Thanks! I appreciate that.
On the other side of the coin, it’s not too often that ensuring compliance of fiduciaries through ERISA comes up for discussion at parties.
Gotta love these Pubbies. They try to argue realism, i.e. we (the Pubbie cheer squad) accept that the Government took our tax money, promised to invest the money and to pay it back, but realistically, the money’s gone, and so it can’t be paid back. But the Government now as a better proposal, where it will take our money, invest the money in something else, and promises to pay it back. And this time, by God, they’ll actually pay it back! Trust me! I’m not stupid, I swear!
Makes no difference to me what happens to Social Security, but, shit, what can you do but laugh at the stupid cheer squad?
Republican words are worthless.
Republican bonds are worthless.
This is what they meant when they said their word is their bond.
Hopefully more than just Bush and Scylla will choose this rhetoric. 2006 will then be a walk in the park.
That stands in complete contradiction against what Scylla actually said. He listed more cons than pros for Bush’s proposed reforms. In fact, he said specifically, “Oftentimes of course there is a big difference between what we are sold, and what we actually get, so we’ll see.”
Um, go and jerk off in one of the libertarianism threads that people started for you in GD?
Scylla, I didn’t mean to speak on your behalf when I was correcting the bedlamite, so feel free to chime in if you were making some other point. What I got from your very informative posts is that what is in place is untenable, and that what is proposed is unappetizing. My question is, why is the government already not investing even its general funds, let alone social security, in accordance with modern portfolio theory? Wouldn’t earned interest be a way of getting revenue to bail out social security?
Hentor and Desmostylus, where exactly was I cheering over the financial state of Social Security? I get no pleasure from sham trust funds. I just refuse to accept the rhetoric that they’re there when they’re not.
And I haven’t weighed in on any of George Bush’s Social Security proposals in this thread. All I’ve done is point out that he is correct. The trust funds are a fiction, and have been for decades. My forty year old cites prove that.
I find it interesting that instead of responding to the points made by Scylla, Liberal and myself, you both instead choose to attack us personally. Could this be because you have no answer that will support your position?
Liberal: Sure. It’d just be illegal. The government isn’t allowed to invest in any way, shape or form.
For good reason, too- the government would be the single biggest investment in the market. Having the government buy this fund or that portfolio would be a massive boon to said fund or portfolio. The possibilities of corruption- or worse, government favorites playing- would be endless and drastic.
But the problem isn’t just those who live to be 65. It’s also the number who make it to 20, begin paying into Social Security, but don’t actually live to be old enough to receive their benefits.
In some circles, welching on a debt would earn you a late night “visit” from some very large people with no necks. Snap. Crunch. Pow.
I do apologize for any personal element of attack. However, you haven’t really made any point about the non-existence of the trust fund, other than to assert that conversion into bonds made it go poof. Perhaps we are talking past one another, but this is not a trivial point to me that can be dismissed with hand-waving.
Are you saying that there are no bonds? There I disagree.
If you are saying that there are bonds, but that they are worthless, then it becomes a debate about whether those commitments should be honored. I will argue that they should.
I don’t think any of us are arguing that the bonds are “worthless”. What I’m arguing is that the bonds aren’t enough. Simply put, current Social Security output is heavily dependent on money currently coming into the system. And over the next twenty years, there isn’t going to be enough coming into the system to be able to pay out to the benefits holders.
I think that what several people are saying that there are bonds, but they don’t have the same meaning that a private party holding a bond would. That was the point of the IOU to yourself analogy. You can owe yourself money, and even calculate something like imputed interest, but the IOU you wrote to yourself isn’t an asset. You can’t put it up like collateral or anything like that.
Of course the commitments should be honored. The day the US defaults on a debt will be a dark day indeed. The question is, since the money is not there in a real form, how and when do we start paying off some of the bonds real cash? It seems to me that, at this point, a wad of bills under the Presidental mattress would be preferable to creating more bonds.
I know dick about economics, so keep that in mind. I’m asking for education here at a very basic level – so if you use words like “TIAA-CREF,” my eyes are going to glaze over.
That being said, critique my understanding here:
In 1983, Alan Greenspan et al. increased payroll taxes for the express purpose of using the extra money to pay for the wave of Baby Boomer retirements. This money was collected – and still is being collected, right? Of course, the government didn’t take the extra money and bury it in a coffee can in the backyard. They did stuff with it – invested it, in other words. Makes sense, I guess… you make more money by putting your money in a savings account than you do stuffing it under your matress.
The twist, as I understand it, is that the government didn’t just invest the money; they spent it as well. So when 2018 rolls around, and all the Baby Boomers retire, a naive person like me will say, “Fortunately, we’ve been saving for this eventuality since 1983, right?” At which point, someone like Scylla will say, “Well, that was the plan, but we’ve screwed the pooch on that one. There ain’t enough money left.”
Is that about it?
If so, Princhester’s analogy of lending your car to a friend who loses it seems very apt. We “lent” our “car” (in the form of money) to our “friend” (the government), and it got lost. So Hentor is pissed. Yeah?
I can see how this isn’t just Dubya’s fault, but rather the fault of every President since 1983. So I’m not going to go into some partisan fury over this. I just wanna know how we can fix it. We’ve been saving extra since 1983, but it’s not gonna be enough to cover the Boomers. So what do we do? Bush’s plan seems like it’ll solve fuckall, and has the added benefit of screwing up everything to boot. So what do we do? Make it so that you pay Social Security taxes on income above $90,000 too? Set up another arrangement a la 1983, except this time put it in a “lockbox”? Draw a red line in Bush’s proposed permanent tax cuts plan and replace “… money back to the taxpayers” with “… money into Social Security Coffers, and this time we mean it”?
Yep. Keep in mind that the government isn’t allowed to do any of the kind of investing that we normally think of- it can’t buy funds or stocks. I’m not even sure what the regulations are on it buying domestic or foreign bonds. That’d be something for Scylla or Manhattan to answer.
Well, the more apt analogy would be this: a friend comes up to you and five friends and states that if you each give him $1000 a year for the next fifteen years, he’ll give you each a $20,000 car. He’s assumes that one of you will kick the bucket before that time comes, and so he’ll be able to pay off. He uses the proceeds from his assumed profit to buy you and your friend beer… as well as to buy cars for other people that have been promised them.
Fifteen years pass and, guess what? None of you croak. Your friend then pushes a $12,000 car at you and says, “This is the best I can do.”
That’s what will begin happening in about ten, fifteen years.
And every Congress as well, since Congress has authority over the purse strings. It’s as much O’Neill, Wright, Foley, Gingrich, and Hasert’s fault as it is Reagan, Bush, and Clinton’s.
Well, Bush stated in his State of the Union address that a bipartisan panel would be formed to investigate the issue, and make recommendations. And that he’s open to any recommendations made (though we’ll see about that) and hopes the Congress will be as well (again- we’ll see). All of the proposals you’ve made are considered good ideas.
Partial privatization, like the President is suggesting, will not fix the solvency issue. I believe that everybody realizes this. You could probably solve the solvency issue without dealing with privatization at all. However, the President wants it, although I don’t think he’d veto a bill that made significant changes while not adding the privatication. There are, as I see it, three or four things you could do without increasing the 6.4% payroll tax. All of which seem fairly simply to me, except for the politics of the thing.
1: Remove the cap on payroll taxes. Even though tax hikes are unpopular, I think you could get public support for this. After all, you can spin it as “it’s not a tax hike but instead bringing the Social Security tax structure more into line with the income tax.”
2: Raise the age for collecting. I think this will go over more easily with the younger workers, under 30 especially. Don’t change it radically, but more quickly than it’s being done now. Say, for example, anyone born in 1959 or before can still retire and collect benefits as it’s set up now. People born between 1960 and 1969 would have to wait another year. People born between 1970 and 1989 would have to wait two more years from where it is now. People born between 1980 and 1989 would have to wait three more years, and so on until we get the retirement age up for someone born recently to about 70. Then we set the retirement age at that.
3: Index the benefits to inflation instead of wages. This means that the buying power of the benefits would stay relatively constant over the years. There is math out there that this would also save money. I think this one would also be fairly easy to get passed.
4: Means-test the benefits. This, I think, would be hard. Too easy to spin towards the dangerous S-word.
The thing is, the plan Bush has floated so far includes at least idea 3. Being young, I also support partial privatization.
Does anyone have a hard number on what the obligation currently is to the “trust fund”?
I don’t think that’s a good analogy either. In 1983 the demographic problems that will face SS in the future were understood, there was no “hoping more people will die” so that the trust would not have to be paid back in full. The gov’ t collected the extra money at the time realizing that it would have to be paid back in full, through income taxes. Nothing has really changed since then.
A better analogy: you gave your car to a friend, and he gave you a piece of paper saying he’d return it to you in 20 years, with interest. Now he’s lost the car, the question is, does he still owe you an automobile?
Of course that’s a flawed analogy as well, since both you and your friend new ahead of time he wasn’t going to have the car in 20 years time, and that he was going to have to pay you back some other way.
Also, SS is complicated enough. Can we devote this thread to talking about the trust fund or talking about privitization. They’re two seperate issues, fixing one won’t fix the other, and their are several threads already in GD discussing privitzation.
Exactly, Malodorous. The existence of the trust fund is independent of any problems with Social Security. That is to say whether or not it is sufficient or whether or not the system will remain solvent does not determine whether the fund exists. Let’s not conflate the issues, and there are and have been plenty of other threads discussing the extent of the problem with SS and potential solutions.
I am going to resist the compelling urge to point out that, were government not a multi-trillion dollar behemouth that misplaces a billion here and a billion there, this wouldn’t be a problem. Nosiree, I ain’t gonna bring that up. 
Look, it’s pretty easy to understand. The government can easily pay back the “trust fund”, it will just have to raise taxes (or cut other programs) to do it. The trouble is that we’ll have fewer taxpayers in the future, so we’ll have to raise taxes even more. And we’ll have more social security recipients, so we’ll have to raise taxes even more.
All this is going to create a crushing tax burden. Either that or we cut benefits, or we pay exactly the agreed on monetary amount, but inflate the money supply to make that monetary amount worth less.
As for the argument that back in '37 FDR promised you that you’d be sipping Cristal and doing cocaine off a whore’s ass when you retire, I don’t see how he could make a promise that my two year old daughter would have to pay for it.
The reality is that social security has always, is, and will always rely on that year’s current payments of by the taxpaying public. The taxpaying public will decide exactly how much they want to pay in old age pensions, and how much they are willing to fork over in tax payments to fund those pensions.
I can’t make a promise to my parents that my children will fund them at such-and-such level when they retire. I can promise to fund my grandparents at such-and-such level today, but when my children become taxpayers they will decide how much to fund my parents, I cannot ethically make binding commitments for them.
Explain to me exactly why this is Bush’s fault?