- Mar 20, 2000
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there are only 3 major areas that major defined benefit pensions come into play these days. one of them is airlines, one of them is automakers, and the last is social security.
watching the airlines and automakers founder under the weight of their defined benefit pensions makes me cringe at what will happen to the US when the government is doing the same. (guess what will get cut first?)
there used to be enough surplus in social security, and enough time before demographics made it unworkable, to switch the pay as you go type of system that is it (aka unfunded, a characteristic it shares with gm's pension, amongst others) to a fully funded system without much pain on anyone's part (due to the miracle of compound interest).
we have known this is going to happen for at least 10 years (it was a major part of the 1996 presidential election, for instance) and yet there has been nothing done.
rather, congress has been pissing away the money on exponentially growing pork barrel projects (121 earmarks got a veto from reagan in 1987, there were 1,439 in 1995, and 13,998 in 2005). congress has been able to do this because there is nothing to stop them from doing it (the only thing social security can do with its money is buy t-bills, which is like handing money to congress).
now, there may not be enough time to fix the systemic problems with social security's funding method. and yet there is basically nothing.
let's be clear on this though: changing the ratio of pay-in to pay-out is not a fix for the system. it is merely a bandaid and does nothing to address the underlying problem. it'd be like prescribing morphine for a broken leg and doing nothing else. sure, the patient might feel ok for a while, but they still have a broken leg.
now, maybe the time before social security's trip into the red could be put off by removing the cap on the payroll tax, but do without something solid in place to keep congress's hands off of the money no one can be certain that they just won't piss it away like they have been for the last 70 years. and how much time would it buy?
oddly enough... social security is one of the most regressive taxes there is. it isn't dependent on income, rather it is dependent on wage. (for more than half of wager earners the pay roll taxes are actually larger than the income tax, iirc) it also has that cap. but the real kicker is that it transfers wealth from the less wealthy group to the more wealthy group.
keep in mind that discussion should not be limited to 'bush's plan,' but to any plan that would fix the problem.
watching the airlines and automakers founder under the weight of their defined benefit pensions makes me cringe at what will happen to the US when the government is doing the same. (guess what will get cut first?)
there used to be enough surplus in social security, and enough time before demographics made it unworkable, to switch the pay as you go type of system that is it (aka unfunded, a characteristic it shares with gm's pension, amongst others) to a fully funded system without much pain on anyone's part (due to the miracle of compound interest).
we have known this is going to happen for at least 10 years (it was a major part of the 1996 presidential election, for instance) and yet there has been nothing done.
rather, congress has been pissing away the money on exponentially growing pork barrel projects (121 earmarks got a veto from reagan in 1987, there were 1,439 in 1995, and 13,998 in 2005). congress has been able to do this because there is nothing to stop them from doing it (the only thing social security can do with its money is buy t-bills, which is like handing money to congress).
now, there may not be enough time to fix the systemic problems with social security's funding method. and yet there is basically nothing.
let's be clear on this though: changing the ratio of pay-in to pay-out is not a fix for the system. it is merely a bandaid and does nothing to address the underlying problem. it'd be like prescribing morphine for a broken leg and doing nothing else. sure, the patient might feel ok for a while, but they still have a broken leg.
now, maybe the time before social security's trip into the red could be put off by removing the cap on the payroll tax, but do without something solid in place to keep congress's hands off of the money no one can be certain that they just won't piss it away like they have been for the last 70 years. and how much time would it buy?
oddly enough... social security is one of the most regressive taxes there is. it isn't dependent on income, rather it is dependent on wage. (for more than half of wager earners the pay roll taxes are actually larger than the income tax, iirc) it also has that cap. but the real kicker is that it transfers wealth from the less wealthy group to the more wealthy group.
keep in mind that discussion should not be limited to 'bush's plan,' but to any plan that would fix the problem.
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