noob social security question -

[LordSnailz]

I did a search and read most of the threads already but can someone explain in 2-3 sentences why Bush's plan is bad?

From what I understand you take percentage of what they tax you and use it to invest it yourself. What's wrong with that plan? I understand it won't fix the problem but isn't it in the right direction?

Not trying to start a flame war here just a simple answer. TIA!

 

[conjur]

Well, technically, he doesn't have a plan. He's just tossed about some ideas.

 

[LordSnailz]

What's fatally wrong with the idea of letting people invest some of their money for retirement?

 

[Darkhawk28]

His plan would cost us trillions in additional national debt.

Would reduce guaranteed benefits.

Is a stretch because the CBO (Congressional Budget Office) and the SS Trustees both say that the system is 100% solvent until 2042 and 73%-80% solvent indefinitely.

Broker fees and the shaving of the first 3% of your earning above and beyond what SS normally earns is taken.


That's just a start.

 

[Kibbo]

Depends on your view of the "right" direction.

It could be bad because it is higher risk: what will happen to the losers in the market? It's all very well to say that they assumed the risk themselves, but what happens when thouseands of grandmothers are thrust into the poorhouse when the next generation's Enron hits? You're going to end up paying for them anyway.

Also, it doesn't even begin to fix the problem. The major problem lies in the fact that the workforce isn't growing as fast as the "retired force." This one idea isn't going to come close to fixing that. To fix that you need some combination of increasing premiums, reducing payments and topping it off with general taxtion revenues. And how much of each is a very hotly debated topic. It could be that a small amount on each level could even things out quite nicely. The funky accounting measures used on this thing, and the reliance on long-term economic and demographic estimates, means that any guess will lie on shaky ground.

Edit: This could also lead to long-term political problems, because some on the left fear that any new call for an environmental regulation or tax could fall victim to apocolyptic fear mongering about the collapse of business in America. This happens already, but it might be much more compelling when the pro-business side can say "it threatens Ma Mae's pension!! She'll be making catfood pie for dinner!!"

 

[Darkhawk28]

Originally posted by: Kibbo
Depends on your view of the "right" direction.

It could be bad because it is higher risk: what will happen to the losers in the market? It's all very well to say that they assumed the risk themselves, but what happens when thouseands of grandmothers are thrust into the poorhouse when the next generation's Enron hits? You're going to end up paying for them anyway.

Also, it doesn't even begin to fix the problem. The major problem lies in the fact that the workforce isn't growing as fast as the "retired force." This one idea isn't going to come close to fixing that. To fix that you need some combination of increasing premiums, reducing payments and topping it off with general taxtion revenues. And how much of each is a very hotly debated topic. It could be that a small amount on each level could even things out quite nicely. The funky accounting measures used on this thing, and the reliance on long-term economic and demographic estimates, means that any guess will lie on shaky ground.

Let me just add that most of SS's problem like in the baby-boom generation. After WWII, people were fornicating like crazy (as well they should have 😉) and the child birthrate skyrocketed for a few years. That's what we're going to be hitting really soon. If we can rationally explore sensible options to tweak SS right now, we can overcome that nicely.

 

[Kibbo]

My overall point was this:

The problem in social security will be handled with normal and predictable methods. The revolutionary ideas Bush is proposing will not help the fundamental economic and demographic realities. His way may be better, and if you like his ideas of a "culture of ownership" or whatever it is, then you may want his new plan.

But his new plan doesn't fix the problem. It doesn't rescue social security from the depths of crisis. And painting his ideas as salves the way he does is intellectually dishonest and manipulative. If you like the plan ideologically, you may like the fact that he is misleading the American public. Your call, really.

 

[StageLeft]

Scrap SS if you're not going to do anything else with it. It's theft of money.

 

[Fingolfin269]

I thought his idea was that 1/4 of your social security could be invested. The key word is 'could' because you could opt to not touch it if you want.

I don't see a problem with that. Also, where is this 'will add $X million to the national debt' factored in? I've heard people say that but have yet to actually see where the numbers come from. If anyone can provide this information I'd appreciate it. Numbers from both sides would be nice. 😉

 

[Fattz]

Darkhawk28

Is a stretch because the CBO (Congressional Budget Office) and the SS Trustees both say that the system is 100% solvent until 2042 and 73%-80% solvent indefinitely

And your happy with that(73% - 80% solvent)? Or it doesn't affect you so you do not consider it a problem?

LordSnailz, for me it means extra money. Look at Darkhawk28 and he says after 2042 then its only 73% - 80% solvent. Does that sound good for you or your children? using Darkhawk's math, let's assume you pay 3% broker's fees. Would you rather pay 3% broker fee or lose up to 27% of your potential benefit(assuming SS is only 73% solvent after 2042)? Go plug in your numbers at the social security website or at www.daveramsey.com (also has a social security calculator). You'll see that you have the potential to earn more than what social security will pay you(or your children and future generations). Also go look at the long term market and see the history's and trends. Some people will lose money in the new plan but alot will gain benefits, but we all lose money after 2042 (using Darkhawk's number's up to 27%). Not to mention you will own that portion of the contribution and the goverment won't be able to squander it away or waste it as they are doing now. So it costs us 2 trillion.... thats over how long? Thats not up front that's over a period of years, compare that to millions of people losing 27% of their benfits (again using Darkhawk's numbers) and see which is greater.

SS ideas (plan) he(Bush) has says it won't change for those 55 and over.

The other portion is that the new plan is strictly VOLUNTARY yes, if you want to use the old waste of a plan then use it. You don't have to use the new system he is proposing. Which is a good thing.

But do the math yourself and don't rely on my opinions or anyone's elses. Plug in the numbers, see what you would get with the proposed plan (idea) and see what you would get it you didn't do it. Compare and make your own mind.

 

[Darkhawk28]

Originally posted by: Fingolfin269
I thought his idea was that 1/4 of your social security could be invested. The key word is 'could' because you could opt to not touch it if you want.

I don't see a problem with that. Also, where is this 'will add $X million to the national debt' factored in? I've heard people say that but have yet to actually see where the numbers come from. If anyone can provide this information I'd appreciate it. Numbers from both sides would be nice. 😉

Here's a little something

And a little more.

 

[Darkhawk28]

Originally posted by: Fattz
Darkhawk28

Is a stretch because the CBO (Congressional Budget Office) and the SS Trustees both say that the system is 100% solvent until 2042 and 73%-80% solvent indefinitely

And your happy with that(73% - 80% solvent)? Or it doesn't affect you so you do not consider it a problem?

LordSnailz, for me it means extra money. Look at Darkhawk28 and he says after 2042 then its only 73% - 80% solvent. Does that sound good for you or your children? using Darkhawk's math, let's assume you pay 3% broker's fees. Would you rather pay 3% broker fee or lose up to 27% of your potential benefit(assuming SS is only 73% solvent after 2042)? Go plug in your numbers at the social security website or at www.daveramsey.com (also has a social security calculator). You'll see that you have the potential to earn more than what social security will pay you(or your children and future generations). Also go look at the long term market and see the history's and trends. Some people will lose money in the new plan but alot will gain benefits, but we all lose money after 2042 (using Darkhawk's number's up to 27%). Not to mention you will own that portion of the contribution and the goverment won't be able to squander it away or waste it as they are doing now. So it costs us 2 trillion.... thats over how long? Thats not up front that's over a period of years, compare that to millions of people losing 27% of their benfits (again using Darkhawk's numbers) and see which is greater.

SS ideas (plan) he(Bush) has says it won't change for those 55 and over.

The other portion is that the new plan is strictly VOLUNTARY yes, if you want to use the old waste of a plan then use it. You don't have to use the new system he is proposing. Which is a good thing.

But do the math yourself and don't rely on my opinions or anyone's elses. Plug in the numbers, see what you would get with the proposed plan (idea) and see what you would get it you didn't do it. Compare and make your own mind.

How about he read some true FACTS I provided in the links above and not some Bush rhetoric.

Does SS need a tweak? YES and I've already stated that! But first, you, Dave Ramsey and our President need to correctly IDENTIFY the problem.

 

[Darkhawk28]

If a plan could be put together that would

A) Solve the solvency problem (Bush's plan does NOT solve this, even to his own admission)

B) Allow me to choose the stock I want and move them around as much as I want.

C) Have a built in loss insurance of some measure (like an FDIC of sorts).

D) Not borrow trillions of dollars further indebting our nation and destabalizing our economy.

E) Would NOT reduce guaranteed benefits.

Then, yes, I'd be open to it, sure.

 

[Tom]

Suppose you were setting aside money to buy a new car, but then someone told you that if you took one third of that money to put aside for a new refrigerator then maybe you will die before you need the car and your heirs can use the money you saved to buy drugs.

That's the plan in a nutshell.

 

[Fingolfin269]

Originally posted by: Darkhawk28
If a plan could be put together that would

A) Solve the solvency problem (Bush's plan does NOT solve this, even to his own admission)

B) Allow me to choose the stock I want and move them around as much as I want.

C) Have a built in loss insurance of some measure (like an FDIC of sorts).

D) Not borrow trillions of dollars further indebting our nation and destabalizing our economy.

E) Would NOT reduce guaranteed benefits.

Then, yes, I'd be open to it, sure.

Hah, screw that. I don't want average joe citizen to have the power to choose single stocks with their 1/4 of social security. Funds yes, single stocks no way.

 

[Kibbo]

Fatz, you are confusing the issue. Sovancy in this case isn't a cut and dried thing. First of all, the gap could be made up with increased premiums, or payouts that are decreased. People are living longer; what kind of savings could be realized by cutting the payouts in half for the first 5 years for those without disabilities? Or by scaling back income for those who have alternate sources of income?

Worst case scenario, you can mke up that gap with general government revenues, which guarantee the whole system. The worst case scenario isn't default, it's deficit. Something the Bush administration isn't exactly afraid of. It's very hypocritical to argue for fiscal dicipline later, when demographics works against you, but against fiscal discipline now, when it works for you. You guys should be saving for when the boomers retire. Instead you are borrowing. The federal government should look after the current fiscal problems before it looks after the future's. The interest you are going to be paying on the current deficit is how much? How much of the solvency gap would be filled if you could apply that toward social security?

 

[Genx87]

A. Trust Fund is non-existent. When those bonds start coming in who pays for them? The taxpayer.
B. After ~2018 the amount of money coming in from SS taxes will be less than what is being put out. This means those bonds in the fake trust fund will be cashed and the tax payer will foot the bill. This means at first a few billion will be added onto the budget and eventually by the mid 2020s it will grow to a few hundred billion. Sometime in the early 2040s that number will grow to over 1 trillion a year shortfall.
C. Private accounts the way Bush proposes it wont solve the problem. However I believe if a system was devised that privatized the entire system it would. You see the problem with the current system is two fold. 1. The demographics that made the system work for the past 70 years will change over the next 20 and cause it to implode. 2. The system was setup in a way that allowed congress to rape it for all she was worth. Any profits from the system were allowed to be borrowed against and spent by congress. This means the fancy trust fund crap they like to spew is nothing more than a cover for the raping they have been doing the past 70 years. They make it sound like a big old pile of cash is just sitting in a vault waiting to be tapped. It isnt, it is an IOU the govt wrote to itself. When it has to shift the numbers in the books. The numbers will be paid by the taxpayers.
D. If nothing is done then our budget will increase directly by the amount of the SS shortfall. Once the fake trust fund is exhausted then they supposedly will lower benefits to 81%. Meaning people like me who pay at a higher rate so the baby boomer crowd who probably paid a much lower rate can rape me. Ill intern be raped again by the same system

So if they designed a correct system it would either be

A. A system where all of your SS taxes go into an individual account with your name on it and it cant be touched by congress
B. A system that did the above but allowed for the money to be put into a federal run fund that invested in the stock market and gained a higher return than the current system.

Either way putting it into a general fund and allowing the wolves in congress to eat it was and still is a terrible idea. The system it broke(pun intended) and if nothign is done it and medicare will bankrupt this country.

This is a classic case as to why socialism in anything but small doses is not good.

 

[DaveSimmons]

Originally posted by: Fingolfin269
where is this 'will add $X million to the national debt' factored in?

This one is not partisan bickering. SS payouts to retirees are funded from current contributions by people working now. This has been true since the beginning, generation X is paid for by generations Y and Z.

If people working now (the Y and Z) are allowed to divert 1/4 - 1/3 of their money into separate accounts, the government needs to borrow money to keep paying the people who are already retired (X).

The lowest number I've seen for the first few years is an extra $2 trillion in debt, at a time when we're already adding a half-trillion to the national debt each year.

That's a fact, not a point being debated. The odd part is that it's the "party of fiscal responsibility" (Republicans) that is saying we shouldn't care about extra trillions in debt.

(I'm not against the idea of personal accounts or investing in the market, just the current Bush "plan" that ignores the costs.)

 

[SuperTool]

Originally posted by: Genx87
A. Trust Fund is non-existent. When those bonds start coming in who pays for them? The taxpayer.

Trustfund holding bonds is still a trustfund. Do you expect it to hold cash?

B. After ~2018 the amount of money coming in from SS taxes will be less than what is being put out. This means those bonds in the fake trust fund will be cashed and the tax payer will foot the bill. This means at first a few billion will be added onto the budget and eventually by the mid 2020s it will grow to a few hundred billion. Sometime in the early 2040s that number will grow to over 1 trillion a year shortfall.

We are running half a trillion deficits now in the general fund, and republicans are the ones responsible. Before trying to "fix" problems in 2040, how about they fix the current problems they created?

C. Private accounts the way Bush proposes it wont solve the problem. However I believe if a system was devised that privatized the entire system it would. You see the problem with the current system is two fold. 1. The demographics that made the system work for the past 70 years will change over the next 20 and cause it to implode.

Can be solved by raising the retirement age

2. The system was setup in a way that allowed congress to rape it for all she was worth. Any profits from the system were allowed to be borrowed against and spent by congress. This means the fancy trust fund crap they like to spew is nothing more than a cover for the raping they have been doing the past 70 years. They make it sound like a big old pile of cash is just sitting in a vault waiting to be tapped. It isnt, it is an IOU the govt wrote to itself. When it has to shift the numbers in the books. The numbers will be paid by the taxpayers.

If the government wasn't running deficits all the time, it wouldn't need to borrow SS funds. Also, I don't understand what you are complaining about. That the government is going to pay too much back to SS or too little. On one hand you are whining about how much the government is going to have to pay back to SS, and on the other hand you are complaining that the government is ripping off SS. You need to make up your mind

D. If nothing is done then our budget will increase directly by the amount of the SS shortfall. Once the fake trust fund is exhausted then they supposedly will lower benefits to 81%. Meaning people like me who pay at a higher rate so the baby boomer crowd who probably paid a much lower rate can rape me. Ill intern be raped again by the same system

So they should cut it to 81% now, instead of waiting for SS trustfund to be exhausted

So if they designed a correct system it would either be
A. A system where all of your SS taxes go into an individual account with your name on it and it cant be touched by congress

We already have such a system, it's called 401k or IRA

B. A system that did the above but allowed for the money to be put into a federal run fund that invested in the stock market and gained a higher return than the current system.

The problem with SS is not that it invests in the stock market over bond market. It's that it offers subsidized low interest loans to the federal government. But if it didn't then the government would have to borrow at a higher interest rate, and your income taxes would go up

Either way putting it into a general fund and allowing the wolves in congress to eat it was and still is a terrible idea. The system it broke(pun intended) and if nothign is done it and medicare will bankrupt this country.
This is a classic case as to why socialism in anything but small doses is not good.

Except you have to think back to why we got SS in the first place. Capitalism system failed americans before the great depression, and a healthy dose of socialism needed to be injected. Markets are a volatile thing, not something you can trust your retirement to. I personally like SSI more than SS. I think the government should guarantee a minimum standard of living to seniors, but not necessarily the same standard of living one was accustomed to.

 

[SuperTool]

dp

 

[Genx87]

Trustfund holding bonds is still a trustfund. Do you expect it to hold cash?

I have a trustfund with cash in it, when I cash it in it will spit back the cash that was put into it because it has my name on it. When this trustfund spits out cash for the bonds redeemed. Where is the money coming from? Whose name is on the account?

We are running half a trillion deficits now in the general fund, and republicans are the ones responsible. Before trying to "fix" problems in 2040, how about they fix the current problems they created?

This is simple deflection and sticking of ones own head in the sand.

Can be solved by raising the retirement age

You think the AARP crowd was crying foul about privatizing SS? Wait until you tell them to wait anoth 10 years.

But yes it can be done this way and the fed govt can continue their nice little scam. Raise it to 79 and call it even. Works for me but dont raise the tax any higher.

If the government wasn't running deficits all the time, it wouldn't need to borrow SS funds. Also, I don't understand what you are complaining about. That the government is going to pay too much back to SS or too little. On one hand you are whining about how much the government is going to have to pay back to SS, and on the other hand you are complaining that the government is ripping off SS. You need to make up your mind

This isnt rocket science. I am complaining about the govt raping the SS fund and placing IOUs into the fake trust fund that are too be paid back later. Both of these are related. How do you think they are not?

So they should cut it to 81% now, instead of waiting for SS trustfund to be exhausted

Doesnt fix the fundamental problem of the system.

We already have such a system, it's called 401k or IRA

Yes, and it should be implemented within this system so we dont have what is about to happen.

Except you have to think back to why we got SS in the first place. Capitalism system failed americans before the great depression, and a healthy dose of socialism needed to be injected. Markets are a volatile thing, not something you can trust your retirement to. I personally like SSI more than SS. I think the government should guarantee a minimum standard of living to seniors, but not necessarily the same standard of living one was accustomed to.

The system was setup as nothing more than a tax disguised as a social program. If it was truely designed to help people out of the depression. Then why did they set the age at which you can cash in on this program at the avg lifespan of the time? They knew full well 50% of the people will never once get to cash in on the program and thus they can keep the tax revenues.

70 years later it is biting us in the ass and will bite generations to come if it isnt fixed.

 

[Mursilis]

Originally posted by: DaveSimmons
SS payouts to retirees are funded from current contributions by people working now. This has been true since the beginning, generation X is paid for by generations Y and Z.

Which means the first generation to receive SS payments basically got someone else's money. Great - another Democratic Robin Hood Income Redistribution Scheme. :disgust:

 

[BaliBabyDoc]

Originally posted by: Fingolfin269
I thought his idea was that 1/4 of your social security could be invested. The key word is 'could' because you could opt to not touch it if you want.

I don't see a problem with that. Also, where is this 'will add $X million to the national debt' factored in? I've heard people say that but have yet to actually see where the numbers come from. If anyone can provide this information I'd appreciate it. Numbers from both sides would be nice. 😉

The devil is in the detail. Bush would "borrow" the 1/4 to pay for the "investment". Further, the "secret" Bush plan would have cut EVERYONE'S benefits regardless of whether you chose to participate or not. But if you enrolled in the plan, your guaranteed benefit would be reduced by the amount "divested" plus whatever interest it would have earned as part of the "trust fund" . . . ~3% . . . compounded.

The dyscalculia of the Bush administration summarized:
1) The Treasury currently receives $160B+ more in SS taxes than it pays in benefits. Administrations since the 2nd Reagan have been using these proceeds to hide the true magnitude of the annual deficit. Granted, Bush43 and Clinton had much larger surpluses than Bush41 or Reagan.

2) The SS surplus will peak somewhere in 2008-2010 well north of $200B per year.

3) By 2017 the annual SS surplus will be history. Government will then redeem those "trust fund" bonds but its the government that must pay for them. The assumption is that we will either raise taxes or make draconian cuts in EVERY other function of government in order to pay for SS. NOTE: This dire scenario ignores the fact that Medicare will be a friggin' monster in 10 years.

4) So Bush can "borrow" from SS to pay for personal accounts in the same manner that he's "borrowing" from SS to pay for current spending. But it will accelerate the decline of SS.

 

[PatboyX]

Originally posted by: Mursilis

Originally posted by: DaveSimmons
SS payouts to retirees are funded from current contributions by people working now. This has been true since the beginning, generation X is paid for by generations Y and Z.

Which means the first generation to receive SS payments basically got someone else's money. Great - another Democratic Robin Hood Income Redistribution Scheme. :disgust:

go dig them up and asked if they minded.


there are a few reasons people are getting upset about it.

1. its a fantastic plan of security for a number of people who cant afford to invest on their own, dont have the know how to invest on their own and seriously are living paycheck to paycheck as it is. it helps them out.
2. same situation as above, but with survivor benefits.
3. the oppositions plans are much more detailed as of right now. despite what right-wing radio hosts say, the democrats are the only people right now coming up with ideas...the right ideas have been: privative! (with a footnote to the effect of "we know this will not solve the problem)
4. if you decide to privatize you would either have to a) pay for some sort of clue as to what the hell you were doing or b) only be allowed to invest in a very limited number of groups of stocks. many people fear that the second option would end up as being a select number of companies hand-picked by the administration. paranoid...yet...somehow so plausible.
5. no one is giving us straight numbers. the digits are changing every day but we seem to have stopped on 2040. but at the same time, people are acting like treasury bonds are "useless IOUs" which, in fact, i spose they are...but then so is every other piece of currency i hold on to. im hoping the government isnt going to default on their pledge to keep those.
6. risk. while personal accounts (the new term in lui of privatize) could possibly yield higher results, they could also yield lower results. the way people talk about how bad social security will be in a few years seems to often forget that if it is true that the system will be in disrepair, the market probably aint going to be so hot either.
7. while SS does need repair, other systems, like medicare are due to fall flat a helluvalot sooner. some may dismiss this as "deflection" other would say "one fire at a time."
8. its going to cost a lot of cash. the plan that has yet to truly exist on the part of the administration has only a few key things written down. and one of the largest is the 2 trillion dollars it will cost to switch to a system that will admittedly not "fix" it. this is troubling to many who remember the original projected cost of the Iraq war and the amount of money we are paying now. when someone sketches a plan with a rough "guestiamte" of 2 trillion dollars, it doesn't look so hot for the actual end price.

those are the first 8 things i can think of, in no partiular order.

 

[cquark]

Originally posted by: Kibbo
The problem in social security will be handled with normal and predictable methods. The revolutionary ideas Bush is proposing will not help the fundamental economic and demographic realities. His way may be better, and if you like his ideas of a "culture of ownership" or whatever it is, then you may want his new plan.

But his new plan doesn't fix the problem. It doesn't rescue social security from the depths of crisis. And painting his ideas as salves the way he does is intellectually dishonest and manipulative. If you like the plan ideologically, you may like the fact that he is misleading the American public. Your call, really.

Good summary.

It's also worth pointing out that Bush's example of Chile's plan as a demonstration of how well partial privatization works is a clear reason to think twice about it. Over a third of the money went to stock brokers and the like, and the Chilean government's having to put in enormous amounts of money to bail people out, partially because of that and partially because of the inevitable percentage of investments that went bad.