The New York Times spells it out for you today; here's highlights from the lead editorial.
What you deposit into your private account would be subtracted from your regular benefits: "Your Social Security benefit would be reduced, dollar for dollar, by the amount of money you deposit into your private account and an additional charge amounting to 3 percent plus the rate of inflation. All the money that is drained off would presumably go to pay for the enormous upfront government borrowing - $4.5 trillion over the next 20 years - that privatization would require."
Your account would have to grow at 3% over inflation to do what Bush promises: "People whose private accounts steadily earned three percentage points over inflation throughout their working lives would wind up with exactly what they would have gotten if Social Security remained untouched. Anyone who earned less than that would end up with less than is offered by the current system."
It doesn't solve the problem: "Establishing private accounts does nothing to solve the long-term shortfall in the system."
Privatization will require drastic benefit cuts: "All in all, they would leave the average worker with a government benefit worth only about 10 percent of his or her preretirement earnings. (Currently, Social Security replaces about 35 percent, on average.)"
Necessary safeguards will stifle growth: "Mr. Bush assured listeners that the government would prevent people from making bad decisions by restricting their investments to a conservative mix of stocks and bonds. But the more restrictions there are, the harder it would be for people to achieve the outsized returns that the administration has generally promoted to sell the public on private accounts."
Your heirs will only inherit a portion of your account, unless you die before you retire: "That works entirely only if you die before you retire. Under a scheme that is going to take a while for the public to digest, the White House wants to require new retirees to use their private accounts to buy annuities large enough to keep them above the poverty line for the rest of their lives. The most they could leave to heirs, then, would be what is left over after the annuities are purchased."
Bush has never given us a reason to trust him. Now is no time to start.
Sunday, February 06, 2005
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10 comments:
but he said it's MY money, weren't you listening?
I thought you and your readers ight want to take a look at my blog for a bit of contrast on the whole Social Security reform debate. Well, more like the proposed debate since only the President and the Republican party are proposing to actually debate ways to fix the program and restore some security to Social Security.
The party of no seems to be dead-set against fixing the current system, and their ideas seem to be either to raise taxes or reduce benefits, both of which are not fixes, but band-aids. As a fellow 'progressive', I would hope you would join together with Mr. Bush to work out a plan that benefits everyone.
Mike, if it ain't broke, don't fix it. Social Security is just fine. Raising the tax cap from $90,000 will pay for the shortfall, or rolling back Bush's tax cuts on the top 1% of earners will also cover it; or possibly we could combine those two options with a benefit cut.
What you seem to think is one of Social Security's flaws is actually its greatest strength: there is no permanent fix, and there shouldn't be. The program is already 60 years old and we've undergone a dramatic demographics shift in this country. The figures we're talking about now are based on 75 year projections. What if the projections are wrong? Bush's "plan," which won't work any way you slice it, will lock us into a hole we can't get out of. Tinkering with Social Security every decade or so, making little adjustments here and there, is a completely legitimate idea, and far more pragmatic.
You must completely misunderstand what Bush is trying to do. He is not fixing social security. He's fundamentally changing the program and eliminating its most important aspect, which is a guaranteed amount of money that taxpayers can count on when they retire. He's getting rid of that guarantee! It's craziness. Plus, all his plans are based on ridiculously rosy assumptions of economic growth. He's going to bankrupt millions of people. Contrary to your statement, he's actually ripping the "security" out of the program.
I don't intend necessarily to defend the current Democratic congressional leadership, but if you don't think progressive leaders out there haven't been coming out with easy, sure-thing, inexpensive solutions to the problem, then you just haven't been paying attention. And since you think Bush has a plan that will work, it pretty much confirms that suspicion.
you suck
Furthermore, no one can give me a reason why Democrats would object if Bush's numbers were actually right and if this were a good idea. This should not, actually, be a partisan issue, but I guess it's become one.
If Bush gets his way, the finance industry reaps billions, and he'll go a long way toward achieving the conservative desire to end "entitlement" programs.
Let's say for the sake of argument that he's right. (He's not.) Do you honestly think that Democrats -- and many Republicans, as well -- would oppose him simply for the sake of obstructionism? Why? What good would it do?
Social Security is OUR program. If Bush was right, that it was heading for financial disaster, we would be setting up our important constituents for an enormous fraud. There's no points to be had for opposing Bush when he's right. (Fortunately, he never is.)
People keep telling me Paul Krugman lies. For God's sake, why? What does he stand to gain by lying about Social Security and saying it's in a better position than Bush says it is? You people make no sense sometimes.
Thanks for not just deleting my comment. Some other site makes it policy to not tolerate dissent. I would prefer for you to do what I have done and educate yourself on the true naure of the crisis that is inevitable under the current Social Security system. Its not a question of taxes or benefits, but of demographics. The coming retirement of the baby boomer generation will place an unacceptable burden of having two workers pay for every one retiree. The entire structure is headed for collapse. Private plans reduce the coming burden by placing a portion of the benefit outside government bounds. As I explained in my recent post, the reduction of government responsibility to beneficiaries will help to reduce the coming burden. You should read the links in my posts on the topic for some facts on the issue.
You said:
Mike, if it ain't broke, don't fix it. Social Security is just fine. Raising the tax cap from $90,000 will pay for the shortfall, or rolling back Bush's tax cuts on the top 1% of earners will also cover it; or possibly we could combine those two options with a benefit cut.
I’m sorry, but we can argue the benefits of a tax cut all day, but you wouldn't admit defeat and I have already won. Tax cuts increase government revenues every time they are tried. Behold:
Income Tax Receipts. Even income tax revenues grew substantially in the 1980s. In 1981 income tax receipts totaled $347 billion; in 1989 they totaled $549 billion, a 58 percent increase. In fact, income tax collections grew only slightly slower in the 1980s than in the 1990s despite income tax rate reductions in the Reagan years and increases in the Bush-Clinton years. Real income tax revenues rose by 16.3 percent from 1982 to 1989 after the top income tax rate had been reduced from 70 percent to 50 percent in 1983, and then to 28 percent in 1986.
So repealing a tax cut, or to be more accurate, raising taxes would have the opposite intended effect. Incentive to earn would decline and thus taxes would drop due to less economic activity to be taxed.
The other option, lowering benefits seems to go against the promise of a secure benefit in old age that is the bedrock of a Social Security ethos. Neither option is a real option, since they don't reform an essentially broken system that relies on current taxpayers to pay the way for retirees. Pay as you go is destined to die when the ratio of retirees to workers becomes 1:2.
More of your arguments:
You must completely misunderstand what Bush is trying to do. He is not fixing social security. He's fundamentally changing the program and eliminating its most important aspect, which is a guaranteed amount of money that taxpayers can count on when they retire. He's getting rid of that guarantee! It's craziness. Plus, all his plans are based on ridiculously rosy assumptions of economic growth. He's going to bankrupt millions of people. Contrary to your statement, he's actually ripping the "security" out of the program.
I would hope that the entire edifice of Social Security could be eliminated, but the fact is it's here to stay no matter what and we have to deal with the obligations it created. The President's plan is to allow, I say allow individuals to invest a small amount of their taxes into a private account. One that the government can't replace with IOU's like they do with the current trust fund. As to the soundness of the proposed program, I give you the Thrift Savings Plan.
Important quote:
* Over any 35-year period ending between 1872 and 2000, the market provided an average annual return of 6.4 percent after inflation.
* There were positive gains in every 35-year period and each outperformed what Social Security will pay in return for workers' payroll taxes.
Notice how those dates include the Great Depression. And that's just for the stock market. Under the TSP, investors can choose to go into more secure investments, like government bonds.
You ask the question:
Furthermore, no one can give me a reason why Democrats would object if Bush's numbers were actually right and if this were a good idea. This should not, actually, be a partisan issue, but I guess it's become one.
Then you give the answer:
Social Security is OUR program. If Bush was right, that it was heading for financial disaster, we would be setting up our important constituents for an enormous fraud. There's no points to be had for opposing Bush when he's right. (Fortunately, he never is.)
You've invested in the notion that President Bush must always be wrong, no matter what. This seems childish at the least. Also, why should a political party own any government program? I thought the People owned the government? And as President Bush represents the People, he has a responsibility to present solutions to looming problems that face the nation. Just admit that you cannot countenance any solution offered by your opponent, because doing so is to admit that the program is broken and that all during he Democratic domination of Congress nothing was done to fix it. It doesn't really matter to me who fixes it, only that it gets fixed and I stop earning negative returns on my Social Security premium. Im at -0.04% according to the calculator. I'd be better off stuffing the money under my mattress.
Please, use your mind and look beyond both sides' rhetoric at the facts. I recommend the Heritage Foundation as a source for a primer to understanding the situation and some solutions. You’re in this with me, and we should look to our own pocket as well as those around us. The current system is a disaster waiting to happen, and we can do much better. Progressives should be in favor of progress, not enshrining a past failure. The old system worked for a while, but today it is made obsolete by 401Ks and the like. We can combine the best aspects of both private investment and Social Security and come up with something advantageous for all Americans.
I’d like to post this on my blog, if you don’t mind my using your words. I would post the exact content of this reply.
To hell with social security. When I am old I am going to shoplift to survive because, hey, who locks up crazy old men?
His plan is not a scam...if you want to make your rich friends richer and the poor of the country more destitute. It is not a scam...if you want to erase the middle class.
Well, it wouldn't be a scam if Bush said he thinks reform is necessary because he's opposed to the idea of tax-payer funded welfare for the elderly; if he said that it was your responsibility to plan for your own retirement instead of saying he was creating an opportunity to do better than SS; if he said it was a great boon to the finance industry which needs all the help it can get after all those crippling corporate scandals which have sent as many as 3 people to jail; if he admitted that it will actually cost taxpayers more in the long run to do this than to leave it as is.
You guys are right. Your arguments have won me over to your side. Economics and real figures mean nothing to me now. The only thing that matters is 'Bush is evil and so is anything he endorses.' If his ideas had actually proven to be completely wrong, I might be somewhat disposed to truly agree with you guys. However, his initiatives like tax cuts, liberating Iraq, and the prevention of any domestic terror attacks since 9/11 are proven successes. Maybe you guys should think about yourselves and how much money you are throwing away on Social Security. As it stands, you are losing money. I don't care who fixes it, I don't want to keep throwing my money down a hole. Private accounts would allow for real growth and security in my old age. If you think they are destined to fail, then so are 401K pla ns and the federal retirement plans.
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