Inventing a Crisis

[Kidlicious]

Originally posted by DanS


All that would happen is that money would be taken from government bonds and put into assets paying slightly higher rates. The rate spread of corporate bonds and stocks over government bonds would decrease to correct for these cash movements. The government would have to pay more for use of people's money, but the impact on rates paid by the private sector would be minimal.

You're talking about govt bonds in the hands of the govt. I'm suprised that you don't understand that those aren't really assets. If privatization goes through the govt will have to borrow money that it wasn't borrowing before and the deficit will increase.

[DanS]

Yes, the deficit would increase, but the overall system would be more financially sound. What we have now is a deficit figure that doesn't reflect the government's true obligations.

[Kidlicious]

Originally posted by DanS
The difference in benefits versus contributions would flow through to the deficit. The government would borrow from the market at x% interest rate and the private accounts would accrue interest at x+3% interest rate. The system would be better off financially, even if the federal deficit looks ugly in the short term.

Indeed, you could probably convince the people who are getting the x+3% interest rate to defray some of the transition costs from the extra 3 percentage points that are accruing to them. I would take that proposition in a heartbeat.

I think there is going to be crowding out though. Even though the overall savings is going to increase, the demand is going to increase more. That's because we have to borrow everything to pay for this.

[floppy_lobster]

Social Security is pay as you go. Its always been like that...Pay as you go. My money that I pay into SSI goes right to the old folks. Not to some box with my name on it.

The problem in 10 years: More old Folks then young folks
This will effectively bankrupt the System

The Solution(s)
1) Old Folks wont get paid as much
2)Young folks get taxed more
3) allow younger workers to send a % into a IRA or 401k.

[Japher]

duh

[floppy_lobster]

So it will break soon. I dont want to pay in thousands of dollars and I not see a dime back.

Ditch the System now, Refund the money.

Keep the Disability aspect

[chequita guevara]

No matter what system we use, we still have the same problem, not enough workers to support a senior heavy population. There's no good way to make it work, but there are definately ways to make it fail spectacularly. Privatising SS is one of those ways.

[floppy_lobster]

No. It will fail no matter what, thats what there not telling you. Its simple math.

The whole point of Privitazation is to start phasing the doughy, Bloated old method of paying as you go. Start diverting funds away from a failing system.

Its the best and only solution Ive seen thusfar.

Besides more of the same procrastination.

[chequita guevara]

Privitization only shifts the problem onto individuals. You still have the same demgraphic problem, the same falling productivity per capita that causes the SS crisis. Basically, we're setting sections of the senior population adrift on their own ice flow.

[Lawrence of Arabia]

[Tingkai]

Originally posted by DanS
All that would happen is that money would be taken from government bonds and put into assets paying slightly higher rates. The rate spread of corporate bonds and stocks over government bonds would decrease to correct for these cash movements. The government would have to pay more for use of people's money, but the impact on rates paid by the private sector would be minimal.

No. There would be a significant increase in market rates and that would severely damage the US economy.

You assume that the money that individuals invest privately would automatically go back to the government. That's not the case. A large chunk of it would be invested in equity markets by mutual funds (because most investors will not put 100% into slow growth, balanced investment funds).

The government will have to borrow money from the international community and the international community is already signalling a reluctance to finance significantly more US gov't debt. And any money borrowed would put further downward pressure on the dollar.

The increase in interest rates will be felt market wide. There is nothing that will soften the impact.

The result will be an economic downturn.

Originally posted by DanS
What Bush plan have you looked at that proposes a wide range of investment choices?

From the White House:
"The President’s proposal would ensure that workers who have participated in 401(k) plans for three years are given the freedom to choose where to invest their retirement savings. The President has also proposed that choice be a feature of Social Security itself , allowing individuals to voluntarily invest a portion of their Social Security taxes in personal retirement accounts."

http://www.whitehouse.gov/news/releases/2002/02/20020228-1.html

It's a recipe for economic disaster.

[Tingkai]

Originally posted by booger
Social Security is pay as you go. Its always been like that...Pay as you go. My money that I pay into SSI goes right to the old folks. Not to some box with my name on it.

The problem in 10 years: More old Folks then young folks
This will effectively bankrupt the System

Not only


But also completely wrong.

In 10 years, the Y-gen (a group that is larger than the baby boomers) will be working so there will be more young working folks than old folks.

[Tingkai]

If you click the link below, you'll see the projection for 2025.

http://www.census.gov/population/www/projections/np_p3.gif

Notice the bulge of people between the ages of 30 - 44. These are the Y-gen (people who are not 10 to 24 years old.

Crisis? What crisis?

[Ogie Oglethorpe]

Originally posted by chegitz guevara
Privitization only shifts the problem onto individuals. You still have the same demgraphic problem, the same falling productivity per capita that causes the SS crisis. Basically, we're setting sections of the senior population adrift on their own ice flow.

Yay! Eskimos! Damn elderly with no teeth of their own. Can't even soften the seal skins.

[DanS]

You assume that the money that individuals invest privately would automatically go back to the government.

Where did I assume that?

The government will have to borrow money from the international community and the international community is already signalling a reluctance to finance significantly more US gov't debt. And any money borrowed would put further downward pressure on the dollar.

Yes, the government will have to borrow more money. And the interest rates for the government will go up. Isn't that what I just got done saying? (You appear to be doing your level best to misconstrue what I am writing.) However, extra money will be going into the private sector, partially offsetting this increase for the private sector (i.e., the spreads will decrease).

Further, if we continue down the path we're on, the market will start pricing in government debt rate rises to account for the government's obligations that are not being recognized but that are real nonetheless.

There is nothing that will soften the impact.

Sure there is. It's as I described.

The result will be an economic downturn.

A more stable and realistic system will better for the economy in the long run.