On Sun, 16 Jan 2005 23:00:05 -0600, Robert G. Seeberger <[EMAIL PROTECTED]> wrote: > http://www.time.com/time/magazine/article/0,9171,1018065,00.html > > The Bush Administration has not yet offered details of its plan for > Social Security, but it's expected to follow the contours of a > proposal spelled out by a 2001 commission on Social Security: a > combination of scaled-back guaranteed benefits and private investment > accounts. This controversial proposal would divert a portion of your > payroll taxes to a private account, to invest as you choose. > Participation would be voluntary, and there would be a ceiling on how > much you could put in. You would not be able to draw on the money > until retirement, when it would be paid out as an annuity with your > Social Security check. The benefit cuts are meant to address Social > Security's long-term financial health; the private accounts are meant > to deal with your future. Would you be better off? > > THE PROS > > 1 Control. Under the current system, each generation of workers pays > for the retirees ahead of it. With a private account, some of the > money you put in would be there for you alone rather than fund someone > else's golden years. > > 2 Better Returns. With Social Security, funds set aside for the future > earn a minimal return over time, because the government invests them > conservatively, in Treasury bonds. Investing in the stock and bond > markets via private accounts could allow those dollars to grow faster. > > 3 Offset the Pain. Benefit cuts will probably be necessary to keep > Social Security solvent as the number of retirees grows. The appeal of > private accounts might persuade voters to accept the trade-off. > > 4 Encourage Savings. Private accounts reinforce a mind-set of saving. > When you see a direct connection between what you put in now and how > it can grow in the future, you may be motivated to save more > elsewhere. > > 5 No New Taxes. The commission's plan, if adopted, avoids the > unpleasant medicine of higher payroll taxes. Set at 12.4% of taxable > wages, they already squeeze earners. > > THE CONS > > 1 Risk. Getting a good return on your private account is up to you. If > you make poor choices, you can lose money, and your nest egg will > suffer. Invest too conservatively, and you will not be able to make up > for the cuts in benefits. > > 2 Debt. The costs of making the transition to a private-account system > are estimated at up to $2 trillion. That burden will widen the > government's already yawning budget deficit, and could put the economy > at risk for higher interest rates. > > 3 Uncertainty. Private accounts on their own do nothing to solve > Social Security's solvency challenge and may discourage people from > supporting real solutions. > > 4 Undersaving. With private accounts in place, some people may be > tempted to save less elsewhere. Americans' record of saving is not > encouraging; two-thirds of retirees rely on Social Security as their > primary income. > > 5 Delayed Reaction. By promising to preserve current benefits and > funding the transition costs through borrowing, this plan shifts costs > to future generations, who will have to pay off the debt. > > xponent > > Which Plan Is This? Maru
Everyone is using Option 2 as a proxy Bush plan. I would note that the Bush plans also is buckpassing to future generations by using debt financing. I am more than ever convinced that the only reason this is a "crisis" that has to be dealt with now is a GOP.fiscal crisis The SS surpluses that W has been using to cover up the extent of his deficits is now decreasing - so he must act more fiscally responsible and cannot continue his every year tax decreases. If you count those excess SS payments coming in as revenue as Bush does that has turned the corner is is decreasing .This is a real crisis for this administration. In any event, next decade Bush's big tax cuts to the rich have to be ended as the SS bonds come due. You cannot meet these bonds with current taxes and all the current programs. I'll recommend again a very well written article on the SS "crisis" - http://tinyurl.com/3kk77 http://www.nytimes.com/2005/01/16/magazine/16SOCIAL.html?ei=5090&en=724735416bdbfdd8&ex=1263618000&partner=rssuserland&pagewanted=print&position= Excerpts: The debate over Social Security's solvency is really two debates. The first is over how long the trust fund will last. The law requires the Social Security Administration to estimate its financial condition for 75 years into the future, and the agency's conclusions depend on the assumptions it makes about what America will look like decades hence -- how much people will earn, how large their families will be, how long they will live... Contrary to widespread belief, recent demographic trends have been modestly better (from an actuary's gloomy standpoint) than anticipated. For instance, longevity hasn't increased as much as expected. Partly as a result, since 1997 the agency has pushed back, by 13 years, the date at which it projects its reserves will be exhausted. In other words, as the cries of impending doom started to crescendo, the guardians of the system have grown more optimistic... The second debate concerning solvency is over whether the securities in the trust fund will be honored or whether, in Moore's pointed imagery, the fund will resemble a bank ''after it's been robbed by Bonnie and Clyde.'' This seems an odd preoccupation. Social Security does not own junk bonds or third-world debt; it invests in U.S. Treasuries, considered the safest investment on the planet. Since 1970 there have been 11 years in which Social Security has operated at a deficit; each time, it redeemed bonds from the trust fund without a fuss. Goss, the agency's actuary, says he has no doubt it will be able to do so again. ''Absolutely,'' he said when asked if the trust-fund bonds are sound. This isn't what some conservatives have said. Paul O'Neill, the former treasury secretary, went so far as to say that Social Security has no assets. In anti-Social Security literature, the ''no assets'' contention isn't even debated; it's treated as gospel... Cato, a libertarian policy center founded in the late 1970's, has been arguing for 25 years that Social Security is on the verge of crisis. In a recent position paper, Tanner wrote that Social Security faces a horrendous unfinanced liability of $26 trillion over 75 years. In a footnote, he cited the 2003 trustees' annual report. Actually, the trustees' intermediate projection is for a deficit, over 75 years, of $3.7 trillion. Though that is a lot of money, it could be covered by an immediate surcharge to the payroll tax of less than two percentage points, or by various combinations of tax hikes and benefit cuts, each of them quite manageable. But $26 trillion is too big a hole to fix. When I asked Tanner about the footnote, he admitted that the trustees didn't actually say $26 trillion; Tanner derived the figure by counting the cash-flow deficits that the trustees project from 2019 on out. In other words, he ignores the next 15 years or so, during which time Social Security will be running a surplus. And he assumes that the assets in the trust fund, which should be accruing interest into the 2040's, won't exist, either. Tanner counts only the bad years and only the bad numbers. Another doomsayer, former Republican Representative John Kasich, pegged the Social Security deficit at $120 trillion in a recent op-ed -- some 32 times the agency's figure. (Kasich toted up annual deficits in nominal -- not inflation-adjusted -- dollars for every year through 2080, by which time a hamburger could cost $40.) (At least the doomsayers on this group aren't quite using Tanner and Kasich economics. - I think. I haven't fully studied all their links.) Social Security does not provide, and was not meant to provide, a satisfactory retirement on its own. The average stipend for a 65-year-old retiring today is $1,184 a month, or about $14,000 a year. About half of Americans also have private pension plans, but for two-thirds of the elderly, Social Security supplies the majority of day-to-day income. For the poorest 20 percent, about seven million, Social Security is all they have. Even those figures understate the program's importance. According to an agency publication, ''Income of the Population 55 or Older: 2000,'' 8 percent of elderly beneficiaries were poor, but a startling 48 percent would have been below the poverty line had they not been receiving Social Security.... (SS also provides survivor benefits and disability benefits, a point frequently missed in arguments that convert it into something it is not - a retirement plan.) Absent a sustained roaring bull market, the private accounts would not fully make up for the benefit cuts. According to the C.B.O.'s analysis, which, like all projections of this sort should be regarded as a best guess, a low-income retiree in 2035 would receive annual benefits (including the annuity from his private account) of $9,100, down from the $9,500 forecast under the present program. A median retiree would be cut severely, from $17,700 to $13,600. On the plus side, budget deficits would be lower in the future. But, because of the lengthy transition, that ''future'' is exceedingly remote -some 50 years down the road. In the interim, deficits would rise by up to 1.5 percent of the country's G.D.P. (This privatization plan would creat big deficits for the next three decades to prevent deficits further in the future.) Seniors now get an initial benefit that is tied to a fixed portion of their pre-retirement wages. If the index was changed, their pensions would be pegged to a fixed portion of a previous generation's income. If this standard had been in force since the beginning, retirees today would be living like those in the 1940's -- like Ida Fuller, which would mean $300 a month in today's dollars, as opposed to roughly $1,200 a month... (Right now SS pegs you benefit to your salary which is useful for planning purposes. If you know SS will provide 40% of your last 5 years salaries you can decide on how much to put in a 401K to increase this. To make people realize their status SS now sends everyone a yearly contributions and benefits mailer.) Prudence dictates taking steps now to minimize the possible shortfall. This could include raising the cap, some modest cuts and tax increases and a gradual redeployment of the trust fund into assets that may not be tapped, willy-nilly, for whatever legislative purpose. But only a real crisis would dictate undoing an institution that has provided a safety net for retirees, that has helped to preserve in the social fabric some minimum of shared responsibility and that has been supported by workers in good faith. And, in looking at Social Security today, the crisis is yet to be found... (Clinton tried to get the GOP controlled Congress to look at this in 98 when he was running a budget surplus. He didn't call it a crisis then. They must not have thought it was a crisis at all - they weren't interested.) Gary Denton http://elemming2.blogspot.com _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
