Social Security yet again!

[PLATO]

Originally posted by chegitz guevara


That's not true. At best, as el freako has showed, the actual return on investment from the stock market has been below 5%. You're better off investing in your home as a retirement plan than putting it in the market. Consider, though, that there will eventually be a housing market crash, since you're going to have more supply than demand as all these aging boomers want to sell off their homes and move to Boca Raton. Those of us in the Sun Belt will be fine, though.

You are indeed correct. A little research shows the long term return to be just a touch below 5%. el freako has it right.

WRT housing market crashes, that has been predicted for years. In some areas it is already happening, while in others values are skyrocketing. New York's market, for example, remains pretty strong...Ohio's is a bit flat.

Oh...save me a condo in Boca btw.

[Kidlicious]

Originally posted by GePap
Millions of Americans own US Treasuries- are you claiming they have nothing, since all they own is government debt?

I am still at a loss of why anyone ever claims that US Treasuries don't matter, that they are ephemeral- is the Bond market just a fantasy???? When did the US start issuing junk bonds?

There's no value in owning your own debt, but to say that the govt will go bankrupt is really is not reasonable. The US can pay it's debt and fund much more than it currently does. The US will not go bankrupt unless things change very dramatically.

[Kidlicious]

The Social Security Trust Fund isn't an asset account. It's used for information purposes. Using the surplus of the fund to pay for other costs makes the deficit correct. Without it the deficit would be larger, which isn't correct.

[JohnT]

Correct. It is a legal fiction, not an actual trust account.

[DanS]

You are indeed correct. A little research shows the long term return to be just a touch below 5%. el freako has it right.

5% is the long-term real appreciation per annum. Add dividends (~ 1-1.5% per annum) and inflation (~ 2-3%) and that's the number to compare against other investments.

[Rufus T. Firefly]

Originally posted by GePap


SS was never a "last resort" as you mention.

States in Europe and Japan do have public pensions, AND higher rates of savings than the US. Our miniscule savings rate has nothing to do with SS- without social security, many elderly, (heck, a good portion) would be on welfare programs-that Americans don't save is a cultural issue- we encourage spending and consuming, not saving. Fast, cheap, easy credit has far more to do with our palrty savings rate than Social Security.

The article still isn't on-line, but I look forward to reading it when it is.

And by last resort, I mean as retirement income for those those who had none. Perhaps I am wrong -- I don't know the history here -- but was there really no means testing or income ceiling attached to the original social security? That doesn't seem very Rooseveltian, but perhaps that's how it was.

I would disagree with you about the savings rate, though. The fact that we, as an aggragate population, no longer save any money is a huge change not only from the 1930s but from core American values that informed the national character from the very beginning. However farsighted they were (and it sounds like they were), I can't imagine that the architects of social security ever envisioned a citizenry as profligate as ours (remember, for example, that consumer credit is a largely postwar phenomenon, and easy credit -- qualifying for a Visa card just because you've graduated from college, for example -- dates only from the mid-1980s).

But we're on the same side here, GePap. My only objection, really, is that defenders of social security too often sound like Grandpa Simpson ("I'm old -- gimme gimme gimme") and need instead to actually engage the policy debate. Obviously, that doesn't apply to you.

[GePap]

Here is the article:

http://www.nytimes.com/2005/01/16/magazine/16SOCIAL.html?oref=login

It takes longin, but its free. I won't try to put the whole thing up, since it is several posts long. If you care to read it, sign up, its free and you never get e-mails.

Just a few bits worth reading:

In 1938, the Social Security Act was only three years old, but its future was already very much in doubt. Conservatives claimed it would bankrupt the nation, and independent critics argued that the way it was financed amounted to ''financial hocus-pocus,'' as one editorial in The New York Times put it. President Franklin D. Roosevelt defended the program, said by a cabinet member to be his favorite, with some of his trademark oratory. ''Because it has become increasingly difficult for individuals to build their own security,'' the president told a national radio audience, ''government must now step in and help them lay the foundation stones.''

Currently, Social Security is running a hefty surplus; the payroll tax brings in more dollars than what goes out in benefits. By law, Social Security invests that surplus in Treasury securities, which it deposits into a reserve known as a trust fund, which now holds more than one and a half trillion dollars. But by 2018, as baby boomers retire en masse, the system will go into deficit. At that point, in order to pay benefits, it will begin to draw on the assets in the trust fund.

The debate over Social Security's solvency is really two debates. The first is over how long the trust fund will last. The law requires the Social Security Administration to estimate its financial condition for 75 years into the future, and the agency's conclusions depend on the assumptions it makes about what America will look like decades hence -- how much people will earn, how large their families will be, how long they will live.

For JohnT:

IS THE TRUST FUND TRUSTWORTHY?

The second debate concerning solvency is over whether the securities in the trust fund will be honored or whether, in Moore's pointed imagery, the fund will resemble a bank ''after it's been robbed by Bonnie and Clyde.'' This seems an odd preoccupation. Social Security does not own junk bonds or third-world debt; it invests in U.S. Treasuries, considered the safest investment on the planet. Since 1970 there have been 11 years in which Social Security has operated at a deficit; each time, it redeemed bonds from the trust fund without a fuss. Goss, the agency's actuary, says he has no doubt it will be able to do so again. ''Absolutely,'' he said when asked if the trust-fund bonds are sound.

This isn't what some conservatives have said. Paul O'Neill, the former treasury secretary, went so far as to say that Social Security has no assets. In anti-Social Security literature, the ''no assets'' contention isn't even debated; it's treated as gospel. According to Michael Tanner, head of the Cato Institute Project on Social Security Choice, the agency's pauperism has turned America's seniors into ''supplicants'': after working and paying taxes their entire lives, ''they earn the privilege of going hat in hand to the government and hoping that politicians decide to give them some money for retirement.'' The implication is that the money isn't there: graybeards will have to beg for it.

Cato, a libertarian policy center founded in the late 1970's, has been arguing for 25 years that Social Security is on the verge of crisis. In a recent position paper, Tanner wrote that Social Security faces a horrendous unfinanced liability of $26 trillion over 75 years. In a footnote, he cited the 2003 trustees' annual report. Actually, the trustees' intermediate projection is for a deficit, over 75 years, of $3.7 trillion. Though that is a lot of money, it could be covered by an immediate surcharge to the payroll tax of less than two percentage points, or by various combinations of tax hikes and benefit cuts, each of them quite manageable. But $26 trillion is too big a hole to fix. When I asked Tanner about the footnote, he admitted that the trustees didn't actually say $26 trillion; Tanner derived the figure by counting the cash-flow deficits that the trustees project from 2019 on out. In other words, he ignores the next 15 years or so, during which time Social Security will be running a surplus. And he assumes that the assets in the trust fund, which should be accruing interest into the 2040's, won't exist, either. Tanner counts only the bad years and only the bad numbers. Another doomsayer, former Republican Representative John Kasich, pegged the Social Security deficit at $120 trillion in a recent op-ed -- some 32 times the agency's figure. (Kasich toted up annual deficits in nominal -- not inflation-adjusted -- dollars for every year through 2080, by which time a hamburger could cost $40.)

Such hyperbolic claims aside, there is a serious issue at the heart of what worries critics. It isn't that the trust fund is broken; it's that the existence of the fund is seducing the government to spend more than it otherwise would, thus brooking larger deficits in the future. Since Social Security lends its surplus to the Treasury (that's what it means to be investing in Treasuries), it is parking its surplus cash with the government. And just as lending money to a child outside a candy store may impose an impossible temptation, so the government may feel tempted while it holds onto Social Security's purse.

The fear that the trust fund would represent a ''perpetual invitation'' to Congress has bedeviled Social Security since its inception. Economists of the 1930's knew that every pension plan starts with more workers contributing into the system than there are retirees. But down the road, as those workers retire, obligations mount. Therefore, they recognized, any system that builds an adequate reserve for the future must collect more than it needs in the early years. And though social scientists of the 30's could not anticipate the war or the baby boom that would follow it, they knew that America's population was going to age.

In 1934, when Franklin Roosevelt formed the Committee on Economic Security to design what was in effect the first federal safety net, the committee hired three actuaries to stargaze into the future. The actuaries predicted that the proportion of Americans over 65 -- then only 5.4 percent -- would rise to 12.65 percent in 1990, meaning that retiree costs would soar. They were just a tad high; the actual figure would be 12.49 percent.

The committee was sharply divided on how to prepare for this demographic onslaught. Harry Hopkins, who oversaw the New Deal's relief program, thought the U.S. should simply pay retirement benefits from general funds; the more fiscally minded Henry Morgenthau Jr., the treasury secretary, wanted a self-financed system. F.D.R. sided with Morgenthau; above all, he said the system should be simple -''nothing elaborate or alarming about it.''

But the opposition wouldn't die. The issue that sparked the loudest protest was one that still burns today: the trust fund. Deductions from pay envelopes began in 1937, but benefits weren't scheduled to start until 1942, and there was a great deal of mistrust about where the money was going. Government actuaries sheepishly explained that Social Security was building a reserve eventually expected to reach $47 billion. This was an awesome sum -- eight times the total then in circulation. Alfred Landon, the Republican who ran against Roosevelt in 1936, called it ''a cruel hoax'' on the American people. His platform, sounding uncannily that like that of Republicans today, stated, ''The so-called reserve fund . . . is no reserve at all, because the fund will contain nothing but the government's promise to pay.'' Arthur Altmeyer, head of the Social Security board, came under heavy fire at a Congressional hearing. Looking for a way to safeguard the reserve, he made an intriguing suggestion: why not let the government invest in sound private securities, and thus insulate the surplus from Congress's eager hands? As Altmeyer recounted in his memoir, Arthur Vandenberg, a Republican senator from Michigan, threw up his hands and snickered, ''That would be socialism!''

To quell the furor, Roosevelt turned to that standby device for embattled politicians -- an advisory council. The council arrived at an expedient solution, though one with troubling longer-term implications. It suggested increasing benefits for the first generation of retirees, even though that group had paid little in payroll taxes. An amendment in 1939 raised their benefits and also created new classes of beneficiaries -- wives, widows and survivors. This was a departure from the principle that all workers would be treated equally (couples would get more than single workers) and added an element of ''need'' -- a point that would rankle conservatives and later fuel the privatization movement. But in the political climate of 1939, it had the advantage of soaking up surplus taxes and greatly reducing the rate at which reserves would accumulate in the trust fund. F.D.R., anxious to have the controversy settled, went along, even though the changes paved the way for the eventual deficits he had feared.

The crunch came, as actuaries had predicted, in the late 1970's. Part of the problem they had not foreseen; Social Security benefits were skyrocketing because of inflation. In the 70's, Congress decided to index retirees' benefits to the cost of living. The timing was awful. Not only did inflation soar, but incomes -- the basis of payroll contributions -- stagnated. Critics like those at the newly formed Cato Institute warned of disaster. A former Nixon cabinet member, Peter Peterson, began to attract attention by arguing that any pay-as-you-go system (in which one generation supports another, as today) was inherently unstable, and advocated deep cuts in the rate at which benefits increased. The criticism had an ideological as well as an economic edge. In a pre-financed system -- in which, for instance, each worker invests for his own later retirement -- society never faces a liability. But individuals may come up short (if their investments fare badly) and live out poorer retirements. President Carter, responding to the darkening outlook, became, in 1977, the first president to legislate a belt-tightening.

Carter's efforts, however, didn't suffice. The trouble was that Social Security's actuaries had been way too optimistic. The actuaries had assumed that from 1978 to 1982 inflation would total 28 percent; the actual figure would be 60 percent. And they had predicted that wages would grow by 13 percent after inflation, whereas, in fact, real wages didn't rise at all; they declined. Social Security's experts were hardly the only people surprised by the dreadful economy, which was buffeted by skyrocketing oil prices, Middle East turmoil and a slumping stock market. Regardless, in 1981, Social Security experts announced that the trust fund would run dry in a year or two. That left the problem up to a new president, Ronald Reagan.

Once Reagan was in the Oval Office, he allowed his budget director, David Stockman, to handle the crisis. Stockman, who was waging a war on government spending, tried to exploit the moment to curtail Social Security sharply. It was Stockman's idea to cut benefits to early retirees by one-third. Without those cuts, he warned, the U.S. could suffer ''the most devastating bankruptcy in history.'' There were two weaknesses in the Stockman approach. First, he exaggerated. The deficit looming in 1983 was only temporary. (Since the birthrate dropped during the Depression, the number of seniors coming of age in the 1990's would decline, providing the agency with a respite.) Second, Stockman was politically naive. By proposing cuts for people on the verge of retirement, he triggered vehement protests. Members of the Republican-controlled Senate showed their instinct for self-preservation by voting 96-0 for a resolution intended to distance themselves from Stockman. James Baker, Reagan's chief of staff, urged the White House to do likewise. So Reagan, like F.D.R., bounced the problem to a commission, this time led by a well-known economic consultant, Alan Greenspan.

The 15-member commission got nowhere until December 1982. Then, with default only months away, an unofficial subgroup began to meet in secret. Robert Ball, a former Social Security commissioner, and Senator Daniel Patrick Moynihan negotiated for the Democrats opposite Baker for the White House.

In the end, they compromised on a combination of benefit cuts and tax hikes. The payroll tax, then 10.16 percent, was already scheduled to rise, but the negotiators sped up the implementation of the increase. (Today the rate is 12.4 percent.) Moreover, Congress agreed to hike the retirement age from 65 to 67. This change, which is being phased in very slowly (the retirement age is now 65 and 6 months) had the same effect as cutting benefits. Greenspan and company now calculated that Social Security would build a giant reserve, sufficient to see it through the middle decades of the 21st century. This was the original F.D.R. approach -- build a trust fund. President Reagan said the package ''assures the elderly that America will always keep the promises made in troubled times a half-century ago.''

Social Security's next few annual reports made best-guess (intermediate) projections of solvency for 75 years, meaning it expected the system to remain solvent until 2060 and beyond. So the question that should arise now, but that has been oddly ignored is, What happened?

Social Security's key long-range projection is that, over 75 years, it will come up short by an average of 1.89 percent of payroll. Though deficits would still loom beyond 2080, the problem could be fixed until then by an immediate tax increase of 1.89 percent, or a benefit cut of roughly 13 percent. (Democrats tend to favor a combination.) But this all assumes that the middle projection is right. And several underlying assumptions of that middle projection tend to exaggerate the potential deficit. The first concerns longevity. A 65-year-old man today can expect to live to nearly 82. According to the most likely projection, in 2080 he should expect to live to 86. Goss says that the agency is assuming that medical technology will deliver more ''miracles.'' Most demographers agree with him, and some even think the agency is not being optimistic enough. The only trouble is, as Goss notes, that over the past 20 years ''they have been wrong at every turn. There has been less improvement than we were expecting.'' Indeed, the improvement in mortality has slowed significantly. And no one is sure why it has slowed. Nonetheless, the agency expects a sharp rebound over ensuing decades. Its fiscal gloominess thus depends on a speculative uptick in medical miracles.

Immigration is another contentious point. Immigration is good for the system because immigrants are earners and taxpayers. Though immigration has been rising, Social Security projects that it will taper off sharply, from 1.2 million a year to 900,000 in 20 years. This forecast is curious, because if the birthrate in America declines as anticipated, the country will need more foreign workers.

Rising wages are also a boon to Social Security's finances. Forecasting wages is difficult, as the trustees' report frankly admits, but it seems undeniable that as society ages, businesses will be harder pressed to find workers, and that should push wages higher. The trustees, however, project that real wages will grow at only 1.1 percent a year -- roughly equal to the level of the last 40 years.

The basic point here is that tiny swings in any of these or other factors could improve -- or worsen -- the program's balances. If a few of them lean in the direction of the optimistic forecast, the trust fund will cover benefits through 2080, or close to it. Would such a program, which appears to be solvent or near solvent until the limit of what is humanly forecastable, be improved upon by the various schemes for privatization?

Social Security does not provide, and was not meant to provide, a satisfactory retirement on its own. The average stipend for a 65-year-old retiring today is $1,184 a month, or about $14,000 a year. About half of Americans also have private pension plans, but for two-thirds of the elderly, Social Security supplies the majority of day-to-day income. For the poorest 20 percent, about seven million, Social Security is all they have. Even those figures understate the program's importance. According to an agency publication, ''Income of the Population 55 or Older: 2000,'' 8 percent of elderly beneficiaries were poor, but a startling 48 percent would have been below the poverty line had they not been receiving Social Security. Charles Blahous, the White House point man on Social Security, publicly criticized this calculation as ''mindless,'' and the Social Security agency no longer computes the figure.

[GePap]

A little more:

The White House asked the Congressional Budget Office to analyze one advisory council plan. That plan would allow workers born after a certain date (perhaps 1950) to siphon about a third of the payroll tax into individual accounts, up to $1,000 a year. The money could be invested in any of three choices (other plans provide for wider menus) and would be converted into an annuity upon retirement.

The C.B.O. assumes that the typical worker would invest half of his allocation in stocks and the rest in bonds. The C.B.O. projects the average return, after inflation and expenses, at 4.9 percent. This compares with the 6 percent rate (about 3.5 percent after inflation) that the trust fund is earning now.

Proponents hail the plan for forcing savings on the government. But the diversion of money into individual accounts would save the government nothing, since it would have to borrow to offset the loss of the diverted dollars. The individual accounts represent a transfer, not a savings.

The second feature of the plan would link future benefit increases to inflation rather than to wages. Because wages typically grow faster, this would mean a rather substantial benefit cut. That cut would mean a savings for the government. This is a political choice; we can always save money by reducing benefits. But it's important to stress that the savings result from cuts, not from the decision to privatize.

Overall, the plan is gentler toward lower-income seniors than wealthier ones, but all seniors would be poorer than under present law. In other words, absent a sustained roaring bull market, the private accounts would not fully make up for the benefit cuts. According to the C.B.O.'s analysis, which, like all projections of this sort should be regarded as a best guess, a low-income retiree in 2035 would receive annual benefits (including the annuity from his private account) of $9,100, down from the $9,500 forecast under the present program. A median retiree would be cut severely, from $17,700 to $13,600. On the plus side, budget deficits would be lower in the future. But, because of the lengthy transition, that ''future'' is exceedingly remote -some 50 years down the road. In the interim, deficits would rise by up to 1.5 percent of the country's G.D.P.

One rationale for privatization is that workers would get a better return on their money in Wall Street securities than with Social Security's dowdy old Treasuries. This notion, which has Wall Street investment banks salivating, was especially in vogue during the 90's, when the stock market was soaring. When the bubble burst, advocates reined in their sales pitch, but they still are unrealistically sanguine. Last year, Tanner of the Cato Institute wrote that ''over the worst 20-year period of market performance in U.S. history . . . the stock market produced a positive real return of more than 3 percent.'' Actually, the market has done worse than 3 percent per annum in nine different 20-year periods.

In any case, Social Security could capture the return on stocks, without putting individuals at risk, by investing in equities directly. This would also achieve another frequently stated objective: keeping the government's hands off the Social Security trust fund. That option would be far more efficient, in economic terms, than separating the money into 150 million disparate accounts. Costs are much lower for one big investor. And more important, in a system of individual accounts, benefits will vary with individual choices, and some people will make poor ones. In Sweden, where the retirement system has included private accounts since 2000, the majority of Swedes made excessively risky investment choices by putting money into stocks at the market top, according to Richard Thaler, a University of Chicago behavioral economist. Finally, pooling the investment pools the risk, and thus reduces the danger of retiring at the wrong time. In a system of personal accounts, someone who retired after a market crash would be out of luck.

So it is notable that all the current proposals to privatize involve the economically inferior option of individual accounts. But privatization advocates aren't motivated solely, and perhaps not even primarily, by economics. Glenn Hubbard, Bush's former top economic adviser, wrote in Newsweek that an ''obvious objective'' of privatization is ''to advance the president's ownership society agenda.'' Such pro-free-market sentiment has a long lineage. Remember Senator Vandenberg, who fretted in the 30's that public ownership of private securities would amount to socialism? Even though state pension funds and some U.S. agencies, including the Federal Reserve, put some pension money in stock-index funds, conservatives still react as if such a solution for Social Security were akin to turning it over to the Kremlin. Peter Ferrara, a former White House staff member under Reagan and now senior fellow at the Institute for Policy Innovation, who has been proposing Social Security privatization plans since the late 1970's, told me that economics ''was not my primary motivation. It was ideological. We don't want the government controlling that much investment.''

HOW BUSH WOULD CUT BENEFITS

There is a policy choice that unites Social Security's critics -- from Goldwater to Reagan to Bush -- which is that the program should be balanced by shaving benefits rather than by raising taxes. They favor smaller government, so shrinking Social Security (rather than increasing its financing) serves their broader aim. Indeed, though the public continues to oppose cutting benefits, Bush has ruled out any solution that involves a tax hike.

Reagan said the program had morphed from the humble insurance plan formulated by F.D.R. (for whom he voted four times) into a swollen caricature of government excess. The first Social Security recipient, a legal secretary in Vermont named Ida Fuller, started with a benefit of $22.54 a month. Today's retirees obviously do better (even after adjusting for inflation). Nonetheless, according to Lawrence Thompson, who was the Social Security acting commissioner in the 90's, the retiree program is not really more ''generous'' now than it was in the past. Like other pension systems, Social Security was designed to replace a fixed portion of a retiree's previous earnings. For a single person with average earnings, initial benefits were intended to replace about 40 percent of income. They are still pegged to 40 percent of income.

Since wages generally rise faster than inflation, retirees in each generation get more in real dollars than those in previous ones. Contemporary critics, like Kasich and the Bush council, would slow the rate of future increases by linking benefits only to inflation. Though this would save a lot of money, its effect on retirees should be understood.

Seniors now get an initial benefit that is tied to a fixed portion of their pre-retirement wages. If the index was changed, their pensions would be pegged to a fixed portion of a previous generation's income. If this standard had been in force since the beginning, retirees today would be living like those in the 1940's -- like Ida Fuller, which would mean $300 a month in today's dollars, as opposed to roughly $1,200 a month.

One way or another, societies with more old people have to devote more resources to them. Right now, benefits amount to 4.3 percent of G.D.P. The trustees' most likely projection assumes that over the next 75 years that figure will rise to 6.6 percent. In the more optimistic case, benefits will rise to 5.2 percent. Given the substantial increase in the elderly population, neither of these figures seems rash or out of proportion. The increased cost would be on a par with that of making Bush's first-term tax cuts permanent, which is projected to be about 2 percent of G.D.P.

And though future generations of workers will have to support more retirees, they will also be having fewer children. In fact, according to the Social Security actuaries, the total ''dependency'' burden (that is, the number of nonworking seniors and kids that each working-age adult will have to support) will remain lower than at its baby-boom peak. ''In a grand social sense,'' says Thompson, the former Social Security commissioner, ''we can support more seniors where there are fewer people in day care.''

THE INESCAPABLE COSTS OF AGING

Ultimately, every 75-year forecast is just a guess, and therefore every approach must accommodate a range of possible outcomes. Plans that link worker benefits to the stock market automatically adjust -- if the economy underperforms, then workers get lower benefits. This enhances, rather than mitigates, whatever is the trend in people's private savings. As Thompson says, ''The default adjustment is you eat less.'' This could be brutal and also unfair, especially to the post-1983 generation of workers that, on the say-so of Greenspan and Reagan that the trust fund would be honored, has paid a sacrifice in both reduced benefits and higher taxes.

What other solution is there? Ball, who joined the system in 1939 as a $1,620-a-year district officer in Newark, has thought of one. He starts from two premises: it would be reckless not to make some adjustments now, but foolish to make too much of 75-year prophecies. ''In 1928, there was no way to forecast the Depression, World War II, the birth-control pill. We have to stop acting as if 75-year estimates were absolute,'' he told me.

Nonetheless, Ball would tweak the system in several modest ways to reduce the projected deficit. For instance, he would very gradually raise the cap on income subject to the payroll tax, now at $90,000. This would reverse a recent regressive trend. Income distribution in America has become more skewed, thus upper-income folks have earned more money that has escaped the tax. Ball would also add three other, smaller fixes to further tighten benefits and raise taxes. (There are many variations of these fixes floating around the Beltway.) After Ball's prescription, how much of a deficit would then remain? Possibly a fraction of a percent of the payroll, possibly zero. The answer would depend on the net effects of future birth rates, wars, diseases, inventions and so forth. Enter now Ball's little accommodation to uncertainty. It is that Congress simply resolve now to impose, 50 years hence, a payroll tax increase sufficient to close whatever gap exists over the ensuing quarter-century. This could not be enforced now, of course, but that is Ball's point. He wants to free the Congress, and the rest of us, from the annual game of insisting on an exact and illusory far-off balance; to diminish the perception that we must urgently adjust to economic and demographic developments too distant to be forecast.

The 2004 ''Economic Report of the President'' takes dead aim at such an approach. It reckons that all pay-as-you-go systems will eventually be doomed by demographics, and that solutions like Ball's will only push back the date that the trust fund runs out of money by a few years. The White House worries that any fix that covers 75 years of benefits could still bequeath a deficit in the 76th year. ''The nation must act to avert a long-foreseen future crisis in the financing of its old-age entitlement programs,'' the report states. Its assumptions may be true, or they may not be, but the conclusion suggests a misplaced allegiance: We have an obligation to the distant future, but don't we owe a greater debt to the current generation and to those that immediately follow?

Prudence dictates taking steps now to minimize the possible shortfall. This could include raising the cap, some modest cuts and tax increases and a gradual redeployment of the trust fund into assets that may not be tapped, willy-nilly, for whatever legislative purpose. But only a real crisis would dictate undoing an institution that has provided a safety net for retirees, that has helped to preserve in the social fabric some minimum of shared responsibility and that has been supported by workers in good faith. And, in looking at Social Security today, the crisis is yet to be found.

Roger Lowenstein is a contributing writer and the author of ''Origins of the Crash.'' His last article for the magazine was about presidents and job creation.

[GePap]

Originally posted by JohnT
Correct. It is a legal fiction, not an actual trust account.

NO, its a real fund- made up of 1.5 Trillion in US Treasuries, just as a Private fund with billions in US Treasuries is real.

Unless of course you mean that bonds are just a legal fiction, which is true, and which is also true of cash, which is just a legal fiction as well.

[Dinner]

Originally posted by JohnT

passing laws requiring Congress to stop stealing from the Social Security Trust Fund would also help.

FYI: There is no Social Security trust fund.

I know John. There was supposed to be but it ended up getting stolen instead of being kept seporate from the general fund. BTW are you people who support privativation going to start justifying your position or are we going to continue hearing tangential facts which have already been previously covered?

[Ming]

Does anybody that supports the current system actually plan on trying to live on the small monthly checks they provide when you finally qualify

[Dinner]

Originally posted by chegitz guevara
That's not true. At best, as el freako has showed, the actual return on investment from the stock market has been below 5%. You're better off investing in your home as a retirement plan than putting it in the market. Consider, though, that there will eventually be a housing market crash, since you're going to have more supply than demand as all these aging boomers want to sell off their homes and move to Boca Raton. Those of us in the Sun Belt will be fine, though.

The was an interesting article in Money Magazine a few weeks back. It seems that a very large percentage of American own two, three, or even four houses now and the pecentage is expected to grow. If housing prices decline it won't be because of demographics as each person will own more.

[GePap]

I recommend reading the article posted.

Oh, and no, I don't plan to live solely of social security- I also don't plan to die young, but you know what they say about the plans of mice and men...It is nice to know there will be something there if I live long enough and my plans did not come to fruition.

[Kidlicious]

Gepap,

Selling treasury bonds from the trust, and just selling them is the same thing. The 'assets' don't increase any confidence in the fiscal solvency of the Federal govt, because the are just Federal Govt debt.

[GePap]

Originally posted by Kidicious
Gepap,

Selling treasury bonds from the trust, and just selling them is the same thing. The 'assets' don't increase any confidence in the fiscal solvency of the Federal govt, because the are just Federal Govt debt.

The SS Trust does not sell bonds, IT BUYS BONDS.