them property- rental property.
I think the best way to start helping out Soc Sec is to start educating our kids about money management at a very early age, perhaps even field trips to the bank to start savings accounts, and manage them throughout thier education K-12
Possibly to help calibrate this discussion, in 2002 the US median household income was less than $43k, down from the previous year (see http://www.census.gov/hhes/www/income/table3r.pdf )
There is growing disparity in US household income. I don't see how changing Social Security into an individual retirement program will do anything other than assure that as they grow older the "haves" have progressively more and the "have nots" have progressively less.
There is growing disparity in US household income. I don't see how changing Social Security into an individual retirement program will do anything other than assure that as they grow older the "haves" have progressively more and the "have nots" have progressively less.
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