Alan Greenspan was before Congress yesterday and was questioned about his views on Social Security reform.

His comments were mixed. He warned against borrowing too much to fix it (he qualified "too much" as $1 trillion). He also strongly supported private accounts and said that "I think the existing structure is not working".


Greenspan Backs Idea of Accounts for Retirement

Borrow Cautiously, Greenspan Advises

Questions for Debate:

How does the opinion of Greenspan affect the Social Security debate?

Does Greenspan's backing of private accounts change your view about them?

How does the opinion of Greenspan affect the Social Security debate?
I can guess what the supporters of the President's plan think about Greenspan's comments, but what I think is happening is people are listening to the parts of Greenspan's plan that they want to hear (i.e. private accounts are a good thing) and ignoring the rest. Here is where everyone that supports the President's plan stopped reading the article:


But then this is the portion all the supporters ignore:


The bolded and underlined section is exactly the point. Of course Greenspan agrees with private accounts, anyone who is relying on the government for their retirement and isn't saving on their ownand is under 50 is either crazy or stupid. If your goal with social security "reform" is actually to fix social security then you would do well to listen to Greenspan's words on whether or not this will actually solve the problem.

Does Greenspan's backing of private accounts change your view about them?
Of course it doesn't, in fact it supports the many arguments I have been making in this thread. There is absolutely no financial proof or common sense that says that private accounts would be a good thing for social security. In fact, every single shred of evidence points the other way and suggests they will in fact destroy the system that much faster and put us further into debt. Furthermore Greenspan suggests it could have an adverse effect on the economy in general.

I don't know how many more people have to come out and say these private accounts are not the solution to the problem before it sinks in.

I'm still waiting by the way for just a modicum of proof that these accounts will save the system. After 7 pages in the previous thread we still have nothing, zip, zilch, nada.

How does the opinion of Greenspan affect the Social Security debate?
It gives both sides ammo to attempt to defend their position on the issue, although i lean on the side of private accounts

Does Greenspan's backing of private accounts change your view about them?
No. Because i have backed them from the beginning. I guess watching 5k and my employers 5k "dissapear" every year makes me want to see some of that actually attached to my s.s.n. and possibly willed to me next of kin...

I do not think the opinion of one man can sway the nations opinion. People will believe what they want to believe, despite Mr. Greenspan's personal belief. Social Security will be a growing debate until it either finally goes bankrupt or someone bails it out. The conflicting views of the public have split politicans... now it has become a feud between political parties. His opinion means nothing in the grand scheme of things.

Greenspan's backing of private accounts proves to me he simply agrees with how I view the world. I like to believe in the rights of the person, and the person should regulate his/her own money... no one other than them should have that power. His view may have only served to increase my support of the accounts but it has not negatively impacted my view in any way.

Now I am just curious....but did you have some sort of epiphany or life altering experience since Jan 31st, when you wrote on the subject of Social Security and said:
Link

Actually no, I simply believe that private accounts are the way to go. We need to have management of our own lives and I do not view Social Security as a safe way by which people can live. Thank you for calling attention to my previous post but like all people I am entitled to change. I just think that a person should be in control and not let the government or a group of people dictate their monetary means to them. It becomes far too messy when people let the government/organizations control their lives by holding all the fiscal cards. People should be in control and under no circumstances submit to anything other than themselves.

My chief reservation about personal accounts is associated with my feeling that a significant portion of the stock market's value is speculative, and not based on real future earnings. Allowing / requiring much more investment in the market will increase that speculative amount and exacerbate future 'corrections' in the business cycle. Historical returns have been in the neighborhood of 10%, due to increasing P/E ratios, while actual real economic growth has been in the neighborhood of 3.5%.

Having so many people's wealth tied up in the speculation of stock values has two negative effects: we trade the pyramid scheme of SS for the pyramid scheme of [URL=the greater fool theory]http://www.investopedia.com/terms/g/greaterfooltheory.asp[/URL]. The other effect is that we would then have greater popular resistance for fixing the causes of such overvaluation and the subsequent cycle of corrections.

Furthermore, I support retaining some form of safety net, in the form of poverty level income for those who live beyond their life expectancy, which would be much, much cheaper than the current benefit structure. I also support the idea of federal and state [URL=citizen's dividends]http://www.worldhistory.com/wiki/C/Citizen's-dividend.htm[/URL], similar to Alaska's Permanent Trust.

It is doubtful that Greenspan's advice will be heeded except to the extent that the administration can turn it to their own uses. (The President's plan is fiscally irresponsible; it will be funded by heavy debt financing, which is hardly something Greenspan would approve.)

Privatization is part and parcel with the administration's plan to eliminate government entitlement programs, while giving another bonus to the wealthiest citizens at the expense of the poor and the middle class. Cutting benefits for the elderly, including the baby boomers (those over 55), while flooding the equity markets with Social Security taxes from the younger generation of Americans works this from both ends. It's a two-time loser for taxpayers and participants who will have to pay more to play the table stakes of "casino conservatism."

The younger generation, who will have privatization forced upon them, won't realize the diminished return on investment until too late, and so it is unlikely that they shall voice much opposition to Bush's plan (they will be less risk-averse because Social Security is "framed" as a prospective loss); and although the cuts for the elderly will be felt immediately, their voices are dying out rapidly; therefore, it will be up to the baby boomers to speak for both.

President Bush will push privatization through by increasing the deficit - even if he has to start another war to do it - and so we had better face the issue from that perspective. For an alternative analysis to the Bush privatization plan, see:

http://www.fpanet.org/journal/BetweenTheIs...ays/040203B.cfm

As opposed to giving a bonus to the poor at the expense of the middle class and wealthiest citizens?
New CBO Study Confirms Wealthiest Americans Bear Income Tax Burden



Do you realize that there used to exist an "opt-out" clause for social security? Check out Galveston County, Texas. They voted in 1980 to opt out of social security and invest in private accounts, and they're all happy they did. When it looked like more counties in Texas were going to follow their lead, Congress cancelled the opt-out clause.
How Galveston Opted Out of Social Security
Please don't make arguments and predictions with nothing to back them up. And one more thing - I believe Bush's plan is optional - meaning no one will have anything "forced" on them.

asoko

Actually Bush has said himself he has NO plan. So maybe that's why you "believe" it's optional. Privatizing Social Security is not the solution, it will cost the Taxpayers too much money, and possibly result in destroying a system which too many Americans depend on.

In fact Bush himself here:

http://www.usatoday.com/news/washington/20...htm?POE=NEWISVA

says that Private accounts will solve nothing.

The SS debate is a pointless distraction to help America ignore what should be the priorities, such as meaningful energy reform and debt reduction. Things this administration does not want to be seen as priorities.

Does anyone honestly believe that fixing a system that will not break for however many years is more important than working to reduce the national debt? What kind of "tax and spend" conservatives are these people?

Privatizing social security is not the solution to finding money to pay current and near future retirees, correct. That can either be done by A. raising taxes, B. cutting benefits, or C. cutting spending on other programs to pay for SS. B. is simply out of the question. I'm personally in favor of the third solution, which does NOT require more taxpayer money.

Apparently I was wrong about Bush having a plan. He and Congress are going to have a tough time coming up with something everybody can agree on.

However, this is not a pointless debate. I don't want to be paying Social Security. I don't even want government-mangaed private accounts. Is it too much to ask that I be allowed to manage my own money? Bush says the private accounts won't "permanently fix" the system, in your article. The only way to fix it is to get rid of it entirely. Social security did not start to become a problem recently. It was a problem disguised as a solution from when it was first created.

You are correct in that reducing the national debt should also be a priority. But fixing Social Security now rather than when it gets really bad is a step away from incurring more debt. We can fix it now, or we can wait until millions more Americans need their checks. We're going to have to pay for the mistakes of the past one way or another.

PS. In your sig., you forgot: government education, welfare, social security, the TVA (government granted monopoly and still hugely in debt!)

If we are talking about solutions, option D (not listed) is a better solution to all of this. Stop congress from using money that comes in via the social security tax for whatever they would like. The money should be used specifically to fund the program itself. All excess money should be placed in some sort of annuity with the goal of making the program self sustaining eventually.

As soon as people realize this is just a tax like any other tax you pay such as income tax, state tax, sales tax and stop thinking they have a right to manage their money for retirement we'll all be a lot better off. Social Security is not a retirement program, it is a benefit just like medicare, welfare or unemployment.

Why is B out of the question? In the long run, it is the ONLY way to solve the problem. Note that raising the benefit age to align more closely with life expectancy, as SS was originally positioned, and which numerous people here have been in favor of, is indeed cutting benefits--that is in fact its purpose.



One of the largest debts we currently have is the unfunded liability for SS. So, you can't address the one without addressing the other.

I oppose privatising SS as it stands.

It would artificially raise the demand for stocks and bonds, without any real increase in their value. It would further ingrain most of the population with a tiny tiny piece of the pie, making any future real economic reform more difficult.

I believe that some form of a safety net is important, and I don't particularly mind the government providing it. I would however rather see the age raised, and the maximum benefit limited to about 1.5-2x poverty level. It should be a safety net, not a retirement fund.

Back in the day, the caesars rewarded their legionnaires with gifts of land for their retirement. Unfortunately, we've pretty much run out of land. I would not mind if the lands under federal purview were rented out at full market value, and the proceeds used to fund SS. If you take a fairly expansive view of 'land', the USGovt controls a lot. Mineral & Oil extraction rights, Broadcasting rights, Pollutant Emission Permits, Grazing and Timber Rights, Fishing Rights, etc. My guess is that these rights are worth at least $0.5 Trillion, and most of these are currently given away for pennies on the dollar to the corporations that benefit from them.

Edited to add back of envelope calculations:
17,000,000 persons 75 & up, $20,000 each = $340B
35,000,000 persons 65 & up, $15,000 each = $525B
I do feel that we as a country have at least an implied contractural obligation to pay the promised benefits to all those retiring in the next two decades.
But, even accepting that, we could eliminate most of the payroll tax.

Hobbes an unfunded liability is not technically a "debt" it could be better described as "potential debt". This unfunded liability is not currently on the books as part of our national debt as far as I know.

What it means is that if every person in the system called in their benefits then the system couldn't support it. Obviously that is a bad thing.

So you can address one without addressing the other pretty easily.
1) If you are actually concerned about reducing the national debt, the most effective way to do that is stop spending money on worthless programs. We spend hundreds of millions a year on abstinence only programs as an example which have been proven by every expert in the book (as well as common sense) to be ineffective. Cutting taxes during a war is also not a very smart idea. The list could go on for pages.

2) With social security the way that you address this first and foremost is you require all the money collected by the social security tax to be actually used for social security - what a novel concept! Currently that would mean there would be more money in the system than is needed to pay benefits for current retirees. So instead of pork spending we could be setting up an annuity with that excess with the goal of making the system sustainable. If there were strict guidelines in place I'm betting that the young working population would even be willing to pay more into the fund to get this annuity setup so it would be there when they retired, provided there was a sunset clause on the increased taxes.

There certainly are a lot of solutions to the problems we have today but they would all require politicians to stop being politicians and sadly I don't think that will happen.

These two statements are incongruous...if it is a tiny tiny piece of the pie, then it wouldn't have a significant impact on demand for stocks and bonds. I disagree mostly with the tiny, tiny piece part....retirement contributions are significant, and you would be talking about fairly sizable investments for those that contributed to them. I would also further argue that owning such a significant piece of the pie would encourage economic reform, not hinder it.



Isn't that about what its at now? Maximum annual benefit is $23,000...while poverty level is $10,000 or so. So, I guess this would be a little reduction...



Wouldn't this just be a one-time disbursement? ie...payroll taxes would still continue, to fund the continuing disbursements.

Some interesting facts from the following link;



on Social Security in the Washington Post

Note first that benefits are currently progressive..ie, those at the lower end of the wage scale get more out than they pay in, while those at the higher end get less out. So making benefits even more regressive isn't necessarily the answer

Hobbes, each individual crumb is fairly small, but across 150 million families, it adds a significant boost to stock prices, benefitting those that are alread 'in', especially those that are alread in 'big', the top 1%ers.

I don't know what the max benefit is, I hoped someone would come up with it.

One time disbursement? Not sure if I was unclear. I meant for the Fed Gov't to retain title to those lands & rights, and rent them annually (or for some other convenient time period). They should produce $500B a year, from renting federal grazing lands, timber lands, mineral rights, and broadcast spectrum. This is a conservative estimate. Being natural resources, they are one of the few investments that consistently appreciate.

The rates of payback are progressive, the effect of shortened life-spans for low-income earners makes it relatively regressive. Either way, taxing wages, and taxing them regressively, is about as bad of a tax as you can get.

The tax apportionment argument is inapposite. Social Security taxes are capped at 12.4% percent on earned income up to $90,000.00 of employed and self-employed individuals, and not assessed on corporate profits or capital gains. Nor does Social Security place a disproportionate burden on one class of taxpayers as benefits are paid out in proportion to employment taxes paid into the system.

Social Security was sabotaged when President Reagan raided the trust fund and used the money to pay for general fund expenditures; and now, President Bush argues, disingenuously, that since the government has misspent the money, that that's good reason for reforming ("eliminating") Social Security and replacing it with private investment accounts. The truth is that Privatization will be primed with borrowed money while employment taxes will be pumped into the equity markets, which will effectively scuttle the program and shift the blame for when it finally founders. It will be cold comfort for the participants who, when they need a life buoy, find that it has been replaced by a lottery ticket and the number for Dial-a-Prayer.

Many states have "opt-out" retirement programs for teachers and government employees, and not just a few of them are bankrupt as in the case of Orange County, California. At this moment, the City of San Diego, once held up as a model alternative to Social Security, is considering filing Chapter 9 bankruptcy to deal with its insolvent public employee's retirement system. See

http://www.cato.org/dailys/03-24-99.html
http://www.sdreader.com/php/cityshow.php?id=C092503
http://www.sandiegomag.com/issues/may04/featured0504.asp

Indeed, California is currently facing the same financial crisis, albeit that bankruptcy is not an available option.

Ronald Reagan - who many revere more than George Washington - once said that Social Security was a Ponzi scheme; and, if President Bush has his way, the government will use it so. George Washington is reported to have said that he could not tell a lie; as for Bush and Reagan: there is a saying that figures don't lie, but that doesn't mean that liars don't figure.