posted on February 22, 2005 10:17:50 AM new
Kinsley's Proof That Social Security Privatization Won't Work
By Michael Kinsley
MY CONTENTION: Social Security privatization is not just unlikely to succeed, for various reasons that are subject to discussion. It is mathematically certain to fail. Discussion is pointless.
The usual case against privatization is that (1) millions of inexperienced investors may end up worse off, and (2) stocks don't necessarily do better than bonds over the long run, as proponents assume. But privatization won't work for a better reason: It can't possibly work, even in theory.
The logic is not very complicated:
1. To "work," privatization must generate more money for retirees than current arrangements. This bonus is supposed to be extra money in retirees' pockets and/or it is supposed to make up for a reduction in promised benefits, thus helping to close the looming revenue gap.
2. Where does this bonus come from? There are only two possibilities-- from greater economic growth or from other people.
3. Greater economic growth requires either more capital to invest or smarter investment of the same amount of capital. Privatization will not lead to either of these.
a) If nothing else in the federal budget changes, every dollar deflected from the federal treasury into private Social Security accounts must be replaced by a dollar that the government raises in private markets. So the total pool of capital available for private investment remains the same.
b) The only change in decision-making about capital investment is that the decisions about some fraction of the capital stock will be made by people with little or no financial experience. Maybe this will not be the disaster that some critics predict, but there is no reason to think that it will actually increase the overall return on capital.
4. If the economy doesn't produce more than it otherwise would, the Social Security privatization bonus must come from other investors, in the form of a lower return.
a) This is in fact the implicit assumption behind the notion of putting Social Security money into stocks, instead of government bonds, because stocks have a better long-term return. The bonus will come from those saps who sell the stocks and buy the bonds.
b) In other words, privatization means betting the nation's most important social program on a theory that cannot be true unless many people are convinced that it's false.
c) Even if the theory were true, initially, privatization would make it false. The money newly available for private investment would bid up the price of (and thus lower the return on) stocks, while the government would need to raise the interest on bonds in order to attract replacement money.
posted on February 22, 2005 11:07:51 AM new
If not given the chance to succeed, it never will. You demoRATS cry for change, then protest when an attempt at change is made,
A word to the wise ain't necessary, it's the stupid ones that need the advice."
- Bill Cosby
posted on February 22, 2005 11:54:08 AM newIf not given the chance to succeed, it never will. You demoRATS cry for change, then protest when an attempt at change is made,
When a Republican presents a plan with facts and not speculations, we will listen. When a Republican presents a plan that will actually fix the real problem, instead of spreading the problem around, we will listen.
When Republicans stop trying to turn social secuirty into their own personal retirement plan, we will listen.
Absolute faith has been shown, consistently, to breed intolerance. And intolerance, history teaches us, again and again, begets violence.
----------------------------------
Bush will fix Social Security just like he has fixed Osama Bin Laden and Iraq. Bush can't be trusted to run this country and you want to trust him with your retirement?
[ edited by logansdad on Feb 22, 2005 11:55 AM ]
posted on February 22, 2005 01:29:10 PM new
How funny. Now this Michael Kinsley, who writes op-ed articles for Slate and the LA Times shares "The Meathead's Proposition" - Rob Reiner's opinion on why SS privatization won't work.
Maybe we should be calling on ALL the actors and actresses from Hollywood and see what else they don't like about what this administration does...or doesn't do.
posted on February 22, 2005 01:41:21 PM new
Now they're going after the AARP
Quote:
Taking its cues from the success of last year's Swift boat veterans' campaign in the presidential race, a conservative lobbying organization has hired some of the same consultants to orchestrate attacks on one of President Bush's toughest opponents in the battle to overhaul Social Security.
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The lobbying group, USA Next, which has poured millions of dollars into Republican policy battles, now says it plans to spend as much as $10 million on commercials and other tactics assailing AARP, the powerhouse lobby opposing the private investment accounts at the center of Mr. Bush's plan.
"They are the boulder in the middle of the highway to personal savings accounts," said Charlie Jarvis, president of USA Next and former deputy under secretary of the interior in the Reagan and first Bush administrations. "We will be the dynamite that removes them."
Though it is not clear how much money USA Next has in hand for the campaign - Mr. Jarvis will not say, and the group, which claims 1.5 million members, does not have to disclose its donors - officials say that the group's annual budget was more than $28 million last year. The group, a membership organization with no age requirements for joining, has also spent millions in recent years vigorously supporting Bush proposals on tax cuts, energy and the Medicare prescription drug plan.
So far, the groups dueling over Social Security have been relatively tame, but the plans by USA Next foreshadow what could be a steep escalation in the war to sway public opinion and members of Congress in the days ahead.
posted on February 22, 2005 02:46:11 PM new
Once again your democRATs fail to acknowledge that the greatest democrat of all times foretold and advocated privatization of social security. I posted the article a short time ago, but apparently the attention span of you demos is such that you cannot remember it.
So, here it is again. Try to comprehend and retain the info this time.
And if you still think privatization of social security wont work, read on.
Social Security Alternative Already Working in Texas
By Jeff Johnson
CNSNews.com Senior Staff Writer
February 03, 2005
(CNSNews.com) - The personal retirement plan sketched out in President Bush's State of the Union Address has been universally derided by Democrats as an unworkable privatization of the retirement program.
"As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers, and the best way to reach that goal is through voluntary personal retirement accounts," Bush said during the address Wednesday night.
"Here is how the idea works: Right now, a set portion of the money you earn is taken out of your paycheck to pay for the Social Security benefits of today's retirees," Bush explained. "If you're a younger worker, I believe you should be able to set aside part of that money in your own retirement account, so you can build a nest egg for your own future."
President Bush warned the nation that 13 years from now -- in 2018 -- Social Security will start paying out more than it takes in. He also had a message for Americans 55 and older: "Do not let anyone mislead you;" he said: "For you, the Social Security system will not change in any way. For younger workers, the Social Security system has serious problems that will grow worse with time."
Senate Minority Leader Harry Reid (D-Nev.) said on Wednesday that all 44 Senate Democrats were united against the president's plan to reform Social Security. Without knowing any details, Reid told reporters, "President Bush should forget about privatizing Social Security," adding, "It will not happen."
But privatized Social Security has been a fact of life for municipal employees in Galveston County, Texas, for nearly a quarter century. Local government workers voted overwhelmingly in 1981 to opt-out of Social Security in favor of a locally controlled system that has since been widely described as a phenomenal success.
Under federal law at the time, municipal workers had the option of not participating in the Social Security program, replacing it with private retirement accounts. The private system is subject to regular payroll deductions and employer matches, essentially mirroring Social Security tax withholding and employer match provisions.
"There are a number of [county employees] that are strong advocates and say it's really a very, very good, solid, strong, financially and fiscally strong program that is for the benefit of county employees far in excess of what Social Security would be," Galveston County Legal Department Director Harvey Bazaman told Cybercast News Service.
Under Galveston's "Alternate Plan," the county withholds approximately six percent of each employee's salary for retirement. That money, along with a partial match by the county, is invested in personal accounts for each participating employee. The remaining county match covers the cost of disability and life insurance policies for employees, which also pay benefits much higher than those offered by Social Security.
While the employee-employer funding formulas are nearly identical under both Social Security and the Galveston Alternate Plan, the results are very different.
The U.S. Treasury Bonds purchased with money from the Social Security "trust fund" pay approximately two percent. But for the period from 1982 through 1997 the rate of return on funds invested in the Galveston plan has averaged 8.6 percent, a return more than 400 percent greater than Social Security.
Data from First Financial Benefits, which administers the Galveston Alternate Plan, shows that county workers earning slightly more than $17,000 a year can retire at age 65 with a monthly payment of $1,285 compared with $782 a month under Social Security.
Due to having more money withheld and the effects of compounding interest, higher income employees in Galveston see even larger benefits under the Alternate Plan. Workers earning $51,263 a year could retire at 65 with a monthly benefit of $3,846, while the same worker participating in Social Security would receive $1,540 each month.
Even the relatively low "guaranteed rate of return" in the Galveston plan roughly doubles the rate of return for Social Security. Funds already invested in annuities have a guaranteed yield of 3.75 percent, according to Bazaman. As for money being placed into private accounts today, Bazaman said the rate is slightly higher at 4.24 percent.
"They have never lost money. They have gone through double recessions in the 1980s, recessions in the 90s, and a tech boom and bust in the 1990s and into 2000," said Charles Jarvis, chairman and CEO of USA Next-United Seniors. "They've gone through another recession, an attack on this country and wars in Afghanistan and Iraq, yet they have steadily provided income for people."
The Galveston County, Texas Alternate Plan enacted in 1981 with the approval of 78 percent of local employees proved popular locally. By 1983, local government workers in three nearby municipalities -- Brazoria and Matagorda Counties, and Texas City -- also voted to quit Social Security in favor of private retirement plans.
Amid growing enthusiasm for an alternative to Social Security, the Democrat-controlled Congress voted in 1983 to end the provisions giving municipal workers the option to leave the federal system.
The Social Security Administration estimates that, nationwide, seven million public employees opted out of the federal retirement plan before Congress eliminated that choice. Those employees' combined annual incomes for 1999 totaled $129 billion. Based on that figure, and including estimated employer matching funds, those public employees invested approximately $17 billion in variations of private retirement accounts that year rather than in Social Security.
In testimony before the President's Commission on Social Security in 2001, former Galveston County Judge Ray Holbrook relayed the story of a county commissioner who died in office.
According to Holbrook, the commissioner's widow received a $255 death benefit from Social Security. But under the Galveston Alternate Plan, she also received a lump-sum survivor's benefit of $150,000 and was entitled to her late-husband's $125,000 reserve account.
Holbrook's anecdote underscores another aspect touted by backers of private accounts -- that the money paid into them is the private property of the employee. As a result, private retirement account funds are passed on to an employee's heirs upon his or her death, unlike unpaid Social Security benefits, which are forfeited to the government.
posted on February 22, 2005 11:11:12 PM new
linduh says,
""Maybe we should be calling on ALL the actors and actresses from Hollywood and see what else they don't like about what this administration does...or doesn't do.""
Why wouldn't we....they're Americans, too !
How about calling REPUBLICAN GOVERNOR (and "actor" Ahnold ?
Too bad REPUBLICAN and actor Ronald Reagan is dead...we could ask him, too.
posted on February 23, 2005 09:02:05 AM new
Reagan and 'Arnold' were elected to their positions/offices... Meathead hasn't been. He's just another liberal Hollywood activist spouting off his liberal opinions.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Four More Years....YES!!!
posted on February 23, 2005 09:32:36 AM new
OH LINDUH! NOW I really know why you hate Rob Reiner......HE helps CHILDREN!
And too, he's rich and successful and you aren't.
90210. Really – that’s the zip code for Castle Rock Entertainment, maker of big movies and TV shows. Visiting the Beverly Hills studio’s cofounder, Rob Reiner, I walked through his office door and immediately noticed a large framed poster of Annette Bening and Michael Douglas from The American President on the wall behind his desk.
The walls were lined with books and posters from all of Reiner’s movies, from When Harry Met Sally and Misery, to The Story of Us. What was missing was a picture of the show that first made Reiner famous in the ’70s – All in the Family – in which Reiner played Archie Bunker’s son-in-law with that endearing nickname ("Meathead".
The office was nice, but not ostentatious. It was big and comfortable, like Reiner himself. That day, he wore sneakers and dark sweats. Smart. Deliberate. Busy, successful and rich. He immediately struck me more as a director, issuing directives, than as a comedic actor.
By the time we sat down on one of the sofas and started talking, his movie life seemed almost incidental. It was clear that Reiner’s real passion of the last several years was represented not by the big posters on the wall, but by a simple box on the big coffee table. The box, the "Welcome Baby Kit," contained five videos and reading materials. Reiner wants to get the box, covered with illustrations of cute babies, into the hands of every new parent in the country. So far, 2 million tapes have been distributed through various organizations and are available through Reiner’s I Am Your Child Foundation. This is part of the instruction manual that people had always wished came with babies. In English and Spanish, the video series – featuring stars like Gloria Estefan, LeVar Burton and Jaime Lee Curtis – covers a range of topics from early brain development to tips on discipline and child care, plus reminders to be generous with praise and affection.
Last month, I Am Your Child received an early Christmas present from one Bill Gates. The $1 million gift from the Bill and Melinda Gates Foundation will widen Reiner's efforts to improve early-childhood health and learning.
Reiner’s foray into "baby talk" began nearly two decades ago on a therapist’s couch. He says his personal life was a real mess in the late ’70s and early ’80s. He spent lots of time in therapy. He won’t talk about the details, but he says, "It’s no great revelation that my early experiences as a child informed my relationship to others." He’s a child of television; son of Carl Reiner, the famous writer/director who pretty much invented TV sitcoms-turned-syndication-treasures. (Ever see reruns of the Dick Van Dyke Show?) We know that even lives of privilege can leave one wanting. So he’s made it his business to promote that for all kids.
We all have a few demons in our lives. Some we conquer, some get the best of us, some we just ignore. Reiner is lucky in that he’s wrestled with his demons and turned the tables on them, using what he learned in battle to benefit others in a big way. Like many high-profile Hollywood types, he’s brought his personal interests into the political limelight. Like few others, Reiner has been able to politicize his issue to the tune of $700 million to benefit the youngest residents of the state of California
posted on February 23, 2005 12:39:56 PM new Too bad, bear, I already posted the TRUTH in the OP
As perceived thru your lieing lips? And you are saying the system in Galveston Tx isn't working? Get your head out of the Minnesota snow.
What Social Security crisis?
In 1935, wealthy liberal do-gooder Franklin Delano Roosevelt, the most notorious violator of Constitutional federalism in the 20th Century, found a clause in that venerable document authorizing the central government to provide retirement benefits for all Americans. Apparently, 100 years earlier, that clause did not exist. So claimed another Democrat, Tennessee's Davy Crockett, who rose on the floor of Congress and chastised his colleagues for their proposal to appropriate benefits for the widow of a distinguished naval officer.
Crockett protested: "I will not go into an argument to prove that Congress has no power to appropriate this money as an act of charity. Every member upon this floor knows it. We have the right, as individuals, to give away as much of our own money as we please in charity; but as members of Congress we...have not the semblance of authority to appropriate it as a charity."
Crockett was echoing the words of our Constitution's author, James Madison, who said, most eloquently, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents...." Madison further noted, "If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions."
However, those words were long lost on FDR, who eviscerated federalism in his relentless endeavor to make the central government the agent of salvation for all ills. In June of 1934, he announced to Congress one lasting example of that endeavor -- his intent to create a nationalized Social Security program, ushering the United States into the ranks of Europe's welfare democracies. The nation was in the midst of the Great Depression, and FDR was funding his political dynasty by redistributing wealth. After all, as noted by George Bernard Shaw, "A government that robs Peter to pay Paul can always depend upon the support of Paul." FDR's plan, like all unbridled populist-entitlement programs, was popular with the democratic majority -- and helped ensure his re-election to office three times.
Social Security's first beneficiary was Ernest Ackerman of Cleveland, Ohio, who retired one day after the Social Security Act was signed into law 14 August 1935. A nickel was withheld from Ackerman's final paycheck, but he received his one-time lump-sum Social Security payment ... 17 cents.
That 12-cent return was the beginning of unforeseen things to come. Soon, congressional amendments added benefits for spouses, minor children and survivors, and by 1950 the program assured virtually universal coverage. 1972 saw the addition of the Supplemental Security Income (SSI) program (AKA "welfare", and by 1975 the addition of annual Cost of Living Adjustments (COLAs) assured the SS juggernaut's exponential growth. In 1977, Medicare became an independent entitlement, spun off from the Social Security system. Today, despite its humble beginnings, the Social Security system confronts our young people with the grim prospect of paying for unfunded promises made to past generations.
Notwithstanding the "welfare reform" acts of the 1990s, when Social Security turned 65, SSI benefits covered 6,688,489 Americans at a cost of $32,165,856,000, while Social Security itself disbursed some $431,949,000,000 to 45,877,506 beneficiaries. However, those staggering numbers are mere chump change compared to what lies ahead.
President George W. Bush's modest proposal to reform Social Security appears to be a good start at diverting this behemoth from its collision course with insolvency. Predictably, though, the latest retort from the Left is, "What insolvency? What crisis?" Indeed, these do-nothing Demos claim the Fed's IOUs in Social Security's so-called "trust fund," combined with minor tweaks to the system, will keep it solvent for generations.
Well, not exactly. Unless Democrats plan to "tweak" the system by increasing both the retirement age and the current 12.4% SS tax, adding more government debt and reducing benefits, Social Security will not have the revenues to refund current IOUs and meet the SS revenue shortfall. IOUs? For generations, every dime forcibly taken from worker paychecks -- ostensibly to finance the non-existent SS "trust fund" -- has been taken from that fund and applied to other massive entitlement programs.
Social Security outlays now consume 4.28 percent of GDP but will exceed 6 percent in 20 years. There are two reasons for this growth: demographics and benefits increases.
There are 48 million Social Security beneficiaries today, but in 2030 there will be 84 million. In 1950, there were 16 SS taxpayers for every recipient. Now there are only 3.3 taxpayers for every recipient, and that will be reduced 30 percent by 2030. Additionally, when SSI was formed, life-expectancy was 61 years, which is to say, most Americans did not make it to 65. Now, however, average life expectancy is 77.
The second reason for the SSI balloon is that benefits have not been indexed to inflation. Future retirees are being guaranteed retirement increases that grow substantially faster than inflation.
Social Security, as currently managed, will incur an estimated unfunded liability of 27 trillion 2003 dollars over the next 75 years. To offset this jaw-slackening shortfall, President Bush has proposed the incremental privatization of some SSI taxes by allowing individuals under age 55 to invest in personal retirement accounts (PRAs). Additionally, Congress must resolve to index benefits to inflation.
The President's three-year PRA opt-in for SSI taxpayers born after 1950 would allow them to put up to four percent of their wages in their PRAs. At retirement, those invested in PRAs would be guaranteed to receive at least what their payout would be if they only had SSI income. But those beneficiaries whose PRAs have a higher return can share in that return, which reduces the burden on the SSI fund, and the principal balance is fully inheritable.
The PRA plan would "cost" about $664 billion in "lost" SSI revenue over the next ten years. Of course, this lost SSI revenue is merely revenue that's been moved to PRAs, and thus isn't available to "borrow" from the SSI trust fund for other entitlement programs -- and that's why the Demos are hopping mad. Still, all Americans need to understand that the PRA plan does not fully address the revenue shortfall crisis looming on the horizon. That crisis can be resolved only when Congress commits to bringing SSI benefits in line with SSI revenues. (For a comprehensive review of Social Security and the Bush Administration's proposal, see http://FederalistPatriot.US/news/ssi.asp)
posted on February 23, 2005 02:01:25 PM new
A Republican sees through the Bush plan.
By Kay Henderson | February 23, 2005
NEWTON, Iowa (Reuters) - Iowans gathered in a small basement room at the Jasper County Courthouse on Wednesday peppered Sen. Charles Grassley with questions about President Bush's Social Security plan, seeking reassurance that the changes will help the retirement system survive.
"How is the privatization of Social Security going to cure the problem?" Donna McCoy of Newton asked Grassley, the Republican who leads the Senate Finance Committee and will be among those crafting legislation.
"It isn't going to, is the short answer, but since you raise this and it's such a significant issue, bear with me," Grassley said. He launched into a three-minute tour of Bush's proposal, the centerpiece of which is to let younger workers divert part of their Social Security payroll taxes to private investment accounts.
But, responded McCoy, "If it's not going to save Social Security, why are we doing it?"
These are among the complex questions Grassley has been fielding this week during his annual county-level visits with constituents, 20 stops across the state to talk about Social Security and other issues. In Newton about one in every four questions went to Social Security.
To McCoy, the 71-year-old four-term Iowa senator said: "It's kind of a moral issue of whether Grandpa Grassley ... today drawing Social Security as I do, should I just be worried about Grandpa Grassley or should I be worried about (granddaughter) Dana Grassley ... When she retires, will she have Social Security?"
He held up charts, graphs and a newspaper clipping to respond to questions about the Social Security system and its predicted demise if changes aren't made.
Bush bases his call for a broad overhaul of the 70-year-old Social Security program on his contention it is headed into a financial crisis, a characterization Democrats, and many in his own Republican Party, say exaggerates the problem.
Grassley told the crowd that raising the retirement age and reducing benefits for wealthier Americans may be part of the fix. Bush has been adamant only against raising the payroll tax rate above the current 12.4 percent shared equally by employers and workers.
"It's a mathematical problem of what do you do to fill in this red area here," Grassley said pointing at a chart he held in his hand. But he cautioned that nothing will be done until Bush convinces the country there's a crisis.
Grassley's staff said he "clearly sees a problem" with the retirement system's future, but does not use the term "crisis."
"He's got to be like a professor Bush, having a national seminar with the American people, discussing this problem," Grassley said. "Then, let's suppose he's convinced you and other people that there's a problem and you tell me there's a problem -- at that point I can write a bill."
Afterward, McCoy said she is afraid of the move to let younger workers pay less into the Social Security system.
"I do not think it's a solution. I think it's very, very wrong," McCoy said. "It could hurt Social Security in the end and hurt our economy."
But for Larry Ballard of Newton, who is getting Social Security disability benefits and was the first to question Grassley, the senator provided "real good" answers.
"I wanted to know if Social Security will be continuing and wanted to know if it will be in good hands like it was years ago," Ballard said.
Absolute faith has been shown, consistently, to breed intolerance. And intolerance, history teaches us, again and again, begets violence.
---------------------------------- Bush will fix Social Security just like he has fixed Osama Bin Laden and Iraq. Bush can't be trusted to run this country and you want to trust him with your retirement?
posted on February 23, 2005 02:03:37 PM newAnd you are saying the system in Galveston Tx isn't working?
I posted a link last week about the plans in Texas. It worked in some cases, mainly if you were single. If you were married SS did better than the individual account idea.
Absolute faith has been shown, consistently, to breed intolerance. And intolerance, history teaches us, again and again, begets violence.
---------------------------------- Bush will fix Social Security just like he has fixed Osama Bin Laden and Iraq. Bush can't be trusted to run this country and you want to trust him with your retirement?
Ahnold ?