The Social Security "Problem"

[Jacques Treatment]

And they say that Democrats have not brought up alternatives...

A quick summary of Social Security's problem... and a solution.

Just remember that one of the reasons we have Social Security at all is because of Wall Street's phenomenal crash.

--J,

New Deal or Big Deal?

[Black Sunday9]

you might want to direct the makers of that game to this website

http://minneapolisfed.org/research/prescott/

he wants to have a word with the top economist at moveon.org, and he's already won.

[TomCat]

What about the"Raw Deal?" That's a good name for it, isn't it?

Yes, we've missed you Jacques.

[Troy Spiral (13)]

Wow. Last month i probably read, er.. at least 10 different articles on various aspects of social security reform.

I don't think this "social security tax cap" was ever suggested as a place in the system for reform. Pretty interesting. Does sound like something that would have little chance in hell of getting pushed through a tickle-down economics friendly administration without massive public pressure. >ponder

Although im not sure that removing the cap and privatization necessarily need to be mutually exclusive even if it is used as part of the "solution". Pretty interesting regardless. Bizzare i never heard about this suggestion before. (nor did i realize this cap was in existance)

>ponders some more

[The_Dark]

OK, so you feel that Bush is lieing when he says there is aproblem with SS... Does that mean that Clinton was lieing when he said it too?

[Fierce Critter]

Ahh... a spark of life in the Politics forum. Let the liberal/conservative battle begin!!!

Thanks, JT. Nice to have you back. =)

[Jacques Treatment]

OK, so you feel that Bush is lieing when he says there is aproblem with SS... Does that mean that Clinton was lieing when he said it too?

No, I feel that Bush is lying when he says that the way to fix the problem is by having a government-sponsored gamble on Wall Street. Clinton and Bush are correct in that Social Security needs to adjusted to remain solvent; it has needed adjustment before and needs it again.

There are a couple of things that do need to be done in order to get the problem fixed:

1) The FICA cap needs to be removed or at least raised, thereby increasing funding while only drawing more money from those who are arguably most able to afford it.

2) Social Security benefits need to be adjusted actuarially, with retirement age based on the average expected lifespan of the citizen in question. People in general live longer than they used to, which means that Social Security is paying back each citizen for much longer than it used to. That does mean that the "official retirement age" is in all likelihood going to need to be raised, balancing a longer work life against the longer life expectancy (and thus longer retirement period).

Aside from the setup period for private accounts resulting in billions, if not trillions of dollars in loans in order to switch over--which drives our country further into debt--an investment in an Enron or a Tyco or an Arbusto Energy, and suddenly, our benefits are gone.

--J,

putting the "fun" back in "funding"

[Black Sunday9]

I already gave you a link to Prescott who won the nobel prize for economics, you should read what he has to say on social security, more or less he backs the presidents plan. The guy is a genius and I reccomend reading his work.

I am not in favor of your ideas.

1) the fica cap is already $90,000. no individual should have to pay more than $90,000 into social security in a year. Besides, taxing the rich does not work, in fact study economic growth trends during the JFK and Reagan years and you'll see quite the opposite is true.

2) Raising the retirment age based on life expectency is another shaky idea. How are you going to ask a blue collar worker to work until he is 70? I know the Haigel proposed retirement age raise was from 67 to 68 but if you want to go by life expectency then you will have to raise the retirement age often....eventually you'lll be asking 90 year old people to work.

3) Based on new corporate scandal laws we are unlikely to see any more enrons anytime soon. Regardless, Bush is proposing only investing FOUR PERCENT of your social security tax into individual accounts - 96% of what you pay into it will still be there. Some people will lose money, no one will lose the shirt off their backs.

While I am not in favor of the Bush plan 100%, I certainly am not in favor of the people at moveon.org who have no economic education picking apart the Presidents plan.

[Jacques Treatment]

1) the fica cap is already $90,000.  no individual should have to pay more than $90,000 into social security in a year.

*facepalm* No, no. What the FICA cap means is that people making $90,000 per year are the highest value at which FICA is at 5.6% of wages. Those making more than $90,000 just pay the same flat amount as that. Lifting the FICA cap means that people making more than $90,000 are still paying 5.6% of wages, hence they would be paying their fair share.

2)  Raising the retirment age based on life expectency is another shaky idea.  How are you going to ask a blue collar worker to work until he is 70?  I know the Haigel proposed retirement age raise was from 67 to 68 but if you want to go by life expectency then you will have to raise the retirement age often....eventually you'lll be asking 90 year old people to work.   

First of all, I wrote, "Based on the life expectancy of the individual." A blue-collar worker is less likely to live as long as a white-collar worker (in general, often based on hazardous work conditions), and so will thus be able to retire earlier. At some point, however, you *still* have to raise the retirement age, anyway, if only so that what was intended to pay for only five or ten years is not now a program intended to pay out for twenty to thirty years.

3)  Based on new corporate scandal laws we are unlikely to see any more enrons anytime soon.  Regardless, Bush is proposing only investing FOUR PERCENT of your social security tax into individual accounts - 96% of what you pay into it will still be there.    Some people will lose money, no one will lose the shirt off their backs. 

While I am not in favor of the Bush plan 100%, I certainly am not in favor of the people at moveon.org who have no economic education picking apart the Presidents plan.

A loss of money is still a loss of benefits. Force-shifting money into a janky economy and then taking out yet another huge loan in order to shift to the new system is going to result in more financial difficulty. This president had to have Congress lift the debt ceiling *again* at the end of his prior term because he had them max out our government's "credit cards." As for "New and improved scandal laws," they don't stop the practices, they just punish those who use them that much more. Besides, it doesn't take a scandal to make a company fail. That 4% is too much to trust to Wall Street.

As for moveon.org, you're not talking about just a group of web geeks who know little about anything else; you're talking about a fairly large group of individuals contributing knowledge from their various fields. As far as opinions on business and fiscal policy, I trust them far more than a president who can't run a business on his own without it plunging into disaster.

--J,

wiping with Arbusto stock

[Black Sunday9]

uh, the fica cap, For 2005, the Social Security Portion is 6.2% of wages up to $90,000 (this limit goes up each year) but there is also a 90,000 cap on individual payments which is what I thought you were reffering to. My grandfather is a millionare and paid close to 80,000 in fica in 2004. FOr the breakdown of the FICAP cap:

http://waysandmeans.house.gov/legacy/socse...-98/6-3gold.htm

I'd also suggest you read this:

http://www.cato.org/pubs/ssps/ssp4.html

A loss of money is still a loss of benefits. Force-shifting money into a janky economy and then taking out yet another huge loan in order to shift to the new system is going to result in more financial difficulty. This president had to have Congress lift the debt ceiling *again* at the end of his prior term because he had them max out our government's "credit cards." As for "New and improved scandal laws," they don't stop the practices, they just punish those who use them that much more. Besides, it doesn't take a scandal to make a company fail. That 4% is too much to trust to Wall Street.

This is an outright lie. I am not accusing you of lying but wherever you got this from is a liar.

http://www.cnsnews.com/ViewSpecialReports....E20050221a.html

http://www.techcentralstation.com/012104H.html

http://www.cato.org/pubs/ssps/ssp13es.html

http://www.capmag.com/article.asp?ID=4101

I can tell you one thing for certain, you should stop taking advice on economic issues from moveon.org and pick up the wall street journal or even the economist if you insist on left leaning economic writers. I've never met anyone who discusses economic policy that has ever quoted moveon.org. It's a joke of a website.

but really I gotta know something.....

First of all, I wrote, "Based on the life expectancy of the individual." A blue-collar worker is less likely to live as long as a white-collar worker (in general, often based on hazardous work conditions), and so will thus be able to retire earlier.

what the heck kind of argument is that?

At some point, however, you *still* have to raise the retirement age, anyway, if only so that what was intended to pay for only five or ten years is not now a program intended to pay out for twenty to thirty years.

which is why clinton and bush are adressing the issue in alternative ways. making people work til they are 70 isn't the answer, regardless on the profession you are in. By the way how do you know white collar workers live longer, do you have any stats to back that up?

[Jacques Treatment]

This is an outright lie. I am not accusing you of lying but wherever you got this from is a liar.

Which statement was a lie? That privatizing social security requires creating new accounts and thus new infrastructure? That diverting incoming money from their trip to the coffers into these accounts won't create a need for replacement money in those coffers? That the debt ceiling was raised last term due to all the new deficit spending? That scandal laws aren't a guarantee that corporate execs won't try to get away with their companies' spoils?

I can tell you one thing for certain, you should stop taking advice on economic issues from moveon.org and pick up the wall street journal or even the economist if you insist on left leaning economic writers. I've never met anyone who discusses economic policy that has ever quoted moveon.org. It's a joke of a website.

I can tell you one thing for certain, that you should take the time to examine the whole flash movie, including where it gives quotes and references from the Social Security Administration, several economists, and the like.

For example:

Ten Myths About Social Security, (as presented by the Century Foundation) Please take a look at the documents they site, as presented by our nation's own Social Security Administration and the Congressional Budgetting Office.

If you prefer to look at miscalculations from Bush' own people, there's this article from Bloomberg.

Of course, if you prefer what factcheck.org says about the "crisis" as initially presented, here's their take on the data.

what the heck kind of argument is that?

Well, I don't know about you, but I think that everyone deserves a period of retirement before the end of his or her life. That blue-collar workers tend to be struck with more life-long ailments is discussed heavily in the US Senate Committee on aging. Most statements there discussed benefits and disadvantages of raising the retirement age and that blue-collar workers would bear the brunt of the pain from that. I suggest, however, that actuarial tables based on career be used to better determine retirement age so that workers more heavily worn by work should not have to suffer, while those of us (like me) who work at less physically-demanding white-collar work should have to wait a bit longer to retire.

Statement of Barbara D. Bovbjer

Statement of David A. Smith

As for more direct information on the actuarial data (unfortunately, I couldn't find the actual tables), it does get mentioned in the New York Times as part of an article about pensions related to life expectancy. Apparently, though, the American Academy of Actuaries certainly thinks that blue collar workers do indeed have shorter life expectancies.

--J,

privatizing himself

[Black Sunday9]

you knowI typed out a very long response to this thread and I kicked the cord to the computer and the power went off.

The basic points:

1) the bloomberg article you linked was good but only showed the Bush team made an error. What it did not do was prove that private accounts would be harmful.

2) the transition costs thing is a lie. I gave you links for it. So why did you ask what I was talking about? It's a typical democrat talking point, but almost everything you've said is.

3) the ten myths of social security you linked, which I've read before, is a farce. Greg Anring tried to debate this nonsense to Larry Kudlow and didn't get very far. I went step by step and give evidence that Anring ( a noted bush hater who used to pretend he was a terrorism expert and now claims he's an economist) played fancy with the numbers. I'm not gonna type it out again, instead I will tell you to try and read Greg Fund's (wall street journal) disecting of Anring's cute little web page.

4) you claim "everyone deserves a time of retirement before they die" and then you suggest that white collar workers aren't included in "everyone" by suggesting they should have a different retirement age. Even in the links you provided it didn't prove any link between bluecollar workers and life expectency.

in fact from the new york times article you linked:

"In addition, Mr. Hustead said workers' pay had been shown to be a more powerful predictor of life expectancy than whether a worker was blue collar or white collar, but the bill did not recognize that higher-paid workers live longer and therefore require longer pension payouts. Many auto workers and airline pilots are classified as blue collar in the bill, because they are covered by collective bargaining agreements, even though they are highly paid."

So who gets to choose who is blue collar and who is white collar? moveon.org?

Honestly of all the debates I've read about social security, I've never heard an argument as bizarre as the one you provided.

If you want to believe that private accounts are a bad thing (oh and by the way Bush is suggesting trust funds as an alternative to market investment so there goes the misguided enron quip) that is fine, but don't use Anring as your economic source. I know you hate the president and all, but do research for yourself and listen to the other side of the debate. Hell even Alan Greenspan backs private accounts. Alan freaking Greenspan. But let me guess, moveon.org knows more about social security than the federal reserve chairman?

Oh and I don't totally agree with Bush's plan, mostly I think he has fudged some numbers like bloomberg article states, and I don't think there is a "crisis" however as Greenspan noted, something needs to be done soon or we will have a crisis.

[Jacques Treatment]

Actually, those articles do talk about transition costs, but instead call it a "revenue crunch" or similar such term. Revenues diverted from the coffers still can't be used for benefits as they otherwise use. That money needs to be supplemented from somewhere. That's the cost of transition--that's a loan.

From one of the articles:

There are no transition costs," Hunter said. "There's simply a cash flow crunch that exists and if Congress chooses to borrow the money to alleviate that, it has done nothing more than replace one form of debt ... with another. It's refinanced the debt."

The difference between the "crunch" and what would have otherwise been pay-back through the same system is that the "crunch" comes all at once, and it's sizeable. What would have been drawn gradually through contributions now becomes another huge lump of debt that we'll have to pay for somehow.

As for the question, "Who is blue-collar?" It really doesn't matter; actuarial tables have been made for just about every particular type of worker based upon risk factors, stress, and the rest. These are recalculated year after year, primarily for insurance purposes. There is no reason that the government cannot use these effectively as well.

As for raising the retirment age, I actually *do* suggest that the white collar worker gets a retirment... it just happens at a later age. If you retire at 70 and live to be 80, you get as much time as the coal miner who suffers from his job, retires at 50, only to die at 60. Naturally, these are broad-stroke examples.

As for "trust funds," if they're so good as alternatives, why divert from the main Social Security trust fund at all? At least with one big trust fund, the government should have better bargaining with the banks regarding its accounts. Instead, this just pushes numbers around and nets banks some more capital for *their* investments (if not service charges and fees related to the trusts in question). Then there's always bank failures and such: Silverado, anyone?

The problem I'd had was getting the actual actuarial table that the SoA is using, but here is another article about that topic.

And now, what you've all been waiting for, the actual Society of Actuaries' Mortality Tables! They provide a great deal of text analysis, which is good, because the processes used to analyze the numbers is quite arcane. They break the data down by industry, as well, so any need to taxonomize to the two terms "blue collar" and "white collar" in analysis has effectively been removed, if the government wanted to use more exacting calculations.

--J,

carrying the three

[Scary Guy]

You know in Logan's Run they also fixed this problem