socail security

[Alaska Darin]

In all fairness, estimates on stock growth should be tempered if SS funds are diverted into the stock market, because the market will have to absorb all that liquidity.  Mathematics alone will dictate that you'll have too much money chasing the sparse returns. 

 

The upside of course, is that with more market liquidity, you may have more patience with some ideas that wouldn't have been funded otherwise.

229523[/snapback]

I'm really curious to see what that much capital will actually mean to the overall picture.

[KRC]

Yeah...i dont get it.  For all the money you are paying in SS Taxes today,  you will get ZERO back when you retire (if you are younger).  Now if you put that money in a private account, in an ABSOLUTE WORST CASE scenario, you get 0.  Of course, if you get zero it will be because america as we know it no longer exists.

 

The real annual rate of return on your social security taxes is NEGATIVE.  So even if you put your money in a money market account getting you 1% annual, you make more money than you are now.  There is NO downside here, other than the cost to implement, which is not an excuse.

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You have to remember that the Dems do not want the Republicans to get credit for doing something with Social Security. They feel that it is their issue and want to save it for election time. Therefore, everything that they said previously about wanting to fix Social Security, having private accounts and the fact that it is critical that something be done all takes a back burner (relying on the fact that the American public is too stupid to remember their quotes from a few years ago) while they obstruct this so that they can save it for their side when they regain power.

 

On the KRC for President vote issue, it will take time before anything like that is published. People do not care about write-in candidates so they are not concerned about quickly counting those votes.

[JimBob2232]

Oh, i didnt forget that KRC...

 

First, the democrats cant have a solution to this problem because it is THEIR issue, so they will fight it so they can use it as a campaign platform. Though this will be harder to do now that they are on record saying bush is LYING about the problem.

 

The whole thing is pretty sad really...

[DC Tom]

In all fairness, estimates on stock growth should be tempered if SS funds are diverted into the stock market, because the market will have to absorb all that liquidity.  Mathematics alone will dictate that you'll have too much money chasing the sparse returns. 

 

The upside of course, is that with more market liquidity, you may have more patience with some ideas that wouldn't have been funded otherwise.

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I was wondering when someone would bring that up. Dumping even 1% of the current annual FICA intake into the markets can't help but throw them out of whack to some degree. Then throw in the idea of "government approved investments"...now you've got a lot of money chasing investment vehicles that essentially have a federal rating for investment quality, official or otherwise. It's pretty easy to forsee a situation where retail investors start chasing "government approved" investments secure in the knowledge that the inflow of money into SSA personal retirement accounts will at least provide price support - and worst case, drive the stock up to lofty valuations approaching unreality (i.e. a bubble). There's quite a few ways these personal accounts can end up being a bad thing on a macro level outside of Social Security.

[JimBob2232]

Lets look at this a bit differently then. Suppose everyone decided to invest 1% of their salary in an s&p 500 index fund completely out of a privatized SS account. Would this be a bad thing?

[Kevbeau]

I was wondering when someone would bring that up.  Dumping even 1% of the current annual FICA intake into the markets can't help but throw them out of whack to some degree.  Then throw in the idea of "government approved investments"...now you've got a lot of money chasing investment vehicles that essentially have a federal rating for investment quality, official or otherwise.  It's pretty easy to forsee a situation where retail investors start chasing "government approved" investments secure in the knowledge that the inflow of money into SSA personal retirement accounts will at least provide price support - and worst case, drive the stock up to lofty valuations approaching unreality (i.e. a bubble).  There's quite a few ways these personal accounts can end up being a bad thing on a macro level outside of Social Security.

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Might be an offset to the glut of boomers pulling money out of the market when they retire. I'm not knowledgeable enough on the ramifications to make predictions and I imagine most boomers would leave the bulk of their investments in the market, albeit they'll probably move the bulk of their money into safer stocks. I listened to an economics professor last semester (going back for my MBA) lecture on the negative affects of the mass retirement we face...However, it was obvious he definitely had a biased slant towards the US. I believe he was Dutch.

[swede316]

I'm not relying on SS...I have a 401K, an IRA, and another Mutual Fund to get me by. Granted I'm no Donald Trump and got started later....I guess my point is you gotta look out for #1....and not rely on the govt. Man If I knew this when I was 20 vice 35...I'd be a millionaire already.

[KD in CA]

I cant understand why people are against the privitazation of social security.  (Notice i did not say bush's plan...but the concept of privitazation itself).  It HAS to be that bush is bad and therefore his plan is bad, becaues the options are

 

1) Continue the current system and let social security kill itself off

2) Privitize social security and guarentee everyone they will be cared for in old age.

3) Get rid of social security alltogether.

 

Option 2 is THE ONLY ONE that makes sense. 

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I disagree. I vote for # 3. 6.2% of my lifetime wages plus investement earnings on that money ought to be plenty for retirement.

[DC Tom]

Might be an offset to the glut of boomers pulling money out of the market when they retire. I'm not knowledgeable enough on the ramifications to make predictions and I imagine most boomers would leave the bulk of their investments in the market, albeit they'll probably move the bulk of their money into safer stocks. I listened to an economics professor last semester (going back for my MBA) lecture on the negative affects of the mass retirement we face...However, it was obvious he definitely had a biased slant towards the US. I believe he was Dutch.

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Hadn't thought about that (balancing the outflow). If it does, I suspect it would only in part, as the outflow would be from a broader base of investments than the inflow...the thing that really worries me is the "government approval" aspect of it, which basically would serve to create a family of "elite" investment vehicles that everyone would chase, safe in the knowledge that billions of dollars will be invested alongside theirs by federal mandate. There's a lot of ways that something like that can go bad in something as fundamentally twitchy and unpredictable as the market.

[JimBob2232]

I disagree. I vote for # 3. 6.2% of my lifetime wages plus investement earnings on that money ought to be plenty for retirement.

 

I agree with you in principle. However, you and I might be smart enough to put away 6% of our salaries away for retirement, but joe and suzie down the street are not. Ordinarily I would say, screw em, they could have done the same, but then it all boils down to the plethora of other social programs our taxes go to to bail them out. Privitization is kinda the middle road, where you are forced to invest in your retirement so that others dont have to bail you out (as often...)

[Cripes]

Here to clear up all this confusion and worry about his Social Security proposal is the man himself:

 

Q. How would the privatization plan ensure that Social Security will not run out of money down the road?

 

GW: "Because the -- all which is on the table begins to address the big cost drivers. For example, how benefits are calculate, for example, is on the table; whether or not benefits rise based upon wage increases or price increases. There's a series of parts of the formula that are being considered. And when you couple that, those different cost drivers, affecting those -- changing those with personal accounts, the idea is to get what has been promised more likely to be -- or closer delivered to what has been promised.

 

"Does that make any sense to you? It's kind of muddled. Look, there's a series of things that cause the -- like, for example, benefits are calculated based upon the increase of wages, as opposed to the increase of prices. Some have suggested that we calculate -- the benefits will rise based upon inflation, as opposed to wage increases. There is a reform that would help solve the red if that were put into effect. In other words, how fast benefits grow, how fast the promised benefits grow, if those -- if that growth is affected, it will help on the red.

 

"Okay, better? I'll keep working on it."

 

---

 

Translation: "We have to consider what amounts to benefit cuts on future recipients, through the use the inflation-based COL index rather than the existing, and higher-yielding, wage index."

[DC Tom]

Translation: "We have to consider what amounts to benefit cuts on future recipients, through the use the inflation-based COL index rather than the existing, and higher-yielding, wage index."

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The three problems with that translation being:

1) That a "decrease in growth" is the same as a "cut" - try using that same logic on the federal budget deficit, and see how quickly you get laughed at, yet it's okay to rationalize Social Security with it.

2) Even if it IS, in fact, a cut...what are we comparing it to? Insolvency. I think, long-term, a 40% "cut" is preferable to a 100% cut.

3) No one really knows what the hell Bush's plan is - not the least of which is Bush himself. Every source I've checked - including, but not limited to, Treasury, SSA, MoveOn.org, the NYT, and the Post - can't even begin to say what the "reform" is in "Social Security Reform" except for throwing out buzzwords like "privatization" and "personal retirement accounts".

[Thamus]

I disagree.  I vote for # 3.  6.2% of my lifetime wages plus investement earnings on that money ought to be plenty for retirement.

230890[/snapback]

 

You do have the benefit of being some generations removed from the Great Depression?

 

If this was 1938, not 2005 would you think the same way?

 

Trust is EVERYTHING!

 

And that can quickly tank!

[Thamus]

Just think: Back when SS was implemented, do you think such privatization talk could have ever floated? Hell NO!

 

I agree SS needs to be tweaked, it has been historically coming!

 

I just can't look at it as a negative thing.

 

Just as DB on the Bills stopped the skid and brought competivness (hahahahah!) and filled stadium seats to bridge the future.

 

WOW! That is a reach comparing DB to SS!

 

[KRC]

Just think:  Back when SS was implemented, do you think such privatization talk could have ever floated?  Hell NO!

 

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In a written statement to Congress in 1935, Roosevelt said that any Social Security plans should include, "Voluntary contributory annuities, by which individual initiative can increase the annual amounts received in old age," adding that government funding, "ought to ultimately be supplanted by self-supporting annuity plans."

[KD in CA]

I agree with you in principle.  However, you and I might  be smart enough to put away 6% of our salaries away for retirement, but joe and suzie down the street are not.  Ordinarily I would say, screw em, they could have done the same, but then it all boils down to the plethora of other social programs our taxes go to to bail them out.  Privitization is kinda the middle road, where you are forced to invest in your retirement so that others dont have to bail you out (as often...)

231590[/snapback]

 

Unfortunately, that is true. But what we have now is just another welfare program in the making. Already we are starting to hear the suggestions of reducing benefits for the "wealthy", which happens to be the people that held jobs all their lives and capped out the benefit contribution every year. I'm sure by the time this is a fiscal disaster in 20+ years, it will turn into a 'need-based' program and we'll all be required to qualify for SS benefits.

[Kane]

I've been trying to find examples of other countries that have privatized pre-existing systems. Apparently 20 countries have partially privatized. The best that I could dig up was an edited version of a Wall Street Journal article which cannot be accessed without a subsription. The edited version is linked below. If anyone has a subscription to the online Journal, I would like to know what has been edited out (the author says that the article deals with 7 countries and he only writes about 5).

 

http://www.campaigndesk.org/archives/001284.asp

[GG]

If anyone has a subscription to the online Journal, I would like to know what has been edited out (the author says that the article deals with 7 countries and he only writes about 5).

 

http://www.campaigndesk.org/archives/001284.asp

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I like this quote:

 

But it has been ever thus. Years ago, Walter Reuther, then-head of the AFL-CIO, was heard wondering aloud why labor had never been able to produce a national newspaper nearly as comprehensive or as intelligent as the one that capital had produced.

 

We're still waiting.

 

It was a very good, lengthy piece. The purpose was to illustrate the downsides of private accounts and the importance to set up the program to eliminate the pitfalls that were found im other countries.

 

The short version - keep administrative costs down, don't give people too many choices, don't be generous in allowing people to withdraw savings before retirement, etc.