Can someone explain Bush's social security plan?

[Sikander]

The current system is an abomination. It is totally at the mercy of demographic trends. During times of rapid population growth the government is awash in our real money and goes on a shopping spree. Not only do they simply spend the money, they also make rosy assumptions about the future and increase entitlements, essentially spending the money which they won't be getting in the future.

During times of slow growth or population decline the system goes into the red, sucking money from the general fund. Eventually it is predicted that there will be only two workers to each retiree. As there is absolutely no real assets set aside for their retirements this means that each worker will have to shell out $500 to $750 a month simply to keep the program solvent. Stupid stupid stupid!

Of course real pension plans make management easy simply by tracking each worker personally. Monies paid into the system are not spent, but invested in order to take advantage of compounding interest and to completely avoid any of these demographic problems. Whether the population is growing , falling or holding steady every worker is assured of their pension because it has never been converted from real assets to a promise that other people in the future will probably pay.

I'm not suggesting that people will rebel and refuse to pay, I'm suggesting that younger people will simply not be able to afford to pay hundreds of dollars a month in order to keep old people afloat financially, especially as their share of every other public expense will rise as well. How can they afford to care for their own children too? We need to do the smart thing and save for the future.

[Sikander]

Originally posted by Dracon II
Tying social security to the stock market doesn't sound too secure to me...

It's a hell of a lot more secure than the assured bankruptcy that we're heading for. Even if the money never manages to earn a dime in the stock market it's a much better investment than handing your money over to the government to be spent right away. None of that money is ever going to be available to us again.

[Kidlicious]

Originally posted by Sikander
It's a hell of a lot more secure than the assured bankruptcy that we're heading for. Even if the money never manages to earn a dime in the stock market it's a much better investment than handing your money over to the government to be spent right away. None of that money is ever going to be available to us again.

There's no risk to a pay-as-you-go system.

[Kidlicious]

Originally posted by Oerdin
The politicians in Washington like how Social Security has to use its money to buy T-Bills because it means Washington essentialy gets extremely low interest rate loans instead of having to pay market rates for its binge spending.

It actually doesn't cost anything to use the money from the fund. As far as the binge spending goes maybe you also believe that cutting spending reduces spending because the govt has less money. I don't know about that, but the the funding from the SS fund has reduced the govts borrowing needs and costs.

[Dinner]

Originally posted by Sikander
As there is absolutely no real assets set aside for their retirements this means that each worker will have to shell out $500 to $750 a month simply to keep the program solvent.

Sure... There's no real asset other then the massive pile of highly liquid T-Bills they've stored up over the last 72 years. Even the CBO says those liquid assets wil see the system through without any changes or reductions in payments to retirees at least until 2052. The CBO also reports that simple changes such as raising or eliminating the Social Security tax cap would make the system solvent for at least the next century. Currently people only pay Social Security taxes on the first $90,000 the make each year. This means medium and lower income workers have to pay this tax on all of their income but the wealthy are given an outragous loop hole in which to escape paying SSI on much if not most of their income. If that loop hole is closed then the system is solvent for the next century.

Other possible changes are raising the retirement age to reflect the longer life span of today's workers, doing means testing in order to insure SSI money goes to those who need it most instead of to millionares, or reducing benifets by some amount. The system will remain solvent at least until 2052 then there will be a period of 40-50 years where about $1 trillion would need to be paid out of the General Fund in order to finance SSI benifets to the elderly. Bush's plan would atleast double that debt to $2 trillion dollars and many analysts say the cost of his plan could go much, much higher.

His "cure" is worse then the original problem. Worse to the tune of $1 trillion.

[Patroklos]

Currently people only pay Social Security taxes on the first $90,000 the make each year. This means medium and lower income workers have to pay this tax on all of their income but the wealthy are given an outragous loop hole in which to escape paying SSI on much if not most of their income. If that loop hole is closed then the system is solvent for the next century.

That might make the system solvent, but there is that problem of being exactly the opposite of the American ethos.

Robbing people because you are two stupid to take care of yourself

[Kidlicious]

Originally posted by Patroklos


That might make the system solvent, but there is that problem of being exactly the opposite of the American ethos.

Robbing people because you are two stupid to take care of yourself

Actually robbing people is the American ethos, and it's pretty smart too.

[Patroklos]

And can we apply this superior flat tax system to everything? Nothing would make me happier.

[Dinner]

Originally posted by Sikander

It's a hell of a lot more secure than the assured bankruptcy that we're heading for.

Such doom and gloom. In the 1980's the Republicans said SSI would be bankrupt in 2010, in the 1990's it was 2020, and now it's 2052. These "the sky is falling" guys have never once been right.

Changes in population due to immigration and/or higher birth rates (both of which happened and are likely to continue to happen) changed the math on all of their predictions about SSI's demise. The assumption the CBO used to reach the 2052 experation date was that economic growth between now and forever into the future would be just slightly above the rate of inflation. Pretty conservative (most would say to conservative) so if real economic growth manages to grow faster then an average of 0.1% then Social Security once again continues living a healthy life far longer then all the nay sayers ever predicted.

There is no immediate crisis and it is simply a lie to pretend there is. The people who want to privatize Social Security have made up this lie in order to pretend that "something must be done right now!" and of course their plan just happens to put trillions of dollars into the pockets of bankers and financial planners who supported the phase out of Social Security. What a big surprise.

If our goal is to increase returns on SSI's assets then a simple change which allows SSI to invest in the stock and bond markets with a portion of its funds instead of being 100% invested in T-Bills would achieve that without 295 million different private accounts. Of course one big account would also be able to demand super low rates due to its status as the world's largest investment account. 295 million small account holders wouldn't be able to do that and instead would have to pay 295 million times the annual fees which one big account would have to pay. It seems like the people pushing for the phase out of Social Security have other motives besides "saving Social Security" like they're claiming.

[Kidlicious]

Originally posted by Oerdin
Sure... There's no real asset other then the massive pile of highly liquid T-Bills they've stored up over the last 72 years.

It's a pay-as-you-go system. That means there is no assets, and no risk.

[Dinner]

Originally posted by Patroklos
That might make the system solvent, but there is that problem of being exactly the opposite of the American ethos.

Robbing people because you are two stupid to take care of yourself

I love how conservatives say a flat tax is such a good idea until a regressive system is turned into a flat system then they don't want the flat system. Currently, everyone who makes less then $90k per year pays a flat rateof SSI taxes; I'm not sure the exact amount but lets just say 3% as that's likely not far off from the truth. People who make more then $90k per year pay an ever small percentage rate towards SSI because only the first $90k is taxed while the rest is not taxed by SSI. Thus the guy who makes $100k pays $2700 in taxes (2.7% tax rate), the guy who makes $500k pays $2700 in taxes (0.54% tax rate), and a guy wo makes $1 million per year pays $2700 in SSI taxes (0.27% tax rate).

If we just had a flat tax the system would be more fair and completely solvant for at least a century.

[Dinner]

Originally posted by Kidicious

It's a pay-as-you-go system. That means there is no assets, and no risk.

The system is pay as you go except for the excess "income" it has over expenses that is the "Social Security Trust Fund". Llegally the excess money that Social Security makes must be spent to buy government Treasury Bills which while low yielding are never the less highly liquid and are an asset. some people have said this amounts to nothing but IOUs (which is true enough) but as long as the government continues to pay it's debt then they are perfectly good.

I grant you that Bush has less finanacial sense then a baboon and that his mismanagement of the nation's finances has been the horrible in the nation's history but even with Bush's massive debts there is no danger of default. Maybe if we add on $2 trillion in more debt (as Bush wants to do with his Social Security phase out plan) that might change but likely not. The T-Bills are liquid and an interest earning asset as far as SSI is concerned.

[Ming]

Originally posted by Oerdin
If we just had a flat tax the system would be more fair

Fair... the person the makes 90K and the person who makes a million will get the identical payout from social security... why shouldn't they pay the same.

I guess it's all a matter of what you consider fair.

[Kidlicious]

Originally posted by Oerdin
The system is pay as you go except for the excess "income" it has over expenses that is the "Social Security Trust Fund". Llegally the excess money that Social Security makes must be spent to buy government Treasury Bills which while low yielding are never the less highly liquid and are an asset. some people have said this amounts to nothing but IOUs (which is true enough) but as long as the government continues to pay it's debt then they are perfectly good.

Sure the govt is good for it's obligation, and the people who keep screaming about bankruptcy are just trying to scare people, but holding your own debt, even if it's in another account, isn't holding an asset. It doesn't yield any return, and it doesn't carry any risk. It's just for keeping track of the obligations of the govt.

If the govt bought assets to put into an account tax payers would have to pay for that, and there would be risk to holding those assets.

[Dinner]

I consider it fair that everyone pays the same flat percentage rate in order to support a universal retirement system.