Can someone explain Bush's social security plan?

[The diplomat]

Re: Can someone explain Bush's social security plan?

Originally posted by Dracon II
Is he trying to privatise social social security?

No. That is what one of the big lies about Bush's plan. Privatization means the private sector controls it.

Basically, Bush's plan is a "optional 2% privatization". Under Bush's plan, nothing changes for seniors. But for younger folk, you get an option to put up to 2% your social security tax into a personal account that is invested in the stock market. The other 98% stays in your normal social security fund. When you retire, you get your 98% + whatever interest you made from the 2% that was invested over all the years.

The plan is actually similar to Clinton's plan. Both plans involve personal accounts that are invested in the stock market. The difference is where the money comes from. Under Bush's plan, the 2% is taken out of your SS tax whereas under Clinton's plan, the 2% was taken out of your federal income tax.

[Ming]

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

But, the payout for SS is based on what you put in. By putting a cap or maximum pay out in place, it's only fair to put a cap on what you have to pay into the system.

SS is NOT a univeral retirement system... so don't base your arguments on something that it isn't

If you don't like SS and would like to see a true universal retirement system established, that's a whole different story... but this is about SS. And the fact is, the payout is based on what you put into it above the minimum payouts... Capping the tax you pay once you get to max payout is the only fair thing to do.

[chequita guevara]

Originally posted by Oerdin
then it would be best to simply allow SSI to invest a portion of its income stream into the financial markets.

While investors want to get their hands on SSI monies, neither businesses nor the GOP want would would naturally come along with the government owning part of your business, massive regultory headaches.

[KrazyHorse]

Why should the SS investment panel put any extra regulations on the companies they buy parts of?

That doesn't happen up here...

[chequita guevara]

Originally posted by KrazyHorse
Why should the SS investment panel put any extra regulations on the companies they buy parts of?

That doesn't happen up here...

This is America. We're far more corrupt.

[KrazyHorse]

[Kidlicious]

I don't know if regulations would be as much of a problem as special treatment.

[Drake Tungsten]

I can't believe I'm saying this, but Canada...

[Dinner]

Originally posted by chegitz guevara
While investors want to get their hands on SSI monies, neither businesses nor the GOP want would would naturally come along with the government owning part of your business, massive regultory headaches.

It seems like it would be a seporate retirement account just like CALPERG (California's public employee retirement fund; currently the world's largest) and it could be as seporate and independent as the Federal Reserve Board. It would boost returns, not take away funds from SSI (thus not bankrupting the system around 2015 instead of 2052), and it would be massively cheaper then creating 300 million private accounts all of which would each be charged yearly and monthly fees.

[Admiral]

Originally posted by Oerdin


It seems like it would be a seporate retirement account just like CALPERG (California's public employee retirement fund; currently the world's largest) and it could be as seporate and independent as the Federal Reserve Board. It would boost returns, not take away funds from SSI (thus not bankrupting the system around 2015 instead of 2052), and it would be massively cheaper then creating 300 million private accounts all of which would each be charged yearly and monthly fees.

Running the risk of being called a far left-wing loony conspiracy theorist, it is reasoning like this that leads one to question Bush's fundamental goal here. There are actually a number of solutions to the social security problem, this being one of them, another being an addition of 1.87% to the payroll tax (this would completely aleviate the gap betweentaxes and benefits projected to occur in 2041).

The real question is, what is Bush's agenda? And the answer is not hard to find. In the eyes of the conservative, social security is an immoral program. It hampers the self-disipline necessary for success in conservative morality, and should thus be eliminated. And privatization of social security is in effect elimination, since it reverts back to the traditional managing of stocks and the like, with all the risks and uncertainties.

As many people, myself included, have stated, Bush's current plan isn't privatization. It's partial privatization. And Bush and his associates would continually push for more if they are successful in their current attempts.

[Sikander]

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. 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.

T-bills are promises to pay, ie liabilities. The fact that you bring them up at all shows how little you know about the situation, which is simply that the current system has no assets other than the stream of cash that it gets from workers every month. "Bankruptcy" and the pile of T-Bills are nothing but canards. The system cannot go bankrupt because the government will simply screw someone (or everyone) when the shortfall become unsustainable.

The real issue is when payouts exceed income for the program. When that happens there will be an ever increasing pressure on the budget for decades. As nothing has been saved, there is nothing to be drawn upon. American workers will have to simply pony up the cash on demand. According to the SS administration I'll be raking in about $1500 a month when I retire. That amount of money will have to be extracted from whomever is working at that time. Whether there are two or three of them they are going to find my pension a heavy burden indeed. Perhaps an older worker can afford the $500-$750 a month they'll need to pay my SS, but younger workers and parents are going to be extremely hard pressed to keep themselves solvent under that sort of pressure.

It's a simple analysis because there are no assets and no interest rates to consider. Simply figure out how much is going to go out and you know how much has to come in. I didn't jump on this thread to support the Bush "plan", which hardly dares to propose anything but vagaries. I did write here because Bush is correct in that this is a very important issue (as are the half dozen other entitlement programs that are unsustainable as currently designed), and the democrats are wrong to stick their fingers in their ears and sing LALALA as loudly as possible about the problem, only deigning to comment with partisan bullsh!t and obfuscation.

[Sikander]

Originally posted by Oerdin

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.

That might be worth a laugh at Kos, but it's pretty disingenuous. I remember that in the 1980s there was general agreement between the Republicans and the Democrats who controlled both houses of congress that SS was going deep into the red unless they did something. So they did something, which in this instance was a massive tax increase (felt much more heavily by the poor) via increased SS "contributions". It's silly to blame people who sounded the alarm for being "wrong", as it was their ability to generate a consensus that prevented the system from sustained shortfalls for 30 years or so.

Originally posted by Oerdin

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.

Of course if we had a real pension system rather than a Ponzi scheme we wouldn't have to worry about economic growth rates, population growth rates or immigration rates in regards to pensions, because the accounting wouldn't be based on how much might be coming in in a particular year, but on individuals whose lives follow pretty predictable lines.

For the purposes of pensions, clients begin to work and contribute and then either die or retire and then die. If there are a lot of clients who are near to retirement or retired, there should be a lot of money in the system to take care of them as they've been contributing for many years. It's a simple, tried and true system which is emminently predictable. Applied to SS it will give congress one less moving variable for them to budget.

Originally posted by Oerdin

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.

Actually, Wall Street is lukewarm on the idea because even a majority of Republicans don't support individual accounts which are also controlled by individuals. Instead a system much like what you propose is the most likely to pass. Wall Street won't be able to churn it to death or dump their dogs on the unsuspecting individual because there will be a lot of scrutiny on the government account. Any more Democrat talking points you want to serve up?

As for the immediacy of the threat, we'll start going into the red fairly soon (a little over a decade). This is the only important factor, the stack of T-bills is bullsh!t. If we were predicting that we'll be flush with cash then it wouldn't be an immediate problem, but as you know we are hemmoraging red ink from every entitlement program as well as from every recent budget. As it stands now it is silly to assume that the SS shortfall is going to be manageable in addition to everything else.

If you think all of these liabilities are a joke for future generations to worry about then you should run for congress, as that seems to have been the prevailing attitude for quite a while now. Realize that it isn't congress that wants this, they'd rather keep getting re-elected while running up the red ink. Besides (as the Dems have shown) its a complicated issue and an easy issue to demagogue, so why take the risk? It's the president who wants this, and congress is killing the discussion from both sides of the aisle because they don't have the courage to suggest that something might be required of the American people. We shouldn't help them avoid the issue just because the president is an ass.


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[Kidlicious]

The Bush plan only proposes to put 4% of SS contributions in private accounts. That's not really significant. The thing is though nothing more can be afforded. People can complain about the system all they want, but it's not really going to change significantly anytime soon. Creating a pension fund type SS system requires higher taxes. That's why a pay-as-you-go system was adopted. We'll just have to see if people will be willing to pay those higher taxes when that possibility exists some 40 or 50 years down the line.