State of the Union 2005

Thank you for this article, too many people hear sound bites and bumber sticker statements, then choose sides as if we knew the details of either side with any real depth.

So far, from what I've heard and read, the two sides of the Social Security reform issue (once again) comes down to who should have the say in how our money is used.

The people who fall on the side of the president's plan would rather see people have control of at least some of the money that comes out of our paychecks every week.

From listening to those opposed to president Bush's plan, the arguments seem to boil down to two categories.

1) The government is more qualified to control the Social Security revenues, and should protect the people from risky investment choices.

2) "If it ain't broke, don't fix it".

Well, during his adminstration, Prs. Clinton said that the Social Security system was headed for crisis. So, unless congressional democrats (and others who oppose Prs. Bush's plan) can show how the problems identified in the 90s have been addressed, I'd say SS isn't anymore healthy now than it was back then.

You'd think that the democrats would consider it a pretty good victory that republicans are even considering Social Security worth saving in the first place. ;~D

I think GW made a strong argument about why social security reform is needed. I do believe what we need to take from this is that we need to make sure we have our own retirement savings in place and not to rely on social security. This is something that I really need to start working towards. The problem is that we need the safety net of social security because there will always be people who are not saving for retirement.

I agree that Social Security should be reformed in some manner, to ensure it's solvency and ability to provide benefits indefinitely. However, in fairness, an editor at US News, Mort Zuckerman, wrote a very good article Link articulating some facts about the issue. His argument is falls into the "If it ain't broke...." category, but at least he backs up his argument with a little logic and numbers. I still think that there should be some reform personally, but the article at least gave me something to think about....

I agree that Social Security should be reformed in some manner, to ensure it's solvency and ability to provide benefits indefinitely. However, in fairness, an editor at US News, Mort Zuckerman, wrote a very good article Link articulating some facts about the issue. His argument is falls into the "If it ain't broke...." category, but at least he backs up his argument with a little logic and numbers. I still think that there should be some reform personally, but the article at least gave me something to think about....

Thanks for the link.  It was an interesting read, but it still failed to make its point, it only posited that perhaps the time line is wrong.  The simple fact of the matter is that a Ponzi scheme has to colapse in time, as there is no way for it to continue drawing in new money. 

We see the fiscal wastes that this type of mentality has wrought on most of Western Europe, and ignore the models of privitazation plans that have worked and worked well in our own hemisphere.  That the democrats declared it DO before A is just their bitterness at being out of power, for it was Clinton and Before him Carter who sounded the alarm that the system was failing.  yet instead of making the hard choices that must be made, each left it up to a republican sucessor to fix the problem.

That is as spineless as it gets with politicians.  It is easy to make easy decisions, but great leaders make the tough calls, and that is what makes them great.

The Democrats view is to take the easy path: Eliminate the limit on how much you are taxed on social secuirty.  Right now, if you make over $90,000 per year, you are capped on how much you contribute to it since there's no way you'd ever get anywhere near that much back. By doing that, the system remains solvent longer.

The Republican point of view is that Social Security is fundamentally flawed because it is a pay-as-you-go system. Therefore, when in 2020 or so there's only 2 workers per 1 retiree, the system will start collapsing.  By 2042, the system goes bankrupt (for Democrats who disagree, look up the definition of bankruptcy, even Democrats in congress admit that payers will only be getting 70 cents on the dollar back -- that's called bankruptcy).

I'd love to be able to wave a magic wand and force congress back in 1960 to have switched to private accounts. Then we wouldn't be going through the pain we are now going ot have to go to.  Bush's plan will require much larger deficits (from somewhere) to pay for system - like I said - it's a pay as you go system. So if some of the moeny you currently pay in goes into a private account, that missing money will have to be made up somewhere. So the Democrats are right on that point - it will increase the deficit.  But if we wait, it'll be much much worse.

I thought it interesting that 2042 is the year it will be totally bankrupt...if the retirement age is raised to 72, as has been proposed to some, that'll be the year I'd otherwise be scheduled to collect.

Has there been any discussion on how much it will cost to create these accounts? Who will maintain the accounts and what their cut is?
Is it taken off the end result? Each payment?

You know the will and financial lawyers are going to have a field day with this.

IG

You know the will and financial lawyers are going to have a field day with this.

In any eco system, there is always leeches and parasites.  A sad fact of life that will not go away whatever happens.

Has there been any discussion on how much it will cost to create these accounts? Who will maintain the accounts and what their cut is?Is it taken off the end result? Each payment?

Good questions, and there may be some answers, but since this idea is just in the "idea" stage, the details will have to be hashed out as the concept develops.

The counter to the first question of course would be, has there been any discussion on how much it will cost the average worker if we stick with the current plan? Expecting to tax 2 workers enough to give 1 retiree all the benefits promised (and that doesn't even take the non retired disability recipients into consideration), is far more "risky" to the system than allowing the people to invest a portion of what is their own money in the first place.

People need to check facts before they believe what they are told. The Social Security system will not go broke in 2042.

Link


At a time when corporate taxation is down by billions because of moves to offshore havens, and in a time of war (Bush will be asking for yet another 80 billion for Iraq after being unable to account for about 90 billion from before), this is no time touch Social Security. This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

Reply #10 By: dlepel - 2/3/2005 4:45:13 PM People need to check facts before they believe what they are told. The Social Security system will not go broke in 2042. Link At a time when corporate taxation is down by billions because of moves to offshore havens, and in a time of war (Bush will be asking for yet another 80 billion for Iraq after being unable to account for about 90 billion from before), this is no time touch Social Security. This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

Oh REALLY? Maybe you should go listen to the Democrats. Cause they are singing a vastly different tune. EVERYONE agrees that it's in trouble. The difference in opinion comes from how to fix it.
And just an FYI....*your* own article says your wrong.

After that point, Social Security would be unable to pay full benefits. But by law, it would continue to issue benefit checks to the extent that incoming revenue from payroll taxes allows. With reserves gone, Social Security would be on a cash accounting basis, able to pay out only what it collects in a given year

Unable to pay *full* benefits is bankruptcy in ANY economics class.

This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

A fabrication that Prs. Carter first identified, and Prs. Clinton called "a crisis".

People need to check facts before they believe what they are told. The Social Security system will not go broke in 2042.

No, it will.  And your link only confirms it. By that time, there will be no reserves left so they will be paying from the money recieved.  So as long as there are still taxpayers, there will be money coming in.  But as your link confirms, it will not be enough to pay the obligations incurred.  That sir is called bankruptcy.  I should know.  My wife works in that field.

So you go tell your parents or grandparents that they are going to get a cut of 75% of their benefits next year, and see if they agree with you.  My Mother is as conservative as I, but she screams if they even think of touching her monthly check.

This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

No, SS is fabricated.  Because it is doing more than it was originally intended to do.

But let me set you straight.  Corporations, or rich fat cats are not being given money by the government.  Neither this one or any one.  They are at times, allowed to keep more of what they earn.  Money earned is not by default the governments.  ONly through taxation does the government get money and that is confiscatory.

Want an example closer to home?  I dont have a coat.  You have 2.  So I get to take one of yours.  And you have no say so in it.  Why?  Because you have 2 and I have none, so one of yours BELONGS to me.

That is taxes.

I wonder what would happen if suddenly everyone decided NOT to pay any taxes to the federal gov.?

I wonder what would happen if suddenly everyone decided NOT to pay any taxes to the federal gov.?

It's not like they can bust everybody!! ;~D

Although that would make it hard for me to collect my VA disability pay, now wouldn't it..... Hmmm, going to have to think about this one.. ;~D

The most interesting historical fact is that originally the SS program was billed as a private account system by President Roosevelt. But because of the Republican stacked Supreme court had repeatedly shot down other progressive reform Acts, as unconstitutional, Roosevelt had to change to a much easier pay as you go tax system. A private account was one of the Republicans big complaints in 1932-40 about Government interfering too much in Private financial institutions.

Good old President Roosevelt had to sacrifice what he wanted due to politics.

It took only eight years to Republicans and Democrats to swap sides on the issue.

Just ironic isn’t it?

That's My Two Cents

The most interesting historical fact is that originally the SS program was billed as a private account system by President Roosevelt. But because of the Republican stacked Supreme court had repeatedly shot down other progressive reform Acts, as unconstitutional, Roosevelt had to change to a much easier pay as you go tax system. A private account was one of the Republicans big complaints in 1932-40 about Government interfering too much in Private financial institutions.

Not doubting you as I plain just dont know, but do you have some links I can read?  I find your thesis to be very ironic!  And perhaps very stupid of republicans back then.

Do we trust bush and his teams to handle this? Is this the right time to do this? We're already in a war, or a couple wars if you think about it. We're already in some financial poop as a country right now, and our dollar value is at an all-time low. Overseas investors are pulling cash out from the US quite rapidly. I don't really have much comfort in thinking Bush should be "The Guy" to handle this. I mean heres a guy thats a multiple-failure at running businesses, has a proven track record of incompetance, and an overall lack of "Empathy" for his constituents, and you want HIM to decide our future for the next 50 years? NOT ME!

why is this so hard to fix?

Not doubting you as I plain just dont know, but do you have some links I can read? I find your thesis to be very ironic! And perhaps very stupid of republicans back then.

I have no problem with your doubt, every thing you read today needs to be taken with a grain of salt.

I am taking History 416 "US Political history 1918-present" at the University now. My professor spent half of the last class talking about SS Act, just a few hours before Bush's SOTU speech. He had said something I heard Bill Bennet confirm on one of the Fox news shows tonight. Both of them said that Roosevelt's hand written notes from meetings showed him originally working on a Private account system. I will have to ask my professor for a reference in my next class on Monday. This Professor is sharp. He had published at least five “good sellable” history texted books. He name is Richard O. Davies, a Republican (that I can figure), he slams both sides equally, and a proud recipient of Social Security.

Here is something that I did find on a quick search:

"A now almost-forgotten part of the Economic Security Act, Title V, proposed voluntary old-age annuities to supplement compulsory old-age insurance. All workers, including those excluded from the compulsory system, would have been allowed to make periodic voluntary deposits—in effect, loans—to the old-age fund. Workers who participated would hold certificates representing amounts they had deposited. At 65, workers would trade in their certificates for annuities, paying up to a maximum of $100 per annuitant per month, based on their total deposits plus interest. Title V would have helped workers save for retirement, and would have helped the government raise revenue for the payment of old-age benefits."

The rest of the link is here:Link

A very interesting article and a good read. Unfortunately I was only able to spot read, because I'm also taking two other classes, have a family and working full time. But when I catch up on my homework I'll dig up some more articles.

That's My Two Cents

The reason it's so hard to fix is that there is no easy fix.

Simply put, on a "pay as you go" system like social security, it requires X number of workers for Y retireess. 

Well, the number of workers per retiree is dropping too low and the system will no longer work.

You have to either:

A) Tax the workers far more to make up the difference.

Change the system so that the money workers pay to the system is used more effectively.

Bush is going for option B.  Social Security has a horrible return on investment.  Even a savings account at the bank is better.

But going from a pay as you go system to a personal account system means we'll have to borrow (or tax) people a lot during the transition from the pay as you go to the personal accounts.  The sooner we do this, the less painful that will be. But it's still painful even now.

The alarmist cries about the Social Security are rather funny. This isn’t about fixing something that will destroy your economy, it’s an ideological debate between Neoliberals and Keynesians. Economic theories always have more than one solution; there’s absolutely no way to possess the absolute truth on a macroeconomic level. If the whole economy crashes, it certainly won’t be because of Social Security. Adequate reforms can easily be applied by both sides for whatever problems that could occur from the aging of the population. But these reforms won’t necessarily fix anything (or be a better alternative from keeping it).

The real question you should be asking is: do you want to increase the individualistic tendencies in society brought by the wave of neoliberalism from the past 20 years or keep some social cohesion?

the social security trustees dispute the 2042 date. 

social security and medicare works to the benefit of younger workers altho indirectly.  aging relatives are increasingly prone to illnesses and accidents requiring extensive medical care. without medicare, those costs can quickly wipe out a an extended family's resources.  pension benefits limit out--even if they havent been whittled down to nothing by former employers. according to a study i saw a couple days ago, private insurance rarely provides adequate protection for severe chronic illnesses.  

there's no reason to assume privatization will work any better for individuals than it has for employee pension funds which are--along with insurers--among the largest investors.  some do well.  others have suffered.  they have leverage no individuals are ever going to enjoy.

as steven dedalus has pointed out repeatedly in his articles, someone is going to benefit very well if the proposed 'reforms' are implemented--unless youre going to be earning interest on the trillions of national debt that bush so cavalierly ignores, it wont be you.

Reply #24 By: kingbee - 2/4/2005 1:32:19 AM the social security trustees dispute the 2042 date. social security and medicare works to the benefit of younger workers altho indirectly. aging relatives are increasingly prone to illnesses and accidents requiring extensive medical care. without medicare, those costs can quickly wipe out a an extended family's resources. pension benefits limit out--even if they havent been whittled down to nothing by former employers. according to a study i saw a couple days ago, private insurance rarely provides adequate protection for severe chronic illnesses. there's no reason to assume privatization will work any better for individuals than it has for employee pension funds which are--along with insurers--among the largest investors. some do well. others have suffered. they have leverage no individuals are ever going to enjoy. as steven dedalus has pointed out repeatedly in his articles, someone is going to benefit very well if the proposed 'reforms' are implemented--unless youre going to be earning interest on the trillions of national debt that bush so cavalierly ignores, it wont be you.

I'm just a little fed up with this *whole* thing. People just don't seem to understand. The purposed privatization of SS is the same thing as your 401k yet I don't hear anyone complaining about that.