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The FACTS behind Bush's Social Security Plan
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And I can quote studies that show African American families benefit to a greater degree from Social Security.
But that's not the question, is it?
Are you now saying that you and Bush want to destroy Social Security because you claim black males don't get a high enough rate of return?
You are the one who said you were trying to protect Blacks, not me. I never said that was my reasoning for wanting to fix SS, you said that's why you were AGAINST private accounts, was because you read an op-ed piece and got a boner. That's your ASSumption and your problem. Anyway, quote me a study that says African American families have a higher rate of return than private accounts. You said you could do it, so please do it. Oh, but it was the question -- you brought it up. 🙂
BaliBabyDoc
Lifer
I love the point/counterpoint followed by, "well all the details haven't been released yet so it's not fair to criticize."
The fundamental problem with SS is demographics. Every knowledgable and honest person will acknowledge that truth. Another fundamental "problem" with SS is that government (you know the one being run by Bush, the Lesser) is spending 1/4 of all SS receipts (aka ALL of the surplus). The corollary to that issue is the fiscal mismanagement of the Bush Regime.
What fool would defend a "solution" to this problem based on "borrowing" $2T and praying for good market performance? That's not a solution . . . it's not even a partial solution. Let me be clear, I have no problems with private accounts funded by expanding FICA rates or raising the FICA cap. But it's an extremely dishonest dialogue being led by President Bush . . . from the "alleged" benefits for blacks to the true nature of the problem.
The fundamental problem with SS is demographics. Every knowledgable and honest person will acknowledge that truth. Another fundamental "problem" with SS is that government (you know the one being run by Bush, the Lesser) is spending 1/4 of all SS receipts (aka ALL of the surplus). The corollary to that issue is the fiscal mismanagement of the Bush Regime.
What fool would defend a "solution" to this problem based on "borrowing" $2T and praying for good market performance? That's not a solution . . . it's not even a partial solution. Let me be clear, I have no problems with private accounts funded by expanding FICA rates or raising the FICA cap. But it's an extremely dishonest dialogue being led by President Bush . . . from the "alleged" benefits for blacks to the true nature of the problem.
BaliBabyDoc
Lifer
There's NO law that says government MUST spend the SS surplus . . . that's like claiming government has to spend every cent of income taxes. It would be perfectly acceptable to plow SS surpluses into paying down debt . . . you know the kinda of thing proposed by EVEN Bush when he was running in 2000.
It's extremely disingenuous to claim the fiscal morasse we are experiencing is mandatory or some creature beyond the control of elected officials.
I think, BBD, that you're right, but somehow mistaken about the semantics of "spending" within this context. Using surplus SS funds to pay down debt would, in truth, be a form of spending, or at least debt transfer from one creditor to another. That would assume, however, that the Admin and Congress were taxing and spending at rates compatible with such a concept, which they're not, and have absolutely no intention of even acknowledging as possible.
Simply setting the money aside, holding it, would cause it to lose value relative to inflation. The rule of 72 applies- it would lose half its value in 24 years at a low 3% inflation rate...
And, yes, your're correct in pointing out that current privatization arguments are deceptive in the extreme, w/o regard to race or age. It's an attempt to divert attention from the shameles exploitation of the general fund to favor a very few while masking the looting with debt...
The whole issue for black males is making it to the age of 40, when their chances of making it to 65 are equal to those of whites. The disparity for Hispanics is similar, iirc... none of which is really germane to the discussion at hand, other than in the sense that SS provides survivor and disability benefits to victims of whatever leads to those disparities...
"Conservatives" are offering up any and every argument, no matter how nonsensical, in an effort to further their agenda, continue the ongoing transfer of wealth to the very, very top. They're not prepared to do anything that would actually save SS, or benefit the population as a whole in his regard. They've been ideologically opposed from the outset, and that won't change.
Simply setting the money aside, holding it, would cause it to lose value relative to inflation. The rule of 72 applies- it would lose half its value in 24 years at a low 3% inflation rate...
And, yes, your're correct in pointing out that current privatization arguments are deceptive in the extreme, w/o regard to race or age. It's an attempt to divert attention from the shameles exploitation of the general fund to favor a very few while masking the looting with debt...
The whole issue for black males is making it to the age of 40, when their chances of making it to 65 are equal to those of whites. The disparity for Hispanics is similar, iirc... none of which is really germane to the discussion at hand, other than in the sense that SS provides survivor and disability benefits to victims of whatever leads to those disparities...
"Conservatives" are offering up any and every argument, no matter how nonsensical, in an effort to further their agenda, continue the ongoing transfer of wealth to the very, very top. They're not prepared to do anything that would actually save SS, or benefit the population as a whole in his regard. They've been ideologically opposed from the outset, and that won't change.
Once again, not letting the facts stand in your way.
While it is true that once blacks reach the age of 65, they do have similary longevity to white people. However, blacks in general have a quite few a disease related issues that keep them from reaching 65. Blacks do have a higher homicide rate, but then whites offset that a great deal by having a higher suicide rate.
Hispanics disease issues do not look like that of blacks.
Why Bush is wrong
His Social Security reforms are neither 'social' nor 'secure'
Social Security is the cornerstone of life for nearly 48 million people - retirees, dependents, survivors of deceased workers, and the disabled - all of whom receive a check like clockwork every month. Millions more will come to rely on those checks in the years ahead.
Many don't think much about that fact, and few realize just how much of a nest egg they're going to need. An American reaching the retirement age of 65 today has an average life expectancy of 18 more years, which means that roughly half of those who reach 65 can expect to live longer than 18 years. Four out of 10 have no nonwork-related retirement savings. Six out of 10 haven't even tried to estimate what they'll need. They rely vaguely on Social Security, but how far will it carry them? How serious is the "crisis" they hear about? What are the implications of "reform?"
Social Security pensions were indexed to the rate of inflation in the 1960s and 1970s, dramatically diminishing poverty among the elderly. Now only 10% of those over 65 live in poverty - 2 points lower than the national poverty rate. Roughly two thirds of people age 65 and over depend on Social Security for at least half their income, and roughly 20% rely on it for their entire income.
Currently, the payroll tax brings in more dollars than it pays out in benefits. The surplus, roughly $180 billion a year, is invested in treasury securities and deposited into a trust fund, which holds more than $1.5 trillion of these notes. As baby boomers begin to retire, the system will go into deficit around 2018, requiring drawing down on the fund. By that time the fund will exceed $3 trillion, so it will be in the black until around 2042, using the Social Security Administration's conservative economic and demographic assumptions, or 2052, using the assumptions of the nonpartisan Congressional Budget Office. Even if the system exhausts its reserves, payroll taxes will roll in, enabling at least 73% of scheduled benefits to be paid out.
In other words, there is no current financial crisis. So, what's with all the hand-wringing? Well, if you make pessimistic predictions about economic growth, immigration and wage inflation, projected revenues may not be enough to pay benefits. Social Security actuaries, for instance, project that growth will average only 1.6% after 2010, about half the rate we have enjoyed in the past century. But if the economy grows at anywhere near the levels that Bush's own budget experts project, the surplus, in effect, would never run out.
Most important, to the extent that there is a deficit, it could be covered by a variety of modest combinations of tax hikes and benefit cuts - each of them quite manageable.
A careful study by AARP estimates that 43% of the Social Security deficit projection would be met by raising the cap on taxable wages from $90,000 to $140,000; 38% would be covered until 2083 by raising to 70 the retirement age for full benefits; a quarter-percentage-point increase in the payroll tax for employees and employers would cover 24%; requiring state and local government workers to join would cover 9%. Yet another approach implicit in the President's program is to decelerate increases in benefits by raising them in line with prices, not wages.
This readjustment would eliminate the 75-year projected deficit of Social Security, but it would have a major impact on low-wage earners who depend almost entirely on Social Security, and it would reduce benefits for middle-income workers by as much as 25% over 30 years. It would thus preclude many seniors from enjoying the benefits of rising standards of living.
A solution here is to protect workers at the lower end of the income spectrum by retaining benefits according to wage rises for them but lowering benefits to price indexing for the higher levels. Or some mix of the two.
President Bush has a different answer to all of the above. In pursuit of his "ownership society," he wants to move Social Security toward "greater individual opportunity, risk and reward" by allowing individuals to carve themselves private investment accounts out of Social Security payroll taxes, much like a 401(k) plan. This raises a whole host of problems.
It discriminates against poorer workers because the lower your income, the less you have to invest and the smaller your return will be. The Bush plan offers nothing close to the financial security of the existing program. Then there's this: Are individual investors sophisticated enough to match the higher returns now being forecast? At least 10 studies analyzed by the Securities and Exchange Commission indicate a disturbing level of financial illiteracy. Only 12% of the investors studied could distinguish between a load and a no-load mutual fund; only 14% understood the difference between a growth stock and an income stock; only 38% knew that when interest rates rise, bond prices fall; almost half somehow believed that diversification guarantees that their portfolio would not suffer if the market dropped, and 40% thought that the trust fund's operating costs would not be deducted from their investment return.
Experience with 401(k) plans shows that many people fail to invest and to diversify sufficiently to maximize returns. Many make mistakes, not because they are stupid but because they live busy, complicated lives, focusing on work and family, and lack the time to become financial experts. Those 50% or more who are not in the stock market presumably have even less knowledge and experience.
Furthermore, historical stock-market returns are not a guide for future performance. If someone retires after the market dives, he or she could lose a good chunk of retirement savings. The market, after all, fell by 45% in real terms between 1968 and 1978 -- never mind the bust between 2000 and 2002. If millions of retirees suffered dramatic losses, there would be enormous pressure to come to their rescue. We would very likely end up privatizing gains and socializing losses.
The macroeconomic consequences of privatization are equally significant. Privatization fails to address the long-term gap in the program's financial resources. It would make things worse because the government would have to borrow the money that otherwise would be paid into the system.
Of course, the idea of Bush's "ownership society" is to change the relationship of Americans to government so they look less to Washington than to themselves (and, just maybe, vote more Republican). No doubt some Americans could build savings and more wealth and have a nest egg for retirement. No doubt there is value in savings and self-reliance, planning ahead and increasing distance from the government. But there are other values in the very title of the program - Social Security. "Social" surely implies a contract to help manage poverty among the old and to know that our society provides a minimum income for all in the retirement years. And "security" means buffering the harshness and cruelty of the markets so the well-being of the elderly is not dependent on shrewd stock picks and hot mutual funds.
Privatization thus gets things upside down. Social Security was not meant to re-create the free market; it was intended to insure against the vagaries and cruelties of the market and to permit Americans to count on the promise that the next generation will take care of them in their old age.
His Social Security reforms are neither 'social' nor 'secure'
Social Security is the cornerstone of life for nearly 48 million people - retirees, dependents, survivors of deceased workers, and the disabled - all of whom receive a check like clockwork every month. Millions more will come to rely on those checks in the years ahead.
Many don't think much about that fact, and few realize just how much of a nest egg they're going to need. An American reaching the retirement age of 65 today has an average life expectancy of 18 more years, which means that roughly half of those who reach 65 can expect to live longer than 18 years. Four out of 10 have no nonwork-related retirement savings. Six out of 10 haven't even tried to estimate what they'll need. They rely vaguely on Social Security, but how far will it carry them? How serious is the "crisis" they hear about? What are the implications of "reform?"
Social Security pensions were indexed to the rate of inflation in the 1960s and 1970s, dramatically diminishing poverty among the elderly. Now only 10% of those over 65 live in poverty - 2 points lower than the national poverty rate. Roughly two thirds of people age 65 and over depend on Social Security for at least half their income, and roughly 20% rely on it for their entire income.
Currently, the payroll tax brings in more dollars than it pays out in benefits. The surplus, roughly $180 billion a year, is invested in treasury securities and deposited into a trust fund, which holds more than $1.5 trillion of these notes. As baby boomers begin to retire, the system will go into deficit around 2018, requiring drawing down on the fund. By that time the fund will exceed $3 trillion, so it will be in the black until around 2042, using the Social Security Administration's conservative economic and demographic assumptions, or 2052, using the assumptions of the nonpartisan Congressional Budget Office. Even if the system exhausts its reserves, payroll taxes will roll in, enabling at least 73% of scheduled benefits to be paid out.
In other words, there is no current financial crisis. So, what's with all the hand-wringing? Well, if you make pessimistic predictions about economic growth, immigration and wage inflation, projected revenues may not be enough to pay benefits. Social Security actuaries, for instance, project that growth will average only 1.6% after 2010, about half the rate we have enjoyed in the past century. But if the economy grows at anywhere near the levels that Bush's own budget experts project, the surplus, in effect, would never run out.
Most important, to the extent that there is a deficit, it could be covered by a variety of modest combinations of tax hikes and benefit cuts - each of them quite manageable.
A careful study by AARP estimates that 43% of the Social Security deficit projection would be met by raising the cap on taxable wages from $90,000 to $140,000; 38% would be covered until 2083 by raising to 70 the retirement age for full benefits; a quarter-percentage-point increase in the payroll tax for employees and employers would cover 24%; requiring state and local government workers to join would cover 9%. Yet another approach implicit in the President's program is to decelerate increases in benefits by raising them in line with prices, not wages.
This readjustment would eliminate the 75-year projected deficit of Social Security, but it would have a major impact on low-wage earners who depend almost entirely on Social Security, and it would reduce benefits for middle-income workers by as much as 25% over 30 years. It would thus preclude many seniors from enjoying the benefits of rising standards of living.
A solution here is to protect workers at the lower end of the income spectrum by retaining benefits according to wage rises for them but lowering benefits to price indexing for the higher levels. Or some mix of the two.
President Bush has a different answer to all of the above. In pursuit of his "ownership society," he wants to move Social Security toward "greater individual opportunity, risk and reward" by allowing individuals to carve themselves private investment accounts out of Social Security payroll taxes, much like a 401(k) plan. This raises a whole host of problems.
It discriminates against poorer workers because the lower your income, the less you have to invest and the smaller your return will be. The Bush plan offers nothing close to the financial security of the existing program. Then there's this: Are individual investors sophisticated enough to match the higher returns now being forecast? At least 10 studies analyzed by the Securities and Exchange Commission indicate a disturbing level of financial illiteracy. Only 12% of the investors studied could distinguish between a load and a no-load mutual fund; only 14% understood the difference between a growth stock and an income stock; only 38% knew that when interest rates rise, bond prices fall; almost half somehow believed that diversification guarantees that their portfolio would not suffer if the market dropped, and 40% thought that the trust fund's operating costs would not be deducted from their investment return.
Experience with 401(k) plans shows that many people fail to invest and to diversify sufficiently to maximize returns. Many make mistakes, not because they are stupid but because they live busy, complicated lives, focusing on work and family, and lack the time to become financial experts. Those 50% or more who are not in the stock market presumably have even less knowledge and experience.
Furthermore, historical stock-market returns are not a guide for future performance. If someone retires after the market dives, he or she could lose a good chunk of retirement savings. The market, after all, fell by 45% in real terms between 1968 and 1978 -- never mind the bust between 2000 and 2002. If millions of retirees suffered dramatic losses, there would be enormous pressure to come to their rescue. We would very likely end up privatizing gains and socializing losses.
The macroeconomic consequences of privatization are equally significant. Privatization fails to address the long-term gap in the program's financial resources. It would make things worse because the government would have to borrow the money that otherwise would be paid into the system.
Of course, the idea of Bush's "ownership society" is to change the relationship of Americans to government so they look less to Washington than to themselves (and, just maybe, vote more Republican). No doubt some Americans could build savings and more wealth and have a nest egg for retirement. No doubt there is value in savings and self-reliance, planning ahead and increasing distance from the government. But there are other values in the very title of the program - Social Security. "Social" surely implies a contract to help manage poverty among the old and to know that our society provides a minimum income for all in the retirement years. And "security" means buffering the harshness and cruelty of the markets so the well-being of the elderly is not dependent on shrewd stock picks and hot mutual funds.
Privatization thus gets things upside down. Social Security was not meant to re-create the free market; it was intended to insure against the vagaries and cruelties of the market and to permit Americans to count on the promise that the next generation will take care of them in their old age.
0roo0roo
No Lifer
Little Black Lies
By PAUL KRUGMAN
Published: January 28, 2005
Social Security privatization really is like tax cuts, or the Iraq war: the administration keeps on coming up with new rationales, but the plan remains the same. President Bush's claim that we must privatize Social Security to avert an imminent crisis has evidently fallen flat. So now he's playing the race card.
This week, in a closed meeting with African-Americans, Mr. Bush asserted that Social Security was a bad deal for their race, repeating his earlier claim that "African-American males die sooner than other males do, which means the system is inherently unfair to a certain group of people." In other words, blacks don't live long enough to collect their fair share of benefits.
This isn't a new argument; privatizers have been making it for years. But the claim that blacks get a bad deal from Social Security is false. And Mr. Bush's use of that false argument is doubly shameful, because he's exploiting the tragedy of high black mortality for political gain instead of treating it as a problem we should solve.
Let's start with the facts. Mr. Bush's argument goes back at least seven years, to a report issued by the Heritage Foundation - a report so badly misleading that the deputy chief actuary (now the chief actuary) of the Social Security Administration wrote a memo pointing out "major errors in the methodology." That's actuary-speak for "damned lies."
In fact, the actuary said, "careful research reflecting actual work histories for workers by race indicate that the nonwhite population actually enjoys the same or better expected rates of return from Social Security" as whites.
Here's why. First, Mr. Bush's remarks on African-Americans perpetuate a crude misunderstanding about what life expectancy means. It's true that the current life expectancy for black males at birth is only 68.8 years - but that doesn't mean that a black man who has worked all his life can expect to die after collecting only a few years' worth of Social Security benefits. Blacks' low life expectancy is largely due to high death rates in childhood and young adulthood. African-American men who make it to age 65 can expect to live, and collect benefits, for an additional 14.6 years - not that far short of the 16.6-year figure for white men.
Second, the formula determining Social Security benefits is progressive: it provides more benefits, as a percentage of earnings, to low-income workers than to high-income workers. Since African-Americans are paid much less, on average, than whites, this works to their advantage.
Finally, Social Security isn't just a retirement program; it's also a disability insurance program. And blacks are much more likely than whites to receive disability benefits.
Put it all together, and the deal African-Americans get from Social Security turns out, according to various calculations, to be either about the same as that for whites or somewhat better. Hispanics, by the way, clearly do better than either.
So the claim that Social Security is unfair to blacks is just false. And the fact that privatizers keep making that claim, after their calculations have repeatedly been shown to be wrong, is yet another indicator of the fundamental dishonesty of their sales pitch.
What's really shameful about Mr. Bush's exploitation of the black death rate, however, is what it takes for granted.
The persistent gap in life expectancy between African-Americans and whites is one measure of the deep inequalities that remain in our society - including highly unequal access to good-quality health care. We ought to be trying to diminish that gap, especially given the fact that black infants are two and half times as likely as white babies to die in their first year.
Now nobody can expect instant progress in reducing health inequalities. But the benefits of Social Security privatization, if any, won't materialize for many decades. By using blacks' low life expectancy as an argument for privatization, Mr. Bush is in effect taking it as a given that 40 or 50 years from now, large numbers of African-Americans will still be dying before their time.
Is this an example of what Mr. Bush famously called "the soft bigotry of low expectations?" Maybe not: it isn't particularly soft to treat premature black deaths not as a tragedy we must end but as just another way to push your ideological agenda. But bigotry - yes, that sounds like the right word.
http://www.nytimes.com/2005/01/28/opinion/28krugman.html?oref=login
I need to apologize to charrison- I jumped columns while evaluating this data- mea culpa. Black male death rates are extremely high in younger men, however, not due so much to disease issues as to environmental factors. Hispanic data shows the same trend, although not as pronounced-
http://www.cdc.gov/nchs/fastats/deaths.htm
Nonetheless, GWB is basically telling blacks that nothing is going to change, anyway, by dragging this irrelevancy into the picture. Hopefully, he's doing himself more harm than good.
http://www.cdc.gov/nchs/fastats/deaths.htm
Nonetheless, GWB is basically telling blacks that nothing is going to change, anyway, by dragging this irrelevancy into the picture. Hopefully, he's doing himself more harm than good.
Spencer278
Diamond Member
I never claimed it is a perfect solution, but it fixes the ratio of workers to leechers and there for the budget problem and it makes sure no one has to go with out their viagra and other important medices/food/shelter.
BaliBabyDoc
Lifer
Yet Bush's claim that SS is a bad deal for black males is still horse poo. Urban black male . . . yeah SS sux. Appalachia white male . . . yeah SS sux. But dismantling SS (which is the true aim of this endeavor) is a HORRIBLE deal for low income people of every shade.
As for "spending" SS, the "fears" that the US government will ever hoard money are unfounded and it's difficult to believe Greenspan really thought that justified Bush's first tax cut plan . . . but I digress. If the SS surplus was being "invested" in improving preventative healthcare or a myriad of other "interventions/infrastructure" then I wouldn't bat an eye. Instead it's being pissed away in the desert and spurring Maybach sales.
The law requires the purchase of Treasuries as a means of securing it's future availability. The current fiscal morasse being run by President Dumbarse essentially guarantees there will be nothing available. It's ridiculous to defend his policies under auspices of "the legislation made him do it".
BaliBabyDoc
Lifer
Well, it's a little OT but the Medicare Modernization Act (aka Bush Boondoggle #5) REQUIRES that drugs like Viagra (sildenafil) be covered. So . . . yes you will pay for Grandpa's woody until the day he dies trying to use it.
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