Assuming we can make a smooth transition, satisfying current obligations to retirees and near retirees, what sort of cons are there for privatizing SS?
Do we think private financial institutions won't give us the same return on our money?
Currently, with longer life-spans, are people receiving more than they ever put in?
Will banks oppose setting up untouchable savings accounts? Will they charge large fees?
Since SS is handed out on a basis of how many hours you worked and the amount of money you've put in over your lifetime, what sort of negative points are there to make John Kerry so vehemently opposed to privatizing SS, ever?
Posted by Paul Goldner (Member # 1910) on :
Social Security is basically a commitment ot making sure that we meet some level of minimum standard for retirees. Privatizing social security means we are backing out of that commitment.
Posted by Frisco (Member # 3765) on :
Is it better to acknowledge thet we're backing out of it by setting up something in its place, or do we keep handing out benefits, taking money from other programs until we just can't afford it anymore?
Posted by Paul Goldner (Member # 1910) on :
I don't think those are the only two options.
Posted by Frisco (Member # 3765) on :
True. We could raise taxes or lower benefits. But if (if) the private sector could get us bigger returns on our money, is the only reason to keep it as a government institution the fear that we'll only be able to take out what we've put in?
Posted by Dan_raven (Member # 3383) on :
Here is the problem.
SS is not supposed to be one's sole retirement plan, but was supposed to be the emergency, last ditch, support network for those to old to work.
Replacing it with a privatization plan is great for the investment communitee, but it does not give that last ditch support that is required.
People who claim, "If I would have invested my money it Stocks, I could afford a condo in Arizona" miss the point.
SS is supposed to make sure that you have someplace to live.
There are a flood of bad investments, cons, and junk investments out there now. Imagine what the system would be like if every person, no matter how gullible, was offered the opportunity to invest as they wished. Sure, 90% would invest wisely. But 10% would end up the suckers of some unscroupulous Ken Lay=esque, credit scheme.
Then where would they be at retirement age? The wards of the state? Starving on the street? Those that don't have family would be worse off, but those that did have family to take them in would be a financial drag on their economy as well.
Posted by Frisco (Member # 3765) on :
I'm not suggesting that people be given a choice as to what they invest their money in, just that it be put in a personal account rather than a government one.
Much like a retirement account, but without the ability of early withdrawl.
Posted by aspectre (Member # 2222) on :
I'd suggest a direct bonds/shares-instead-of-money single-level tax on corporations to fund SocialSecurity. Then gradual sales throughout the year -- ~1/250th per workday of the total of any given stock/bond to minimize market-flooding driving down bond/share valuations -- of those bonds/shares to raise money for SocialSecurity payments.
The reason the Republicans like privatization is cuz: 1) New money into the bond/stockmarket overinflates current bond&stock valuations. Look at the Japanese stock&bond markets. 2) Most of the income earned in bond/stockmarket retirement trust accounts goes straight into the pockets of brokers and mutual-fund managers for stock/bond churning -- excessive amount of sales and purchases to generate commissions -- adding insult to the injury that the portfolios they select substantially underperform the market average. 3) A wealthier sophisticated investor in the bond&stock markets who manages his/her own portfolio pays considerably less in commissions and considerably less taxes on profits than those who would be forced by the government to choose amongst those usually badly managed retirement mutual funds.
[ September 22, 2004, 06:06 PM: Message edited by: aspectre ]
Posted by saxon75 (Member # 4589) on :
According to what I could find here (under Analytical Perspectives, Table 24-1), Social Security is projected to account for aboutr 21.3% of total government expenditures in 2005. Defense, by comparison, comes in at about 19.7%. (In 2000 the percentages were 22% and 15%, respectively.)
From what I hear, social security is facing major problems when the baby boomers hit retirement. A friend of mine says that reasonably simple means-based eligibility testing would reduce the outlay enough to make social security manageable. What do you folks think of that idea?
Posted by Dagonee (Member # 5818) on :
I'm expecting means-based outlays by the time I retire, and I'm not really against it. They also need to start raising the retirement age gradually to take rising life expectancy into account.
Dagonee
Posted by Goody Scrivener (Member # 6742) on :
quote:I'm expecting means-based outlays by the time I retire, and I'm not really against it. They also need to start raising the retirement age gradually to take rising life expectancy into account.
Do you really think that by the time we're old enough to retire (I'm assuming you're a bit younger than me since you're currently in law school) that therew will be ANYTHING left in Social Security if nothing changes? My understanding - and I could very well be wrong - is that our parent's generation (a.k.a the Baby Boomers) will completely wipe out what funds are left within ten years, leaving absolutely nothing at all for us.
I know that my grandmother, who collects TWO payments (her own benefits and widow benefits from my grandfather) still can't entirely make all her bills. No, she doesn't have another source of income any longer. She used to work part-time but her health now prohibits it. She often misses doses of medicine simply because she can't afford to pay the deductibles. While what she eats is nutritious, variety is very limited and ramen features prominently at times. I can't imagine how people with only one distribution or where both partner is still alive can manage without other income.
Looking at that, especially in light of there being no funds in ten years, is really frightening. Knowing how much I've had deducted from my payroll over the years, anticipating that I'll never see that money again even though I should have it coming to me in 30-some years, is painful. If I could put that money into a private account for my own future benefit, I'd feel much more secure, even if I were only to get the kind of return I get on my credit union savings account. At least I would know without a doubt that the money would be there when I could no longer work... and yes I do plan to work for as long as I'm physically able.
Goody
Posted by Dagonee (Member # 5818) on :
If nothing changes, it will run out of money. I'm expecting these changes to start sometime in the next decade. This is why I want to give my "save $2,000 a year for 8 years when you're 21 and have almost as much money as saving $2,000 a year for 30 years starting when you're 30" lecture to as many young people starting out as possible.
I know lots of people can't save that much, but many, many more can than actually do.
And I think we're close to the same age. I took 11 years between undergrad and law school.
Dagonee
Posted by Belle (Member # 2314) on :
Social security is not a good term around my household right now.
Thanks to the so called "Windfall Exclusion Act" my husband is ineligible to receive social security benefits because he participates in a pension as a public servant.
So all the money he's put in since he started working at age 16 is of no benefit to him whatsoever. All the insane amounts he pays out of the business profits he makes now will never gain him anything.
Yeah, I know all the arguments about how it's not supposed to be considered "his" money, but it's damn frustrating to know all that money that was taken out of his checks in years past and what we send to the IRS every year from our business profits will never result in any monetary benefit for us.
Posted by Storm Saxon (Member # 3101) on :
1)Raise the retirement age.
and/or
2)Only pay social security to those that need it.
Doing both of these things would help SS payments to go down, I think. If SS is only paying for,say, 20% of the population, whom is older, then that allows people to invest the savings into private accounts. This should be agreeable to those people in the higher income brackets, I think.
Posted by Dagonee (Member # 5818) on :
Belle, have you made sure that you have enough quarters to qualify? It's pretty easy to shuffle the profits around so the SSN payments are credited to you. An accountant should be able to show you how to do it pretty easily.
Dagonee
Posted by Sopwith (Member # 4640) on :
One thing that the government needs to do, but they are reluctant to do, is to keep their hands out of the Social Security cookie jar.
Most of the "wealth" stored in there is no longer hard currency, but IOUs for the hard currency. They spent way too long in using funds from there to meet budgetary needs.
And while the money is out of the Social Security account, it hasn't been earning interest. To fix this problem, the first step is keeping the money where it is supposed to be.
Then they can move to means-based testing and be a bit more vigorous in pursuit of fraud cases.
Once the actually begin managing it responsibly, we can sit down and figure out how to preserve this. It is a good program and one done for the right reasons. And it makes a huge difference in the lives of more people than we can ever understand.
Posted by BookWyrm (Member # 2192) on :
quote:One thing that the government needs to do, but they are reluctant to do, is to keep their hands out of the Social Security cookie jar.
Most of the "wealth" stored in there is no longer hard currency, but IOUs for the hard currency. They spent way too long in using funds from there to meet budgetary needs.
And while the money is out of the Social Security account, it hasn't been earning interest. To fix this problem, the first step is keeping the money where it is supposed to be.
Then they can move to means-based testing and be a bit more vigorous in pursuit of fraud cases.
Once the actually begin managing it responsibly, we can sit down and figure out how to preserve this. It is a good program and one done for the right reasons. And it makes a huge difference in the lives of more people than we can ever understand.
Hear! Hear! IAWTP
Posted by Dagonee (Member # 5818) on :
The alternative would be to turn it into a pay as you go system. This would allow them to stop funding it via regressive payroll taxes.
I'm not sure it would be better than a true pre-funded system. But it has to be all or nothing - this middle of the road system where we pretend it's pre-funded is deadly.
Dagonee
Posted by fugu13 (Member # 2859) on :
Dagonee -- yep, I remember in the 2000 elections when Bush was taughting moving $1 trillion dollars of social security into private accounts within the next ten years and going "so where is he subtracting out the $1 trillion he needs to get in revenue to pay out to people immediately from?" (it certainly didn't appear in his ten year budget!)
Posted by Olivetta (Member # 6456) on :
I haven't read everything in the thread, as I'm pressed for time right now, but I do have something to add to the discussion.
1. A large part of the press for privatizing SS has to do with the private sector wanting the commissions on the huge gov't funds. They are a big force behind the lobby.
2. A lot of people forget that a large portion of the SS safetly net is paid out in disability benefits. Right now SS funds are invested in very safe but lower interest sources. People FOR the privatization point out that investment in the stock market could provide more, if you can ride out the market downturns. If you get smashed by a truck, you can't wait to ride out a downturn, and you are screwed.
I worked for SS for nine years, and I have seen people who have fallen through the cracks in our current system, but not to many. It is a safety net. What is the point in having a safety net that isn't safe?
They may increase taxes, or deny ss benefits to the wealthiest recipients. I dunno. We'd be okay if there weren't so damned many Baby boomers. *shakes fist* they are a big demographic hump. If we could get over that, we'd be fine. But as they retire, a larger segment of the population will be getting benefits than will be paying into the system. That's bad. I don't deny that.
But I have seen too many people for whom SS is the only income they have in their old age, and I am not willing to risk having them end up on the street.
I don't have an answer, but the privatization scheme isn't all sunshine and roses. You, Frisco, might do better, but there are a lot more people who wouldn't. I've dealt with the public who come into SS offices. Many of them can barely write their own names, and depend on others to handle these sorts of things. Those people will be very easy to victimize in a privatized system. Some of 'em regularly send money to Robert Tilton, for chrissakes.
Posted by Dagonee (Member # 5818) on :
One thing they need to do is disconnect the disability portion from the retirement portion. Conceptually, the former is like insurance and the second is like investment. I realize insurance has investment aspects to it, but it makes much more sense to fund disability on a pay-as-you-go basis..
Dagonee
Posted by jeniwren (Member # 2002) on :
Olivia, you make an excellent point -- Social Security isn't just for the elderly. The portion used by disabled citizen, is, IMO based only on experience, is that "disability" has sure come to encompass people quite capable of earning a living.
For example, the amount I receive for my son's child support is three times as much as what was negotiated in the divorce settlement. Why? Because it is paid by Social Security. My ex-husband was diagnosed "disabled" and has been on the Social Security dole for the past couple of years. The way SS works for child support is that we get a percentage of the payment that would go to my ex. I don't need the money, fortunately, so it goes to private school tuition and the rest is saved for college. IMO, that's a misuse of the money that people think they are safeguarding for their elderly years.
I've also known a couple of other people much too lazy to do honest work who have figured out how to be "disabled" also and still to this day live on SS.
I'm not saying there isn't a place for that use of the money, but the only people I've known who collect SS for disability were IMO capable of working. That's quite a waste.
Posted by Olivetta (Member # 6456) on :
I did see a lot of people get disability who could probably work. However, most of them were denied several times and eventually went before a judge with attorneys and medical evidence acquired by the attorneys (usually including questionable menta evaluations and other things).
Now, I did see some people who were really disabled not get their benefits without a fight, too. The system is flawwed, no question. But as long as there class action lawsuits and medical professionals willing to stretch the truth, there will be people who abuse SS disability benefits. I don't like it, but I'm not stupid enough to think anything we do will change things for very long. It's a multimillion dollar business for some law firms, and they won't give it up.
It's a horrible situation, and I'm glad I don't have to face it everyday anymore.
Posted by Dan_raven (Member # 3383) on :
Here is my three step approach.
1) Set up a draft, but make it for all folks now over 55.
2) Increase the war on terror by, say, invading Mexico.
3) If we win, we turn the old-Mexican conquered territory into a low paying retirment center.
If we lose, well, we've killed off enough of those pesky babyboomers to keep the system going.
Or alternately, instead of offering cheap drugs from Canada to seniors, we ship them off on sleds, to the ice flows of the Canadian artic. Hey, its a traditional value--that's what the Eskimo's used to traditionally do.
Posted by Belle (Member # 2314) on :
Dag, our CPA has indeed been over it. Yes, he definitely qualifies for benefits he will never get.
And I, as his spouse, won't get but a small portion of mine either.
Funny, that they call it a "Windfall" exclusion act. Because our fire department pension is such a windfall, truly.
Edit: How about I spell windfall correctly?
Another edit: Here is some information on the WEP. According to what we've been told, Wes will lose 60% of his social security benefits and I will lose a portion of my own as well, because he's a firefighter and works in that job.
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