----- Original Message ----- From: "Erik Reuter" <[EMAIL PROTECTED]> To: "Killer Bs Discussion" <[email protected]> Sent: Wednesday, January 19, 2005 6:12 PM Subject: Re: Kotlikoff's PSS plan
> * Dan Minette ([EMAIL PROTECTED]) wrote: > > > But, my generation supported higher taxes on itself to partially pay > > for our own generation. Right now, our taxes have put 3.3 trillion > > into the trust fund for our own retirement. It should near 5 trillion > > by 2010 (or about 40% of GDP). The change in taxes in the early '80s > > were the cause of that (the reserve was only .2 trillion in '80. > > Partially pay for itself? That means they did NOT pay for themselves (I > wonder how the IRS would feel if I told them, "well, I partially paid my > taxes"). They paid in 4-5% of GDP year, and will get out a bit above 6% > of GDP per year. Social Security had been from inception to the time I was discussing the present generation of workers paying for the present generation of disabled and retirees. It's just like the present generation of workers pays for the present generation of children. > > >And the politicians will give it to them, since spending now and > > >leaving the bill for the next elected official is good politics. > > > > That didn't happen when I was close to your age. > > Yes, it did. It has been happening continuously since SS started. And > not just in SS. You posted the national debt figures yesterday. The national debt, in real terms, went down by a factor of four between '46 and '80. It ballooned under the two Bushes and Reagan, and went down some under Clinton. I think this just shows that there is something fundamentally wrong with supply side economics. > Except that, as has happened each generation since SS began, people will > try to raise benefits for themselves and put the bill onto the next > generation. I guess I'm not clear. My taxes are now paying for benefits for the previous generation of workers. They also go to pay the future benefits of the next generation (including me). As a result, unlike previous generations, SS is roughly a break even proposition for my generation (at least according to the reference I was given.) It may be helpful to look at the fraction of SS tax going to paying for the present generation (both retirement and disability) and for future use. By decade the % of SS taxes being put away for the future is: 50s 24.3% 60s 16.1% 70s 13.8% 80s 21.2% 90s 28.5% 00s 32.5% >From the '50s through the '70s, one can see a general trend towards lower SS savings for future benefits...it was more and more to just pay for today. Since '80, the fraction of taxes for future benefits has risen significantly....with the rise in SS taxes. >The pay as you go idea is fundamentally broken given human > nature and politics. If it were, then we wouldn't have fixed things in the early '80s. We are looking at a need for a much smaller fix. It's true that the present budget deficits are very worrisome....and it bothers me that many people still believe in trickle down economics. But, with SS, we have made more painful changes in the than we presently need to fix it. >People need to account and be accountable for their > own saving and spending. Earmark the money to each person so that there > is visibility and accountability. While I favor personal accountability, I also favor community responsibility. I think there should be a balance between the two. I think that we, now, have pushed to balance to worrying more about our seniors vs. our children, and I'll agree that this balance should be redirected. I also agree that the savings rate is abysmally low now. I see how your suggestion is one way to address that. But, I...as I think others do....reserve the word crisis for something that may collapse on us if we don't address it soon. I think our balance of payments problem has the potential to be an explosive crisis within the nex t 4 years. We may have gotten to the point where, no matter how smart and responsible we are from here on, we're still in big trouble. I think the federal deficit represent another, related potential crisis. They are an immediate problem, and could reach crisis proportions within a decade. I think they should be addressed by rescinding Bush's tax cuts. Maybe they have to be phased out to keep from jarring the economy. I think Social Security could become a crisis in 30-40 years. We can take modest steps now to make sure that SS will be maintainable virtually forever. Indeed, given your economic assumptions, we should be able to start cutting SS taxes as a fraction of GDP within 40 years by implementing some rather modest changes. So, by all means, lets actually solve a problem before it is a crisis. But, we still need to remember that we have several real time fiscal crisises on our hands right now. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
