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Thread: Bush Administration SS Overhaul

  1. #1
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    Bush Administration SS Overhaul

    I have simple questions to poise:

    1. If younger workers are in fact allowed to divert a percentage of current SS paycheck withholding taxes to private investments for retirement purposes, will that amount, in 'special' retirement funds, somehow be accessible to the government as general operating funds as with current SS funds? If not, will additional public debt be required to supplement that loss of cash flow?

    2. Given the dismal state of our equity markets, who will be responsible for those investments?

    3. How will the US economy cope with the additional public debt, now conservatively estimated at $2-trillion, required just to initially enact such a scheme?
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  2. #2
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    It seems to me the problem with Social Security is pretty basic: over the next several years we will be handing out more money than we're taking in. When you look past all the political "double talk" there's only one solution: raise taxes on current and future contributors until you close the collection/benefit gap. Privatizing accounts doesn't reduce the shortages unless the average American is savvy enough to stay ahead of market cycles, and I think we all know that's unlikely given the number of investors caught in the last "correction". Maybe we should just take the government completely out of the retirement business and create more generous tax considerations for IRA, 401K, and other private retirement accounts.

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    Quote Originally Posted by jskufan
    It seems to me the problem with Social Security is pretty basic: over the next several years we will be handing out more money than we're taking in. When you look past all the political "double talk" there's only one solution: raise taxes on current and future contributors until you close the collection/benefit gap. Privatizing accounts doesn't reduce the shortages unless the average American is savvy enough to stay ahead of market cycles, and I think we all know that's unlikely given the number of investors caught in the last "correction". Maybe we should just take the government completely out of the retirement business and create more generous tax considerations for IRA, 401K, and other private retirement accounts.
    What about existing benefit liabilities and current SS collections diverted into general funds? That alone eats up current payroll tax collections. With Bush always being the fiscal conservative, I can see many trillions in public debt being used to stem that tax revenue loss. Neither party is going to upset the senior vote.

    With our current economic direction, I wouldn't favor any public equity market investment where people are looking to live off of proceeds. Private pension funds, basically the same structure, are failing about as fast as the government can fund takeover to continue pension payments. Even GM is attempting to distance itself from what has turned into monsters. With inflation, changing actuary statistics and our history of corporate fraud, I'd say give it to the Zürich Gnomes where the return won't be as high, maybe forcing future retirees to reduce their working days lifestyles, but it would be there when needed.

    The current administration is clearly looking for ways to pump the GDP and valueless equity market transactions would do just that. More fluff in the GDP. He'll sell it by claiming fund contributions would supply expansion capital - insert a 'Make America Strong' or three - and forget to tell the public there's no demand for domestic expansion capital. And also fail to disclose what will happen to equity markets based on retirement funds when fund contributors begin retirement, discover fund returns won't let them live at their accustomed lifestyles and start going after the capital.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  4. #4
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    Quote Originally Posted by georged

    With our current economic direction, I wouldn't favor any public equity market investment where people are looking to live off of proceeds. Private pension funds, basically the same structure, are failing about as fast as the government can fund takeover to continue pension payments. Even GM is attempting to distance itself from what has turned into monsters. With inflation, changing actuary statistics and our history of corporate fraud, I'd say give it to the Zürich Gnomes where the return won't be as high, maybe forcing future retirees to reduce their working days lifestyles, but it would be there when needed.
    The agency that insures the private pension plans are facing an upcoming shortfall which might again force the government into bail out mode. Future retirees had better plan on feathering their own nests when they retire ..... or they could run for congress where they will find the world's best retirement and insurance plan.
    Dono

  5. #5
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    I fail to see ANY logic at all in the Bush plan. His Social Security logic seems to fall in line with his WMD logic. Here's why. He's turning what may be a future problem in to a present day emergency. I say MAY be a future problem because all projections, by default, must be based on nothing more than a statistical guess regarding population growth. That first guess is the basis for a second guess. What will the life expectancy be 20 or 30 or 50 years from now. Then the third guess. What will the income level of that fictitious population be? A guess on top of a guess on top of a guess doesn't constitute an emergency in my book. Example: when Social Security began, they didn't project today's baby boomers. Why would the next guess be any more accurate? I predict a population decline. Or... I predict that the bird flu will wipe out massive numbers of aged. There. Problem solved.

    Of course, it's not that simple, but my point is that financial predictions, that far in advance, just are not reliable from either point of view.

    Now, let's take GWB's assumptions as fact. IF, IF, IF the guesses are at least close to correct, his plan is still a terrible way to deal with the problem. Here we sit with a huge and growing deficit. Why would we shift future debt to the present. He's promising to not cut benefits to those who are currently retired or nearing retirement. In other words, the government will continue to pay out the same amount of money for the next 25 or more years. He's not avoiding paying the baby boomers. He's promising to pay them - every last one of them - full benefits. Yet, at the same time he would like to reduce the amount of money coming in to that account immediately - making the dreaded baby boom years as financially painful as possible. Would we voluntarily take a pay cut on the day we send our children off to college? Of course not. We'd all say we'd prefer the pay cut AFTER they graduate. That is - IF there has to be a pay cut at all. Why would we bear the full burden of the baby boomer's benefits earlier than necessary - and increase that burden by paying it early - along with the resulting interest from having borrowed it. Do we borrow the money to pay our kids college tuition when they're in Kindergarten? That's what he's suggesting.

    Today is the day to stop looking into the future. The future is here. The baby boomers have already arrived. It's too late. Continuting to pay them while cutting the income to pay them with seems like the silliest thing I've ever heard.

    According to a Nightline I watched last week: If Social Security remains as it is now, it will take until 2016 for the SSA to be paying out more than it takes in. It will take until 2048 to use up the reserves that are there. So much for the advertisement about 16 to 1 workers. 16 was obviously way too many. There's enough reserves to last through 2048. AND THAT'S AFTER they raided the fund.

    Finally, George's big lie. From Factcheck.org (or Factcheck.COM as Dick Cheney likes to reference it). Face it, George is just trying to sell the demise of Social Security. Social Security simply doesn't fit his vision for an ownership society. So, he's twisting the "facts" to suit himself. And he's running a blitz of an ad campaign. He's done it before.

    http://www.factcheck.org/article302m.html

    And Georged, your question is good. But I have another one. If a worker puts say 2% in his private account, does the employER have to match it as he currently does with Social Security. Or is this really a plan to reduce employer costs.

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    Quote Originally Posted by kickin50
    And Georged, your question is good. But I have another one. If a worker puts say 2% in his private account, does the employER have to match it as he currently does with Social Security. Or is this really a plan to reduce employer costs.
    The Christian God's self-proclaimed prophet and crusader GW Bush has yet to unveil his plan for SS reform in any tangible form. Perhaps that God has yet to whisper all the details in his ear. Any reduction of tax revenue, be it a 2% employee and/or 2% employer contribution, will affect current/future SS payments and general revenue, where congress has been using it for years to avoid raising taxes to ensure reelection into the finest retirement program in existence.

    I can't see employers getting much of a break other than reductions already in play. Our median income at lower and middle worker class levels is going down, which reduces that revenue stream with a corresponding reduction in employer tax costs. Planned relaxation of immigration laws will drop those costs even farther. We're becoming a service transaction oriented economy, with larger payrolls exiting the US in the form of relocated production and outsourced jobs servicing US requirements, so most employers won't be that concerned with their 2%. The feds will get it one way or another.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

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    I don't disagree with your assessment of our economy as a whole. Manufacturing is moving to service for obvious reasons. That's the result of our move to a "global economy". We've only accomplished global manufacturing but not global consumerism. We're in the process of averaging our economy with places like Mexico, China and Sri Lanka. I'd rather not be averaged in with them but then, what do I know.

    My dad used to say when choosing friends and associates to do it wisely because you can't bring them up. They can only bring you down. It seems to work with economies, too.

    I do disagree with you, though, about the Social Security matching. Business will care. And they'll care a lot. 2% of payroll ain't hay.

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    Quote Originally Posted by kickin50
    I do disagree with you, though, about the Social Security matching. Business will care. And they'll care a lot. 2% of payroll ain't hay.
    2% isn't a factor to business. That's put into product pricing when calculating gross margin and the consumer pays for it. It's just another line item like materials, labor, shipping, etc., not a reduction in profit.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

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    The important thing to remember here is that there IS NO TRUST FUND. Our trust fund is one big IOU, which there is really no hope of repaying. If you keep in mind that the trust fund is nothign but smake and mirrors, it becomes obvious fairly quickly that the bush administrations dire warnings of emminent doom are fairly accurate.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo
    The important thing to remember here is that there IS NO TRUST FUND. Our trust fund is one big IOU, which there is really no hope of repaying. If you keep in mind that the trust fund is nothign but smake and mirrors, it becomes obvious fairly quickly that the bush administrations dire warnings of emminent doom are fairly accurate.
    The public is unaware of the fact that SS trust fund revenue has been 'borrowed' for general operating purposes and replaced with treausury issue debt. Meaning those treasury issues have to be redeemed with new treasury issues sold to foreighn investors to raise cash! Double debt. Almost as deceitful as Iraq, but since both administrations have been raiding it for years neither one is going to point a political finger at the other.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  11. #11
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    Quote Originally Posted by georged
    The public is unaware of the fact that SS trust fund revenue has been 'borrowed' for general operating purposes and replaced with treausury issue debt. Meaning those treasury issues have to be redeemed with new treasury issues sold to foreighn investors to raise cash! Double debt. Almost as deceitful as Iraq, but since both administrations have been raiding it for years neither one is going to point a political finger at the other.

    Many folks have said that is the way it was supposed to work (politicians raping the trust fund repeatedly). Originally, as drifted, the SS trust fund was to be untouchable, a virtually black hole from a politic ans perspective, where money went and they could never touch it.

    The argument for allowing for access to SS trust fund was that, in the event of another world war, or a major disaster, the government might need access to that money. Like so many other things, I think our earlier politicians (many of whom were very nearly angels by todays political standards) failed to grasp that the day would come when our politicians were all special interest whores who had shirked all responsibility or accountability to the American public.

    Instead we have used the trust fund as a slush fund. It has been years since there was any liquidity to it, or any real hope of repaying it.

    Double debt, George? In light of the fact that we did not even manage to sell enough bonds last year to meet our operating deficit, I think that having to sell bonds in order to repay bonds in the SS trust fund is likely closer to "triple debt".

    The American public obviously has not yet figured out that floating your debt with more debt just screws you worse later (we can see this in consumer trends).
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  12. #12
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    Quote Originally Posted by daewoo
    Double debt, George? In light of the fact that we did not even manage to sell enough bonds last year to meet our operating deficit, I think that having to sell bonds in order to repay bonds in the SS trust fund is likely closer to "triple debt".
    Can't argue with that, but good luck convincing voters that politicians consider them as a malleable mass with not enough common sense to cross a street alone. And they've endlessly proven those politicians correct. I can see Joe Sixpack gladly approving 2% of his gross going into a 'personal' account in equity fund manipulation while paying more than that 2% in another form of taxaction called public debt service to churn the GDP on both sides.

    Run 2% of say $40k/yr at 6% for 40 years and subtract inflation including food and energy. Joe won't be drinking premium beer during retirement, he'll be killing neighborhood pets or children for food.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  13. #13
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    As we look at the mess the U.S. is in, on multiple fronts, not the least of which is money, I can't help but wonder how we have the NERVE to advise the rest of the world how they should be running things. We have a 200+ year history, a moment in time compared to every other society, yet we're sure we have all the answers. Our founding fathers were wise men. But even they couldn't protect us, just a few decades later from the unbridled greed that drives our own elected officials.

    I still disagree with how businesses look at 2%. Certainly, they can absorb it in the cost of what they sell. They'd rather keep it. Second choice, they'd rather not raise prices. That's the basis of competition. They'll take an extra 2% where ever they can get it. Be it labor or raw materials or operating costs. We see massive lay offs every day for the purpose of cutting costs.

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    Quote Originally Posted by kickin50
    I still disagree with how businesses look at 2%. Certainly, they can absorb it in the cost of what they sell. They'd rather keep it. Second choice, they'd rather not raise prices. That's the basis of competition. They'll take an extra 2% where ever they can get it. Be it labor or raw materials or operating costs. We see massive lay offs every day for the purpose of cutting costs.
    Keeping in mind that the average markup for american consumer goods is in the 300-500 percent range, are you sure you don't want to rethink that?

    Most of the massive layoffs we see are either permanent reductions (failing company) or short term number polishers. Your average laid off worker actually MAKES money on the deal becuase they are back to work before their severance package runs out.

    You lay people off to polish your earnings reports, so your premium stock shares increase in value. After you have cashed out your quarterly or yearly stock options, you re-hire the same folks. Can't produce without producers after all.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by kickin50
    I still disagree with how businesses look at 2%. Certainly, they can absorb it in the cost of what they sell. They'd rather keep it. Second choice, they'd rather not raise prices. That's the basis of competition. They'll take an extra 2% where ever they can get it. Be it labor or raw materials or operating costs. We see massive lay offs every day for the purpose of cutting costs.
    2% doesn't mean much to any level of business. It's just another cost of doing business passed on to the ultimate consumer. If it goes from manufacturer to distributor to retailer, one has it and that means they all have it. As do their competitors. And vice-versa without it. By removing it we're back to the problem of replacing it in general tax revenue. The only question is which pocket do you want pilfered.

    The issue is still how to bite the bullet, increase it and bar government from stealing it. In our current lack of government accountability and apathetic public, I don't see that or any other reasonable solutions transpiring. The general public has shed personal responsibility to the point where equity market investment of retirement funds is and will be a complete disaster. Again, take a look at mass failings of traditional pension funds, they're a glimpse of your future 401k and other pre-tax gimmicks. Be it Bush or the next thief, they're going to use public funds and debt to retain and gain public office until the tap runs dry and that includes 'overhaul' of the SS fund.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

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