Democrats & Liberals Archives

Republicans Seek Social Security Privatization

Republicans want to privatize Social Security. President George W. Bush spent months seeking privatization with no luck. Today Republican Representative Paul Ryan is touting his new “budget” that seeks privatization of Social Security. And now the old Republican Senator Simpson, the co-chair of Obama’s deficit commission, is trashing Social Security.

Listen to this:

Alan Simpson believes that Social Security is "like a milk cow with 310 million tits," according to an email he sent to the executive director of National Older Women's League Tuesday morning. Simpson co-chairs the deficit commission, which is considering various proposals to cut Social Security benefits.

The purpose of the deficit commission is to reduce the deficit. Simpson and other Republicans on the commission want to cut spending for ordinary people. So all we hear from them is cutting Social Security, Medicare and other popular programs. Nary a word do we hear about anything that would hurt the rich and the super-rich.

Millionaires and billionaires, on the whole, pay less a percentage of their income in taxes than do people in the middle class. This is due of course to the many exemptions and deductions they may use to reduce their taxes - in some cases, to nothing. Will Simpson consider this legal cheating in his recommendations?

If he had any courage - just dreaming - Simpson would recommend that the Bush tax cuts for millionaires and billionaires be removed in order to cut our deficit by $36 billion per year from now on.

Let's cut this nonsense about Social Security privatization. If Bush had been successful in his privatization efforts, the deep depression we are in would have been deeper. Things are bad enough without Republicans trying to make things worse.

The commission should recognize that the depression has hit the poor much worse than it has hit the rich. As a matter of fact there is no depression for the rich, among which there is a 3% unemployment rate. The rich, not the poor or middle class, should be made to contribute most toward reduction of the deficit.

Posted by Paul Siegel at August 25, 2010 8:02 PM
Comments
Comment #306822

Republicans are, right now, the party that wants to run government like a business. That is, with profits their bottom line.

They look at most Americans as a drain on the economy, which they believe is mostly held up by the rich and by the investor class.

And that, friends, is exactly the kind of attitude that lead them to allow a business environment that basically legalized theft, fraud, and loansharking in certain sector, all in the name of pumping up the profits of Wall Street.

Now some people might have had the best of intentions here, but the truth is, we cannot lead our economy to recovery with that kind of elitist-focused philosophy.

And no, Republican, this is not about socialism, this is about capitalism that can actually work to support a functioning economy in the real world.

Posted by: Stephen Daugherty at August 25, 2010 8:14 PM
Comment #306827

Nevertheless, we cannot ignore the growing burden SS and other entitlement programs bring to our national deficit. We need to reduce the amount of money we spend in those areas. Personally, I think the improvements in medical technology mean that a reasonable increase in the retirement age is necessary, probably to at least 70 years of age. Remeber SS is not for everyone. Only people who lived to be exceptionally old were meant to benefit. It’s an insurance plan not a retirement plan.

Removing the $102,000 cap on payroll taxes would also be a good idea.

Posted by: Warped Reality at August 25, 2010 8:59 PM
Comment #306831

Warped

It is $106,000 these days.

The idea of SS was that is was an insurance programs and that people were saving for retirement. It was never true, but that is how FDR sold it. Already it is very much skewed toward the lower income contributors and is redistributive.

That is why everybody knows that you cannot make SS voluntary. The system is set up to force higher income earners to pay for lower income retirees.

If you remove the caps, you remove the fiction that most SS recipients are somehow getting “their” own money back. This is a very powerful and cherished myth, more on the left than on the right.

Beyond that, if you remove the caps, you will be putting an additional tax on both employees and employers of those making more than the cap. With tax rates already going way up, you will be pushing the limits even farther and since SS is before tax, you may actually make it unprofitable to work beyond certain levels.

I believe in a progressive tax system, but I do not believe that the tax system should have a goal of equalizing incomes. That is just unjust.

Paul

We both know that saying that something hurts the poor more than the rich is a tautology. It is a definition. If you are poor you have - wait for it - less money. If you stop having less money you stop being - surprise - poor.

There is NEVER a recession for the rich because if they stay rich they are - rich. If they are sufficiently hurt by the recession they become - poor.

Let’s just stop this BS. It is like lamenting that the person who ran the fastest won the race. And complaining that it never changes. Indeed the one who runs fastest wins the race.

Posted by: C&J at August 25, 2010 9:23 PM
Comment #306835

I want to invest my social security funds with those aggressive boys over at Lehman. Will they be giving me a call?

Hello?

Fine. Forget Lehman. I’m going to put my social security money with Bear Stearns.

(crickets)

Because everyone knows equity markets make more money over the long term. Just look at the DJIA from January 2001 and compare it today.

(crickets stop chirping)

Or the S&P 500 index. Or Nasdaq.

(fill this space with private market nothingness).

And remember. There is no spoon.

Posted by: phx8 at August 25, 2010 10:53 PM
Comment #306836

Paul:

Great topic. The $36 Billion you talk about is a drop in the bucket when we look at $1,0000 Billion dollar deficits. I think we can do what you request, but then where do we get the other $964 Billion?

The budget deficit is caused by spending. Revenues right before the recession were well within historical norms. What is way out of historical peace time norms is spneding.

Our health care system is set up for bankruptcy and it mathematically unworkable. The simple reason is that the more money we put into the system, the longer people live which drives up the cost of SS and medicare.

The answer to me is to push back the date of retirement. It probably should be 70. We need to keep the size of government consistent with our history. 20 % of GDP. That way we can keep tax rates low and our chldren/grandchildren can have the same opportunities we had to prosper!!

Posted by: Craig Holmes at August 25, 2010 10:54 PM
Comment #306838

By the way, as a frame of reference, most countries in the EU set retirment with full benefits at age 65. For a working person, retiring with a pension is considered a right.

Craig,

Raise the retirement age? It’s a shame to see people give up so easily on the dream of America as a good place to work and to retire. What is wrong with out system? How could pessimism become so deeply ingrained, that we can turn our backs on the vast majority, and tell American working people that they must work well into their old age? How could things have gone so wrong, that we cannot entertain the idea of reducing the retirment age?

It would be easy to reduce the size of government if we simply reduced the size of the military. It could be cut in half with no noticeable effect on security. That alone would fund national health care for every man, woman and child in the US, fund public education through college, and permit a reduction in the retirement age.


Posted by: phx8 at August 25, 2010 11:13 PM
Comment #306839

phx8

FDR was very clever. He sold SS as an insurance program and in some ways he was right. In 1933, the average life expectancy was 63. Pretty smart to make the retirement age 65. Many of the people would never collect at all and most of those who did collect wouldn’t do so for very long.

For many years we had lots of workers and not many retirees. Now it is changing.

Today the retirement age is nearly 80. Almost everybody makes it to retirement age and many live a long time collecting money. You can easily visualize scenarios in the near future where a person could spend more time collecting SS than he does working.

It is really unjust to ask young people to pay for old people to live in leisure for decades. Retirement was when you could no longer work. We have to adjust our expectations. People need to work longer, and maybe a kind of phased retirement.

I am 55. I hope I am healthy enough to work beyond 65 and if I can, I think I should. The alternative is to ask people like my daughter and sons to take away from their needs and their kids so that I can lay around in Florida or drive back and forth across the country in a Winnebago. It just is wrong morally and makes no sense economically.

Posted by: C&J at August 25, 2010 11:33 PM
Comment #306840

phx8

BTW - check the your figures on the military. If you cut it to nothing, it would not make much of a dent on entitlements. ALL discretionary spending makes up only a little more than 1/3 of the budget and that number is falling every year.

And if you cut ALL security spending,not only military but also including things like preparedness and homeland security, the Obama deficits would still be the highest in history. That’s how bad it is.

Posted by: C&J at August 25, 2010 11:45 PM
Comment #306843

Paul Krugman has shown time after time that tinkering with SS, the way conservatives wish, would actually hurt our economy, and increase the deficit. NOTHING Republicans say about SS can be taken seriously, as they have been attempting to dismantle it since its inception.

Posted by: Marysdude at August 26, 2010 12:02 AM
Comment #306848

Craig,
I’m 53, and I really do not know how retirement will look for me. I used to make good money. So did my wife. Unfortunately, we are now both unemployed. In 30 years of marriage, we were never both unemployed at the same time. My 25 year old son is unemployed too. We have enough to last a good while, but obviously relying on that makes retirement more uncertain. In addition, I snapped my ankle. It was just bad luck, stepping over rather than around a gate early one morning; now I sport a pin through one ankle, as well as a plate and five screws. There’s no particular moral to the story, other than don’t get up at 6:00 AM if you don’t have to! Fortunately insurance covered most of it, about $10,000 out of the $12,000 to date. Now we have do decide whether to use COBRA or a private insurer, or risk going without coverage. Typical insurance, with a $1,000 deductible, would run over $700/month for the two of us. (My 21 year old daughter will probably go uninsured). So the American dream isn’t looking too good for me anymore, although after eight weeks and a lot of painkillers, I am just now able to walk again without crutches.

C&J,
Here is a link to the Wikipedia article on defense spending:
http://en.wikipedia.org/wiki/Military_budget_of_the_United_States
Half of the defense budget adds up to at least $350 billion per year.

To put the total defense spending into perspective, the US spends almost as much on defense as the rest of the world combined. We spend nine times as much as China. Spending is still near the levels we saw during the Cold War, when the USSR existed; and yet, today, our chief security problems seem to involve low-tech terrorists in mud huts.

Imagine what it would mean for the US to invest that money in education, health care, and social security!

Posted by: phx8 at August 26, 2010 1:07 AM
Comment #306859

C&J;

“I am 55. I hope I am healthy enough to work beyond 65 and if I can, I think I should. The alternative is to ask people like my daughter and sons to take away from their needs and their kids so that I can lay around in Florida or drive back and forth across the country in a Winnebago. It just is wrong morally and makes no sense economically.”

Well, C&J, you are slamming our life:) I retired at 60 and my wife retired at 55, we own a place in Florida and spend our winters there; we also travel in the Summers with an RV. But, we do not draw SS and I paid very little into it over the years. We paid into a retirement fund and have investments, which allowed us to retire and to live comfortably. We love retirement and live full lives, and we are able to donate our time to doing faith based work. As a personal testimony, I would say, we are Christians and God has blessed our lives abundantly. I would not change a thing.

I realize there are many Americans who do not have our lifestyle to look forward to, and to those I would like to repeat the words of d.a.n:

“At any rate, the majority of voters have the government that they elect, and re-elect, and re-elect, at least, possibly, until repeatedly rewarding failure and these abuses, and repeatedly rewarding FOR-SALE, incompetent, arrogant, and corrupt incumbent politicians in Do-Nothing Congress with 90% re-election rates finally becomes too painful (and finally provides the motivation for seeking Education as to the cause and solution for so much pain and misery).”

But, I believe it goes beyond re-electing incumbents. God gave us a brain to think with, and to elect and re-elect politicians who have an agenda, which destroys the economy, does not make sense. Democrats introduced the SS system, which while assisting many Americans to live a somewhat better quality of life, it has been nothing more than a slush fund to be robbed and used to promote a socialist agenda. If the money had been invested and locked away, it would be solvent. But democrat politicians doomed the program before it ever got off the ground. Why would anyone want to re-elect these people?

Posted by: Beretta9 at August 26, 2010 9:50 AM
Comment #306871

SS was enacted in reaction to old people dying in the streets.

Means test it, raise the retirement age, remove caps …. whatever. SS isn’t that hard to fix. You might want to invest in a lock box, as well. Funny, doing that would have solved the problem years ago.

We realized a social safety net was a civilized thing to do in the depths of the depression. It still is. One possible benefit of another depression could be a single payer system for health insurance.

Privatizing SS would be a disaster, as most privatized government functions are. Think Bell, California.

Posted by: gergle at August 26, 2010 2:00 PM
Comment #306873


Our history with capitalism is one of booms and busts, good times followed by recessions and depressions.

Pardon me if I am wrong, but I can’t recall one recession or depression that was caused by Social Security or other social spending. I can’t even recall a time when total government spending caused a recession or a depression.

Social and military spending might be a drag on the economy, but corruption is king.

Posted by: jlw at August 26, 2010 3:38 PM
Comment #306877

phx8:

I am 55 and employed. I am very sorry both you and your wife are unemployed right now. I hope your situation improves.

I disagree with you that moving retirement age back would mean asking workers to work well into old age. Old age is a moving target. Longevity has been moving back about three years every 20. That is a bunch!!

Medicare and SS are wonderful programs. The problem with them is that they are too successful. They keep making people’s lives better which results in longevity increases which increases the cost to our children.

The system is set up in a mathematically impossible state. The more money we put into health care the longer people live, and the more in costs to support them in their longer retirement.

We can raise taxes for a while. But that is just a temporarty fix. Raising taxes means putting more money into health care which will increase longevity which will drive up costs. Eventually there will be on more money!!

The only way I know of to solve the problem is to reframe how we view the problem so that increases in longevity mean more years of working. We still get the same amount of time in retirement as our parents, but we just start later.

If we can change to a concept like this our children and grand children will have the same opportunites we did growing up. We can pass the american dream on to them. Otherwise, we are on the road to bankrupting their dreams before they start.

Posted by: Craig Holmes at August 26, 2010 4:16 PM
Comment #306881

Every insurance program or policy I know of involves paying a premium to insure a risk. Some, like whole life insurance provide insurance upon death combined with dividends that grow the policy cash value.

Social Security requires a premium as well and pays a benefit if one becomes disabled or lives to a certain age. In some cases, if one dies before reaching retirement age or does not become disabled, the entire premium paid is forfeited.

I would suggest that there is a way for SS to be restructured to require the same premium being paid now but with a built-in savings plan similar to whole life insurance. With such a change, the value of the premiums paid would grow faster with the addition of dividends being paid on those accumulated premiums.

This is not similar to investing premiums in the stock market but rather, very much like whole life insurance which is regulated heavily. Insurance companies are restricted as to how they invest premium dollars and are required to keep substantial amounts in reserve for paying claims and benefits.

Insurance companies have been selling whole life insurance for decades and have a very good record of solvency and claims paying ability.

There is no reason why we should not use our private insurance industry with their experience in helping millions of Americans not only insure against early death, but to also help them grow their retirement money.

Please, don’t bring up AIG in this regard as AIG did not have any problems with their normal insurance activities.

Posted by: Royal Flush at August 26, 2010 4:47 PM
Comment #306884

Well I do not know about everyone else, but I am 59 and have been working most of my life. I want to retire in a few years so I can enjoy a few of the things life has to offer besides getting up every morning and going to work. My husband and I have a 401k but it will take more than that to live now days. IMHO I think the cap should be raised. Years ago people making over 106,000.00 per year was a lot different than it is now.

Posted by: Belinda at August 26, 2010 5:55 PM
Comment #306889


If that is true for those who make over 106,000.00, Imagine making 15,000.00.

I am now Sixty. If I had been born in 1850 instead of 1950, I would have most likely been dead at the age of 22 from a ruptured appendix.

There are quite a number of 45 to 60 year old workers who have been discarded by the system. Many of them are finding it virtually impossible to get back in the workforce. Many of them spend years mired in long term unemployment, unable to contribute to Social Security or 401K’s, and end up in the social safety net. How will raising the retirement age benefit these people?

Posted by: jlw at August 26, 2010 6:50 PM
Comment #306891

jlw:

I do not believe there is a need to change retirement benefits for those who are 60 and over.

I would be opposed to such a move.

How will raising the retirement age benefit these people?

I think it will help them a great deal. Right nowcorporations and sitting on mountains of cash not willing to invest in America. Why should they? America is insolvant. Change the long term picture from bankruptsy to solvancy and jobs will be created.

We need to borrow money short term, and cut benefits long term. It is impossible to tax our way out of this problem.


Posted by: Craig Holmes at August 26, 2010 7:17 PM
Comment #306892

Belinda:

Raising the cap is certain to be considered. Unfortunately it is a drop in the bucket compared to what is needed.

When you raise the cap, that changes the calculations for the person who pays the taxes, raising their benefit.

Posted by: Craig Holmes at August 26, 2010 7:19 PM
Comment #306894

Craig:

“Right nowcorporations and sitting on mountains of cash not willing to invest in America. Why should they? America is insolvant.”

And why is that???

Posted by: Beretta9 at August 26, 2010 8:02 PM
Comment #306899

Craig,

“Right nowcorporations and sitting on mountains of cash not willing to invest in America. Why should they? America is insolvant.”

It is not the government that is insolvent, it is the private sector. You do recall that it was the bankruptcy of the financial sector that required the federal government to socialize trillions of dollars of private sector debt. Private sector debt reached in 2008 approximately 350% of GDP, a level unprecedented since prior to the Great Depression. The private sector remains underwater and is deleveraging. The gap between demand and output capacity is high. Aggregate demand in the private sector is understandably depressed. It is trying to work out enormous debt.

The unwillingness of corporations to invest in capital expansion under such circumstanes is understandable. Do we really need a new factory if the current one is only running at 70% of capacity? Blaming government expenditures or regulation for the lack of investment misreads the economic circumstances. It also misreads the recent history of corporate capital investment in the US. Corporations have been hoarding cash for well over a decade. Corporations have not been investing in the US. They have been outsourcing their manufacturing to China and their investments have been in the financial markets and purchasing of their own stock.

It is time that both conservatives and liberals take a closer look at what is and has been going on in our economy. It is not as simple as many would portray.

Posted by: Rich at August 26, 2010 8:44 PM
Comment #306903

Phx8

The Obama deficit is still a trillion and a half dollars. If we cut defense to nothing, we are still in deep in debt.

IMO we can indeed make cuts in defense, but the defense budget is not what is driving the deficit. It has been shrinking as a % of GDP over the last fifty years.

Posted by: C&J at August 26, 2010 9:25 PM
Comment #306906

There is a difficult reality that some don’t seem to grasp here.

Understanding the difference between real property/work and cash.

Cash has no intrinsic value. It makes good kindling for a fire. Gold has only minor intrinsic value.

After WWI Germany was burdened with debts that ensured WWII.

The Marshal Plan was the intelligent idea that recognized the problem. What happened to Germany’s debts after WWII? They vanished into thin air.

Government Debt is something owed by the people to the people themselves. That is reality. Would there be a serious consequence on defaulting on foreign debt? Yes. Would the world come to an end? No. Would war ensue? Very likely.

This is by no means a statement that is promoting default on debt or that we shouldn’t be fiscally responsible.

What IS important is whether the economy serves the mass of the people? The middle class. If it doesn’t, then there needs to be change.

A complex monetary system can only pay debt when the economy is growing. That is the what the economists are trying to spur. Debt is a burden on the economy, if it isn’t productive, in the same sense that borrowing money for an individual makes sense if it can be used to increase income or reduce living costs. Otherwise, it simply lowers the standard of living one can achieve.

Posted by: gergle at August 26, 2010 9:45 PM
Comment #306944

Those evil Republicans.
How dare them?

After all, what’s all the worry?
Because there are many trillions of dollars worth of I.O.U.s in reserve within the Social Security Trust fund?

Also, even if we run out of money, we can always create more money out of thin air, because the U.S. Dollar is so strong.

At any rate, the majority of voters have the government that they elect, and re-elect, and re-elect, at least, possibly, until repeatedly rewarding failure, repeatedly rewarding the duopoly, and repeatedly rewarding FOR-SALE, incompetent, arrogant, and corrupt incumbent politicians in Do-Nothing Congress (who perpetuate these abuses) with 90% re-election rates finally becomes too painful.

Posted by: d.a.n at August 27, 2010 11:41 AM
Comment #306953

Rich:

Good points.

Corporations have been hoarding cash for well over a decade. Corporations have not been investing in the US. They have been outsourcing their manufacturing to China and their investments have been in the financial markets and purchasing of their own stock.

Economics is indeed complicated.

The fact that America has some of the highest Corporage Tax rates in the world certainly helps contribute to this outsourcing.


Posted by: Craig Holmes at August 27, 2010 1:32 PM
Comment #306965

Craig,

“Economics is indeed complicated.”

On that we certainly can agree. It is not called the “dismal science” for no reason.

Posted by: Rich at August 27, 2010 5:11 PM
Comment #307706

Of course economics is complicated. It’s as complicated as a dog and pony show in a room full of smoke and mirrors. Oh, looky here! I forgot to take into consideration hedge funds and private equity groups. They could always use more money. Hmmm, where to get it? Oh yeah, let’s go to where the money is. Whose money? The accounts of the top 1 to 2 per cent total anywhere from 1 ‘an three quarters trillion to 3 trillion. We can’t ask them! They “earned” their money! Let’s look around. Wow! Look at that stack of money all the way up to the ceiling and beyond. We’re gonna get it! Yes we are! We can’t allow those “entitlements” to go to those lazy bums!
Ronald Reagan closed mental institutions and now we see Pete Peterson vocalizing some pretty weird things. Can somebody please say to Peterson whilst looking him in the eye, “I DON’T BELIEVE YOU!!” Oh wait. I forgot. You can’t reason with a sick mind.

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