Social Security plan wins support

By Amy Fagan
THE WASHINGTON TIMES
June 30, 2005

House Republican leaders say there is broad support in their ranks for the new idea to use Social Security's surplus to create private accounts, and members were told yesterday to tout the idea at home and expect a vote on it as early as July.

http://www.washingtontimes.com/national/20...23022-4153r.htm

Private accounts - this proposal by the Republicans is still just a partial plan that mainly includes private accounts. The main problems with Social Security are demographics, extended lifespans, and a young wage base which won't have the real income for their taxes to pay for their parents and grandparents.

That news article in the Washington Times doesn't seem balanced - it had nine paragraphs quoting Republicans before one quote or paraphrase of the Democrats. Anyway, this serious problem should not be a partisan issue. Unfortunately, everything is politics, and politics now is always partisan.

Private accounts could be very risky, such as the dot.com meltdown, the Enron types of scandals with their 401(k) plans, and the stock market decline of 2000/2001. Most American workers are not sophisticated investors.

The treasury deficits year after year have been covered up, in part or whole, by the 'pension fund' we call Social Security, with its huge surpluses. Pension funds should always be accounted separately from operating funds. Basically, the SS trust fund is just a mountainous pile of IOU's in the form of treasury notes. A treasury that has annual deficits of hundreds of billion dollars every year is not a sound financial source to be lending money to. These suggestions of mine are not meant to be partisan, or liberal - simply the kind of sound fiscal policy and responsibility which the neo-conservatives have abandoned faster than a screaming mob of socialists.

The hard medicine to swallow is that SS benefits will have to be decreased, the ages for full retirement will have to be increased, the maximum income subject to SS will have to be substantially raised, and THE TAX WILL HAVE TO BE RAISED. That's what the electric railroads used to call 'the third rail' - if you touch it, you're electrocuted. Legislators aren't that suicidal.

I disagree.
The tax rate does NOT have to be raised.
Yes, there does need to be some minor tweaking of retirement ages and the way in which benefit increases are calculated AND the income cap for soc sec tax does need to be raised, but the percentage RATE does not and should not be raised. It is high enough!
As far as private accounts, the main problem is that the conversion process would be a huge government expense, basically an insane idea in the middle of massive fed deficits and a war.

I am not overly concerned with whether or not it is necessary to fix SS or if SS is in any trouble, but for the record, according to Fortune Magazine SS will begin harming the US economy in 2011.

Anyways moving on, why exactly is it BAD to let Americans put a percentage of their money in a private account where the government cannot dip into it at will, and where they may if they wish invest it freely? Why is it bad to allow people to control their own money?

Here is a bit of satire from The People's Cube, as to why the Republicans are really wanting to transfer things into private accounts.....

Ben-T, I'm enough of a poseur-libertarian to agree that, in principle, there's nothing automatically, inherently wrong in letting people invest something privately. They already can do that with whatever takehome pay they have. The total of 7.65% of their gross pay that's taken from employees' paychecks (and matched by employers) has 1.45% diverted to the medicare fund, so only 6.2% is left for OASDI.And not all of the OA, S, and D go for retirement - I don't know the exact breakdown.

Yes, it's hypocritical for the govt. to say they're running a pension system when it's just a scheme in which they've SPENT all the pension funds to operate a free-spending federal government, and have nothing to show for it except financial paper of questionable value.

I don't care - let the Joe Sixpacks invest in the Dow-Jones index, or the S&P 500 or Nasdaq, or the Somchai & Pornsapat TomYum Company if they wish. But they're able to do that now, with their 401(k) plans, various IRA's, or private investments. The real problem, though is that Joe Sixpack and Joanny Mascara aren't saving enough, outside of their meager SS contributions, to support them in their old age. SS is supposed to be the safety net, and if it disappears like Enron stock in the employees' 401(k) accounts, Joe and Joanny are going to be very uncomfortable in wet Drypers at age 81 in a decrepit nursing home.

Have the Republicans (or Democrats) who tout these private plans released any details? How would it work? Who would monitor it? Private pensions are failing fast; the federal pension guaranty fund is horrendously in debt now.

TQ, perhaps you're right that SS taxes may not have to raised; I hope you're right. The alternatives, as we've both listed, amount to a decrease in benefits for the same rate of tax. The 7.65% rate hasn't increased since about 1980, but the demographics simply don't support the benefit program in future decades.

Raising the salary cap on SS contributions (the 6.2% tax that's now capped around $85,000 annual salary) is an extreme form of socialism! Already, high wage earners get royally screwed by the benefit formula. It would only be a wealth redistribution system, from rich to poor - which I'll oppose within the confines of what is allegedly or supposedly a pension system.

The trouble with private accounts:

1. It is step one of the radical right wingers plan to totally privatize social security.
2. As recipients get their pay from the general fund, if people are allowed private accounts, current recipients need to be paid even more from general funds; we can't afford it.
3. Raising the cap is not socialism. It is fair. A worker earning 15,000 dollars pays a much higher percentage of her earnings that the worker earning 150,000. Typical right wing tripe to try to paint the wealthy as poor victims.

Thaiquila, you're right that anybody who earns over the capped amount (roughly $85,000) has automatically got less of their total income being deducted for social security. That's beside the point, actually, because this is a pension system. Most pensions that are based on contributions are similarly capped - for example, the Thirft Savings Plan, and IRA's.

The reason I'm saying it's a socialist redistribution of wealth is in the benefit formula. The minimum wage earner all their life is allowed a pension which (adjusted for inflation) pays them 90% of their average wage. But once you get a PIA greater than about $500, the 90% formula falls precipitously. I tried to find the formula on the SSA website, but they don't have it anymore. I think the second tier is about 60% and the third tier is 35%. It's an inverted pyramid from the progressive income tax pyramid. In other words, the more you earn, the less you get back for your payments. No private pension would work like this; it's confiscatory.

Sorry if I'm not clear, but I can't find the percentages anymore.

It is not a PENSION SYSTEM!
It is a safety net so that disabled and old people do not freeze or starve.
You don't own the money you contribute.
It is indeed a SOCIAL PROGRAM, and a ###### good one at that.
It is extremely popular and the American people DO NOT want bush to mess with it.

Thanks for clarifying your definitions or descriptions. Well, maybe yes or no. It is designed much as a retirement pension, and that's what how it was 'sold' to the American people for lo these many decades. I was just a kid reading Reader's Digest - though I hate to admit that - and periodically they'd have an article by a former chief actuary of the SSA. Being an actuary, this mathematician of pensions would write that it was SUPPOSED to be a pension system and a survivors' and disabled program, and it was supposed to be mathematically, actuarially sound. Maybe I'm too much of a fiscal conservative (or a former actuary trainee) to think of the retirement portion of the SS program as a socialist giveaway. Granted, the benefit formula has always been slanted in favor of the low wage earner and against the high wage earner, but they seldom mentioned that, and few high wage earners realize it. It's a well hidden mathematical fact; I just can't find the real numbers now.

Yes, SS is an extremely popular program, which many middle aged Americans are depending on - just like a retirement pension - based upon their wage earnings. They blindly assume they'll get back a proportionate amount, but they won't.

Yes, the American people don't want Bush, either party, or either house of Congress to mess with their benefits. But the things you mentioned earlier - delaying the age for full retirement, and raising the earnings cap - amount to 'messing with the program.' Yet it's inevitable that it must be messed with. You and I don't trust Congress to mess with it; we should also be wary of what the Democrats want to do with it. SS got saved in the 1980's by a subcommittee headed by a fiscally conservative Democratic Congressman, J. J. "Jake" Pickle of Austin, Texas.

Safety nets dont pay benefits to everyone of a certain age regardless of need. Welfare is a safety net. Benefits are paid to those who need it. MARK

The trouble with private accounts:

1.) The Republican party proposed it.

You might as well have just boiled it down to that.

As far as totally "privatizing" social security, yes I would like ALL of my social security money to be put into a private account the government cannot dip into at will, and that I can, if I so choose, use to invest in the market.

Why exactly should the money I pay into SOCIAL SECURITY go not into a SECURITY account I control, but into the greedy palms of the federal government?

Furthermore the historical correlation between the increase of economic liberty and increase of economic growth is no accident. NEWSFLASH: People are smart enough to handle their own money.

You have a point there.
All old people can get social security.
This might mean there will be means testing in the future. I hope it doesn't come to that.
However, DISABLED people can get ss benefits at younger ages.

But don't tell the left that Ben! The free market is evvvvvvil! Those socialist scums think that the American people are too stupid to handle their own money, just what they think with the AA community.

Do they have an alternate plan? Nope! NOTHING, just the same more "Bush is evil!" BS.

Thaiquila, how do you mean that all old people can get social security? If you mean the old age benefits, you have to earn proper credits under FICA or SE (for which you pay a lot of employment taxes). Then, upon filing a claim, your benefit (meaning the cash you receive monthly) is a factor of how much you've earned during your highest 35 years of work, indexed for inflation. My ex-wife, who probably doesn't have $17,500 of earnings in her lifetime, would have to have that sum divided by 35, yielding an average of $500 per year. Reduced ten percent, that means the most she could get would be $40 per month. If she'd never contributed to SS, or didn't have 40 quarters of credit, she'd receive nothing. If she was getting a pension not based upon SS earnings, or was married to somebody who did something special, she'd get little or nothing even if she otherwise qualified.

Again, when we're talking about retirement and annuities or pensions, 'benefit' refers to the monthly or annual cash payment to the 'beneficiary' or the recipient.

Yes, I also hope that means testing doesn't get applied to the receipt of SS benefits. Regardless of their other cash savings, interest income, etc. - as long as they're not working too much - retired SS beneficiaries shouldn't have their benefits reduced. As it is, their benefit is subject to income tax on a certain amount for people with high gross income from all sources.

Whether the Social Security Old Age system is called a 'pension' or a 'retirement program' is semantic. For practical purposes, it is a retirement pension.

Agreeing in part with you, Ben-T: we should neither oppose nor support a program based solely upon which of the two equally corrupt, immoral, major political parties proposed it. They're all crooks, essentially.

SOME people are smart enough to handle their own money. Many are not. The level of economic/capitalistic knowledge of many Americans is dismal. They don't really know who Allen Greenspan is, why greenbacks are just 'federal reserve notes,' foreign exchange rates, or the difference between puts and calls. Many Americans are sitting ducks for a smart-talking stock broker. Who do you think the biggest group of losers is in stock market crashes?

If they have extra cash, let them invest privately. But most American workers need a program like Social Security. It can be improved, but large-scale transfer of income funds to the SS trust fund would not only endanger the existing and future beneficiaries. It would also throw good money after bad into the stock market, which is already overcapitalized.

On the Other hand, will SS be there for them in years like 2020 or 2090? I advise my children not to depend on getting one red cent out of the SS program.

[QUOTE]On the Other hand, will SS be there for them in years like 2020 or 2090? I advise my children not to depend on getting one red cent out of the SS program.

[/quote][/QUOTE]
Sad, but probably true.