My Theory On Why Bush wants to Ruin Social Security

POSTED BY: piratejenny
UPDATED: Wednesday, February 8, 2006 17:07
VIEWED: 13307
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WARTHAWG

Wednesday, March 16, 2005 4:19 AM

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The irony of social security is that it may offer no security whatsoever. All my life, I’ve been told that Social Security was going down the tubes. And whatever anyone’s particularly spin is, it is a real possibility that it won’t be there when I’m 65-70 years old. Yet, I’m forking out 6.2% of my income to pay for other people’s income on the premise that when I’m old Social Security will be there for me, but in the current system there is no reason to believe that that is true. Furthermore, if we just raise taxes then all we are doing is promising future generations that they will have to deal with the same problems, only at a higher tax rate. The only thing ultimately secure about that course of action is that we guarantee that the government will always have a nice little stash to pay for their pork. Someone please tell me how this is not a scam.

Actually your employer pays an additional 6.2% to match your contribution. So SS is actually getting 12.4% of your gross pay.

ZEEK

Wednesday, March 16, 2005 6:36 PM

Quote:
Originally posted by SignyM:
And is your real agenda to get rid of Social Security, not to "save" it???

I don't have an agenda. I'm not going to go out of my way to do anything with SS. However, if it were up to me, I would do away with SS entirely.

Quote:
Originally posted by rue:
Just look at the Federal deficit - the budget is not 'working' economically in a major way and he's in no hurry to fix it.

Deficit is not a four letter word in economics. There's actually plenty of theories that a deficit is good for the economy. The only time the deficit really starts becoming a problem is when investors start to fear that the government is going to default on it's loans. I doubt any investors are worried about the US government falling anytime soon.

However, Mr. Greenspan seems to be worried about the state of Social Security if things don't change by 2008. IMO Alan Greenspan is a bit of an expert when it comes to Economics. That's just my opinion though.

DANFAN

Wednesday, March 16, 2005 7:17 PM

Quote:
Originally posted by SignyM:
What college or university?

I imagine you've already found this. But just in case you haven't, here is contact information for Kelly Blanchard on the faculty at Purdue:

https://directory.purdue.edu/directory-bin/PhDetail.pl?UniqueId=khb

Everybody has ante'd up. I'm interested in the results of the hand.

SIGNYM

Wednesday, March 16, 2005 8:06 PM

I've contacted Dr Blanchard and I'm waiting for a reply. She may not be interested in becoming embroiled in an anonymous internet debate, tho, so I'm not holding my breath for a reply and I advise you not to either.

VETERAN

Wednesday, March 16, 2005 8:48 PM

Quote:
Quote:

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Originally posted by Veteran:
AuraRaptor:

I would point out that one of the reasons for our government listed in the preamble of the constitution for is to "promote the general welfare."

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I know for a fact that the founding fathers didn't intend for the line to mean what you presume it means. Not even remotely.

Maybe some didn't but others, I think, not so much. Here's an excerpt from James Madison in the the Federalist Papers #45.

"It is too early for politicians to presume on our forgetting that the public good, the real welfare of the great body of the people, is the supreme object to be pursued; and that no form of government whatever has any other value than as it may be fitted for the attainment of this object. Were the plan of the convention adverse to the public happiness, my voice would be, Reject the plan."

SIGNYM

Wednesday, March 16, 2005 11:13 PM

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Social security will never be solvent the way it exists. It will always be in a state of running out eventually.

Isn't it a little late to be questioning the solvency of something that's been in existance and paying out for decades? And sure, the sun will run out eventually, but how do you figure Social Security will run out "eventually"?

Quote:
The irony of social security is that it may offer no security whatsoever. All my life, I’ve been told that Social Security was going down the tubes. And whatever anyone’s particularly spin is, it is a real possibility that it won’t be there when I’m 65-70 years old. Yet, I’m forking out 6.2% of my income to pay for other people’s income on the premise that when I’m old Social Security will be there for me, but in the current system there is no reason to believe that that is true. Furthermore, if we just raise taxes then all we are doing is promising future generations that they will have to deal with the same problems, only at a higher tax rate. The only thing ultimately secure about that course of action is that we guarantee that the government will always have a nice little stash to pay for their pork. Someone please tell me how this is not a scam.

"All your life you've been told" ... and they haven't got it right YET, have they? Their decades of predictions haven't come true so far, but apparently you still believe them.

What is going on is a temporary (NOTE: TEMPORARY) bump in the equilibrium because of the baby boomers. In order to stay solvent in the LONG RUN "money in" has to equal "money out" right? "Money in" is the lifetime contributions of contributors plus accummulated investments plus current contributions. Under what circumstances do you forsee this "running out"? Do you anticipate zero employment in the forseeable future? Or no babies being born, perhaps? A massive government default on the debt? You're right- in the future, the system will still be dealing with the "same problems": money in has to equal money out. But 10-20 years from now, when first wave of retiring baby-boomers starts dying off the current problem will ease and Social Security will be at a new equilibrium that will once again start to build up reserves and be sustainable for the forseeable future.

I know you like the idea of investing so it will be "there for you", but if you want to talk about scams, look at Enron and all those people who LOST THEIR RETIREMENTS.

SIGNYM

Wednesday, March 16, 2005 11:13 PM

Here is an article from the Financial Times (of London)

Privatization Bombed in Britain
Now they’re looking for a way out

By Norma Cohen

February 2005

The president’s bold new plan to partly privatize Social Security, which has many on Wall Street salivating, is not new at all. In fact, it looks remarkably similar to Britain’s 25-year experiment with pension reform, which included substituting private investment accounts for a portion of government pension benefits. It is an experiment now regarded as a dismal failure.

In short, the British public—and government—lost money. They learned the hard way that the costs of administering private accounts can affect returns and reduce the size of a retirement pot by up to 30 percent. (This experience has been repated in other countries- SM)

Unusual for Britain, there is now an emerging consensus among labor and business, liberals and conservatives, that the government pension system—the United Kingdom’s counterpart to Social Security—needs serious reform. Recommendations for an overhaul are expected after the elections in May.

One reason for the intense attention is that the U.K.’s traditionally generous system of employer-sponsored pensions is collapsing, exposing the weakness of the government pension system just as more retirees are being forced to rely on it.

So while the United States is looking at privatization, British experts are eyeing the more generous and simpler U.S. Social Security system.

David Willetts, a Conservative member of Parliament whose intellectual acumen has earned him the nickname "Two Brains," is one admirer of the American system. "I like the way they distinguish between Social Security and means-tested welfare," he says. "They have higher Social Security benefits to keep elderly people off welfare."

The Confederation of British Industry (CBI), the functional equivalent of the U.S. Chamber of Commerce, last year made a surprising call for a higher state retirement benefit to be paid for by raising taxes and the retirement age, from 65 to 70. The maximum payout for a single person at age 65 is around 4,200 pounds per year, or about $8,000, although British retirees do not pay for health care or prescription drugs. (In the United States the average annual Social Security benefit is $11,000.)

CBI’s U-turn on pension policy stems partly from self-interest. Government spending on state pensions has been low, and workplace pensions have traditionally been generous. Now employers are straining under the burden and want the government to play a greater role.

The National Association of Pension Funds, an employers’ group, agrees. It’s "actually cheaper for the state to carry the risk," says Chief Executive Christine Farnish, adding that in looking for a system that offers the best combination of modest guaranteed retirement benefits and low cost, the U.S. Social Security program seems the best model. "It doesn’t have to make a profit, and it delivers efficiencies of scale that most companies would die for," she says.

The story of how Britain’s retirement system reached its current crisis began 25 years ago, when Margaret Thatcher’s Conservatives swept to power on a tide of national disgust at high unemployment, high taxes and poor services. Though her pension reforms were ideological, they were also pragmatic: tax cuts could not be delivered without some cuts in benefits. So the first reform, passed in 1979, was to link increases in state pension benefits to prices instead of wages, something the Bush administration is considering.

Ros Altmann, a Harvard-trained specialist in pension economics who is on the board of the London School of Economics, says that at the time neither the voting public nor most politicians understood the true implications of altering that link. But advocates for the change knew what they were doing: they were slowing the rate of growth in pension increases, because wages have historically risen by 1.5 to 2 percentage points ah

SIGNYM

Thursday, March 17, 2005 1:07 PM

Zeek, Finn, Auraptor, Mac, Hero, Inevitable, Byte, Conscience... no comments??

Just wanted to make sure you got a dose of reality for the day.

SIGNYM

Thursday, March 17, 2005 1:14 PM

ZEEK

Dr Blanchard replied that she does not discuss Social Security in her undergrad classes, only in graduate classes, and then only to calculate optimal retirement age (how much od you gain or lose by early retirement). She said that other professors prolly discuss Social Security policy but not her. (I would cut and paste her email here, but I've been told by a major webmaster that's ILLEGAL.) So, I've done my part bird-dogging down your curriculum for you. Feel free to fully document your claims on your own time.

HERO

Thursday, March 17, 2005 4:26 PM

Quote:
Originally posted by SignyM:
Here is an article from the Financial Times (of London)

Privatization Bombed in Britain
Now they’re looking for a way out
The president’s bold new plan to partly privatize Social Security, which has many on Wall Street salivating, is not new at all. In fact, it looks remarkably similar to Britain’s 25-year experiment with pension reform,

Actually the comparsion is less then 20 years. Yes, they've been reforming since the '70s, but the privatization idea has only been around since 1986.

Quote:

In 1986 the Thatcher government offered to let people divert part of their social security taxes into a personal investment account similar to a 401(k). For help in designing the plan, the government turned to the insurance industry...

The competition to sell pension investment products to the public was intense. Products were numerous and complicated, and few people could understand them. Fees and costs often were not fully disclosed by agents, who could pocket a portion of the first few years’ sales. Rules were poorly designed and rarely enforced.

Well the lesson learned is not that privatization does not work, its that the rules need to be well designed and strictly enforeced.

I'm sure "products" in 1986 were "numerous and complicated". Any investment in the '80s and early '90s required a middleman with extensive knowledge and experiance.

Today people have much greater access to information for investment, including several cable networks and internet resources specifically devoted to explanation and advise on all forms of investment. The mechanism is streamlined as well. Anyone can trade, anyone can manage their assets. As a result competition by fund managers is fierce and prices are low. Hang on...just sold 1000 shares of RAD, the stock is up big in last week or so...took me 30 seconds, cost me $8, and I made $5,000. God, I love America!

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Later, after the stock market crash in 2001, even the insurance industry began advising customers to return to the government system.

Ah, another casualty of the 9/11 attacks. I think we all need a moment...

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In 2004 alone, 500,000 people abandoned private pensions and moved back into the traditional government plan. Another 250,000 are expected to move back this year.

Lot of people in Britain. Guess these are the only ones "smart" enough to leave their fortunes in the hands of government intellectuals. The rest, like so many of us red staters here in the US, can't be trusted to think for ourselves.

Quote:

"There are no other choices."

There is however a lack of immagination.

SignyM, the floor is yours.

H

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