In other words, let’s turn back SS into that for which it was originally intended: a safety net for the truly needy.
It is quite amusing to see The Left argue against protecting the poor at the expense of the well-off.
We have three choices:
Bush is advocating the first one - which is implemented now and phased in gradually will be the least disruptive and most humane.
This is why I support means-testing. The choice isn’t means-testing vs the status quo - it’s means-testing vs almost certain massive tax hikes in the future. Not only will that be very hard on the economy, it’s also regressive - a flat tax on employment income hurts the poor far worse than it hurts the rich. It’s also a huge inter-generational transfer of wealth, which is crazy because the elderly are the richest segment of society, and we’re transferring wealth from young working people to the richest segment of society. This does not make sense.
If SS was actuarily sound, this would not be the case. Then it truly would be a retirement program. But it’s not. It’s a government entitlement that sucks more money out of the young than they’ll ever get back (compared to if they had invested the money themselves). It’s also a scheme that greatly benefits current and soon-to-be retirees at the expense of the young. Our parents only put a fraction of the money into SS than my generation will, and my child will put far more money into the system than my generation will. That’s because it’s a ponzi scheme.
Here in Canada, when my mother started working the contribution to the Canada Pension Plan was 2%. By the time I started working in the 1970’s, it was was 4%. Today it’s 8%. And the employer has to match it, which means contributions have already been increased from 4% to 16%. And most people my age or younger believe we won’t see anywhere near the level of benefits current retirees get.
This year, with my employers’ contribution I’ll donate about $3700 to CPP, as I recall. That level of donation over a typical 40 year career will be a total payment into the system of $148,000. If I put that money into a traditional investment with a real rate of return of about 7%, that would turn into almost a million dollars at retirement. I will only see a fraction of that from CPP payments (maximum payout is $828/mo). My mother, on the other hand, paid in probably 1/2 of what I did, and people who retired a decade ago put in maybe 1/3 of that at most.
It’s already welfare. Let’s just call it what it is and deal with the structural problems accordingly.
Boy, those are a pretty bleak set of choices! You sure those are the only choices we got? Well, if GeeDubya says so, must be true. I mean, we’re talking about a guy with a spotless record for candor. And honesty.
Yeah. Uh huh.
I support this fully. Except I think it’s only half the plan I’d like to see. I’d also like to see the cap on income subject to FICA raised.
I’m not going to say that Bush’s numbers are the ones I want until I have a chance to really look at them some more, but I do give it a stamp of approval in the general sense. It’s in the right direction. And certainly better than the private accounts scheme that would make a bundle for brokers while piling even more debt onto the backs of ordinary citizens.
Well, cutting of benefits to the rich is fine. The rich don’t need it.
But there are several really stupid things about the plan. First- the whole idea is the more you earn NOW, the less you get later. However, a dude may earn well now, but be homeless when it comes time to retire. And- you can’t even say it’s always 'their fault"- look at Enron and Polaroid, where employeees and retirees were frozen out of selling off their employee stock purchases (which many of them used as retirement) while the company’s stock tanked, leaving them destitute. Let’s take one of those Polaroid employees, one of the higher paid ones, earning maybe $90K. Not too bad off, sure. But if all their retirement had been in Polaroid stock, under the new Bush plan- their Soc Sec benefits would be drastically cut- forcing them to live on the street i guess. :mad:
Next- around 20 years ago, the Federal Government forced all it’s new employees (and strongly suggested to the ones currently in) into a new retirement system. The system has a 401K type plan, and a small pension- but also full Soc Sec benefits. (The older Federal retirement plan did not qualify one for Soc Sec, and if you did get them from another job, your benefits were cut). The whole idea of the plan is for FULL Soc sec, and a small supplemental pension. Most Federal workers earn between $25,000 and $113,000 , which under the Bush plan would have lower benefits. Except that the whole “FERS” retirement idea was based upon Soc Sec being the foundation- and the combo of full Soc Sec and a small supplemental pension being enough to be a “living” retirement- not well off, but not having to eat cat food, either. Federal workers have no choice- they have to be part of this system. So- basically, the Adminstration has just suggest a cut inretirement benefits for some 80% of Federal workers so that they won’t be “OK” when they retire. :mad:
What a rip-off! It’s one of the most idiotic ideas i have seen come from this Admistration yet.
Sure I can go along “means testing”- but this isn’t “means testing”. Unless I am reading it completely wrong- the cuts are based upon what you earn before you retire- not what you are earning after you retire. Right?
Well. I’m glad to see that Bush is at least putting some meaningful details to his plan.
No problem with means testing. I don’t even consider the amount that SS would bring me in my thoughts when planning for retirement and certainly believe that it should be an insurance against living in dire poverty during retirement more than an entitlement. Now on how to do the means testing … I dunno, and since this thing is DOA I’m not gonna spend too much energy on it.
Question though on the investment option. A preselected group of fairly conservative options would be available to choose between, right? This cannot fail to create a predictable wave of money coming in and out of particular segments of the market according to the demographics of aging. Control over these investment options could become a prime driver of the markets themselves. What happens when the leading edge of these investers start to pull the money out?
Perhaps more to the point:
GeeDuyba’s recent guise of progressive compassion is a crock. He know’s (or Karl knows, at least…) that this has no chance whatsoever. He’s risking political seppuku, but these are not people gifted with knowing when to give up.
He’s trying to pretend that these are the only alternatives, to present himself as a clear-eyed realist facing the dreadful facts when his opponents frolic in la-la land. Its a crock, of course, but he’s hoping it will sell. He’ll probably still be blubbering over the plight of the poor when he signs the bill cutting Medicare, compassionate soul that he is.
Once again, its how dumb does he think we are and, God help us, is he right?
So let me get this straight - if he proposes a conservative solution, he’s crazy. If he proposes a progressive one, he’s lying and anyone who supports him is a dupe.
Is that about it?
Why would you even bother with these debates then? We can just expect for you to oppose everything the man says or does, so why should we listen to anything you have to say?
Not even close, three tries for a nickel, first two don’t count.
I think it extraordinary that someone who shown little, if any, interest in economic egalitarianism (or “common decency”, as I like to think of it…) should suddenly have such a public spot changing. How very odd. Father Christmas for the upper class dons his armor to gallantly protect the workingclass shlub. Extraordinary.
So, yes, I very much doubt the sincerity of the effort, and wonder why you don’t.
Why, same as you, of course. Exaggerated self regard and a dogged insistence that one’s views be heard. Duh.
Not at all. I thought his hand-holding with the Saudi showed diplomacy and tact, and a willingness to look silly in his country’s service. Still, bet my last dollar it wasn’t his idea.
Now I’m no Bush fan, and I hardly think that SS is the most pressing issue for us to face up to. (cough healthcare cough) But for some reason Bush has placed this issue as his big goal for this term. He has placed a lot of his political capital on it knowing that it is a fight that he is an underdog to win. And his approach is one that shows some compassion for the poorer among us while avoiding taking more from the rest of us (for now).
Realistically, if he doesn’t really mean it then what is his more cynical motivation? Just to drive monies into the pockets of connected fund managers?
One does wonder, amongst other things, why “private accounts” are so much more desireable. If the Bushiviks are intent to risk SS funds on the stock market, why shouldn’t they invest one big hulking wad of bucks rather than facilitate the investment of millions of seperate, smaller accounts?
Are all our citizens to become market mavens, by act of Congress? Why, no, of course not, those funds will be directed towards “conservative” investments…being your larger financial firms, heavy industries, solid investments, secure investments. Is General Motors on that list? If this were taking place ten years ago, would Enron have been on it?
And, of course, when a whole bunch of people are transformed into small stockholders, stocks will be sold to them. Necessarily. Law of supply and demand says the price will go up. Of course, the price has to go up, or this plan is doggy doo. And that, of course, favors those who already own stock in relation to those who are to buy it.
Just a couple off the top of my head. Someone smart will be along with others.
I’ve brought this up a number of times, but I figured a few facts, or factoids, at least, to refute the “7% real return” that got brought up above by Sam Stone is in order:
Using the figures (free because they’re offered as a promo, and therefore not really verifiable. However, they do agree with the Ibbotson data since 1925 to a large degree, as far as I can tell.) available at Global Financial Data, for the S&P 500’s total return since 1871 and for inflation since that time as well, the real return available, which assumes zero transaction costs, zero taxes, zero management fees, and reinvestment of all dividends, although at what rate (monthly, yearly, etc.) I don’t know, in other words, about as best case a scenario as you can possibly get, the 40-year returns are as follows:
Mean: 6.51%
Median: 6.04%
Minimum: 2.44%
Maximum: 9.70%
In addition, the distribution clusters around a result of between 3.525% and 5.34%, with 26 years out of 92 possible years coming in in that range, which largely explains why the median, which defines the figure where half the years were higher and half were lower, is lower than the mean, which is the average as normally defined, where you take the sum of all of the results and divide by the number of samples, or 92. Even more indicative of what a more normal expected result would be, 58 out of 92 years, or 63% of the samples, were “below average”, that is, came in with a return less than that average return of 6.51%. Or, you have a 6 out of 10 chance of making less than a 6.51% real return, even if everything is perfect.
Which is a long way of saying that it ain’t going to be 7%. If you take the maximum risk, that is putting all of your investment into the market, and you get a “normal” result after all the costs are factored in, you’ll probably get 5%.
Please note that that’s a real rate of return, so if you, for instance, put 3% in as an inflation rate, the return you’d see would be 8%. Please note also that you’d have to be nuts to take the maximum risk.
Finally, little known fact: there was a large inflation - prices almost doubled - and a stall in the appreciation of the stock market during and after World War One, which resulted in two twenty year periods, those ending in 1920 and 1921, in which real returns were negative. Now the figures from this time period aren’t as reliable as those used by Ibbotson beginning in 1925, but that should still give pause to those who think that the market over any twenty year period will show a positive real return. This twenty year figure is important, since most people will make most of their lifetime earnings in the second twenty-year half of their career, so the average duration of their investment, when weighted by the amount they actually put in each year, will be significantly less than 40 years, at least at the start of their retirement.
I realize this is a bit of a hijack from the subject of this thread, but I needed to throw a little cold water on that 7% figure. Please note that in addition to transaction and management fees, there will be the “elucidator effect” (see penultimate paragraph of previous post) as well. Don’t know how much that effect will be, but I have a suspicion it will be statistically significant.
So the big cold water you threw on the 7% figure was to show that the mean and median has half a percent to a percent lower?
Fine. Let’s say the real number is 5%. Is that reasonable? In which case, my $310/mo in contributions winds up being about $475,000.
Now, a man who retires at 65 will live on average another 14 years. If the money continues to earn 5%, that would generate an annuity of $45,000 a year. My maximum SS benefit is $9,936 per year.
But I can do more. I can plan as if I’m going to live to be 90, in which case I still get an annuity of $32,000 a year, and if I should die earlier, my family will get a windfall.
But with the government plan, if I croak on my 65th birthday, the government gets to keep all that money I contributed.
I’m not sure why so many people on the left support this horrible system. It’s a great impediment to income mobility for the poor. We have a system whereby the poor and lower middle class are forced to put a large percentage of their income into a government program that not only pays them a lousy rate of return, but which can’t be handed down to their children, so their children start from nothing as well. And if a breadwinner dies early, the family gets nothing (assuming they are adults).
In the meantime, the rich largely put their money into retirement plans that get them much better rates of return, and allow them to leave large amounts of money for their children to keep them in the upper class.
The system is not fair to the poor and lower middle classes. They’re getting a raw deal.
Wouldn’t it be great if sudden death in a poor family would release a couple of hundred thousand dollars that the kids could use to go to school, buy a home, or otherwise get a leg up on life?
It’d be like winning the lottery, or maybe a plot from an old Agatha Christie story. 
Part the First - The Actual Takeaways
Actually, the real points are that
1 - Even in a perfect scenario, you still have a 6 in 10 chance of earning less than the mean, which is already half a point lower than your 7%,
2 - There were twenty year periods where the real return was negative, which flatly contradicts the myth that no twenty year period has seen a loss in real terms.
Also, I do think elucidator made an excellent point. Your point about constructing an annuity is interesting, but kind of idealistic; in reality, at least in my experience, most retirees tend to be very careful about dipping into principal, which of course lowers your expected income. This is actually prudent, since if you have any sort of risk in your portfolio, you could very easily wind up compounding your losses if you withdraw in a bad year. Downward spirals are a definite danger in a scenario where you’re no longer adding to your savings.
Of course, I have nothing against anyone accumulating assets to pass on to their children, and the Democratic response to Bush’s plan is that an add-on to SS would be fine. Myself, I’ve thought that we could raise the contribution cap, and as a carrot to that lift the contribution limits on 401k and SEP-IRA plans, (maybe say that everyone who contributes from 100% of his salary can contribute as much as they like, within some reasonable percentage of salary, to their private plans) so that those people who’s taxes would go up in such a scenario could at least save more in their own private plans, which is a way of subbing private plans for SS for the well-off. It also involves some subsidization of SS from general revenues from the decreased income taxes that would result from such a plan, but there’s not much of a way to get around some form of that that I can see.
Part the Second - The Sitting Bull Perspective
The problem with the Bush proposal being discussed here on indexing is that he’s saying to anyone who attained even moderate success in life that their real return on SS will be exactly zero. Far as I can tell, it’s actually a separate proposal from his private plans proposal. It looks, and here my natural cynicism to anything this man says kicks in, like he wants to preserve the SS surplus so that it can continue to be raided for the general revenue side, which of course means so that it can continue to subsidize his tax cuts and runaway expenditures on pork and defense. As I’m sure you know, his international rep as a good custodian of our fiscal affairs is below zero, on a scale of 1 to 10. He is held in almost perfect contempt on this. Rightly so, in my opinion.
As you may not be aware, a lot of us Democrats are extremely pissed that the surplus from a regressive flat tax falling disproportionately on poorer workers and their employers is being used to subsidize tax cuts to the income taxes of the wealthy and their employers. Landscaper employees and their employers are paying so that traders from Goldman Sachs can pay 100k per month rents on Manhattan apartments (while Goldman itself pays far less a percentage of its employee expenses as FICA contributions than does the landscape company owner, a thing that is little remarked, for some reason). At this point, some of us are ready to ditch the entire idea of a surplus in SS, and start making it strictly pay-as-you-go right now, just so that there’s no longer a surplus available to be raided anymore.
So any money proposal he makes has to be examined from the POV of, “What does his fiscal agenda gain from this?” Looked at in that way, it starts to stink very badly.
It doesn’t seem to have anything to do with “means testing”. Unless I misunderstand it, it *seems *to be based upon the income one earns (and is taxed under FICA) pre-retirement.
There’s a lot more detail in today’s New York Times, including some graphs:
Oooh, I thkk I get it now?
And for practical purposes, “irrelevant” usually means “expendable,” doesn’t it? :dubious:
I think it’s pretty funny that, on the main page, this thread’s title is cut off to “Bush proposes SS.” Because, you know, it wouldn’t surprise me if he would insist on having his own Schutzstaffel.
Short answers:
No.
No.
No.
No.
Longer answer: Bush has now become a pinko liberal in the eyes of the core group of people who are inclined to expend political energy fighting for his plan. Stick a fork in it; it’s done.