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Feb 3 thread
Doren's initial query
Ok. I might be crazy, but I just don't get this. Last night in his
state of the Union, Bush proposed allowing people to put aside 4% of
what they are currently required to pay for social security into
private government authorized accounts. How does this save social
security? How does 4% of the 12% (or whatever it is) of my income
that I pay to social security give me anything to retire on? And what
does everyone give up for this lovely "opportunity"?
Sara's response
I believe the fact that a) the funds have a higher risk and therefore
could earn a better return than what's used right now for all the
Social Security funds (I don't know what the return is but it's low
and "safe") and b) the $$ invested would be open to a wider variety of
folks that want the investment capital. Well, the ones that the
Government let's you invest in a.k.a. GWB's friends that need some $$
help.
Kevin's response
Since they still haven't supplied an actual plan, this is mainly
conjecture. The expectation is that the private accounts replace some
or all of the government-paid benefit. We can probably expect the
defined benefit to be sharply curtailed for poeple younger than, say,
50 or 55. Some years later, it may be eliminated altogether. That's
been a goal of the neocons for decades. It essentially "saves" the
program by gutting it.
Of course, there are some serious problems.
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We need to pay benefits to current retirees, and that money
has to come from somewhere. The last thing I read was that they would
just borrow the money and add another two trillion to the debt, but
somehow keep that "off-budget" so it doesn't actually get counted as
such. We'll see what the bond market thinks of that. (Hint: expect
to pay much higher interest rates.)
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If you make bad investment decisions, or if the market tanks right
before you retire, well, too bad for you. (IMHO that's the general
Republican response to anyone who isn't them.)
Never mind that minor tweaks could keep the system solvent for many
decades to come, and who knows what will happen between now and then.
It's hard enough to forecast the economy 5 or 10 years out, much less
30 or 50. This is all about ending the New Deal and getting people to
feel like "investors", so they somehow identify with the billionaires
and support the Republican agenda (e.g. more tax cuts on investments,
shifting more of the tax burden onto labor).
Sorry, bit of a soapbox there.
Tony's response
I think the figure of 4% to 12% is on gross income not the amount
withheld for Social Security (not that I agree with his plan). See
(Paul Krugman) editorial
Of course, the REAL goal of privatization of SS is to create more
people invested in the outcomes (profits) of companies/business than
the quality of life and rights of the individuals (workers). In the
long run (a generation to two), the idea is that you'll have even more
RED voters and better distributed along the coasts ;-)
My guess is that this time around it won't pass but the wind for
reform (like welfare reform almost a decade ago) is in the air....
Gene's response
"save social security"? what in the world do you think that dubya’s
plan has to do with "saving" it? Remember, we went into Iraq
because they were on the verge of attacking the US with nuclear,
chemical and biological weapons. If you’re trying to find motivations
for his plans in his stated reasons, you’re going to have to look with
an awful lot of creativity. The words and phrases that he uses to
talk about social security are meant to stir up an irrational panic,
and sound like a plausible solution. They do not have to have any
truth behind them, they just have to stir emotions, not inspire
thought.
When pondering actual motivations, remember to think big. The greater
concept is that if there’s a pool of money that’s hard to get at, it
takes creativity to drain it.
Starting with Regan’s 1980-2 laws allowing it, a lot of good-ol-boy
bankers began to give out a lot of huge loans to their buds. The game
went on till the house of cards collapsed, because that money was
never going to be returned. Rather than go after the responsible
parties, which included his son Neil, George the first decided that
we, the US taxpayers, should pay back all of those loans. While it
was called a "bailout", an awful lot of S&L workers lost their
jobs. The working class was screwed royally, and those in power got
to keep all of the loot. The pool of money was the federal
government, and the keys to the vault were given to the wheelers and
dealers.
Now there’s the social security trust fund. It’s a gigantic insurance
program, and it’s run like one. It has extremely low overhead,
doesn’t have a great rate of return, and is backed by the US
government. It’s a pool of money that until now, has not been
plundered. Well, you can’t just go in and take it. First redirect
(part of) the flow of money - instead of going into the existing
trust, put it into a pool that you can get into. Eventually the fund
will run out because it’s starved for funds, you’ve already been
siphoning off from the other pool, and now the federal government is
on the hook for replenishing past siphoning. Fundamentally a similar
scam as the 80s, but the stakes are much, much higher.
I would have loved to have paid into a self-managed account, rather
than social security, all of my working life. I would have profited
greatly from it, because I can manage the funds much more profitably
than a low-yield insurance policy. But the Social Security
Administration is not supposed to be about bestowing profit on a
few. It's supposed to be about - well, social security.
Here are some quotes from last night’s speech meant to stir folk into a panic:
- "The system, however, on its current path, is headed toward bankruptcy"
- "the Social Security system has serious problems that will grow worse with time"
- "By the year 2042, the entire system would be exhausted and bankrupt"
- "only solutions would be drastically higher taxes, massive new
borrowing, or sudden and severe cuts in Social Security benefits or
other government programs"
- "Social Security collapsing before they retire"
Mind you, the FACTS are not in dispute. If the SSA continued
to receive money and pay out just as it does now, between now and
ETERNITY the shortfall would be between $10-11 trillion. If there are
no changes at all, something will have to give between 2042 and 2052,
which could be an incremental reduction in benefits or increase in
taxes. A minor change right now that would fix it for all eternity is
to lessen (but not even remove) SS tax exemption for income over
$90,000. A minor change right now that would fix it for all eternity
is to repeal only about one quarter of Bush’s tax breaks to the upper
1%. And saying "the system would be exhausted and bankrupt"
without following it immediately with "but only if the US government
goes bankrupt and cannot pay its existing debt" is intentional
misleading. The state of the union address is supposed to be
about the state of the union. Instead, the SS part of it was used as
a sales pitch. The pitch is going to continue, the media will
dutifully parrot it, and it will go on until a mechanism is put in
place to drain the SSA into the pockets of the rich, or enough people
stop believing the sales pitch that flies in the face of actual facts.
Trying to look for reasoning in the details is falling for the
distraction away from the big picture.
Yes, I’m on a rant, but this is my retirement that this snakeoil
salesman wants to take, and I don’t appreciate it.
Jeff's response
Gene hit most of my points. A quick summary though
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the plan is to replace the missing funds by additional borrowing,
which middle-america will need to bear the brunt of
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getting people to invest in private funds takes all that money out of
a government run funds which do not allow for private profits and puts
all that money in the private investments which directly profits the
deep pockets.
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Money money money
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They’re using a big social issue and the agreed-upon need to do
something about it to seize upon an opportunity to makes lots of cash
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