The actuaries were not rendering an opinion about the budget in general. They were commenting about the impact of the Bush and Gore plans on the SS system. The SS system is a giant pension plan, and actuaries are exactly the people to comment on it. They are also the people that the SS administration hires for this same purpose.
The fact that one consequence of having less revenue in the SS system will be an impact on the general budget is an obvious fact that is not disputed by anyone.
You might wish to check out the link that I provided in my first post to this thread, to see what the actuaries actually said.
There’s more to Life (sic) than setting premiums you know (oho! Actuarial humour).
When it comes to costing retirement plans, medical care or any other uncertain event, actuaries are precisely who should be performing the calculations and commenting on their feasibility. It’s almost a job description. Furthermore, anticipating economic events is an integral part of this. To value anything we must second guess the expected returns in the bond and equity markets. I think that you underestimate the knowledge an actuary needs to be able to call him/herself an actuary.
Listen to your actuaries. They know what they’re talking about
I just noticed something else Scylla. You keep insisting that actuaries aren’t economists. Well, I’d dispute this. You may not need the extent of economic sophistication that a degree demands, but you certainly need a hell of a lot more than high school economics. A discription I’ve heard for actuaries are “economic statisticians” or “statistical economists” (choosing between them is not so much where you stand as which way you face). This seems like a reasonable discription to me.
There is certainly some overlap. For example, a portfolio manager should have knowledge of taxation, actuarial standards, GAAP, as well as economics.
Does this mean that a portfolio manager can give a meaningful opinion on the budget?
Most actuaries that I know are very careful about the assumptions they make. When assumptions must be made, they typically will enlist the opinion of an economist, use Ibbotson historical data as an indicator, or provide a range analysis incorporating several different assumptions.
Again, actuarial input would be essential to a budgetary analysis. By itself though it is meaningless. While an actuary must make use of economic data, they are most decidely qualified to make forecasts.
Economists and Certified Financial Analysts are specifically trained to make the kind of judgements that would render an opinion on something like this valid. That’s what they do. Actuaries are not, and should not, just as an accountant is not necessarily qualified to render investment advice, an analyst is not qualified to underwrite insurance, and an economist shouldn’t do your taxes.
I repeat, there are specific professions designed to answer these kinds of questions. Actuaries are not it.
that should be “they are most decidedly not qualified to make economic forecasts.”
kabbes:
An actuary will most certainly work with economic data. Being an economic statistician is not the same as being an economist, or a CFA.
An actuary rendering an opinion of the feasibility of the US budget in general is outside his/her area of expertise. He is intruding into the territory of Economists and CFAs who are specifically trained to render such an anlysis.
It’s not at all difficult to understand. Actuaries have costed the proposed social security plans of a couple of politicians. They have compared that to demographic forecasts of expected taxation. Both of these things are well within their range of expertise. Comparing one to the other, they have suggested that the budget plans are not feasible.
At no point has any actuary attempted to comment on defense spending, housing benefit or any other area of the budget not related to their area of expertise.
Are we in agreement with this? I’m not trying to claim that actuaries are qualified to comment on an overall budget plan. Why do you say that the above is not within the remit of actuaries?
pan
ps have we successfully hijacked this topic or wot?
I’m not just suggesting that we occasionally need to feed in some economic data given us by some third party. I’m saying that actuaries need to have a pretty detailed understanding of economics in order to be actuaries. Certainly the first year or two of a university economics degree.
I’m not sure at what point one is entitled to call oneself an “economist”. However actuaries would have a fair claim on most reasonable definitions of the word.
We’re most definitely way OT now though. Scylla - you, like me, may feel that this semantic discussion has run its course, in which case we can just leave it here. Otherwise if you start up another topic based on the subject I’ll mosey on down there and continue the pedantry.
Of course that is within the actuarial purvue. By itself it is not a particularly meaningful piece of information. You cannot reasonably analyze one specific area of a budget without also analyzing the other areas which may impact it.
WHen they say “George Bush’s Social Security plan” could eliminate the budget surplus by 2015, they are not actually rendering an opinion on Bush’s budget. They are looking at one facet in a vaccum. They are including economic assumptions which are inherently variable. Is the 2015 number the low end or the high end? What forecasts are they using? Under the individual account plan, how are they assuming the SS funds are invested? Those assumptions can cause the answer generated to vary wildly. I would expect such actuarial results to come in a table showing the variances based on different assumptions. Than it might be useful when taken into account with the other variables of Bush’s plan, and economic forecasts and possibilities.
By itself, it is not a meaningful piece of information. What meaning it actually does have has been severely distorted by the media.
I would guess that one would be an economist when one posess an advanced degree in that area and is employed as an economist.
I have a degree in economics, but am by no means an economist, and would certainly not presume to represent myself as one.
An economist must work with actuarial data, but I doubt you’ll find one that claims he’s an actuary.
I would not trust ** any** information from an actuary who told me that by being an actuary they were also a qualified economist. Such a person would have left their professional standards behind.
And I still don’t see what you are trying to say with your original statement. If you’re now saying that what you meant was that the media has a tendency to mangle experts’ opinions then fair enough. Can’t disagree with you one jot, though it’s hardly a startling revelation. If you’re saying that actuaries shouldn’t comment on the budget as a whole then I guess this is also furry muff, if a touch irrelevant. However, if you’re saying that actuaries shouldn’t comment on the bit of the budget that is their field of expertise then I couldn’t disagree more. In fact, it’s their responsibility to do so.
We’ve probably kicked around this badly defined discussion enough now though, so let’s leave it at that. You’ve got me agreeing with you in 67% of scenarios - actuarially speaking that’s pretty much perfect.
kabbes:
I can’t actually download the raw data to examine what is being said, but it seems to me just from what I do see in the site, that the American Academy of Actuaries is being a little cavalier with their conclusions in this particular instance and that because of that is inherently prone to misinterpretation.
Most actuaries that I know are by nature very very careful with their assumptions, and are well and professionally aware of how statistical analysis can be easily interpreted. Just for fun I’ll download the actual presentation when I’m at a computer that will let me do so, and let you know what I think.
I don’t often bumb threads but I’m giving this one a nudge. In today’s foreskin debacle, I believe some important issues have been overlooked in other threads.
In case you haven’t noticed I am kicking some serious ass here. This doesn’t happen too often, so I wanted to bump this to the top so nobody would miss this historic occasion.
In case you don’t feel like rereading this whole thing, I’ll give you some highlights. In page 1 I repudiated jshore’s arguments with almost laserlike precision. No loose ends were left. I destroyed any arguments against the current estate tax system as well took a few cheap shots at Al Gore with such sweeping finality that none dared to even attempt a rebuttal.
Later on with cool good sense, logic and restraint, I supported my arguments concerning actuarial fields of expertise until I received a an almost complete capitulation.
I notice that there’s not a forum dedicated to gloating, so I guess I’ll just do it here. I RULE!!!
Thank you for your attention. I now return you to your penis argument.
Thanks for your long, detailed post about the estate tax. You clearly know a lot about the gory details of how it works, which I have to admit that I don’t. But, I still have to strongly disagree with your call for abolishing it. Perhaps there are some things that should be changed in it (like to better protect farms) but I think ending it is just a big tax break for the wealthy at a time when inequality of wealth is just growing and growing and growing. And, it really would entrench an “aristocracy” across generations to even a greater extent than exists today.
Well, I guess this comes down in many ways to a difference in values. I don’t see fairness as dictating that everyone has to pay the same percentage, or even something, to this tax. Yes, the estate tax is an explicit attempt to say, “We will allow you to pass on a reasonable amount of money to your heirs, but once that amount gets very high, we will still let you pass it down, but will take a reasonable cut of it and give it back to society at large.” To me, that is fairer than most other schemes that I can think of. Does it to some degree penalize those who are “most successful and frugal”? Well, perhaps, but, hey, they are the ones who have this large amount of money…And, it is not like they still won’t be able to pass on a sizeable chunk of money to their heirs…And, I don’t think the wealthy are really being “penalized for their success”. We’re not leaving them with less money than if they had made less, we are just reducing the amount of reward they get somewhat.
Fine…so this tax helps the wealthy too in a way. I think that’s great. For those parents who are not as enlightened as Warren Buffet, perhaps this tax will even help their children (although I am not convinced the tax is high enough to really do that)!
In my mind, that was their basic point…That although the marginal rate is high once it kicks in, all the exemptions and deductions mean that even the majority who end up paying anything don’t pay that high a percentage…Only the very wealthy do. You consider that bad, I consider it good. It comes down to one’s vision of a fair and equitable society, particularly in light of the current growing inequalities in our current society. I don’t believe we need to make our society ever more unequal. In fact, I think it is detrimental to our society.
Happy gloating! I hate to break it to you, though, but I still don’t think you’ll get nearly the press that the penis argument does! Perhaps you can start a thread on “Penises of actuaries who pay estate taxes” or “A penis tax on the estates of actuaries who support Gore” or something like that!?!
Glad to see you have a sense of humor about my premature gloating. Perhaps if we resort to vile insults at each other we can get more publicity.
The funny thing is that I strongly agree with the spirit of what you say.
The way that we institute estate taxes is highly unfair because
It targets only the extremely wealthy, or those that are unaware of the immense complexities of estate planning.
It amounts to government subsidization of the life insurance industry which neither needs nor deserves such a benefit
Wealth is not a crime. Being more wealthy doesn’t mean that society gets a free shot at you. Higher income taxes for everybody is fair. A lower estate tax that effects more than the extremely wealthy and ignorant is fair. An estate tax as a percentage will automatically place a larger burden on those with more money. 10% of 10 million is a million. 10% of 100,000 is 10,000. Both are significant taxes on significant estates. That is fair and that is equality. If this is a nation that beleives that all men are equal it is an insult to both the wealthy who pay a large percentage, and the less wealthy that do not that there is an inequitable situation in place.
Why the prejudice against wealthy people? Their property is as much their’s as a man with less means.
It may not be wise to leave extreme wealth in the hands of heirs, but that is no more be the government’s choice than it should be to tell you what religion to raise your children.
As far as I’m concerned the current estate laws are unconstitutional due to their inequality. No, I am not in favor of taxing what little a poor person might have when he dies, but estate taxes need to be less lopsided, and more equitable, or they need to be abolished. The double taxation is inherently unjust.
This tax is outrageously unfair. Take two moderately wealthy individuals (several million or so). One pays the best financial planners and lawyers, and pays no estate tax! The other is blissfully unaware of his estate’s impending liability as he goes about his business. He drops dead, and pays tax at a rate approaching 55%! Any tax that can be (albeit legally) avoided by those in the know, but which less aware/capable taxpayers must pay through the nose is hardly fair. (I recognize the income tax suffers from the same problem, though not to the same extent, in my opinion, and with the top rate at 39.6% it is not as burdensome a problem.)
Again, take two individuals who have each earned $10 million over their lives. One fritters it away, gambling, booze, fast cars, fast women, etc. The other reinvests his income in his business, employs people, saves for a rainy day, and provides for his family, heirs, and charity. The frugal, responsible citizen gets screwed by a marginal rate of 55%, while the footloose and fancy-free playboy pays nothing.
(How’s that for insults a la old Saturday Night Live?..I’m probably dating myself.)
As for the estate tax being highly unfair, yeah, I can see how some aspects of it are not so great…like the subsidization of the insurance industry. But, I don’t think the solution is to get rid of it, or to make it less progressive.
I guess I don’t understand the appeal to equality here very much. For one thing, I don’t think it is inherently obvious that the greatest equality arises when everyone is taxed at the same fractional rate. Some might argue that it arises when everyone is taxed the same dollar amount. (Not me, of course!) While some might argue that everyone is equal if they are left with the same amount of money after taxes. (Even pinko me thinks this is way too extreme.)
But, more realistically, an argument for equality might say that everyone should enter life with the same opportunities. Do you think someone born into a rich family and one born into a poor family in this country have the same opportunities even given the current progressive estate tax system? I hardly think one can argue the estate tax as being too progressive to be equitable from this point of view!
I admit that a lot depends on the point-of-view…I can understand how from the point-of-view of the person who has built up their fortune, only being able to pass half it onto their heirs might seem a bit “unfair” (although it is still a God-awful amount of money). But, geez, from the point-of-view of the heirs, it is grossly unfair that because of the luck of the draw some are born into this wealth and some are not! They didn’t do a damn thing to earn this money! (And, after all, it is the heirs who are really the ones affected!)
It’s not just the heirs that are affected. It’s the government telling you what you can and can’t do for your kids.
Perhaps the prime motivation to being successful and frugal is so that you can provide for your children. If you take that away, you’re telling people they might as well not try.
I repeat, that it is none of the Government’s business what you do with your money once you’ve paid your taxes.
And that motivation is eliminated once you put on a 55% marginal tax rate on above a very large amount?!? Boy, what the hell is Bill Gates working for anyway?!? Do you think he could possibly use up the money he has accumulated in his lifetime?
Well, I’d argue that you haven’t paid your taxes until you have paid your estate taxes. Yes, one can do what one wishes with the money left over after estate taxes and, in fact, one can avoid estate taxes altogether by creating a trust for the charity of your choice.
