Social security

[mcsluggo]

This would be a good start to bipartisan cooperation, early. While the details would still be deviling, progress here would make BOTH sides look damn good, for a change.

(personally I would also like an add-on "personal account" a-la the Bush plan. Something that would involve some level of matching of personal contributions by the Feds... an additional 401-k type program that is not dependent upon employer participation---- Hopefully it wouldn't wipe out EXISTING 401 plans.)

http://www.nytimes.com/2009/01/30/op...ml?ref=opinion
Social Security on the First Date

By RAMESH PONNURU
Published: January 29, 2009

DEMOCRATS will probably get their way on most policy matters over the next two years, but bipartisan accomplishments won’t be easy. Congressional Republicans won their elections too, and they didn’t do so by promising to agree to everything that Democrats want. Yes, Democrats have the votes to muscle through a lot of bills without much Republican support — or any, as the stimulus package passed by the House this week shows. But on some occasions Republican support could be useful.

Take Social Security, which President Obama has suggested he wants to reform. A strategy that is supported only by Democrats could result in their having to take full responsibility for a tax-heavy bill, and some would balk at that prospect. This means that the most likely result is inaction.

This, after all, is what happened when Republicans tried to reform Social Security. President George W. Bush proposed restraining the growth in benefits and allowing young workers to invest some of their payroll-tax contributions for themselves. In 2005, Democrats almost unanimously believed that personal accounts “carved out” of Social Security were a deal-breaker.

Instead, they wanted to raise taxes, especially on high earners. They also thought that young people, especially those with low or moderate incomes, should be encouraged to build capital in savings accounts — but only if these accounts were “added on” to Social Security and seeded with tax credits. Congressional Democrats were not willing to cooperate with Mr. Bush, and Congressional Republicans did not want to take full responsibility for reforming Social Security. So nothing was done.

The stalemate continues today. To break it, each side will have to give up at least one cherished goal. Republicans must accept that Mr. Bush’s dream of letting individuals invest Social Security funds is dead. In return, Democrats will need to take tax increases off the table.

This compromise seems more likely than other solutions (though less likely than further stalemate), in part because both sides should agree that solvency will require reductions in the growth of benefits. Progressive price indexing is a good option. Under current policy, tomorrow’s retirees get greater benefits than today’s. Progressive indexing would keep that rule for low-income workers.

Benefits for high-income workers would, on the other hand, keep up only with inflation. This policy should be palatable to Democrats. If they agree to take the remaining steps to make the program solvent without tax increases, then Republicans should agree to finance the “add-on” savings accounts that Democrats favor.

This deal has something for everyone. Incumbents in both parties would be able to campaign on having saved the program. Republicans would get a big spending cut and avoid tax increases. Democrats would have blocked Mr. Bush’s personal accounts, and put most of the burden of rescuing Social Security on the affluent.

Mr. Obama would also be able to make good on a campaign promise. During his debates with John McCain, he said Americans would see a “net spending cut” under his presidency. Given the amount of stimulus spending that Mr. Obama envisions over the next few years, this kind of large, long-term spending reduction is the only way for that net cut to happen. Mr. Obama could demonstrate that his pledges to get past the stale partisan debates of the past weren’t just talk.

Most important, this compromise would result in good policy. Social Security needs to be brought into balance, and reasonable spending cuts would do less economic damage than tax increases. Long-term investment is still a good idea for young people. Besides, the ideological divide over “carve-out” and “add-on” accounts is absurd: whether the accounts are inside or outside Social Security is largely a question of accounting.

And who knows? Cooperation on Social Security could pave the way for bipartisan solutions on everything from tax reform to Medicare, by building good will and showing that such accomplishments are possible.

Ramesh Ponnuru is a senior editor for National Review.

[92bDad]

Please explain to me, what is wrong with setting up personal accounts?

This can be done at NO COST to the current SSN system.

Why not lower the 'Raises' that future recipients will get through SSN, and at the same time allow today's workers the OPTION to participate in a Federal Individual plan...a place where we could contribute to a plan above and beyond our current SSN burden.

It would also allow the 16 year old worker to at least start a fund.

Now that private fund should be allowed to be willed over to someone in the event of an untimely death.

And again, let this be completely voluntary and an extra payroll deduction...this would allow the concept to be run as a pilot program.

Perhaps in the next 30 years or so, we would see those who participated find that they are better off than those who didn't. Allowing bipartisan support in 2039 to transition a nearly bankrupt SSN into a genuine retirement plan for all citizens.

[alexamenos]

I think better than personal accounts, participation should be 100% voluntary.

edit...

and when I say "100% voluntary", I mean 100% voluntary....I think the fed gov ought to send out a little card to every american with a social security number and ask:

Do you want to participate in the Social Security System?

Yes __________

No __________

Those who check "Yes" can continue to send 7.5% of their income plus matching funds from their employer to the Fed Gov in exchange for government issued IOU's.

Those who check "No" will receive a check from federal government for the amount of money contributed into the SS system (plus interest), perhaps with the requirement that the funds be rolled over into a qualified retirement fund or otherwise taxed as income.

[dude1394]

The ponzi scheme is going to implode in the next decade or so.

[92bDad]

Originally Posted by alexamenos

I think better than personal accounts, participation should be 100% voluntary.

edit...

and when I say "100% voluntary", I mean 100% voluntary....I think the fed gov ought to send out a little card to every american with a social security number and ask:




Those who check "Yes" can continue to send 7.5% of their income plus matching funds from their employer to the Fed Gov in exchange for government issued IOU's.

I'm with you to an extent...I would choose to NOT participate, but I have some level of empathy for the current senior who did NOT have the option.

As a result, I am willing to sacrifice by supporting our current Seniors for a fixed time period...and I am willing to give more to a personal account to assist with the transition.

Yes, I and those who choose to participate would lose in the short-term, but our sacrifice would build a financial legacy for our kids, our grandkids and some great future generations of 92bDad's!!!

At the age of 40, I still have some great years ahead of me and thus, provided I invest in the future, I may have the opportunity to NOT rely on our government...however someone who is currently 60 or older is screwed, unless my generation is willing to foot the bill and sacrifice so that those who are 20 or younger wont have to worry about this issue.

Why don't the politicians actually allow the people to decide what they want to participate in, rather than dictate and ultimately drive this thing into the ground where my generation and those younger than me will ultimately get screwed anyway?

Call me crazy, but I would rather not have to count on my grandkids to pay for my retirement...I believe it is my personal responsibility...

Why is there such an opposition to the privatization of SS?


Those who check "No" will receive a check from federal government for the amount of money contributed into the SS system (plus interest), perhaps with the requirement that the funds be rolled over into a qualified retirement fund or otherwise taxed as income.

[alexamenos]

Originally Posted by 92bDad

Why don't the politicians actually allow the people to decide what they want to participate in...

Because if people did have a choice as to what to do with their own money--which any thinking, decent non-socialist can only admit is their right--the ponzi scheme that is the Social Security System would come crumbling down in a heartbeat. That's why we can never be given such a sensible and equitable choice.

If people had such a choice, a great many would obviously choose not to participate further and have their funds returned to them. But...as we're all well aware, the Social Security System is already entirely dependent upon the inflow of funds from investors to pay those "investors' who are now withdrawing funds, same as any ponzi scheme. Like any ponzi scheme, it'll crumble when people start trying to withdraw their invested capital.

The real difference between the Social Security System and Bernie Madoff's scheme is not that Social Security is any less fraudulent, but rather that Bernie Madoff was not able to point guns at people's heads to keep new investments coming in--that is a right reserved for the Federal Government.

Because a federal government can use coercive force to fund a fraudulent scheme, that fraud can be taken to much, much greater levels and sustained long after the fraud is recognized -- can anyone imagine an investor of Bernie continuing to invest in Bernie today? Of course not, but in the case of the federally sponsored scheme, many continue to "invest" in SS (yours truly, for example) because pissing away a chunk of my income is preferable to spending time in jail.

Having said all this....it's a bit of a disinginous argument on my part because there's really no sense in even pretending that social security is an investment scheme of any sort. Rather, the Social Security system is just a massive socialist income redistribution scheme with a harshly regressive income tax.

The first thing we have to do is stop pretending it's anything else.

[mcsluggo]

in the 1930s-ish, the old were the poorest sector of the economy (with the possible exception of the dependent young). A large sector of the population hadn't gotten to the point where they really had much options for setting aside money to live on in the "silver years" AND for the first time nuclear families were REALLY emerging, where children basically said sianara to their parents and grandparents and aunts and uncles and not only set out on their own, but also stopped contributing much to the elder generation's continuing survival (or at least AS much... as in having them live with you as the generally accepted rule, since after all-- in the really olden days you probably were living in what USED to be your folk's home).

So old people were poor, and dying in destitution.

Enter social security, a safety net to ensure that old people would have the barest minimum to survive on, and not be destitute. Then several things happened. First, in order to sell it... the rich were both not excluded from benefiting AND were promised that only their first $x would be taxed to pay for it (so the program shifted considerably away from a program to save people from destitution towards the highly regressively taxed transfer situation that Alex talks about). PLUS it turned out that the taste of this system galvanized cranky old people into one of the most brutally effectively cordoned beneficiary groups in the history of history. Old people got BRILLIANT at lobbying for themselves. Best ever, frankly. So benefits expanded and it shifted even MORE towards the straight transfer of income from the poorish young to what has since become the RICHEST segement of the economy, the old (they are basically now all mongomery burns and "mr. potter" from its a wonderful life)

anyway, so there we are it went from a social safely net to prevent destitution, to a "retirement plan" that helps ensure that the elderly will be able to afford that cabin in the poconos they always wanted without having to give up their upper east side flat.

Question: Is it still useful to have it?

I think it is. I would be happy shaving off a bunch of the added on benefits. But I think it is good to have its original purpose (rescue from destitution) AND it is also good to have a non-cyclical guaranteed small annuity. We have our 401-k's (most of us)... but MINE lost 50% of its value in the last 7 months, had I been 68 years old.. THAT would've really bit me in the ass!

but there is significant room for reform... of course. Do we (as a country) have the fortitude to stare down the AARP and make the necessary reforms? probably not.

[alexamenos]

Originally Posted by mcsluggo

...it went from a social safely net to prevent destitution, to a "retirement plan" that helps ensure that the elderly will be able to afford that cabin in the poconos they always wanted without having to give up their upper east side flat.

yeah...and this is why I reiterate that the first step to "reforming" Social Security is to quit pretending that it's anything other than a "social safety net" -- as long as that 64 1/2 year old dude thinks he's owed the amount he's put in plus interest, then there is no there "there" to reform.

make it a needs based thing, un-regressive the existing regressive tax scheme...

...it'll be a less bad plan at that point, and i'll still have much to bitch about.

[Rhylan]

To answer mcsluggo's point, if we want to provide a safety net against destitution - why can't we just have welfare? That's what welfare is supposed to be for, too. Old people can go get on welfare, and there ya go. We all already pay in to fund welfare and none of us are clamoring for "our share." Because it's welfare!

SS may have been conceived initially as a safety net for the elderly (read, unable to work) poor in pre-welfare days, but when welfare came along we should've just scrapped it. Because at that point SS became a government-mandated, poorly managed, low ROI personal savings program. And for people under 30 like me, it's flat out highway roberry. I'm out over $6500 to SS this year and I will NEVER see a dime of it, much less what could be done with it if it was in my bank account.

So there ya go. Let poor old people be on welfare just like poor people ages 0 - 64. Give everyone their money back. Problem solved.

Also, anyone over 60 who lost 50% in their 401k this year is foolish and doesn't deserve the lost money. Should've converted to some basic interest bearing cash funds and maaaaybe a small portion of bonds by that point. Quite frankly, even anyone over 55 ought to have a fair majority of their 401k in cash, too. I'm really sick of hearing about it, to be honest. Making money in the stock market is not an entitlement.

Being 28, I'm in lots of high risk funds and I lost about 38% in 2008. So what were these 50-plusers doing to lose 50%? You tell me.

[Mavdog]

I don't see any way that the ss system can be eliminated at this point.

we cannot just refund the money to all the workers who have paid in over the years, and the workers who did pay in look to it for their pension as it were.

the simplist way to shore up the system is to remove the cap on taxable earnings, and then set up a scale for payouts to correspond to the amount of $ put in. iow if you earn lots, pay in lots, you will get lots more than those who didn't.

one question is if there is no mandatory participation in ss, do we have the need for mandatory savings? if there is neither our country's anemic saving rate might go to near zero. not a good thing.

[dude1394]

I expect the only way to do it is to do something like dubya already tried. Where you keep the current system in place while creating real dollars in real accounts that are not spent by the guvment.