Private - no, no, PERSONAL Accounts, SSI
Pres. Bush will not let go of his private/personal account plan for Soc. Security. I mean why not, every other proposal he repeated over and over and over eventually got drummed into public policy.
Paul Krugman, Princeton economics professor and NY Times columnist regularly cleaned his clock on the topic earlier this year. Here is one of my favorites. The Free Lunch Bunch by Paul Krugman Did they believe they would be welcomed as liberators? Administration plans to privatize Social Security have clearly run into unexpected opposition. Even Republicans are balking; Representative Bill Thomas says that the initial Bush plan will soon be a "dead horse." That may be overstating it, but for privatizers the worst is yet to come. If people are rightly skeptical about claims that Social Security faces an imminent crisis, just wait until they start looking closely at the supposed solution. President Bush is like a financial adviser who tells you that at the rate you're going, you won't be able to afford retirement - but that you shouldn't do anything mundane like trying to save more. Instead, you should take out a huge loan, put the money in a mutual fund run by his friends (with management fees to be determined later) and place your faith in capital gains. That, once you cut through all the fine phrases about an "ownership society," is how the Bush privatization plan works. Payroll taxes would be diverted into private accounts, forcing the government to borrow to replace the lost revenue. The government would make up for this borrowing by reducing future benefits; yet workers would supposedly end up better off, in spite of reduced benefits, through the returns on their accounts. The whole scheme ignores the most basic principle of economics: there is no free lunch. There are several ways to explain why this particular lunch isn't free, but the clearest comes from Michael Kinsley, editorial and opinion editor of The Los Angeles Times. He points out that the math of Bush-style privatization works only if you assume both that stocks are a much better investment than government bonds and that somebody out there in the private sector will nonetheless sell those private accounts lots of stocks while buying lots of government bonds. So privatizers are in effect asserting that politicians are smart - they know that stocks are a much better investment than bonds - while private investors are stupid, and will swap their valuable stocks for much less valuable government bonds. Isn't such an assertion very peculiar coming from people who claim to trust markets? When I ask privatizers that question, I get two responses. One is that the diversion of revenue into private accounts doesn't have to lead to government borrowing, that the money can come from, um, someplace else. Of course, many schemes look good if you assume that they will be subsidized with large sums shipped in from an undisclosed location. Alternatively, they point out that stocks on average were a very good investment over the last several decades. But remember the disclaimer that mutual funds are obliged to include in their ads: "past performance is no guarantee of future results." Fifty years ago most people, remembering 1929, were afraid of the stock market. As a result, those who did buy stocks got to buy them cheap: on average, the value of a company's stock was only about 13 times that company's profits. Because stocks were cheap, they yielded high returns in dividends and capital gains. But high returns always get competed away, once people know about them: stocks are no longer cheap. Today, the value of a typical company's stock is more than 20 times its profits. The more you pay for an asset, the lower the rate of return you can expect to earn. That's why even Jeremy Siegel, whose "Stocks for the Long Run" is often cited by those who favor stocks over bonds, has conceded that "returns on stocks over bonds won't be as large as in the past." But a very high return on stocks over bonds is essential in privatization schemes; otherwise private accounts created with borrowed money won't earn enough to compensate for their risks. And if we take into account realistic estimates of the fees that mutual funds will charge - remember, in Britain those fees reduce workers' nest eggs by 20 to 30 percent - privatization turns into a lose-lose proposition. Sometimes I do find myself puzzled: why don't privatizers understand that their schemes rest on the peculiar belief that there is a giant free lunch there for the taking? But then I remember what Upton Sinclair wrote: "It is difficult to get a man to understand something when his salary depends on his not understanding it." Originally published in The New York Times, 1.21.05 |
Well currently you would be better off stuffing the money in your mattress....and trust me few people have the means to put 14% into a 401K AFTER they are bled dry from SSI.....and Nobody is arguing SSI is going to be around when I retire much less people 25 years my juniour.....so by doing nothing that leaves a lot of people with no company pension...thanks to corporate greed extending that only to the overly generously compensated fats cats......SSI is unlikely to be around and thanks to taxes and SSI many people have no money left to pay rent, eat AND dump massive dollars into a retirement account....
Anyone with two functioning brain cells won't trust the liberals that the money will be there anymore than they would trust them for their own well being or to not tax them to death to pay for their socialist experiments.. |
Kill the beast!
I want SSI slaughtered on the alter of the free market. I don't like to be forced to pay some other nitwit's retirement. I worked and saved for my retirement and see no reason why the majority of people cannot do the same. I do believe in some sort of charity system for the cripple and destitute, for which SSI was originally created. But the current retirement is stooopid. Check out the Swedish and Chilean models for systems that work to teh advantage of the retiree. Private accounts were proposed by Moynihan and Breaux in Clinton's administration. It was a good idea then and its a good idea now. |
SSI payments are kind of like a user fee, for using the accumulated capital improvements that we inherit from the previous generation. When I make big $$ remodeling a house, I'm leaning on the old farts in a nursing home who built the house to begin with. Private accounts sound nice, but as Krugman points out, investment fees take 20 to 30% of the money. And there will always be fools who can't figure the system out and I would rather see them squeak by on small SS payments than be begging on the street. Enough of that already.
The killer point in that piece was: "The math of Bush-style privatization works only if you assume both that stocks are a much better investment than government bonds and that somebody out there in the private sector will nonetheless sell those private accounts lots of stocks while buying lots of government bonds." "So privatizers are in effect asserting that politicians are smart - they know that stocks are a much better investment than bonds - while private investors are stupid, and will swap their valuable stocks for much less valuable government bonds. Isn't such an assertion very peculiar coming from people who claim to trust markets?" I think Paul's right, there is no free lunch. |
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Social Security is the just about the most successful thing that any government has ever done. I cannot conceive of any way in which getting rid of it advances our interests. |
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Alright, don't make it 'Bush-style'. Make in Moynihan style or Breaux style, Chilean style or Swedish style. Personalizing it is nothing but cheap-ass political hackery. Instead of reading only what evil George and his machievellian handlers from hell want, why not read about various alternatives to SSI? Start with Moynihan/Clinton. Neither of them is owned by Halliburton and at least one of them is currently dead. |
Red Herring
Just raise the damn payroll tax cap and be done with it--forget all this silly privatizing nonsense.
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Great idea - give them more money. I'm quite sure that will fix the problem.
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Let's make a list of all the gov programs that were failing and then improved because of increased funding. 1. |
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If I put my SS money into a safe blue chip stock mutual fund I would be so far ahead come retirement. :mad: It should be an optional program.
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Oh, I know that you do....(spoken Jon Stewart style) No but, hey, I'm game -- guess I could research it myself, though. |
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