Social Security Alternative

[Sava]

I'm against the total privatization of Social Security because it puts peoples' possible retirement money in the hands of the stock market and corporate America. Ask the folks who lost their life savings in supposed 'retirement' 401ks in the latest rash of Enrons. I have an alternative idea. Hopefully not too many trolls will comment. I'd like to hear intelligent arguments for or against this idea.

The US government (to my knowledge) has a federal bank which issues loans to big business. Why not create a program where people get mortgages from the federal government at say between 6-8%. Half of the total interest paid goes into a pension/nest egg fund that people can use after they retire. The other half can be used to pay for the program, etc. This would be a productive use of the enormous sums of money that Americans pay in interest to banks. Instead of this money going into the bank's pocket, it provides a stable alternative to Social Security, and it makes government work for the people instead of big business.

I'm not an economist or anything, and I am not about to work up a huge plan with specifics, but what do you guys think of this idea? People would not be paying the 10-12% income tax for Social Security, and would still have a very stable means of providing for their retirement without putting any trust into the crapshoot known as the stock market.

I know that this will only help out people who buy homes, but its a great start, I think.

[dudemanjack]

Re: Social Security Alternative

Originally posted by Sava
People would not be paying the 10-12% income tax for Social Security, and would still have a very stable means of providing for their retirement without putting any trust into the crapshoot known as the stock market.

The stock market isn't a crapshoot when investing longterm. The average return is 10% per year. You just don't "put all your eggs in one basket", and keep a well diversified portfolio...you know all the things you here on TV

Personally, I wish I could just pay no social security and just be excluded from getting the payments (at least as social security stands now). I know when I start my career that I would like that 10-12% of my salary to save for my retirement.

[JohnT]

Well, for starters home owners already get loans in the 6-8% range, so there's no competitive advantage there.

Secondly, the amount raised would be nowhere near enough to cover even current social security liabilities which means you will start out with a huge shortfall.

(DISCLAIMER: It is late and I'm not into crunching numbers right now, so please take the following calculations with a grain of salt. If they are flawed, accept my humblest apologies - but I do think I'm on the right track)

For example, lets say a group of people have $1,000,000 in aggregate income (keeping the math simple here). Currently, $120,000 would go into Social Security (12% of $1 million). Now the common rule of thumb is that you don't want to buy a house that is more than 3X your salary, so we now have $3,000,000 in mortgages outstanding (we're assuming all the mortgages were taken out yesterday). At a 6% mortgage rate, this means that an average of $90,000 a year would go into Social Security, $30,000 less than the current figure. At 8%, you'd get $120,000 a year - exactly the current amount. Once again, there is no real advantage.

The big problem is that you essentially turn the prime rate into a tax rate, and the unelected Federal Reserve controls the prime rate - if they decide the gov't needs more money, just raise interest rates! BAD IDEA!!!!! Imagine if they raise the rates to 15% - that means that the above group will be paying $450,000 a year in mortgage taxes, with $225k going to SSA. You think that's a good idea? Who here wants to bet that all sorts of new restrictions will appear on the people's right to refinance their mortgage at lower rates?

Thirdly, why is the interest going to banks a "bad" thing? Oh yeah, because your a communist with the comfort of knowing that your family's wealth will prevent you from having to bear the brunt of your bad ideas.

[Evil Knevil]

Handing over control of morgages, and morgage rates to the Government is defacto a bad idea. The bureaucracy would be immense: private banks would be crowded out --since effectively the interest rate would only be half of whats charged, and money slucing around the banks would instead be in pension funds or government coffers. Also not everybody gets a morgage!

[Bosh]

No matter what you do with social security money you've got to deal with the basic fact that currently pretty much all of that money goes directly to people who've already retired, so to free up that money in order to do other things with it, you'll have to:

1. Slash current benefits.
2. Raise payroll taxes.
3. Raise other taxes
4. Borrow hundreds of billions of dollars

none of which are likely to happen on any large scale, we're caught in the ponzi scheme...

[Evil Knevil]

In the short term, raising taxes is the only solution to stave off bankruptcy. However the level of taxes/borrowing required to support the future mass of pensioners will be absolutely enormous, probably enough to kill the goose that lays the golden eggs. A package of reforms would have to happen, such as:

1/ Getting rid of the official retirement age, so older employees can work longer if they want. Tied with anti-age discrimination tactics.

2/ Close the state pensions system to new people.

3/ Raising taxes to support people already in the pension scheme.

4/ Private pension reform, including tax breaks, anti-trust and business practise reform.

5/ Maintaining poverty benefits into old age, so that poor people who can't afford a private pension can still survive (although it would be better to encourage them to have a pension).

Other than that, is there anything that can be done? We've built this mountain of shit, and theres no way over it, only pills to ease the pain

[Dis]

bah! Enron is a dumb argument if you ask me

Don't put all your eggs in one basket.

problem solved. Sure you may lose a little bit. But not as much as I stand to lose when social security kicks the bucket and I get nothing for all the money I put in.

[Dis]

P.S. I just wish so badly that I could get out of paying social security

[Spiffor]

I'm extremely proud paying social security, even if it represents about 40% of my wages in France.
(I should add this in the unorthodox thread )

[Dis]

I don't want to screw the current generation of old people. I'm not that insensitive. It just would be nice to have more of a say in how I retire. What if I decide to committ suicide at age 65? Men in my family never reach that age anyways. Frustrating.

[Berzerker]

I've got a better idea, end Social(ist) Security and leave our retirements up to us. The people on it now will be paid out of the general revenue and the system will end completely when they are paid off. I can make more with CD's than SS.

[Asher]

I agree with Berzerker.

If you've got a problem with social security, then you should be advocating people deal with it themselves.

You don't save for retirement, tough ****. Such is life when you're a moron.

That's what the smart people are doing now anyway, seeing as social security is a joke.

[Dis]

yes but we are still forced to pay. So saving on the side seems a bit silly. My 401 K isn't for retirement. It's for pre-retirement . Like I said men in my familiy die from heart attacks early. I plan on retiring very early.

[Spiffor]

You seem to forget many, many people can't afford savings. Actually, a good part of the population indebt themselves to pay previous debts. That's what you get when you don't earn enough.
Social security is clearly not for the upper / middle class, it's for the working classmen to be able to survive after 65.

[Berzerker]

Spiffor -

You seem to forget many, many people can't afford savings.

Not with government seizing %15 off the top for SS, and certainly not with government taking so much of what we earn for other wasteful programs. The leftist agenda has created such a tax burden for the average Joe, his wife has to work just to pay his taxes. So then they need day care and there are the leftists with another government program to "help" with that.

Social security is clearly not for the upper / middle class, it's for the working classmen to be able to survive after 65.

And if they could keep the %15 and put however much they want into CD's and other investments letting that money keep rolling over, they'd have more than if it was "saved" in SS.

Dissident -

Like I said men in my familiy die from heart attacks early. I plan on retiring very early.

Well, there's the dirty not-so secret to SS, when it was instituted most earners didn't live beyong 65 so the politicians got to keep their money to but votes in other ways. And black males have a ~65 year life expectancy now, so many of them won't ever collect either.