Social Security Reforms perposal could drive up debt dramatically...

[Engineer]

News Story!

Social Security Reform to Drive Up Debt
2 hours, 14 minutes ago Add Politics to My Yahoo!


By Adam Entous

WASHINGTON (Reuters) - President Bush (news - web sites)'s economic advisers said on Monday adding personal retirement accounts to Social Security (news - web sites) would send the nation's debt soaring over the next three decades.



Tapping the bond markets to pay for private accounts proposed by Bush's Social Security Commission would increase the nation's debt-to-GDP (news - web sites) ratio by 23.6 percentage points by 2036, the White House Council of Economic Advisers said in its annual Economic Report of the President.


Democratic critics said there could be dire economic consequences for letting the debt-to-GDP ratio rise from this year's 38.6 percent to as high as 62.2 percent -- a nearly two-thirds increase to the highest level recorded since the early 1950s in the aftermath of World War II.


Under this scenario, the debt held by the public would increase by as much as $4.7 trillion. But the new government bonds would be repaid 20 years later, eliminating Social Security's unfunded liability while reducing the tax burden in the long term, advocates say.


"The economic report illustrates that the long-term fiscal position of the government would improve if Social Security reform were enacted," said White House spokeswoman Claire Buchan, who insisted Bush has yet to settle on a plan to reform the retirement system or on a means to finance it.


The Council of Economic Advisers said increasing borrowing to finance the transition to private accounts was not a problem from an economic perspective. While the deficit would increase initially, it would fall as the reforms are phased in.


At its peak in 2022, the incremental deficit increase would be less than 1.6 percent of gross domestic product, they said. By comparison, Bush is projecting this fiscal year's deficit at 4.5 percent of GDP and a debt-to-GDP ratio of 38.6 percent.


"Since the budget surpluses forecasted a few years ago have not materialized, critics argue that adding personal retirement accounts to Social Security is impossible or impractical," the report said. "In reality, the need to add resources to the Social Security system is no less pressing now that the surpluses have disappeared; indeed, it may be even more so."


UNDER FIRE OVER DEFICITS


Bush is already under fire over record deficits, expected to reach $521 billion this year alone, and Democrats have warned that the nation's mounting debt load could become a drag on economic growth.


A senior Democratic congressional aide warned the debt would push up interest rates. While it may be designed to save Social Security in the long run, the aide warned, "The patient may be dead by then."


Gregory Mankiw, who chairs the White House council, acknowledged persistent budget deficits "do tend to raise interest rates. ... That is one of the reasons why getting the budget deficit down is an important priority."


Though Republicans who control the U.S. Congress see little chance of passing Social Security reform in a presidential election year, the estimates could revive debate over Bush's plan to let workers redirect a portion of their payroll taxes into personal stock or bond accounts.


Under the model analyzed by the Council of Economic Advisers, workers could voluntarily redirect 4 percent of their payroll taxes up to $1000 annually to a personal account.


Bond proceeds would make up for diverted payroll tax funds and shore up the Social Security system. Bush opposes raising taxes or requiring additional contributions from workers. The bonds would be gradually paid off using future savings from Social Security as benefits growth slowed.


But Buchan said: "We've made no decisions about how the transition to personal accounts would be financed."


Bush advisers had once hoped to use budget surpluses, projected in 2000 at $5.6 trillion over 10 years, to fund the transition period. Today, the White House expects the budget shortfall to total $1.35 trillion through 2009 and government debt to rise from $8.1 trillion to $10.5 trillion, forcing Bush's economic advisers to look at alternatives.

When will the deficits stop?.....

 

[charrison]

Originally posted by: Engineer
News Story!

Social Security Reform to Drive Up Debt
2 hours, 14 minutes ago Add Politics to My Yahoo!


By Adam Entous

WASHINGTON (Reuters) - President Bush (news - web sites)'s economic advisers said on Monday adding personal retirement accounts to Social Security (news - web sites) would send the nation's debt soaring over the next three decades.



Tapping the bond markets to pay for private accounts proposed by Bush's Social Security Commission would increase the nation's debt-to-GDP (news - web sites) ratio by 23.6 percentage points by 2036, the White House Council of Economic Advisers said in its annual Economic Report of the President.


Democratic critics said there could be dire economic consequences for letting the debt-to-GDP ratio rise from this year's 38.6 percent to as high as 62.2 percent -- a nearly two-thirds increase to the highest level recorded since the early 1950s in the aftermath of World War II.


Under this scenario, the debt held by the public would increase by as much as $4.7 trillion. But the new government bonds would be repaid 20 years later, eliminating Social Security's unfunded liability while reducing the tax burden in the long term, advocates say.


"The economic report illustrates that the long-term fiscal position of the government would improve if Social Security reform were enacted," said White House spokeswoman Claire Buchan, who insisted Bush has yet to settle on a plan to reform the retirement system or on a means to finance it.


The Council of Economic Advisers said increasing borrowing to finance the transition to private accounts was not a problem from an economic perspective. While the deficit would increase initially, it would fall as the reforms are phased in.


At its peak in 2022, the incremental deficit increase would be less than 1.6 percent of gross domestic product, they said. By comparison, Bush is projecting this fiscal year's deficit at 4.5 percent of GDP and a debt-to-GDP ratio of 38.6 percent.


"Since the budget surpluses forecasted a few years ago have not materialized, critics argue that adding personal retirement accounts to Social Security is impossible or impractical," the report said. "In reality, the need to add resources to the Social Security system is no less pressing now that the surpluses have disappeared; indeed, it may be even more so."


UNDER FIRE OVER DEFICITS


Bush is already under fire over record deficits, expected to reach $521 billion this year alone, and Democrats have warned that the nation's mounting debt load could become a drag on economic growth.


A senior Democratic congressional aide warned the debt would push up interest rates. While it may be designed to save Social Security in the long run, the aide warned, "The patient may be dead by then."


Gregory Mankiw, who chairs the White House council, acknowledged persistent budget deficits "do tend to raise interest rates. ... That is one of the reasons why getting the budget deficit down is an important priority."


Though Republicans who control the U.S. Congress see little chance of passing Social Security reform in a presidential election year, the estimates could revive debate over Bush's plan to let workers redirect a portion of their payroll taxes into personal stock or bond accounts.


Under the model analyzed by the Council of Economic Advisers, workers could voluntarily redirect 4 percent of their payroll taxes up to $1000 annually to a personal account.


Bond proceeds would make up for diverted payroll tax funds and shore up the Social Security system. Bush opposes raising taxes or requiring additional contributions from workers. The bonds would be gradually paid off using future savings from Social Security as benefits growth slowed.


But Buchan said: "We've made no decisions about how the transition to personal accounts would be financed."


Bush advisers had once hoped to use budget surpluses, projected in 2000 at $5.6 trillion over 10 years, to fund the transition period. Today, the White House expects the budget shortfall to total $1.35 trillion through 2009 and government debt to rise from $8.1 trillion to $10.5 trillion, forcing Bush's economic advisers to look at alternatives.

When will the deficits stop?.....

When the people stop demanding more goverment cheese.

 

[Engineer]

When the people stop demanding more goverment cheese.

I guess we just keep giving them the cheese to go with the WHINE!!!....

I've said for the last 8 years....I would give up my Social Security benefits if they would just stop taking it out of my check and let me invtest/save as I see fit. It won't be there for me anyway....and for those who say that I'm being selfish to the older generation, what about my generation paying it in and not much hope (IMO) of getting it....

The deficit will be the downfall of the American way of life as we all know it........one of these days, the banker will come a calling....

 

[charrison]

Originally posted by: Engineer

When the people stop demanding more goverment cheese.

I guess we just keep giving them the cheese to go with the WHINE!!!....

I've said for the last 8 years....I would give up my Social Security benefits if they would just stop taking it out of my check and let me invtest/save as I see fit. It won't be there for me anyway....and for those who say that I'm being selfish to the older generation, what about my generation paying it in and not much hope (IMO) of getting it....

The deficit will be the downfall of the American way of life as we all know it........one of these days, the banker will come a calling....

One day, but the US has been in far worse financial shape in the past.

 

[dmcowen674]

Originally posted by: charrison

Originally posted by: Engineer

When the people stop demanding more goverment cheese.

I guess we just keep giving them the cheese to go with the WHINE!!!....

I've said for the last 8 years....I would give up my Social Security benefits if they would just stop taking it out of my check and let me invtest/save as I see fit. It won't be there for me anyway....and for those who say that I'm being selfish to the older generation, what about my generation paying it in and not much hope (IMO) of getting it....

The deficit will be the downfall of the American way of life as we all know it........one of these days, the banker will come a calling....

One day, but the US has been in far worse financial shape in the past.

An Engineer sighting in P&N

As you can see Engineer there are a bunch of folks quite Happy with the U.S. in the Tank.

 

[CADsortaGUY]

Originally posted by: dmcowen674

Originally posted by: charrison

Originally posted by: Engineer

When the people stop demanding more goverment cheese.

I guess we just keep giving them the cheese to go with the WHINE!!!....

I've said for the last 8 years....I would give up my Social Security benefits if they would just stop taking it out of my check and let me invtest/save as I see fit. It won't be there for me anyway....and for those who say that I'm being selfish to the older generation, what about my generation paying it in and not much hope (IMO) of getting it....

The deficit will be the downfall of the American way of life as we all know it........one of these days, the banker will come a calling....

One day, but the US has been in far worse financial shape in the past.

An Engineer sighting in P&N

As you can see Engineer there are a bunch of folks quite Happy with the U.S. in the Tank.

The US isn't in the tank. Just because you keep trying to say it is dave - doesn't mean it is so.

CkG

 

[Jhhnn]

Interesting how things can be phrased- SS "reform", for example. Bush has no such intention. He and his Congressional cronies intend to destroy it, make as much money off it as possible before its ultimate demise.

What SS needs more than anything is for the portion of the national debt owed to the SS trust to be available when needed, something that ongoing deficits and resultant debt threaten egregiously. The other thing SS needs is more income and long term control of outlays.

A few humble proposals-

1. Remove the $85K cap on contributions, and make all income subject to SS tax at self employment rates- capital gains and dividends, too.

2. Increase individual and employer contributions by 1% each on all income greater than $30K.

3. Create a professionally managed investment fund or funds to invest a % of any SS surpluses in securities other than treasury bonds.

4. Disallow increases for top bracket seniors whose other means are relatively large.

5. Create a slight budget surplus so as to bolster the Govt's borrowing power when the time comes that such may be required to pay back the SS trust...

Dubya's proposals won't do any of this, of course- he'll basically advocate getting out of the hole by digging deeper, bet on it...

 

[CADsortaGUY]

Originally posted by: Jhhnn
Interesting how things can be phrased- SS "reform", for example. Bush has no such intention. He and his Congressional cronies intend to destroy it, make as much money off it as possible before its ultimate demise.

What SS needs more than anything is for the portion of the national debt owed to the SS trust to be available when needed, something that ongoing deficits and resultant debt threaten egregiously. The other thing SS needs is more income and long term control of outlays.

A few humble proposals-

1. Remove the $85K cap on contributions, and make all income subject to SS tax at self employment rates- capital gains and dividends, too.

2. Increase individual and employer contributions by 1% each on all income greater than $30K.

3. Create a professionally managed investment fund or funds to invest a % of any SS surpluses in securities other than treasury bonds.

4. Disallow increases for top bracket seniors whose other means are relatively large.

5. Create a slight budget surplus so as to bolster the Govt's borrowing power when the time comes that such may be required to pay back the SS trust...

Dubya's proposals won't do any of this, of course- he'll basically advocate getting out of the hole by digging deeper, bet on it...

#4 is about the only one which is reasonable and doable...if it means "means testing". SS should have been means tested long ago - SS is not supposed to be a gov't supplied retirement fund.
I'd also support #1 but not on cap gains and dividends.

The rest of the reform would be the internal structure of SS.

Or we could just rid ourselves of the whole beast and actually have a REAL system put in place to handle General Welfare and Aid.

Oh and there is/was no "trust fund" just like there was never a "surplus" - both were figments of people's imaginations.

CkG

 

[charrison]

Originally posted by: Jhhnn
Interesting how things can be phrased- SS "reform", for example. Bush has no such intention. He and his Congressional cronies intend to destroy it, make as much money off it as possible before its ultimate demise.

What SS needs more than anything is for the portion of the national debt owed to the SS trust to be available when needed, something that ongoing deficits and resultant debt threaten egregiously. The other thing SS needs is more income and long term control of outlays.

A few humble proposals-

1. Remove the $85K cap on contributions, and make all income subject to SS tax at self employment rates- capital gains and dividends, too.

2. Increase individual and employer contributions by 1% each on all income greater than $30K.

3. Create a professionally managed investment fund or funds to invest a % of any SS surpluses in securities other than treasury bonds.

4. Disallow increases for top bracket seniors whose other means are relatively large.

5. Create a slight budget surplus so as to bolster the Govt's borrowing power when the time comes that such may be required to pay back the SS trust...

Dubya's proposals won't do any of this, of course- he'll basically advocate getting out of the hole by digging deeper, bet on it...

#3 you trust the folks in DC to handle that much money? How about private acounts similary to 401k for portions on SS moneys. That money needs to be kept out of the hands of those in DC.

 

[Jhhnn]

Well, Charrison, there are folks managing the federal employees' retirement funds who seem to have done a very good job over the years. I definitely agree that Congress must be kept away from it, that's for sure...

The problem with 401 plans and similar is that nobody has any power in the boardrooms, and that account managers and mutual fund administrators have too little accountability to individual small investors. There's strength in numbers...

 

[daclayman]

1. Remove the $85K cap on contributions, and make all income subject to SS tax at self employment rates- capital gains and dividends, too.

If G dumbo and his circus were to say: We're gonna lower the SS tax from 7.65% to say 7.15% thereby giving the Amerikan taxpayer another tax break because we care about the people, I think Congress would have to go along with it. Of course, GW and crue wouldn't touch cap gains and divvies, but might be able to sneak by a new $400k cap. This is a fairy tale IMO but it sure sounds good. Oh well, Canada is a nice place but it sure is cold up there.:beer: