Zoe said:
A TRILLION dollars is unaccounted for? What are you talking about? Do you have a cite for that?
In case you want to just retract that without having to do the research, I’ll point out that a trillion dollars would be more than twice the entire military budget for next year, and more than three times the annual military budget of just a couple of years ago. It would be no mean feat to ‘lose’ a trillion dollars.
No. What I gave you is the total government spending (“outlays”) in a given fiscal year divided by the total GDP. Thus it is not a rate of growth…It is simply a total amount of spending relative to the GDP.
I assume that Zoe is referring to the Defense Department inspector general’s study reported on here. Unfortunately, it doesn’t give details of the time period over which they are talking about. Obviously, it could not be just one year. Presumably it would be something like 20. It should be pointed out also that “unaccounted for” does not mean that it necessarily went to waste but that, at the very least, their recordkeeping on what it did go for was not up-to-snuff.
Simple, John Mace. Not everyone knows the right way to invest their money. Privatizing SS is, even from an investment POV, just plain dumb.
The largest piece of your money as you approach retirement should be in the safest investment. SS forces you into this by investing strictly in US Treasuries. (Of course, from my posts above re the deficit, you can see that I think this is being abused for a quick dose of stimulus to get Republicans re-elected at the Federal level, which destroys the safety of the asset class. One hopes that this will be seen for what it is, and the scoundrels thrown out. But I’m not terribly hopeful.) If people are allowed to make their own choices, then in the midst of a stock mania like the one that died ingloriously a few years ago, they’ll do some truly awful things with their money, and so condemn themselves to poverty in their old age. Most people have neither the expertise nor the self-control to put themselves in safe investments and stay there for their retirement.
My other point is that this is part of a trend in US society towards glorifying those who have some talent in business, while denigrating the rest. The hallmark of a developed economy is the ability to allow people to gravitate towards the things they do best. Forcing people who don’t have much talent in the area to spend inordinate amounts of time thinking about investments at the expense of the things they know how to do best is not a formula for long-term economic health.
Firstly, there are lots of investment theories out there, so it’s unclear that your statement is true. It might work well for some people or even most people, but not necessarily for all people. But let’s accept that investment theory as being sound. Why, then, did you not mention what that theory says you should do in your early years-- ie, invest for growth in stocks. SS currently invest ZERO in stocks. None ever. Now that, my friend, is dumb. Typical portfolie recommendations might include 60-70% stocks for someone in theri 20s, scaling down to 20-25% for someone nearing retirement. You’d be hard pressed to find any investment adviser who would tell his clients to eschew stocks completely.
You’ve taken one small piece of investment theory to defend the current SS system, and ignored the bulk of that theory, which clearly shows that the system is not well founded.
But the thing is, SS is not really a retirement investment program. It’s a program that taxes current workers to pay for the retirement of former workers. A great deal of retirment capital is tied up in some of the worst long-term investments a person could possibly pick.
Presumably, people are forced, increasingly, into stocks in their 401ks (for examples, see Enron, Worldcom, or Global Crossing) so I have no problem with SS keeping them as safe as possible, given that so many companies have no scruples whatsoever about forcing them into paper that they know to be worthless.
Even allegedly reputable companies that are still in business as I write this force their employees into company stock, so SS is performing a valuable service for the employees of these companies.
As for the idea that current workers are paying for the retirement of former workers, this has always been true. The fact that there are so many intermediaries doesn’t invalidate the root of what is happening, which is a wealth transfer from current workers to former workers. This is true in stocks, bonds, and real estate, as well as US Treasuries, all of which will have to be sold to finance the retirement of the boomers. The only answer, for the economy as a whole, is growth. SS is not alone in being caught in this demographic vise.
Presumably not. Do you have any actual evidence that even a small number of companies are forcing their employees to invest their 401(k) money into stock? And even if a few companies were doing this (which I doubt), and SS were a hedge against this, it just proves my original point: mediocrity enforced for everyone because a small minority makes poor decisions.
The company I work for, for one. You will forgive me if I don’t identify it, but it has tens of thousands of employees in the US. If they’re doing it, you can be sure lots of others are too. At the time of the Enron et alia scandals, Congress critters were looking very nervous because one of the reforms proposed was that company contributions not be made in company stock, or at least that the percentage be limited, and you could see by the expressions on their faces during the interviews on the news that they really didn’t want to cross their contributors with this. That companies prefer to force worthless paper down the throats of their employees should hardly come as a shock.
In the real world, companies do what they can get away with. Don’t play the innocent with me, because you know it’s true.
Sorry, but that’s not even close to proof. Don’t name your company, but tell us specifically how it forces you to invest in its stock in your 401(k).
No I don’t know it true, and you have not demostrated that it is either.
Company contributions are made in stock, and it can’t be sold for a period of years.
This is a very common practice, and exactly what was done at the three aforementioned, now bankrupt and scandal-ridden, companies.
No reform has come down the pike, even though the 401k program owes its existence to a government tax subsidy.
The company is not obligated to make any contribution to a 401(k). If it didn’t contribute stock, it might just as well contribute nothing. People are still free to put their own money in a 401(k) and choose from different investment vehicles. That, BTW, is what the plan was devised for in the first place.
Wrong.
The original 401k, which existed at my company until very late in the game, was simple: if the company paid you a bonus and you agreed to take it as deferred compensation, it was designated as tax free.
The structure where I work until not too long ago was precisely the above: you got 3% of your salary at the end of the year. If you didn’t specify that it was deferred compensation, you got it in regular salary and it was taxed. Else, you got it placed in your 401k account and another 3% match was put in. You had complete control of where this money was placed.
A few years ago, one of those parasites who existed purely by merging companies took this place over, and it was converted to the current, more “modern”, structure.
The regular pension plan was also gutted, of course. The secret behind most of these mergers is that the fees of the investment bankers are paid by the gutted retirement and benefits plans.
And, on the political scene, we have calls for the privatization of SS. Of course.
pantom: You have in no way deomstrated that your company or any other company has forced anyone to do anything. If a comapany chooses to pay you a bonus, it’s certainly the company’s perogative to determine the method of payment. If your company has a 401(k), you are free to make contributions to it. If you aren’t, then it’s not a 401(k) plan. But I’m not going to hijack this thread further on this subject, which is actually your hijack of my original SS hijack.
Indeed!
My original question remains…what will the eventual end result be of long-term ‘starving the beast’ (or choose your term for continual spending growth combined with tax cuts)?
No, Just that he may be misinterpreting him. I have not been able to find the quote by Stockman that he mentioned. I think the analogy with the abortion debate is apt. Do you think it is fair when right to choose advocates are called murderers?
I think I may have addressed this one with the quote from the interview that jshore provided. Unless you can find directly where Norquist said this, then yes, they lied.
I’m not saying that anyone is lying. Even that last sentence of mine is a little more hyperbole than anything else. I am simply skeptical of a doctrine which is only described by its opponents. Do you give any credence to conservatives who claim liberals are really closet communists? I don’t either. But why not? Because no liberal uses those words. Many of them actively reject those words. It seems, that in order to prove that such a policy is really advocated by someone, you need to have their agreement (that is a quote indicating that they advocate the policy) or a good reasoned argument showing the the things they do say leads inexoriby to that policy.
Again, let me repeat that I am not denying that some republicans, conservatives, or others might actually believe in this “starve the beast” policy. There are a couple aspects of it that apeal to me, for instance. But I would like to hear form the suposed advocates of the policy before I say one way or the other. It seems unfair to say “they believe this and that” without proof and then proceed to show that this and that are bad things.
How about we will find other ways (besides federal government programs) to solve the problems which it now addresses?
You can’t find it, ergo it was never said?
So Stockman coined a phrase to describe a policy that no one had announced and didn’t intend to implement? Just fun and games, or maybe to give Reagan’s opponents ammunition to make the fight more even?
Why drag in abortion? Don’t we have enough difficulty with “starve the beast?”
I’m not saying that Stockman never said that. I only question what he may have meant if he did say it. Was he talking about a policy? How do you know?
I only dragged in abortion as an analogy of the problems with arguing with hyperbolic straw men. I’m not sure that our current subject qualifies as a straw man, but it seems to qualify as misdirected hyperbole. That is, it seems to be a phrase and a policy which is described only by its opponents. As such, it triggers my skeptic response. I’m certainly willing to be proven wrong. If you can find a book or speach which describes this policy by someone who is a proponent of it, then we can dispense with this whole hijack. I’ll go read it and we can discuss the policy, whatever it is. It seems dishonest to discuss a policy which we cannot even attribute to any of its proponents.
jshore, I thank you for providing the cite that John Mace requested for the Defense Department’s inability to account for one trillion dollars.
This Department also has a reputation for gross overspending on simple items such as hammers and the infamous toliet seats. There have been stockpiles and warehouses of items that were either over produced or did not make it to the soldiers who needed them.
When there are Entitlement Supplies Surplus Stores and Educational Supplies Surplus Stores, then I will entertain the idea that these areas are good places to cut back. There is also room on my social calendar for a National Guard Bake Sale.
Here is a cite from theWall Street Journal editorial page by three Professors of Economics who are all Hoover Institute fellows.
Their concluding word is: “The evidence is clear: Cutting taxes will have beneficial effects. Tax cuts will keep government spending in check [underline added] and will provide the incentives necessary to produce a highly skilled, productive work force that enables high economic growth and rising standards of living.”
And I still see no evidence that innovators are afraid to innovate for fear they will have to pay high taxes on large incomes.
Discussing the idea is a waste of time because nobody intends to follow it. I still claim that “wasteful government spending” is the spending of the other guy, not me.
Thank you for the link. It is a very cursory article. But it does seem to advocate cutting taxes to curb government spending. It seems to indicate that lower taxes have some effect on government increases. Although it is unclear on how this is supposed to work. I have been lurking through some of the conservative think tank sites trying to find an explanation for this. But have had little luck so far.
I’m not sure what your line about inovators was addressing. I don’t think the article proposed that inovators would be less likely to think of inovations under high taxes. I think they simply suggested that lowering the amount of take home pay for some professions reduces the quality of people who take up those professions. Again, the article was a summary and did not contain a lot of meat. But this seems a pretty reasonable assertion.
The idea is only a waste of time to discuss if you mean the idea of forcing a budgetary crisis. I’m not sure that anyone advocated this tactic. Lowering taxes to force government to lower spending, however does seem to be a Reagan era conservative tactic.
I agree entirely that the trend is to label other’s spending as wastful. Notice Zoe’s last couple posts.
But even amongst opponents, there is some common ground on what constitutes waste. Unfortunately, this common ground is woefully small. Does anyone remember the Frontline episode about the Rural Electrification Project?