On Sun, 19 Dec 2004 16:38:56 -0500, Erik Reuter <[EMAIL PROTECTED]> wrote: > On Sun, Dec 19, 2004 at 03:19:38PM -0600, Gary Denton wrote: > > > SS reform is a huge and unnecessary boondoogle and payoff to the > > favored finacial corporations. > > How's that? > > > SS isn't in trouble > > Wrong. SS has troubles.
Wrong, SS is not in trouble. Like many people during the 90's I was falling for that but a closer look at the number shows minimal or no problems. The problems are so far off that financial forecasts are notoriously unreliable. The CBO released a forecast this year that shows it good till 2052 when benefits would have to be reduced. These reduced benefits would be more in real terms than current benefits. This crisis point has move further out every new study. (Partly because wages have been growing faster than benefits. A continuation of this also would push this day of reckoning still further off.) Bush is offering us a guarantee of lower benefits and $2 trillion in debt to forestall the possibility that benefits will need to be lowered sometime in the 2040s or 50's from current plans. > It gets less minor the longer you wait, unless you break your promises > to people. Millions of people who will be alive in 2052 are today > expecting certain benefits. It is quite reasonable to think about the > best way to handle that NOW. Absolutely, and Bush's privatization is not the answer. You only have to look to Great Britain, Sweden or Argentina to see that. Administration costs have skyrocketed, returns on the private accounts have been minimal and the governments have either already or are expected to have to bail retirees out . > > Privatization would cost $1 to $2 trillion dollars over the first 10 > > years. > > No, privatization would cost very little if done correctly. I suspect > you are getting confused by money that has been implicity promised to > people becoming explicit on the books. But this is not a cost. The > promise has been made, accounting for it is just a detail. If you are > talking about the costs of investing the money, that is much less than > your figure. There are index funds today that are run on 0.1% of assets > a year. An index fund of the size we are talking about would benefit > from more economies of scale and could be run for less, I'd guess less > than 0.05%. If the average size of the SS account is $3 trillion during > the first decade, then administration costs would be about $15 billion > over a decade. These are ridiculous numbers and a non-understanding of SS accounting. I will note this is expected to be an argument the GOP makes - these new trillions in borrowing don't really exist. A conservative industry group pushing this idea says that brokerage fees might possibly be as little as $39 billion if they use the type of accounts you suggest. The SS trustees issue reports on the shortfalls with very conservative assumptions that show some tweaks are needed in order to keep taxes low four or five decades out. Privatization will make things worse, reduce the guaranteed aspect of the program, and duplicate the private 401Ks and similar accounts we already have. But Wall Street has already committed millions to Bush to push this idea. The Club for Growth alone has promised $15 million. NYT - "Under the most widely discussed plans under consideration, personal accounts would be created by allowing workers to divert a portion of their payroll taxes into investment accounts set aside in their name. At first, individuals would be offered a limited range of investment vehicles, mostly low-cost indexed funds. After a time, account holders would be given the option to upgrade to actively managed funds, which would invest in a more diverse range of assets with higher risk and potentially larger fees. "Because Social Security taxes are used to pay benefits to current retirees, nearly all the plans envision the government borrowing as much as $2 trillion to fill the gap created by diversion of some payroll taxes. Proponents argue that the borrowing would pay for itself over the long run because the accounts, if they generated a higher return, would help reduce or eliminate the future obligations of the Social Security system. "Some specialists on Wall Street, however, are worried that adding to the budget deficit by such a large amount over the next couple of decades might put upward pressure on interest rates, a move that would not be helpful to the stock market" http://tinyurl.com/4xp4w > > The argument is being mad to avoid going into debt forty years from > > now let's go into further debt now. > > We ARE in debt now, unless you intend to break the promises that have > been made to people who have contributed and are contributing to SS now. SS is generating tens of billions of dollars in surpluses now which Bush is using to make his deficit only $400+ billion. CBO estimates the first shortfall in 2052 keeping all current promises. Doubling the size of the amount of income subject to SS tax just about takes care of that. This is a regressive tax where lower incomes pay the full amount but after $90,000 in annual income people don't pay it. Increasing the retirement age one month every six months is another solution. I think this is really a plan to wreck and abolish SS so that the GOP won't face a choice in a few years of raising taxes or having the national debt skyrocket but that is another long story. I feel that whatever the final proposal is it will move SS off of the government books Right now the SS is on the books because it generates a surplus. I understand my libertarian friends being opposed to a "keep grandparents from starving government program" but when the leaks of the Bush plan call for borrowing another $2 trillion dollars to "save Social Security" you need to check your wallets and wonder what the Grand Old Party has been smoking. This is similar to the Bush plan to expand Medicare that paid more to corporations than it did to Medicare recipients. I might reconsider some form of universal stock and bond invest-in-America benefit account under an administrations that wasn't as corrupt, favored their contributors, secretive, dishonest, or was as totally inept as this one. There has been no program in four years they have not f**ked up. Gary Denton http://elemming2.blogspot.com _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
