Third Party & Independents Archives

December 17, 2004

Bush Selling S.S. Same as Iraq War

If you felt the premises and trumped up fears to support Bush’s invasion of Iraq were regrettable, be advised the very same huckster salesmanship is being applied to privatizing Social Security. Yesterday, President Bush completed his two day staged, no contest, no debate, summit on American economic policy. Using the exact same tactics to sell the invasion of Iraq to the American people, he made his pitch for privatizing Social Security. Start with false premises and statements, add a huge layer of fear, and then push the sale for the transfer of tax dollars into the deep pockets of his corporate buddies who supported his election.

Let me say up front, this is not a simple issue, nor one that can be covered in a few sentences. I hope you will trust me when I say that you will have a much clearer picture of what is taking place with the Social Security issue by following this article to its end.

The False Premises :

The anatomy of the summit looked like this. Bush got roundtable agreement that Social Security is broke, and threatens the derailing of America's economic future. The premise of the C-Span and MSNBC aired summit was that of a debate and roundtable discussion by objective authorities on the subject. First of all, there were no dissenting opinions. Second, the authorities like a Chase Manhattan representative and supply side economist from the Reagan era and school of Milton Friedman were all predisposed favorably to the privatizing of Social Security. So the premise of an objective roundtable debate and discussion was a sham. In fact, the only debate and dissenting opinions came in another conference aired by C-Span by a number of consumer advocacy groups opposed to privatizing Social Security who supported other kinds of reforms that would save it, instead of convert it.

The second false premise was that Social Security is broke and threatens our economy. This, it turns out, is a complete fabrication, like the yellow cake, mobile biological weapons labs and other weapons of mass destruction in Iraq. All false! The Social Security system is currently quite healthy. In fact, according to its Trustees who manage it, the Social Security program is today taking in more revenues from workers than it is paying out and will continue its many years of producing surplus revenues. The purpose of the surpluses is to cover those future periods when the system is paying out more than it is taking in. Congress, years ago, increased FICA deductions for just that purpose.

The third false premise is that radical changes must be made today to save the system. It is true that if no changes are made, many decades from now, around 2070, Social Security will no longer be economically viable. But that is almost 7 decades from now. Bush's summiteers submissively acceded to Bush's "fear" that if we don't do something major now to fix the problem, all Americans face economic collapse.

This directly correlates with Bush's intimations that Saddam could, and likely would, attack us in the near the future through terrorist agents. The fact is, because the trouble is so far down the road, only small and modest adjustments need to be made today to resolve those issues 7 decades from now. In very much the same way as if you increased your savings 2% today over the next 65 years, you would reap a large benefit through compounding interest decades from now, Social Security requires only small modest changes today to remain viable well into the 22nd century.

The fourth false premise is huge. The summit continually referred to the Social Security system as some kind of failed retirement system needing overhaul. This is entirely false. The fact is, if you look at your pay stub for your SS deductions, you find them under FICA deductions. FICA stands for Federal Insurance Contributions Act, a law which established Social Security in 1935. Note the word insurance. Social Security is NOT a retirement plan. It is in fact, an insurance program.

All workers pay premiums into the federal treasury based on a percentage of their income up to $80,000 per year. If you should die before retirement, and have children of school age, your spouse will receive a benefit to cover your lost income until your children are old enough to get jobs. If you become disabled and cannot work, Social Security renders a benefit to you to insure against your having to move into a cardboard box in an alley somewhere to die from your disability. If you reach retirement age, Social Security pays you a benefit to compensate you for your drop in earnings. If you die before retirement age, your premiums are used to pay for others disabled incomes or post retirement drop in earnings.

So, in Bush's Summit, they reiterated the lie that Social Security is a retirement plan that can be replaced by private retirement savings accounts (PSA's) which will generate more benefits. This was a complete fallacy. President Bush is proposing converting part of the Social Security insurance program into a privatized retirement plan. What are the consequences? First, let us say at 20 you begin your career. You pay into the Social Security Insurance program for 11 years while getting married and having a child. Then you up and die. Just like a life insurance policy, the Social Security Insurance program will pay a benefit to your spouse to help raise your child until the age of 18. Once your child reaches 18, the plan stops paying the benefit.

Under Bush's privatizing plan, there is no insurance component. Under his plan, if you pay in his proposed maximum of 2%, in other words 1/3 of the 6.2% of payroll deduction for FICA now taken, into a private savings account for 11 years and then die, your spouse would receive the total of your private savings account deductions minus any losses the markets incurred during those 11 years, or plus any earnings the markets generated for those savings. Let's say you made $50 thousand a year. 2% of $50 K is $1 thousand dollars. Multiply that times 11 years and the total of your savings was $11,000. Now assume the markets earned 4.5 percent for your savings. That brings the total to $11,495. That is all that your spouse and child will receive regardless what happens to them.

On the other hand, given this same scenario, what happens if your wife becomes disabled 2 years after you die and your child is 4 years old? The private savings account does not pay your survivors one extra cent. However, the Social Security Insurance program will continue to pay a benefit to your wife as long as she is disabled, and continue to pay a benefit for your child until they are 18 and able to get a job of their own. The Social Security Insurance program insures your family against poverty in the event something happens to your ability to work.

The private savings account does not insure your family in any way against poverty. It is available, and when it is used up, you are poor or bankrupt The Social Security Insurance plan is guaranteed. The private savings account (PSA) is not guaranteed. If during those 11 years, the markets incurred a net loss, your family would not get back even the full amount of what you paid in. Part of your money will go to hedge investors who bet the markets would go down.

Put simply, Social Security is a guaranteed insurance program designed to prevent adversity and retiring from the work force from forcing hard working Americans into poverty and destitution. It is designed to keep them from defaulting on the mortgage payments and having to move into cardboard boxes in the back alley. It is designed to prevent children from falling through the cracks as a result of the death or disability of their wage earning parent.

Bush's plan is designed to replace the Social Security Insurance system with a private investment plan which while reserving payroll deductions only for your use, absolutely negates the concept of insurance in which all pay premiums in, and those who experience loss receive benefits from those premiums. Social Security was never designed as, nor does it currently operate as, a retirement program or pension plan. It was, and is, the greatest society on earth's insurance program insuring that its citizens who work, and their dependents, are not rejected from that great society's homes and front streets to alleyways and indigent death houses or reform schools and orphanages, due to misfortune.

Fear Factor

Bush and his summiteers then came to their closing sales pitch with what sounded like a reasonable solution. Let Americans own part of their Social Security insurance premiums in the form of retirement investment plans. However, in reality, it amounts to transferring Social Security tax dollars into the profit statements of the many corporations who support Bush's pro-business agenda. Bush has some huge political debts to pay to his party, and their supporters, for his reelection. Bush spent more to get reelected than any other President in history. The Banking industry, Insurance companies, Investment broker and management corporations, and a host of venture capital companies stand to gain directly from the privatizing of up to 1/3 of the Social Security revenues.

What is devastating about Bush's 'economic summit' is the all or none component of privatizing Social Security. The Congressional Budget Office (CBO), a non-partisan organization whose job it is to crunch numbers for various policy proposals, estimates that Bush's plan to privatize 1/3 of the Social Security payroll deductions will pull 2.2 Trillion Dollars from the Social Security Insurance program revenues over the next 10 years. Over the next 10 years, Social Security, if left alone, will continue to generate revenues in excess of payments.

With Bush's plan, the Social Security Insurance plan will start spending more than it is taking in almost immediately. This means our federal budget deficits will increase almost immediately. The CBO currently estimates that the Social Security Insurance program will continue to produce surplus revenues until approximately the year 2016 if left alone. At that time, those surpluses we have been building up will be used to cover the difference between more payments and less revenue until between 2055 and 2070. The fact is there is no crisis in the Social Security Insurance program for at least another 46 years.

Yet, in President Bush's own words according to a Washington Post article:

"One of my charges," Bush said in a 39-minute speech at the Ronald Reagan Building and International Trade Center, "is to explain to Congress as clearly as I can: 'The crisis is now. You may not feel it, your constituents may not be overwhelming you with letters demanding a fix now, but the crisis is now."

This is where Bush is using the Iraq War fear tactic. Just as he hyped the threat of Saddam Hussein to justify invading Iraq, he is now hyping the Social Security situation as a crisis which is imminent. Just as with Iraq, President Bush knows that the longer the debate over privatizing Social Security, the less likely privatizing will occur, because, the more Americans learn about the situation factually, the less likely they will be to convert their insurance program into a boondoggle for Wall Street Brokers and investment managers. It was no accident that Chase Manhattan banking and investment services were present at the summit table.

Real Options

Of course, the President and his summiteers are right and truthful about one thing. If no modifications are made to the program over the next few decades, the program will be in trouble and likely, given other economic circumstances, have to be cancelled or severely reduced in its insurance capacity. But, there are a host of alternatives to shore up the Social Security Insurance program for the distant future.

One is to raise or eliminate the ceiling caps. A ceiling cap is a provision in the law that says that government will deduct 6.2% of your paycheck for FICA only on your annual earnings up to $80,000. If you make $100,000 per year, the last $20,000 you make will not have FICA deductions applied to it. So, when President Bush says his opponents want to raise taxes to save Social Security, he is talking about his opponents wanting to lift the ceiling cap from $80,000 to some higher amount. If the person making $100,000 per year had deductions taken from the entire amount of his salary instead of just the first $80,000, that person would be paying in an extra $1,240 for that year. Multiply that increased revenue by the number of folks making more than $80,000 per year, and you can clearly see how this revenue would extend the viability of the Social Security Insurance program well into the 22nd century.

Some reformers would like to see all caps lifted. That is to say, they would like to see Bill Gates pay 6.2% FICA premiums on his whole annual gadzillion dollar income the same way a Wendy's manager or Home Depot clerk pays 6.2% on all of their annual income. This of course would eliminate any and all problems facing Social Security funding for as far as the eye can see. But, the Bush camp wants to argue that that extra income going into Social Security would not go into the bond, stock, and treasury markets, thus reducing the total amount of money available for corporations and entrepreneurs to borrow in order to start up or grow their businesses. What it really means is only that the cost of borrowing will go up slightly which is what happens when the supply of money is reduced while demand for borrowing stays the same or increases.

Another plan is means testing the payment of benefits. That is to say, change the law so that if Bill Gates of Microsoft retired today with a billion dollars in his portfolio, he would not receive any Social Security Benefits. In other words, for those who do not suffer drops in income when they retire threatening hardship, the Social Security insurance system would not pay benefits to them or Bill Gates. This is entirely in keeping with the fundamental principles of insurance. Most of us pay homeowners insurance premiums. If we do not suffer a loss to our home or property, the insurance company keeps your premiums to pay for losses that other subscribers incur. They don't give your premiums back to you for being fortunate.

Now the Media is going to play this as a Republican/Democrat issue, a conservative/liberal issue, primarily because the most vocal parties debating this issue with access to the media, are the Republican and Democratic spokespersons. But, don't be fooled. This is not a conservative vs. liberal issue. This issue is about protecting the Federal Insurance Contributions Act law, which provides our entire society and all its citizens with an insurance policy against unanticipated misfortune.

Conservatives love insurance companies. Liberals cannot live without insurance policies. The Social Security program is an insurance policy between the government and its citizens. If the President is successful in privatizing Social Security, he will effectively end it. The reason is that he has no plan to come up with the 2.2 trillion dollar hole that the loss of 1/3 of its revenues will create in the program.

Young people are being conditioned to believe Social Security will not be there when they retire. This is false. It can and will be there with means testing the payment of benefits, meaning paying only to those whose work lives failed to secure a dignified retirement, or to dependents who lost their bread winner, and by increasing or eliminating the ceiling caps on the amount of income from which FICA premiums are withheld.

The fixes are easy, and affordable. The fixes will not cost young people one extra dime to save it for their protection. The privatizing option will literally leave millions upon millions of Americans without any security against the misfortunes that Social Security now insures against. It is important to most Americans that they not be duped into dumping the Social Security program in the name of saving it. Bush fooled us once on Iraq, shame on him. If he fools us twice on Social Security, shame on us.

Posted by David R. Remer at December 17, 2004 12:14 PM
Comments
Comment #38841

david,

SS needs to be reformed primarily because it is a fundamentally flawed program.

They are transfer payments from one group to another. Why not support a mandatory minimum income from cradle to grave instead? Why should seniors benefit from such socialist income enhancement at the expense of the young?

Wouldn’t setting the national income at, say, $20,000 a year solve the problem for everyone young and old alike? Everyone could have a guaranteed base income of $20,0000. The argument that we must provide for those who failed to save for their retirement should not just be exclusive to one age group. After all that’s very discriminatory.

Posted by: ericsimonson at December 17, 2004 12:51 PM
Comment #38842

Ericsimonson - Enh? So you’re just going to add that much money to the economy? That’d cause runaway inflation, pretty much on par to printing out a few billion dollars and handing out. It’d basically ensure that the $20,000 you’re giving them is unlivable, so you’d have to jack that up to $40,000, which would instantly be unlivable… et cetera. Which is part of the problem with a minimum wage, but that argument will probably get me flamed to death.

Posted by: Nick Mason at December 17, 2004 01:03 PM
Comment #38843

eric, your argument implies you are opposed to insurance. Insurance companies collect money from all their customers and transfer those premiums to those whose house burns down.

Are you opposed to FEMA? That is a transfer program. Everyone pays taxes so the government can transfer payments to those in Florida who were hit by the hurricanes.

Sorry, I just don’t see how your objections could possibly be mainstream, since, most Americans are not opposed to insurance companies or FEMA, and Social Security Insurance is built on the exact same principles.

Posted by: David R. Remer at December 17, 2004 01:06 PM
Comment #38848

David
As you know, I am against being forced to pay SS. Means testing and higher ceilings are unfair. I believe, if we are forced to pay into SS, we all should pay the same amount.
But, you already knew that so I won’t go into it any further.

I do believe however, that I have a legit question that you can answer for me.
I could not find it in your post so bear with me if I missed it.

You said that 1/3 of the Bush proposal was for the PSA’s. Would that not then leave the other 2/3 to still be used for the “insurance” part of SS?

Posted by: kctim at December 17, 2004 01:59 PM
Comment #38850

kctim, yes, that is correct. The revenues into Social Security insurance would be reduced by 1/3 per year. That means that the date when SS would run out of surpluses and start running deficits for insurance payouts guaranteed by the Federal government, would occur far far sooner that would otherwise happen.

That is the problem. This reduction in SS revenues does not save the SS insurance program, but, hastens its demise. While Bush has not addressed this issue (for obvious reasons) it is reasonable to assume if he could be forced to address it, that the whole insurance program would be scrapped in favor of private savings accounts, which of course is no insurance plan at all.

The PSA’s simply favor those fortunate enough to earn enough to save enough and self insure against disability or death or loss of earnings, while all others are on their own to scrape by on whatever handouts or garbage cans they can find.

Posted by: David R. Remer at December 17, 2004 02:19 PM
Comment #38855

David
Any idea of how much of the SS pie is used for retirements instead of “insurance” purposes right now?

While SS was initially setup as an insurance type plan, more and more people are coming to depend upon it as a retirement plan.
Instead of saving for their retirements, they would rather “keep up with the Jones” down the road.
Along with being forced to contribute and the people who abuse SS, the “keeping up with the Jones” aspect is what makes me mad.
Instead of taking the responsibility to PLAN for their own well being, people would rather drive a huge SUV instead of a more economical car that would allow them to save for their future.

Posted by: kctim at December 17, 2004 03:17 PM
Comment #38860

I saw an interesting story on the New Hour with Jim Lehrer available at http://www.pbs.org/newshour/bb/social_security/july-dec04/fix_12-16.html. According to these guys, Social Security is not in immediate danger, but it would be irresponsible not to start to fix it now. We should have started ten years ago. Each year we put it off, it gets harder.

If we do nothing, the system will stay working for about 40 years. At that time benefits would have to be reduced by about 30%, according to what I learned on the program. Many of us will still be alive in 40 years and almost all of us will be at or near retirement, so it is something we should personally care about.

The raising Social Security caps or raising more money in any other way is only part of a solution. This direct solution doesn’t work to solve the whole problem for the simple reason that we would be taking too much money out of the U.S. economy to pay for retiree transfer payments. It doesn’t matter if we can find the money. It is a bad idea. I don’t want to burden my children and grandchildren with the care and feeding of a geriatric population that soaks up half the national income through government transfer payments. (By the way, it is tempting to tax Bill Gates, but I doubt he needs to take much of his compensation in salary, so we might not get much. A person who earns all his income from stock ownership pays no Social Security at all.)

Another problem is where to put the money the government would collect. The USG can’t really invest in the stock market. Not only would that manipulate prices, sooner or later it would result in government control of industries and we might have a situation like they have in Russia, where “private” firms must do the government’s bidding.

President Bush allowing individual accounts would help keep some of the power away from the government. That will not be the only solution, but private accounts are certainly part of any comprehensive plan.

So our choice is to do nothing, which certainly works for the current retirees, few of whom will still be alive in 40 years. Most other people will not be able to count on the benefits promised them today. Or we can find the courage to take some action and do the SS systems 20 year maintenace.

The last time we “fixed” Social Security (in 1983) our efforts ensured the stability of the system for nearly 70 years. That fix was a success. But like every success, it requires maintenance to continue working into the future.

Posted by: Jack at December 17, 2004 03:57 PM
Comment #38862

kctim, this is from the SSA web site:

Poverty among the elderly has been reduced by 37 percent over the past 30 years, decreasing from 16.3 percent in 1973 to 10.2 percent in 2003. In 1936, when Social Security numbers were first assigned to workers, most of the nation’s elderly were living in poverty. Today, monthly benefits are an important part of the quality of life of elderly Americans and millions more who are protected in case of death or disability.

Posted by: David R. Remer at December 17, 2004 04:17 PM
Comment #38863

Must get all who have not been citizens for 20 years off the Program.(same as for all our govt. programs benefs usage) You people have a clue as to how many allowed to come in here from all over the world and were put on with all the extra housing, etc. benefits??? Let their sponsors (or their adult children) pick up the tab that they dumped on taxpayers.

For others, need to do means-testing as was designed as a safety net mechanism against ravages of poverty.

For others who don’t remember their Amer. hisotry, can’t rely on the markets. (Hey, folks, heard
Frist bet and lost big sums in the markets).

Posted by: Alex at December 17, 2004 04:34 PM
Comment #38864

kctim, I could not find detailed information on income groups. However, in November, the average monthly payment per SSI recipient was $426.50. Since SSI is a percentage of average lifetime earnings, the average falling in the range between $20K per year and $38K per year, this number would represent that the average lifetime monthly earnings for SSI recipients was .60x=426.50 which comes out to $710.33 per month.

This would indicate that the majority of recipients could hardly have afforded SUV’s during their work lives. Given that this number is an average, it is true that some SUV owners in their mid 30’s will collect SSI, in fact all persons who pay in according to rules, will receive SSI, regardless of net worth. Which is why even Bill Gates will get SSI when he retires. Which is why means testing makes so much sense toward saving the insurance program.

Posted by: David R. Remer at December 17, 2004 04:42 PM
Comment #38865

Jack, means testing benefits to insure only those in need receive them, and eliminating the caps, is a total solution well into the 22nd century. The numbers caculated on the infusion into the system through this plan are so large, caps would actually have to reinstalled, though at higher levels, to keep from producing too much of a surplus in the latter half of this century.

Posted by: David R. Remer at December 17, 2004 04:46 PM
Comment #38866

And
Need tax incentives for savings in own accounts away from paper professionals and funny money guys. All was turned upside down @ 30 years ago by Wall Street, etc. when they rolled out all their credit schemes — vs. savings to promote debt & all their funny money schemes.

Posted by: Alex at December 17, 2004 04:47 PM
Comment #38868

Alex

You can’t rely on anything in the future. That is the nature of risk. Markets rise and fall but look at the longer term.

Look at the return on stocks since 1926. This period includes the stock market crash of 1929 and the great depression. If you take the rolling average of any five-year period, you have an 88% of making money. In any ten-year period, you have a 97% chance of making money. And if you hold your diversified portfolio for you always make money. (you can find these figures in many sources. One good one is http://www.harrisinsight.com/education/Coping_With_Volatile_Markets.pdf)

Some of you probably owned stocks during the downturn and dot.com bubble burst at the end of the Clinton administration. Everyone cried about that. I did. But if you had purchased your diversified portfolio in any year before 1998, you made up your loses and were already making money again by 2003 (five years). People would presumably be buying stocks at a regular pace over the course of a lifetime. When stocks are down, they get more. When they are up, they get less. Overall they make money.

Buying stocks is almost a no brainer. Schadenfreude people who were laughing at their investor friends in 2001 stopped laughing again by 2003. The problem is that some people don’t have the money to invest. That is what the Bush plan would help provide. Some people will make mistakes. The old saying that a fool and his money are soon parted still makes sense. For those people, we would still have the backup government plan. They would not do as well as their more clever friends, but neither would they get nothing. Beyond that, we can more effectively take care of the losers if we allow some others who can to make money on their own.

Posted by: jack at December 17, 2004 05:02 PM
Comment #38875

jack, your argument assumes that the unprecedented convergence of record trade deficits, national debt, highest interest payments on that debt, highest personal debt, rise of regional economic unions and China, and long term occupations in two foreign lands and the drain on domestic infrastructure and policy that will entail, will in no way affect the historical record of an every continually positive annual GDP growth, and continue to attract foreign investments to underwrite all that debt.

We are in uncharted waters here, jack. There is no historical model for the economic picture we face over these next 10 years and beyond. I would not even want to make long term investment commitments in this kind of future environment. Too damn many unknowns and potential high risks.

Posted by: David R. Remer at December 17, 2004 06:58 PM
Comment #38885

I understand that the future is uncertain, but consider that through black Thursday, the Great Depression, World War II, decolonization, fall of China to the Communists, Korea, Vietnam, oil embargos, terrorist attacks, unprecedented inflation, the cold war, fall of the Berlin wall and many more crises, the stock market remained a winning investment in the medium and long term - usually in even in the short term too.

It seems to me that if we face things much worse than these things, the U.S. government will be in a crisis deep enough to make it renege on the promises it makes to old people. So what you are saying is that the social security system is finished.

If so, we are probably better off getting to keep what money we can to invest in the only things that will make sense in this new world order: land in a mountainous area away from major roads, a cache of canned goods and some good rifles.

This kind of thinking reminds me of the day I graduated from high school. My aunt commented that the music played was much less triumphant than we she graduated. When I pointed out – with the typical youthful mix of cynicism and naiveté –that given the times there was little to be triumphant about, she reminded me that she had graduated during the great depression, when it looked like fascists and communists were about to divide the world between them and America might never recover. She was right to ridicule me.

Posted by: jack at December 17, 2004 10:25 PM
Comment #38889

Oh boy there sure are some wacky thoughts out there. Excellent post David. I certainly hope some real conservatives stand up and speak the truth about the SS swindle that Bush is attempting to perpetrate.

Jack, I suggest you run for the hills right now. Bin Laden and North Korea have targeted your house I am told.

Eric, I am glad your recognize that SS is a transfer of wealth. Could you please define interest and monopoly for me now?

Posted by: Greg at December 17, 2004 11:09 PM
Comment #38891

Greg

Irony.

That is how bad it would have to get for the stock market not to be a good investment in the long run. It won’t happen, but if it did, nobody would worry about SS.

Posted by: Jack at December 17, 2004 11:45 PM
Comment #38893

Jack,
“The old saying that a fool and his money are soon parted still makes sense.”

There is another saying that a fool and his money were lucky to get together in the first place.

Eric,
I would like to know why it took almost eighty years until the Bush administration to find out that S.S. was a flawed system.
Where is the hard data that backs up you’re claims?
I think that Bush is just trying to baffle us with bullshit,,,again.

Posted by: Rocky at December 18, 2004 12:27 AM
Comment #38894

Sorry seventy years.

Posted by: Rocky at December 18, 2004 12:36 AM
Comment #38899

Rocky,

Hm, if the Bush Administration had been in power for the last 70 years you might have a point.

I’m not saying the Bush Administration isn’t baffling us with bullshit. But I would like to see something done to move the process along instead of keeping the staus quo.

As for hard numbers, if you’re an employee, take a look at your pay stub. SS taxes withheld roughly equal your income tax withheld and that’s only half of your SS ‘contribution’. The other half is ostensibly paid by your employer. It is essentially part of your compensation that you never see. How much could you be saving or investing with an additional 7 1/2 percent of your income?

SS taxes are not saved in an account for you. They go directly to someone else today. It’s not invested. It’s not gaining interest. It’s not ‘yours’ anymore.

We would do much better actually making SS into an account or an investment. As it is, it’s merely socialism in action. Taking from peter to give to paul.

Posted by: ericsimonson at December 18, 2004 02:34 AM
Comment #38903

eric said: ” I would like to see something done to move the process along instead of keeping the staus quo.”

Here we entirely agree, Eric. For all that I don’t like about what Bush’s “principles” for SS represent, I have to acknowledge his wisdom and foresight in pushing action on SS at this point in time. Anyone who understands the economics of SS realizes that if it is kept available in perpetuity or until something much better comes along, some adjustments need to be made soon.

Posted by: David R. Remer at December 18, 2004 08:03 AM
Comment #38909

Excellent article David. I just read another really good article about how the Bush administration figures SS is facing a crisis - or rather, a phony crisis,

…those projections are based on a dire view of the nation’s economic future, one in which the growth in economic productivity crashes from the 3.4 percent rate of last year to 1.6 percent from 2012 on. Economic growth is anticipated to be cut nearly in half from historic trends, to 1.8 percent between 2015 and 2080.

But projections about the fate of Social Security have been sensitive to changes in actual economic performance. Higher-then-expected economic and productivity growth have pushed back Social Security’s anticipated demise from 2029 — as predicted in 1994 — to the 2042 date forecast by Social Security’s board of trustees.

“Under the trustees’ projections, growth is going to slow to half the pace we’ve been growing for 150 years,” [J.P. Morgan Chase’s senior U.S. economist, James] Glassman said in an interview. “That might be, but I don’t know why I should believe that.”


Posted by: American Pundit at December 18, 2004 09:40 AM
Comment #38916

Social security is a ponsy scam. Just can the whole thing via Harry Brownes proposal.
Give me MY money back!

Posted by: Jon Piekos at December 18, 2004 01:51 PM
Comment #38917

Jon, that is just about the most selfish and uncompassionate comment I have heard in a long time, since, to give it back would throw millions your fellow older, disabled Americans into bankruptcy, out of their homes, and into the streets, not to mention the medical issues that would arise, jacking up your health care costs.

But, you are an American and entitled to be as selfish and short sighted on this issue as you please.

Posted by: David R. Remer at December 18, 2004 01:55 PM
Comment #38920

I guess you didn’t bother to read the Libertarian platform from the 2000 election. Those straw man issues were all addressed.

Posted by: Jon Piekos at December 18, 2004 05:20 PM
Comment #38921

You can find that platform in the book by Harry Browne titled “The Great Libertarian Offer.”

Posted by: Jon Piekos at December 18, 2004 05:24 PM
Comment #38922

Jon, you mean the great anarchy platform? Yes, I read it. Except for providing a common defense of the nation, the libertarian platform reads like a dog eat dog world, each person to their own devices. Not born smart enough, rich enough, lucky enough, too bad. Just get off the planet so the rest of us don’t have to look at your misery.

Yep, read that platform. It reminded me a lot of place like Russia or Chechnya - they don’t rely on their society for anything either, just the black market and Russian mafia.

Posted by: David R. Remer at December 18, 2004 05:55 PM
Comment #38930

A very thorough, yet concise reading of this issue David, well done!

I cannot help but believe that somehow tied into this manufactured crisis, are reports of large corporate employers suddenly opting out of pension plans, lowering health care coverage and greatly scaling back benefits packages - in what is supposedly a healthy economy.

Am I also to believe that this administration can simultaneously be worried about the solvency of Social Security in 40 years, but not a record fiscal and trade deficit? If there was a real crisis, the Republicans would’ve copied Gov. Ahhnold (sorta) and floated bonds, thus punting the problem 40 years down field.

I take no comfort in the fact that polling shows some 51% percent believe Bush has no mandate or support, to gut Social Security (35% percent say he does). Same goes for a Zogby poll showing 61% percent believe that Roe v. Wade should be left intact. Why? Because, there are still 44% percent who actually believe a stable Iraq government is possible at this stage.

Two years into a horrendously executed war, the chief architects keep their jobs and their incompetent minions get Medals of Freedom. Such passivity by a nation can only be explained by a combination of indifference and deception.

The only reason Social Security was ever considered the ‘Third Rail’ of politics, was fear of the powerful Senior’s voting block. But now, with the head of the AARP colluding with the administration to sell his constituency a Medicare Prescription Drug Trojan Horse, does this mean the Democrats have the right to tune out Seniors’ complaints over Social Security?

A betting man would bet Red State, on this one.

Posted by: Bert M. Caradine at December 19, 2004 08:02 AM
Comment #38932

Thank you, Bert. It was not an easy topic to cover and put down in writing.

I agree with almost everything you said: no question in my mind about your conclusion of indifference and deception.

On the AARP leadership though, it was my understanding they were duped as well. I read that they had assurances from the Whitehouse and Congress that what they wanted would be included, before the writing of the bill was set down. By the time the AARP leadership read what was actually in the bill, it was too late to launch a campaign against it without losing the Rx portion for seniors altogether. If that is true, I wouldn’t deem it collusion, just an error in judgement in trusting the word of the crafters of the bill.

Posted by: David R. Remer at December 19, 2004 10:46 AM
Comment #38965

Did you see where the White House released an economic projection weeks early to coincide with the economic summit? It shows a declining economic growth rate, and seems to back up the administration’s worst-case projections for Social Security.

But they continue to describe economic growth as “very solid”.

So is the economy good, and the Social Security “crisis” phony? Or is the economy bad, and the administration’s economic policy failed?

Looks like they’re trying to have it both ways. No good can come of that.

Posted by: American Pundit at December 20, 2004 03:54 AM
Comment #38979

Radical change is sometimes necessary, but claims that it is necessary must be backed up by extraordinary evidence.

Which hasn’t shown up. What has shown up is evidence S.S. Will continue to be viable for another seven decades.

The facts: Only about a third of the population actually ends up depending on Social security for retirement, and most likely most of those people are lower income earners. Any magnificent returns on the stock market will only affect ten percent of that income, which means that any improvement in returns will be miniscule at best. It will cost 220 billion dollars a year in adminstrative costs simply to reorganize the system, and there are no guarantees that the people investing will do so wisely The whole thing about greater historical returns does not apply equally to all investors, or across all time periods. It is simply a logical fallacy.

The old saying is that if it aint broke, don’t fix it. Social security needs a tune up, but you don’t need to be yanking the whole transmission out. Unfortunately, The Republican philosophy has never been to leave a working program in place doing its job.

Posted by: Stephen Daugherty at December 20, 2004 01:08 PM
Comment #38980

I am surprised at the liberal response to Social Security reform. Liberals always claim to be forward looking and embracing of change. Instead the comments we hear are that things are okay or that it is a far away problem about which we know little. I wonder what the response would be if Bush were a Democrat proposing to reform a system, which works for now, but will hit a brick wall within the lifetimes of most Americans living today.

Social Security will hit the brick wall if we do nothing to maintain or modify it. The demographics have changed well beyond those anticipated at the inception of SS. Social Security was and is like a giant chain letter. It depends on constantly signing up new people, hopefully in ever-larger numbers. There is nothing wrong with this concept. Most things in life can be described this way. Real estate, the stock market, even child rearing surely have some of these characteristics. The trouble with the chain is when somebody or something breaks it. In the case of SS, we can clearly see the weak links on the horizon.

There is no real urgency to do anything this year, but the cost of fixing SS gets higher every year we wait. President Bush has shown courage and resolution in choosing to tackle this dangerous political issue when everybody knows that he could just kick the can to his successors. I can well understand that many of you disagree with the President’s prescription, but it is hard to argue with his diagnosis of the problem.

Social Security is not in crisis today and maybe not tomorrow, but it will be soon. These sorts of things have fantastic lead times. Good parents start saving for their kid’s college education the day they are born. Smart workers think of their retirement when they are in their twenties. In neither case is there a crisis. But if you fast-forward, you find a lot of unhappiness and crying among those who failed to plan. The safe retirement that could have been easy to attain for the person starting at 25, is a near impossible mountain to climb for the 55 year old. And parents who were too busy to plan for their kids when they were two have to look into their child’s face and tell them there is no money to help with college.

Sure, we have other problems. Many of those problems are more urgent. But there is no rule that stipulates that we only get to solve one problem at a time and there is nothing that tells us that if we can’t do everything, we are not allowed to do anything.

Posted by: Jack at December 20, 2004 01:13 PM
Comment #39045
I wonder what the response would be if Bush were a Democrat proposing to reform a system

Obviously, it depends on the reform. Bush’s plan is not a reform, it’s a step in dismantling a system that’s kept millions of Americans out of the tax-payer funded debtor’s prisons we used to have.

the cost of fixing SS gets higher every year we wait

Or it gets cheaper, because even a mildly optimistic economic projections show there’s no crisis.

No doubt we should keep revisiting the system as the decades go by, maybe there’s even some administrative overhead that can be trimmed, but there’s no reason to take drastic steps that run the risk of destroying the system for my kids and grandkids (at 39, chances are I’ll be dead before the funding runs out - if it does run out - in 40-50 years).

Posted by: American Pundit at December 21, 2004 11:02 AM
Comment #39069

That’s just ridiculous David. What this boils down to is that you think that people are either too stupid to take care of themselves or too malicious not to be fair or charitable, yet politicians somehow aren’t. Grow up.


Your personal remarks are no longer desired at this site. —Watchblog Manager—

Posted by: Jon Piekos at December 21, 2004 02:29 PM
Comment #39105

I have questions, please, trying to understand if SS is/will be broke and why. If the 2 statements below are considered correct, where have the excess revenues been going? How does the excess get used, if not invested? Who’s getting the excess revenue now?

—Over the next 10 years, Social Security, if left alone, will continue to generate revenues in excess of payments.

—SS taxes are not saved in an account for you. They go directly to someone else today. It’s not invested. It’s not gaining interest. It’s not ‘yours’ anymore.


A second question: As women entered the workforce in greater numbers after WWII, I’m guessing the number of workers and revenue contributed would be even more disproportionate (for a period of years) than the number of people entitled to benefits. Wouldn’t this have created even greater excess revenues for awhile? What was done with that?

And a third, if you have the time: What was the average life expectancy of people when Social Security was established, and what is it today? (That is, how many years were/are the retirees expected to live on this income?) Although delaying the retirement age would be a problem in a poor economy, is age an option that might be slowly creeped up?


And a response to this comment:
—Good parents start saving for their kidďż˝s college education the day they are born. Smart workers think of their retirement when they are in their twenties. In neither case is there a crisis.

Yeah, sometimes. I managed it without crisis, but I believe this to be a poor assumption. “Good” parents? “Smart” workers? My mother supported 5 children on her own when my father (an accountant) came home from WWII, one of thousands who were mentally disabled (but not considered to be disabled as the result of military service). He had worked a very short time before the war, at starting salary, so his “average wage” and premiums paid to Social Security were small; therefore his family was only entitled to a small benefit during his disability, and after his death. My mother worked as a nurse full time and held part-time jobs until the youngest was 18. The mother of 3 children across the street in our suburb was in a similar situation. Paying for milk was a priority; saving for college or retirement was not an option for many years, no matter how often it was thought of. To believe that all who plan will succeed, or that all who do not succeed are not “good” or “smart,” means not looking around carefully or not looking very far — in my opinion. Stuff happens.

Posted by: Robert at December 22, 2004 01:12 AM
Comment #39127
Stuff happens.

Damned straight.

Robert, the SS system is running a surplus right now. While there aren’t individual accounts earning interest, the surplus account is.

Your second question begs another interesting question. If Bush can legalize millions of illegal immigrant workers, wouldn’t that solve any perceived, projected “crisis”?

Posted by: American Pundit at December 22, 2004 09:23 AM
Comment #39130

AP and Robert, while on paper (i.e. with bookkeeping) today’s surplus can and should be accruing interest at the treasury rate and that interest is added to the surplus balance of SS surplus revenues, the reality is that we will never see those interest earnings on the SS surplus as long as we are deficit spending, as long as we maintain a national debt, and as long as we are in fact paying interest on that national debt.

The SS surplus is meaningless in actual dollars. The only way the SS surplus has meaning is to the extent that retirees can count on the good faith and word of federal politicians to make good on the promise set down in the law of the SS act. And, as we can see, Bush and the Congress (both Dem and Rep) are dismissing the national debt as nothing to worry about. Which is to say, they are lying to the public about their intent to save Social Security. The first and foremost step to save Social Security is to turn budget deficits into surpluses, erase the national debt, and thus, discontinue spending the Soc. Sec. surpluses on the interest on our national debt, 40% of which goes to foreign investors.

Congress and Bush are literally robbing our elderly to enrich the rich investors both here and abroad who are underwriting our national debt via the interest payments our government pays to them on their investments. The SS surpluses are nothing more than a promise, and IOU, which many in Congress and Bush, apparently, have on intention of honoring. I say that because, the only way to honor that debt, is to eliminate the national debt and interest payments on it.

That is why the SS lock box was such an important, (but, defeated) idea. If SS surpluses had been pulled out of General Revenues and set aside, we would indeed be earning real time interest dollars on those surpluses. As it is however, the surpluses are thrown into the general revenues and spent on shoring up the deficit spending and interest on the national debt.

Posted by: David R. Remer at December 22, 2004 09:42 AM
Comment #39146

A Social Security lock box is a pleasant fiction, but a fiction nevertheless. There is no way the U.S. Government can save the money. It can invest in its own securities, but it doesn’t really change the equation. USG investments in the stock market would bring with it socialized controls that nobody wants. USG investments in the bonds or currencies of other nations would swamp their ability to do much of anything. The problem is that the U.S. is the elephant in the room.

Current U.S. taxpayers will have to pay the bills of current retirees; no matter what the accountant say is happening. The only way to make this less painful is for the economy to be healthy and growing. We will also need to change the equation to make individuals less dependent on SS and perhaps make them recipients for a shorter period (i.e. raise retirement ages).

The SS was designed as a long chain letter, where subsequent generations of workers would pay for the retirees. As long as the number of workers relative to retirees is high and growing, there is no problem.

But the demographics have changed. The worker retiree ratio is changing. When SS was founded few people lived very long beyond the retirement age of 65 and there were many younger workers to support those few. Most pensioners would expect to be in SS only a few years. This is no longer the case. Beyond that, at the creation of SS in the 1930s, sixty-five years old often meant people were too infirm to work and jobs required a lot more physical stamina than they do today. That is why that age was chosen. Today many people can work well beyond the “drop dead” age of the 1930s.

Franklin Roosevelt accomplished a lot with SS. Poverty among the elderly is now very low, partly as a result of his efforts. But in order to sell the program to the American public, he engaged in a little deception. He sold SS as a savings plan, where each week the worker put a little aside and got it back when he retired. It was never that and it never can be because of the structure of the USG. SS represents transfer payments. There is no lock box and if we ever found one, it would be empty.

Posted by: Jack at December 22, 2004 12:58 PM
Comment #39177

A soc. sec. lock box has failed to become a reality only because of the ignorance and apathy of the public. That circumstance is changing.

Posted by: David R. Remer at December 22, 2004 05:33 PM
Comment #39181

David

There is an old Polish story that every Easter in a particular village there was a shortage of cream. The people demanded the local political leaders do something. They wanted to be responsive to the people, but there was no way to get more cream. Then one elder had a good idea. He noticed that while cream was in short supply, there was always plenty of water. He proposed that they change the names, calling cream water and vice versa. It worked. The next Easter, cream was in abundant supply, but people did notice a shortage of water.

This is what you are doing with the lock box. Changing the name without doing anything about the problem.

It doesn’t matter if 100% of the American people want a lock box. They can’t have one because it is not possible. The USG cannot set aside money for future use. It is not like a private citizen or even like any other government in the world. The U.S. could theoretically run surpluses (although it never actually does that because politicians find ways to spend the money) but where would the surplus money be invested? The money that the U.S. has is of such a magnitude that it would crush any market. In fact, the U.S. can invest only in its own securities. The accountant says that the U.S. treasury owes the Social Security X number of dollars. When the time comes to pay, where does the treasury get the money to pay? It can’t withdraw the money from some bank account. It gets it from the taxes (or contributions if you like) of the current generation of workers.

The lock box is a fiction. It is not something we can decree politically.

Posted by: Jack at December 22, 2004 05:53 PM
Comment #39192

Thanks very much for the responses to my questions. This is my first attempt to blog, so pardon me if I’m not with the program right away (and please let me know if my blog etiquette is off).

So, if I understand this correctly, we started Social Security (SS) by having workers pay 1% of their salary for insurance (and the employer matched it). Today the workers pay 7.65 % of their wages for insurance; the employers match that, totaling 15.3% (on the first $80,000 of wages only). Both the percentage paid for the insurance has gone up, as has the ceiling on covered wages (the part subject to payroll tax), but so has the potential benefits received as payouts. Since the 30s, we’ve been paying in far more each year than SS has paid out in benefits each year, and this will continue, although diminishing, over another 10 years or so. The excess revenue in this insurance program has been used to pay for any number of other things the government felt was needed — perhaps missiles, highways, interest on the debt, etc. And the reason SS did not attempt to create any reserves (I think that’s what insurance companies call it) is because they could not find a suitable place to invest the excess revenue, and because it was assumed there would always be more people paying in than taking out. Although there was no plan to use the excess insurance premiums for insurance benefits, they did not attempt to return any of the excess revenue to the payers, like a dividend, because they weren’t required to. Excess insurance payments made by working citizens and their employers have been paying for other stuff besides insurance. And this has been going on for decades under both Democrat and Republican administrations.

After the baby boom peaked in the 50s, no one noticed the system was going to eventually get out of balance? And now the Bush administration proposes that if workers are allowed to put around 2% of the 15.3% of taxed wages into a kind of individually trusteed account (they would own it), that things might balance out because at least some of the future retirees premiums will have been invested — for sure. This would be a step forward for the not-soon-retired as it stops some of the transfer of money from them to retirees and keeps it in the workers accounts (the workers pockets so-to-speak). The downside is it generates less revenue for SS to pay out to current retirees and near-retirees, quickly forcing the government to borrow, print money, or reduce benefits to someone, somehow.

I don’t know the details of the Bush proposal, but I’m presuming workers might have the option of putting the money into investments similar to those of IRAs — CDs, corporate bonds, stocks, mutual funds, government bonds, even stocks that represent foreign investments like Toyota or BP. But the same premiums (the 2%) that individuals would invest in their accounts cannot be invested in the same way if the money is held by SS, where the SS administration is trustee? Same money, invested in the same way. The main difference would be the name on the account. What’s in a name?

How do nations that have birth rates and mortality rates similar to ours keep their Social insurance systems operating?

Finally, I’ve heard that the U.S. population has among the lowest of savings rates of western nations. How do we make ourselves less dependent on SS if that is true? And what will we do with the people earning minimum wages or fairly low wages who have little chance of being able to save independently even if they realized the need and wanted to do it? The freedom to save independently isn’t much of a freedom when there is no discretionary income. For the moment, I think a form of ‘forced’ insurance/savings is more practical. I was taught there were two forms of income — people at work, and money at work. If we’re pretty sure we’ll have fewer people at work, it seems reasonable that we have to put money to work.

I realize I am just pointing a finger, and not proposing a solution, but I’d like to be certain I understand the problem first.

Posted by: Robert at December 22, 2004 07:27 PM
Comment #39194

Jack, your last assessment would be dead on if a lock box was just in name. But, you assessment demonstrates a lack of understanding of the intent and consequence of a lock box. The lock box removes the sums paid in to SS as well as its surpluses from the general revenues. Hence, Congress could not budget all of the rest of their spending using the SS surpluses as a ruse to disguise huge deficit spending.

If you remove SS from general revenues, allocating those sums for, and only for present and future SS needs, then Congress is forced to balance their budget, raise or decrease taxes, or not, on federal income taxes and duties and tariffs and loan instruments, instead of using SS premium revenues for those purposes.

The Public would then be shown, quite accurately, whether or not the President’s and Congress’ budgets based on non-SS revenues are realistic in terms of non-SS revenues. In other words, the President and Congress would not be able to rob from the SS funding in order to claim to lower deficits or to justify tax decreases.

SO NO! It is not in name only. If it were in name only, Congress would not have had a problem with a lock box. The lock box threatened their lavish spending habits, which would have shown up as huge deficits if SS revenues were off the table. Same with Bush’s tax cuts.

Posted by: David R. Remer at December 22, 2004 07:44 PM
Comment #39195

Robert, your understanding is essentially correct. The GOP discussions as reported in recent articles and Bush’s recent statements, however, do anticipate limiting privatized account holders in their selection of investment options. They intend to insure that high risk, hence high return potential, is not an option. Not all however agree in such limitations. Just ask a libertarian.

The biggest problem with SS is simply that is revenues have been raided by virtue of mixing those revenues in with income tax revenues available to Congress for annual budgets for all manner of spending and pork. I outlined this in my latest reply to Jack regarding the lock box.

One option as has been raised, forget by who in Congress, is that instead of private accounts, the Gov. contracts for investing the SS revenues in the markets. That however, leads directly to a SS lock box which allocates those funds outside of annual income tax revenues and general budgets. That is the huge sticking point for Congress. There goes the pork spending or the next election if SS funds are off the table.

The irony is that while SS is producing surpluses, Congress refuses to segregate its revenues from all other general revenues. When however, the SS program begins to deficit spend, these same Congress persons and President are the first to holler that that it will drain our government resources, hurt the economy, and make deficits and debt grow larger. Hypocritical to say the least. They want their cake and to eat is as well.

Posted by: David R. Remer at December 22, 2004 07:53 PM
Comment #39199

David,
I think mandating less risky investment options might be a good idea for a program that is supposed to be an alternative to welfare roles. Paternalistic as it may be, some pretty intelligent people lost a ton in 2000 being smarter than the average Joe. And, I believe the average worker, and especially the low-middle income folks who will rely on SS the most are least prepared to make informed decisions or deal with the losses if the decisions are poor.

So much for a graduated income tax. I don’t know what portion of the total revenues are obtained from the surplus SS revenues, but there is nothing graduated about the 15.3% , except that after the cap is reached, the highest income earners are not paying it.

What’s your opinion re contracting out the investment of surplus funds compared to government employees doing it directly, compared to individuals doing it for themselves? And is the 2% that Bush proposes (if that’s accurate) approximately the amount of the surplus revenue now?

Posted by: robert at December 22, 2004 09:08 PM
Comment #39204

David

I understand and share your concern about government pissing away the excess money from SS. I don’t have any more confidence in Republicans than Democrats, since they both have done it.

The lock box idea doesn’t start because there is no place to put the “surplus.” The USG can’t invest it in any market, since the sheer volume would crush or control any market we now have. Putting it aside means absolutely nothing since the government is both the creditor and the debtor. All money in the Federal government is fungible and nominal. The USG would simply declare that SS had so much money. They would declare that it is being saved. When the time came to pay out more than was taken in, that money would come from the current taxpayers.

Can SS be kept solvent? Of course. We can tax ourselves up to 100% of our national income to pay for seniors, but there won’t be any left for other purposes.

I think the fundamental fallacy is thinking a dollar has a specific value. A dollar is backed by the promise to pay a dollar, which is worth a dollar, which is worth whatever the market says it is at any particular time. You and I and even whole countries can save dollars because our savings does not affect the dollar’s value. The USG controls the supply of dollars and what the USG does affects its value. It can collect and “save” dollars, but that just means that it writes a check to itself. When it redeems that check some time later, it writes another check to itself going the opposite direction. It is not even as complicated as moving your money from one pocket to another. Ultimately, the check is only as good as the taxpaying power of the current generation.

So for the USG there is no such things as future savings. A strong and growing economy and a favorable ratio between recipients and payers is the only guarantee anybody has. We should not call the proposal a lock box. A better term is a lock bag, because future generations of both workers and retirees are left holding the bag if we don’t reform SS.

Robert

Government employees and military have a “thrift savings plan” where participants are allowed to invest in a variety of index funds including American and international stocks. It is a very popular program with the federal workers, and some lucky few have built portfolios of more than a million dollars on their modest government salaries. Look at it at www.tsp.gov. The Bush plan would incorporate something like that.

Posted by: Jack at December 22, 2004 10:07 PM
Comment #39206

robert asked What’s your opinion re contracting out the investment of surplus funds compared to government employees doing it directly, compared to individuals doing it for themselves? And is the 2% that Bush proposes (if that’s accurate) approximately the amount of the surplus revenue now?

Politically speaking, with Republicans in control, contracting out is the only available answer. Jack was right about the index funds for Gov’t employees, which reduces risk somewhat.

However, having managed our own 401K for years in indexed funds, I never worked as hard or spent as much time to eek out the 8.5% return we have achieved this year. I think individuals have varying talents and educations and thus, the public at large would be ill-served if left to manage the funds themselves. The premise of Bush’s plan is to replace SS with something more substantial. What good is it if individuals are free to allow their ignorance and lack of due diligence in following the markets and making appropriate choices to fail them and their retirement savings. They would have been better off with the SS as it is.

Gov’t employees as well as contractors will be subject to illegal pressures, to move money one way or another. I think it is a toss up which could be forced to high degrees of transparency and lack of corruption. We are afterall talking about very large sums of money. The temptation will be huge to manipulate the investments.

Prosecution however, would, I think, be easier against government employees. Less layers of lawyers and no layers of corporate protection to take on. So, I would tentatively choose government employees managing the investments. If private managers have a hand in it, the temptation to market to savers through ads and advertising in the mailings etc. will be to great to ignore, potentially confusing investors from wise choices. Whereas, government employees managing the funds would have no incentive to market investments to savers one way or another.

But, privatizing even 1/3 of current Soc. Sec. revenues means killing the insurance components of SS altogether inevitably. That is something I find abhorrent, since we are all dependent to varying degrees on our government’s management of the economy. If the government fails to manage well, should elderly of modest means just find a poverty hole to die in? I say no. I say the government should insure the elderly and working against poor management of the economy by government.

Posted by: David R. Remer at December 22, 2004 10:42 PM
Comment #39207

jack, your analysis of the value of the dollar completely ignores the underlying bases for its value as laid out in the Adam Smith’s Wealth of Nations. The money, though by distant relationship, derives its basic value by populations capability to provide good and services which are in demand. It is absolutely false that money is nothing but a paper substituting for IOU by a government. It is much, much more substantial than that and far more complicated. It is a hell of a difficult read, but, anyone who wants to understand money, needs to read Adam Smith’s Wealth of Nations. Surprisingly, very few MBA’s ever have. Is it any wonder globalization is beyond most folks control and even understanding?

Posted by: David R. Remer at December 22, 2004 10:47 PM
Comment #39209

David

I am aware and have read Adam Smith, although many years ago. You, Adam and I don’t disagree. What I wrote above is “Ultimately, the check is only as good as the taxpaying power of the current generation.” Which means the same thing, since the taxpaying power is a function of the population’s productivity. I was just more precise to better suite the subject. Adam Smith, in criticizing mercantilism, also would have agreed that a country can’t “save” money in some kind of lock box.

It was exactly that fallacy that formed the basis of mercantilism and people at John Law’s Royal Bank of France would have understood and believed in a lock box. Adam Smith would not and I don’t. It doesn’t look like you do either. The productive capacity of the country is the productive capacity at the current time. When the obligations come due in the future, that generation will pay them off. They will not be able to dig into a lock box full of mercantilist gold.

Sound management of the budget is always a good thing. A growing economy is always a good thing. These will help future generation pay for retirees. But there is no way to “save” for the future beyond building the productive capacity of the country. Adam Smith would have understood that only the current productive generation can pay the bills.

Posted by: jack at December 22, 2004 11:12 PM
Comment #39210

jack, you keep referring to a lock box as a place to put money. As I explained before, the purpose of the lock box is to force Congress to allocate its spending based on its other revenues. If the Congress were, for these last 20 years forced to keep their spending paws off the SS surplus, they would have had no choice but to either run very deep deficits which would not have been popular, raise taxes which would also not have been popular, or curtail their spending, somewhat more popular.

It is clear such a solution implemented today, would not make SS solvent throughout the century, but it would help, since we still have a decade or more of surpluses to generate.

By keeping SS revenue out of the general revenues and budget, run away spending would be curtailed sooner. Deficits no longer cloaked by SS surpluses, would be reduced. Hence the national debt would not be what it will be otherwise. If the debt is lower, the US would have more and longer borrowing capability to assist SS over the baby boom hump.

Now of course, I am arguing from the Options in the original article, namely means testing benefits and raising or eliminating caps. In this way, the US would very likely be able to ride out the baby boom hump and see SS surpluses again after the baby boom generation has largely passed on.

Posted by: David R. Remer at December 22, 2004 11:44 PM
Comment #39220

Jack, I checked out the “thrift savings plan” website. I feel sorry for the guys who switched all their assets to the C, S, and I funds to ride the dot com wave in ‘99 before retiring broke in 2002.

Posted by: American Pundit at December 23, 2004 07:14 AM
Comment #39221

As I’ve never read Adam Smith, I keep returning to kitchen table math and ideas, so thanks for keeping me in the discussion.

I found some info that straightened me out some. I hope I’m reading it correctly. http://www.cbo.gov/showdoc.cfm?index=5530&sequence=2&from=0

First, according to the CBO page, some of my earlier ‘understandings’ may have been off. The discussion & proposals seem only to be aimed at addressing the OASDI portion of SS and not Medicare. Eliminating the Medicare part of the taxes, workers and employers pay in 12.4% for the retirement, disability, and survivors portion of the system, as you mentioned David. So, when you referred to “his proposed maximum of 2%, in other words 1/3 of the 6.2% of payroll deduction for FICA now taken,” does this ignore the employers portion of the taxes or does this mean that the Bush proposal expects to use 2% of both the workers and the employers payments for a total of 4%?

Hope this picking over numbers stuff doesn’t bother too much; it’s just my personality. According to the CBO, in 2003 SS took in $534 B in payroll tax revenues and another $13 B in income taxes paid on SS benefits. Revenues exceeded outlays (benefits plus the cost of administration) by $68 B. So the surplus is about 12.5% of the revenues. SS spent $479 B on benefits, about 85% going to the retirees, their families, and their survivors, and 15% going to the Disability Insurance portion of the benefits. I haven’t found out yet what % goes just to retirees and what % goes to the surviving families of covered workers, but perhaps the insurance component of the system wouldn’t necessarily be lost if the amount diverted to investment isn’t excessive.

Well, if the Bush plan is to divert 2% of the 12.4% to PSAs (about 16% of the $534 B in taxes) that’s $85 B unavailable for SS benefit payments this year. Maybe not 1/3 of the revenues, but it’s more than the surplus and as you said David, it would create an immediate deficit for SS, draining that trust fund much sooner, wouldn’t it? Although I think I’m in favor of investing just the surplus in real investments each year, I’m curious as to what the government will not be spending that $68 Billion on any longer. What else will suffer, and would I hate that change just as much? The $68 B may seem small compared to the $2.1 trillion we spent last year, but it has to impact something.

I still don’t get why it may be okay for individuals to invest the money each year (whether $68 B or $85 B) in PSAs, but a bad idea for the SS administration to invest the same amount in similar investments. Why wouldn’t the individuals have the same impact on the economy and markets that the SS administration would? I don’t see what would be so bad about having real capital on hand to supplement the expected tax revenues to be paid in by future workers. Any specific insight for me?

—“The accountant says that the U.S. treasury owes the Social Security X number of dollars. When the time comes to pay, where does the treasury get the money to pay? It can’t withdraw the money from some bank account. It gets it from the taxes (or contributions if you like) of the current generation of workers.”

Does that have to be the only way it can work? Couldn’t the difference between the expected payroll tax revenues and the anticipated revenue needed (the shortfall due to the baby-boom generation) be funded with hard dollars to help guarantee their pension? Any other pension is required to have a certain amount of hard investments backing up the formula, right? The interest on the Treasury bonds that the SS Admin. holds would be $85 B this year. If SS actually received that interest (or was repaid some of the money lent each year) it seems this baby boomer problem might not exist. So, if the government decided to retire bonds and reduce national debt, could it not choose to redeem those held by SS first? That’s pretty theoretical I guess.

I’m not too keen on the idea of means testing, as it sounds like a welfare program where the higher income folks are asked to pay in but get less or little out, to the benefit of the others. That doesn’t sound like insurance to me. I realize that this happens now to a small extent. Workers with the lowest earnings over their lifetime get a larger percentage back in benefits than do the average or high income workers. I’d rather they push our retirement age back a few months, for fairness.

Posted by: robert at December 23, 2004 08:24 AM
Comment #39227

AP

No life is without risks and rewards.

I was a participant in TSP through good times and bad with the C, I and S funds. I don’t know all the nuances of finance, but my account still has much more money in it than I have put in and the rate has been much higher than in my CD.

I agree that it is risky. Some people follow the market. They put big money into the stock funds in 1999 and withdrew it to put into bonds in 2001. In other words, they did just the opposite of the best-case scenario.

But most people have learned not to try to time the market and have done all right. The other thing that is true from my own experience is that if retired today and started to withdraw from my TSP the amount equivalent to my expected SS payment I would never run out of money even if the portfolio averaged only 5% annual gains. I would have to withdraw three times my SS amount even to risk running out of cash before I was 120 years old. These assumptions would hold true through any economic time in the history of the United States. Of course, past performance is not guarantee of future results, but I don’t see anything better on offer.

I think it is a sweet deal and I would like to share it with other Americans. Remember that Federal workers do not make grand salaries, so this would not be something available only to the rich. Some people would be foolish or unlucky. We need to construct a lifeboat that protects them too. But we don’t need to fill that lifeboat with a lot of guys who could take care of themselves if the government would just let them or lend them a little actuarial hand.

David

I am sorry if I misunderstood your concept of the “lock box”. You mean it as a type of discipline for legislators and presidents and hope that if the true nature of their profligate spending were clear to the public, they would be reined in. I can agree with that and hope it would be true. But I don’t want to underestimate the ingenuity of our elected officials. I expect they could find a way to have a lock box and still hide their spending. The lock box concept would make us all complacent and we still would have the myth that we were somehow saving for our retirements.

Posted by: Jack at December 23, 2004 11:09 AM
Comment #39229

Robert

I suppose it would be possible in theory for the USG to invest in markets, if they used some kind of index fund. But you can’t trust it to do things right. Markets work NOT because they don’t make mistakes, but because mistakes and poor judgment results in losses and perhaps bankruptcy while good decisions results in growth. The market, in short, moves resources from the poor producers to the better producers. Government resists this and makes political decisions. You can well imagine calls for the government not to invest in firms that do animal research, or calls to invest in socially relevant firms. Beyond that, the government’s large revenues could protect firms from market forces.

Imagine a strong and investing government in 1980. It would have fought to protect U.S. auto industries and established technology firms. Why? Because they are already established and have lobbying power. This includes the businessmen who want profits allied with the unions who want jobs. So the government would protect IBM at the expense of Apple. It would fight “expensive” changes in automobiles etc. Government investment has sometimes been essential in getting an industry going, but government investment, by definition is political and status quo.

Progress if often made by entrepreneurs who have ideas that look silly and personalities to match. These are not the kinds of guys who impress government bureaucrats. They are not the sorts that can sit down and successfully fill out the paperwork for a government grant. Put the government in charge of the economy and you get “safe” investments going to the politically savvy and these guys are rarely responsible for innovation. Innovation is messy and cannot be guided from above.

Posted by: Jack at December 23, 2004 11:22 AM
Comment #39231

Yes, Jack. This was the great misunderstanding of Gore’s lock box idea. He was a Senator and he knew that the only way to force Congress to avoid the huge deficits we have today, was to withhold the SS surpluses from the balanced budget equation. Otherwise, the surpluses would be gone in addition to what the public saw as justified deficits. With SS revenues out of the equation, our deficits for the last decade and presently would be immensely higher than they currently appear on the books which would have raised public ire over profligate spending years ago.

As it is, the ‘real’ deficits have been hidden away offset by SS surpluses which allowed paper deficits to look far smaller. End result is, our national debt and interest on it, now threaten the viability of SS, which is exactly what Gore warned about. But, folks didn’t understand the complexities of federal spending and revenues and so we are where we are, discussing the end of SS as we know it.

Posted by: David R. Remer at December 23, 2004 11:27 AM
Comment #39240

I still don’t like the term – lockbox. It is by its nature deceptive and I think it is meant to be so. It implies that this generation is saving for its own retirement. Better just to advocate reporting the deficit minus SS receipts.

Another permutation is simply to report SS receipts in with other taxes. If SS is 15+% and people are paying another 20+% in Federal taxes and maybe another 15% in state and local taxes, the government is taking half of their income. If people could more easily see what they are paying and compare it to what they are getting, perhaps they would call for more fiscal restraint.

Posted by: Jack at December 23, 2004 12:54 PM
Comment #39262

Thanks for the discussion and the education. I’m left with believing that Bush has a half-baked, poor idea to get solvency into SS (or eventually replace it), but not yet a plan for doing that without skimming someone’s retirement money away from them. So far, I believe our government can do that without changing everyone over to individual accounts, and that the investment of surplus taxes each year is at least a part of the solution, and should be. I don’t believe it is impossible for a government to safely, honestly, objectively invest it’s citizens dollars and serve as an honorable trustee; examples are the Federal TSP plan mentioned earlier, and dozens of State Employees and State Teachers Retirement systems. While the $68 B surplus fund would dwarf even the largest of these in a few years, I suspect the markets could handle it since the amount invested is expected to dwindle to zero in 10 years. I believe that raising caps on the wage base, will add more revenue, but also raise the average covered wages used in the formula, so it isn’t a solution as long as we ensure that the formula provides fair additional income for the additional tax paid. I believe that since Americans live longer life spans now, the formula has to reflect that, and retirees should face up to a small drop in expected benefits, somehow. We’ll be getting what we paid for; we just overestimated what our SS taxes would buy. Americans will have to face the same thing in their personal finances if by the time they attempt to annuitize their IRA, 401(K), or 403(b) there has been another change to the life expectancy tables.

Enjoy the holidays.

Posted by: robert at December 23, 2004 08:01 PM
Comment #39274

Great discussion all, very illuminating. Welcome Robert and Happy Holidays to all.

Posted by: Greg at December 24, 2004 12:11 AM
Comment #39361

David,

You keep bringing up the privatization of 1/3 of the SS taxes. This is absolutly incorrect. The 2% that Bush proposes allowing employees to invest on a voluntary basis actually reflects roughly 14% of the total tax not your stated 33%. Do not forget that the taxes taken from your paycheck are matched 100% by a tax from your employer to the government. Since this is a voluntary program not all eligable would participate so the total impact to the FICA tax would be less than 14%.

Notice again that the 2% investment is on a voluntary basis. If you still believe that SS will be there when you retire by all means let the government continue to take the full FICA payment.

As for the insurance aspect of SS, even if every American paying FICA taxes participated, the remaining 86% of the taxes paid in would remain to pay out the “casualty” benefit.

Jack was correct that there has never been a 10 year period where the stock market did not produce a positive return on investment while there has never been a positivve return on investment of the so called SS Trust Fund.

Galveston, Brazoria and Matagorda Counties in Texas opted out of SS in the early 1980’s based on a provision of the original FICA Laws. Read the article at the link below to see how it has benefited citizens of the county.

http://www.prince.org/msg/105/59618

President Bush’s plan would do the same for all American tax payers (who choose to participate) on a smaller basis while maintaining the “insurance” benefit as well.

Posted by: Kirk at December 26, 2004 12:16 PM
Comment #39380

No, Kirk, I have to point out to you that the President’s proposal is talking ‘about’ 2%. The current payroll deduction is 7.65%. 2% is roughly 1/3. We don’t know what the president’s or Congress’s exact figure will be since a formal plan has not yet been announced. Assuming the figures I quoted are exact what is in the bill, the percentage comes out to 26%, or 1/4 of SS revenues currently being withheld.

But, when you do the compounding over a lifetime of work, at about 4.5% per annum (remember the President has said only conservative options for investment will be available), one quickly sees that 2% of payroll deductions will not secure a retirement for a low wage worker. Hence, the amount of about 1/3 of current deductions will likely be closer to the amount in the proposed bill.

As for employer matching, first the President has not indicated employers will match. Since, the President and the GOP are opening doors wider for companies and corporations to get out from under health insurance premiums as well as pension plans, it is a fairly safe bet that the privatized portion of SS deductions will not be matched, either immediately, or at some time down the road.

If you have evidence to the contrary, I would very much like to see it.

Kirk said: “Jack was correct that there has never been a 10 year period where the stock market did not produce a positive return on investment while there has never been a positivve return on investment of the so called SS Trust Fund.”

Sorry, you are wrong on this one. The SS surplus earns the treasury rate of interest, technically. Though it is a somewhat moot point since the Government is obligated to pay beyond SS funding just as it spends deficits when SS is producing surpluses.

It is pure propaganda to tout the elective nature of the President’s plan. The simple fact is, our government is broke, and spending in debt like a drunken sailor. Thus, if the President pulls 2 trillion dollars currently scheduled for funding current and near term retirees from the SS budget, instead of SS going broke in 2045 or later, it will begin going broke with the next decade.

That is the great sham! The President’s plan will bankrupt SS for those who choose to stay in the program as it is. Bush’s tax cuts combined with his record deficits will insure the nation cannot afford to sustain SS as an elective option. There is a limit to the amount of national debt our nation can sustain, and the President is pushing us to the limit as fast as he can. This is how one ends social program spending. The big lie, is that the President does all this in the name of saving the program.

That is why the President is trying to sell the American people a Brooklyn Bridge that can’t be sold if the truth is known.

Posted by: David R. Remer at December 26, 2004 03:21 PM
Comment #39396

David,

Either you do not understand the way the current FICA Taxes are paid or you are deliberately skewing the numbers to support your argument.

In addition to the amount currently held out of an employee’s wages listed as FICA on the pay stub, the employer pays an equal amount to the Federal Government.

FICA tax is a combination of a 6.2% social security tax and a 1.45% Medicare tax. The social security tax is assessed on wages up to $87,900; the Medicare tax is assessed on all wages. Employers and employees are both liable for FICA taxes at the rates given below.

Self-employed individuals pay a self-employment tax which is the equivalent of FICA tax. For 2004, they will pay a 12.4% OASDI tax (the old age, survivors, and disability insurance tax) on the first $87,900 of self-employment income. A 2.9% Medicare tax is imposed on all net self-employment income. Fifty percent of the self-employment tax paid is deductible.

The earnings limit for retirees under age 65 is $11,640. Social security benefits will be reduced $1 for every $2 of earnings above this limit. There is no earnings limit for individuals aged 65 and above.

So based on the above the actual impact of the voluntary transfer of 2% of the FICA Tax to privately managed accounts at the most impacts the overall FICA Tax collection 16.129% Once again that is if every worker who pays FICA Taxes opts to participate in the privately directed savings accounts. Every worker opting to participate is highly unlikely considering the rate at which 401K eligible workers currently participate.

Fidelity Investments last month reported that its annual “Building Futures” study shows the percentage of eligible workers participating in 401(k) plans dropped two points from 2002 to 2003 and now stands at 66%. About 25% of 401(k) plans reported that participants contributed an average of 4% of their salary or less, according to a recent study by Mercer Investment Consulting.

Your assertion that the so called “SS Trust Fund” earns treasury rates of return is technically correct but practically wrong. This money goes into the general fund with all other Tax payments. It is not invested in treasury bonds but instead used to fund government spending.

Even if the funds were invested in government bonds the rate of return over any given 10 year period would not have outperformed the stock market.

There is no propoganda to the “elective nature” of the president’s plans. He has stated time and again that the plan would be exactly that elective. If you want to stick with the current system that is what you do. If on the other hand you want to increase your potential monthly income in retirement you can direct 2% of the current 12.4% FICA Tax to a managed account.

Once again if all FICA Tax payers participated the remaining 83.871% of the current FICA Taxes collected would still be there to fund the old age and insurance portions of SS.

If for instance the rate of participation mirrored the 401K rate of 66% only 10.6% of current FICA Taxes would go into these accounts. Leaving 89.4% of the currently paid FICA Taxes to support the SS program.

Posted by: Kirk at December 27, 2004 01:03 AM
Comment #39440

Kirk, you are making some assumptions here that are not born out yet by any evidence. First you are assuming the President is going to keep the Employers on the hook for the matching portion going into PSA’s. There is no evidence of that yet.

Second, you have not addressed the President hastening the demise of the non-PSA SS program by bull dozing another 2 trillion dollar subtraction to the non-PSA SS program and increasing the national debt by the same amount. Until you address this huge shortfall, your argument makes no sense since it is not comprehensive enough to satisfy the choices of those who wish the PSA routhe AND those who don’t.

Finally, you have not addressed the insurance aspects of the current SS system and how they will fare under the President’s proposal. Current estimates are 2045 or thereabouts before the current system begins adding deficits to the federal budget. Such 2 trillion out and that date gets moved up considerably. If the economy grows well perhaps only by 15 years. If the economy does not grow well, the deficit spending date could be moved up to as early as 2015. That is bankrupting the system far sooner than if the system were left alone.

Posted by: David R. Remer at December 27, 2004 05:53 PM
Comment #39446

David,

I said nothing about employers matching the 2% going into the personal savings accounts. What I did say is that the numbers you were using to state that the 2% going into PSA would be a 30% impact on the FICA Taxes collected were incorrect.

You were making calculations based only on the employee portion of the FICA Tax, ignoring the additional 6.2% employer tax.

That being said, I seriously doubt that Congress or the President would remove the requirement for employers to pony up the 6.2% as required by law. Remember it is Congress who will write any SS reform laws not the president.

If redirecting 2% of workers individual FICA Tax equates to 2 Trillion dollars (by the way that is over the next 10 years) then the remaining FICA Tax going into the so called Trust Fund would equal 10.4 Trillion dollars. Again that 2 Trillion assumes that all eligable workers participate. This simply will not happen.

Using your listed estimates of 2045 before deficit spending in SS that gives us 40 years under the current system. If we allow the 2% PSA’s and again all workers participate, you will see an impact to current FICA Tax receipts of 16.129%. Looking at it logically take that 40 years and reduce it by 16.129% and you get a reduction of 6.5 years. Again that is assuming that all elegible workers participate.

Your assertion that the demise of SS under a reformed system allowing PSA is dependent on the growth of the economy is bogus. It will not matter if we are under the current system or one allowing PSA, both systems would be effected the same by the growth rate of the economy. That is because the FICA Tax receipts are dependant on the number of workers / employers paying into the system not which pot their money is divided into. The only difference would be that the number under the PSA system would be at most 16.129% lower. Again this is not dependant on the growth rate of the economy but on the number of workers who opt to participate.

Posted by: Kirk at December 27, 2004 08:42 PM
Comment #39742


And herein lies the essential rub between Bush’s plan to privatize up to 1/3 of the Social Security Program’s revenues and public expectations. Under the current system, if you paid in you were guaranteed Soc. Sec. checks would be there by the Federal Government. Under Bush’s plan, there are no guarantees to be obtained by playing the stock, bond, or treasury markets.

David, new article same flawed math you used in “Bush Selling S.S. Same as Iraq War.” One more time let me debunk the scare the old folks tactic.

FICA Tax is a combination of a 6.2% social security tax and a 1.45% Medicare tax. The social security tax is assessed on wages up to $87,900; the Medicare tax is assessed on all wages. Employers and employees are both liable for FICA Taxes at the rates given below.

Self-employed individuals pay a self-employment Tax which is the equivalent of FICA Tax. For 2004, they will pay a 12.4% OASDI Tax (the old age, survivors, and disability insurance Tax) on the first $87,900 of self-employment income. A 2.9% Medicare Tax is imposed on all net self-employment income. Fifty percent of the self-employment Tax paid is deductible.

The earnings limit for retirees under age 65 is $11,640. Social security benefits will be reduced $1 for every $2 of earnings above this limit. There is no earnings limit for individuals aged 65 and above.

So based on the above the actual impact of the voluntary transfer of 2% of the FICA Tax to privately managed accounts at the most impacts the overall FICA Tax collection 16.129% Once again that is if every worker who pays FICA Taxes opts to participate in the privately directed savings accounts. Every worker opting to participate is highly unlikely considering the rate at which 401K eligible workers currently participate.

Privatizing however will end the societies insurance policy with its citizens and familes who fall victim to misfortune like disability or loss of a bread winner.

Again, this is simply false. If you allow PSA’s and 100% of the eligible Taxpayers participate at most 16.129% of the current FICA Tax collections will be redirected into the PSA’s. That leaves 83.871% to fund the “insurance” portion of S.S.

But Jack, as I continue to repeat, the opportunity cost of privatizing SS is to end SS forcing everyone into the investment scheme, which offers no guarantees, and when your savings are gone, that’s it, go die! There is no insurance for disability or loss of a loved one, though, I suppose the Privatization legislation would allow for such events and permit the surviving spouse to withdraw the funds early, with the classic GOP penalty of 10% for early withdrawal.
Unless you can micro-manage your account full-time like some Warren Buffet-type investment guru, you’re better off with the current Social Security insurance system. From my pathetic attempts to manage my 401(k) and play the market, I know I am.

President Bush has repeatedly stated that the PSA’s will be on a purely VOLUNTARY basis. No one will be forced into PSA’s.


American Pundit, ff you think you are better off by sticking with the current plan then by all means please do so. But, do not deny those of us who see the current system that is heading for the cliff and want to use a whopping 2% of OUR money to try and salvage something for the years of FICA Tax payments.

Fidelity Investments last month reported that its annual “Building Futures” study shows the percentage of eligible workers participating in 401(k) plans dropped two points from 2002 to 2003 and now stands at 66%. About 25% of 401(k) plans reported that participants contributed an average of 4% of their salary or less, according to a recent study by Mercer Investment Consulting.

I would imagine that the rate of FICA Tax payers electing to participate in PSA’s would not be more than the rate of those taking advantage of 401K plans. That being said, the overall impact to the current FICA Tax receipt of the 2% PSA’s would be only 10.6%, leaving the remaining 89.4% to fund insurance and those of you not electing to participate in PSA’s.

Posted by: Kirk at December 31, 2004 02:23 PM
Comment #39759

Kirk, we are not talking about Medicare. Congress dealt with that this last year. 2% is approx. 1/3 of 6.2%. I do however, stand corrected on the income cap. It is 87,600 not 80,000.

And yes, you are correct, you did not address the 2% matching by the employer, which must be addressed, and will likely be addressed by members of the GOP who will propose that it be eliminated, if not in the first increment of the reform, certainly at a later increment.

You seem to want to pick at the numbers. That is fine. But, to say there is no need for concern for the public, is a statement that is not met with agreement by huge numbers of the population as is already attested to by the number of organizations already writing about the potential consequences of privatization.

Posted by: David R Remer at December 31, 2004 07:17 PM