"GIVE" Act now passes in Senate?

[bamacre]

Originally posted by: chess9

Originally posted by: Jaskalas

Originally posted by: chess9
Sorry, mate, but Libertarians get put in the same category as Chicago School of Economics economists, witchcraft, Zoroastrianism, and other squalid disorders of the brain. Since the Wall Street meltdown, I think the argument is now a mortal lock.

-Robert

Cause government making matters worse is proof that it should do so?

Almost all government is poorly done, granted, but the option isn't to let the Libertarians have free rein. I want my roads fixed, schools improved, military to get the best weapons, and foreign service to work for peace. As for social security, the Libertarians would have had us all invested in the stock market, gold, hedge funds, cds, etc. and we'd be facing even worse catastrophe than we are now facing. (Erm, ok, granted that gold is UP. )

Free markets sound great, but are horrible in practice.

-Robert

Uhh, do you realize that the primary cause of this entire mess was Greenspan's actions at the Federal Reserve? The very actions that most Libertarians have as a rationale for getting rid of it?

 

[fskimospy]

Originally posted by: Zenmervolt

I'm not suggesting individual accounts. Too many people wouldn't manage it properly and we'd be right back where we started.

I am suggesting, however, that there needs to be at least some investment of the overall fund in the stock market. Well-diversified funds that large just plain don't "lose it all". That doesn't happen. Every large corporate pension plan (guaranteed money paid out to employees, just like social security) is invested in the stock market and even with this current correction they haven't "lost it all". In fact, many of them remain healthy because they are managed in such a way that there is buffer room for exactly these kinds of economic shocks.

The US Government Employees Retirement Pension is invested in the stock market. Most (all?) states have their State Employees Retirement Pensions invested in the stock market. Guess what? Those all do better than Social Security, and those are all guaranteed benefits (i.e. they're always there). Just because people don't know that these plans are invested in the stock market doesn't mean they're not.

The problem is that whenever someone suggests investing Social Security in the stock market, people who have never taken a financial management class in their lives come out of the woodwork screaming about risks they don't understand.

ZV

About those pensions invested in the stock market:

Well currently the PGBC estimates the pension funding shortfall due to the stock market collapse to be somewhere around half a trillion dollars for the pensions it services, and its ability to come through on those obligations is currently in doubt as it has lost about a quarter of its equity over the last 6 months. The problem could most certainly be a LOT larger than that, as the companies are still assuming a growth rate in the stock market that is pretty optimistic.

Now what happens if you expanded that to the entire US electorate? Nothing good. We're probably going to end up bailing out a good amount of this pension problem already, we certainly don't need to be bailing out everyone over 65.

 

[ElFenix]

Originally posted by: chess9 As for social security, the Libertarians would have had us all invested in the stock market, gold, hedge funds, cds, etc. and we'd be facing even worse catastrophe than we are now facing. (Erm, ok, granted that gold is UP. )

Free markets sound great, but are horrible in practice.

-Robert

go work out the math for social security vs a diversified portfolio and i'll bet dollars to donuts the portfolio is ahead for anyone except those who started investing in just the last couple of years.


the risk of social security is that congress decides to start means testing. the risk of the diversified portfolio is that the whole economy collapses, which is also shared by social security. can't pay the blue hairs (who, btw, are the weathiest segment of society so we've got a wealth transfer up the ladder) when there ain't any money.

 

[Zenmervolt]

Originally posted by: eskimospy
About those pensions invested in the stock market:

Well currently the PGBC estimates the pension funding shortfall due to the stock market collapse to be somewhere around half a trillion dollars for the pensions it services, and its ability to come through on those obligations is currently in doubt as it has lost about a quarter of its equity over the last 6 months. The problem could most certainly be a LOT larger than that, as the companies are still assuming a growth rate in the stock market that is pretty optimistic.

Now what happens if you expanded that to the entire US electorate? Nothing good. We're probably going to end up bailing out a good amount of this pension problem already, we certainly don't need to be bailing out everyone over 65.

And it's better to have a system that is chronically under-funded and unable to meet its obligations without taking additional funds as Social Security is?

A rare infusion of cash into a stock plan is still better overall than being slowly bled dry by a Social Security plan that never grows fast enough on its own to meet obligations.

You're like someone who chooses to pay $5/day rather than $25/week on the theory that "$5 is less than $25". Well, yes it is. But in the long run you're paying $10 more each week if you're on the $5/day payment plan.

ZV

 

[fskimospy]

Originally posted by: Zenmervolt

And it's better to have a system that is chronically under-funded and unable to meet its obligations without taking additional funds as Social Security is?

A rare infusion of cash into a stock plan is still better overall than being slowly bled dry by a Social Security plan that never grows fast enough on its own to meet obligations.

You're like someone who chooses to pay $5/day rather than $25/week on the theory that "$5 is less than $25". Well, yes it is. But in the long run you're paying $10 more each week if you're on the $5/day payment plan.

ZV

And what I'm saying is that these infusions of cash could very well be much, MUCH larger than you anticipate. A half trillion dollars is likely only the tip of the iceberg for these plans, and these plans only cover a fraction of the US elderly population. Funny how much everyone screamed about Obama's $700 odd billion dollar stimulus bill, I wonder what they would have said to a $1 trillion, $2 trillion, or more social security 'fix' bill?

The real answer is to index social security to demographic change. When the system was put into place it was relatively rare for people to live much past 65, and those who did were frequently unable to work. That's no longer the case today, as we have reams of people living far past 65. The fundamental structure of the legislation has been lost, that's what should be fixed.

 

[Zenmervolt]

Originally posted by: eskimospy

Originally posted by: Zenmervolt

And it's better to have a system that is chronically under-funded and unable to meet its obligations without taking additional funds as Social Security is?

A rare infusion of cash into a stock plan is still better overall than being slowly bled dry by a Social Security plan that never grows fast enough on its own to meet obligations.

You're like someone who chooses to pay $5/day rather than $25/week on the theory that "$5 is less than $25". Well, yes it is. But in the long run you're paying $10 more each week if you're on the $5/day payment plan.

ZV

And what I'm saying is that these infusions of cash could very well be much, MUCH larger than you anticipate. A half trillion dollars is likely only the tip of the iceberg for these plans, and these plans only cover a fraction of the US elderly population. Funny how much everyone screamed about Obama's $700 odd billion dollar stimulus bill, I wonder what they would have said to a $1 trillion, $2 trillion, or more social security 'fix' bill?

The real answer is to index social security to demographic change. When the system was put into place it was relatively rare for people to live much past 65, and those who did were frequently unable to work. That's no longer the case today, as we have reams of people living far past 65. The fundamental structure of the legislation has been lost, that's what should be fixed.

They could just as likely be much, MUCH smaller. That's the nature of an estimate. Additionally, it doesn't say what the assumptions are when calculating that shortfall, so there's no way to evaluate it. Are they assuming that the economy won't recover for 10 years? Are they assuming it will recover in 2 months? Over what time frame is that $500 billion shortfall?

Social Security has a projected shortfall of over $11 Trillion into perpetuity. That seems worse than 0.5 Trillion. Even if it's just over the next 75 years, Social Security still has a projected shortfall of $3.7 Trillion. Again, that's much larger than $0.5 Trillion.

ZV

 

[ElFenix]

Originally posted by: eskimospy
The real answer is to index social security to demographic change. When the system was put into place it was relatively rare for people to live much past 65, and those who did were frequently unable to work. That's no longer the case today, as we have reams of people living far past 65. The fundamental structure of the legislation has been lost, that's what should be fixed.

and there's that pesky social security risk again. taking risk and not getting paid is stupid.

 

[Fern]

Originally posted by: eskimospy
-snip-
I don't think you understand the purpose of social security. It's point is not to achieve the highest return possible for the citizens of the US, it's point is to always be there. (the hint is in the name)

If we're letting people risk it in the stock market, what happens if they lose it? What would we be doing with all those elderly people right now? I'll tell you what we would be doing, we would be paying for them anyway somehow, because nobody is willing to accept large amounts of indigent elderly people. So really all we would be doing (once again) is privatizing gains and socializing losses, but now on such a massive scale that events such as this one would be catastrophic.

Yeah social security isn't perfect, feel free to oppose it in principle all you want. The idea that we should be investing it in the stock market is absolute silliness though, it runs counter to the entire purpose of the program.

Mostly I agree with you.

Turning SS into a Defined Contribution -type system is a very bad idea. In a down market like this most retirees would have lost the money in their SS account and the governement would likely have to pick up the slack to keep them out of poverty anyway.

In other words, we'd end up right with the 'ole private reward, public risk. Those retirees who had great returns would get to keep it, those who lost would be looking for a bailout.

However, the government is cheating SS a bit with the current bond scheme used. The special SS treasury bonds have historically returned less than regualr bonds. In other words, the government has been lessening it's borrowing costs to the detriment of the SS fund/program. This lets them spend more than they otherwise would.

EDIT: Forgot to say that beofre commenting the Give Act will need to read the bill. IIRC, wht I have read on repoerts in EXTRA $5 billion (Jeebus, where is all this money coming from?) was given to the Peace Corp or something to hugely expand it. The PC has had a lot of complaints in the past about their workers being too inexperienced to actually benefit anybody etc. I don't see how rapidly increasing it is gonna do anything but worsen that problem. OK, I see one thing it will do - act as a 'jobs' program like those during the Depression.

Fern