quote: They would be invested in broadly diversified funds that have exposure to hundreds or even thousands of companies.
So, I'm guessing that this would be a requirement under your ideal plan? (that is, diversification) It seems logical to me to diversify, but there are always people willing to do otherwise.
(I can't tell whether you would want required diversification of such investments, or not. The first paragraph suggests so, but the second indicates it would be at best a necessary evil to you. Just a little slow, here. )
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"I can't tell whether you would want required diversification of such investments, or not. The first paragraph suggests so, but the second indicates it would be at best a necessary evil to you. Just a little slow, here."
Not slow at all CT, I'm just not being clear. It is my understanding that the personal retirement accounts currently on the table would be similar to most 401k plans in that individual stocks are not an option. All stock exposure must be through mutual funds that are broadly diversified. In other words I don't think owning individual stocks is even on the table. Thus the concern of having a complete disaster and losing all of your money is only possible in an armegedon like scenario. It is however possible that even in a broadly diversified stock mutual fund you could experience very significant losses based on the market as a whole declining as it has done at various times in the past. That is why it may make sense to limit people's exposure to stocks as they age so that if we did experience a large crash like 1987 or 1929 people close to retirement would either not have stock or at least not much.
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The question of whether or not the govt should force people to limit their stock exposure is similar to whether the govt should pass motorcylce helmet laws. It is obvious that if you are going to ride a mortorcylce you should protect yourself with a helmet. The question is should the govt force you to be smart? I don't think so.
I know, there is one difference. People who chose not to wear helmets either don't crash and are fine or do crash and remove themselves from society. Either way they are not a problem for the rest of us. People who are not prudent in their investment choices have the potential of being a burden that the rest of society has to bear. It is my belief that the fraction of people who would do this would be small enough that the govt could provide some kind of minimal benefit to them through the current system(i.e. maintaining a very small portion of current payroll taxes). I would prefer that this happened through private charities but that might not be politically feasable.
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I'm right now listening to a financial planning radio talk-show, and they're debating this issue right now. If you have streaming audio capacity on your computer and want to know more about how privitization works, you can listen live right here.Posts: 786 | Registered: Jun 2003
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Sorry to double post, but this was under the state of the union topic, and it really applies here...
Someone needs to take the President, Vice-President, and all of Congress to a nice quiet place, and explain that you can't fund new projects and cut taxes at the same time. Raising the national debt limit doesn't help either, it just pushes the responsibility for repaying the debt onto the next president.
Folks, if any of us ran our households like this, we'd be homeless and destitute on the streets. Whether you disklike Bush or adore him, are a Republican or Democrat, you have to see that he is not creating policies that make fiscal sense. Frankly, these policies don't even make it past a common sense test.
I become very worried about our country when I hear some of the hare-brained plans that are being considered for our country and how they will affect us fiscally.
The plan for Social Security is laughable in its deliberately deceptive double-speak. I can't even begin to cover it here in the forums...but read the Washington Post article http://www.msnbc.msn.com/id/6903404/
What's worse is that it doesn't even mention MediCare, which is tied so closely to Social Security that any attempt to change one program will impact the other. Not to mention the fact that it's widely believed that MediCare will go bust years before SS.
What's so frustrating about this, is that we're just along for the ride. Our representatives don't live by the same rules as us, and aren't affected by their actions or in-actions until they run for election. Policy-making has stopped being about policy, and has just become another gimmick to sustain the career of self-serving politicians...
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Privatizing up to 4% of an individual's payroll tax. Is it me or is that not very much? I guess it will need to start out as not very much, since the contribution/payout ratio is going to be so critical for the next 20 years or so.
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Comparing the government's fiscal policy and a household budget is not a valid comparison in my opinion. When the govt makes the decision to lower taxes (decrease govt revenue in the short term) in many cases they actually end up with more revenue in the long term due to classic supply side economics. People have more money so they spend more which causes people to make more money and owe more taxes. Of course this only works to a point or the ideal tax rate would be .000001%. A household on the other hand that makes the decision to make less money, simply ends up with less money. Not the same.
I would be very interested in hearing a plan to fix social security that does not include private accounts. Fix, not delay the problem. To me even if the program is OK until 2105 it is still a problem that we are pushing onto the next generation.
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Mothertree just to be clear it is 4 percentage points of the current 12.6% payroll tax. That equates to about 31.7% of the total payroll tax. So it is a significant amount.
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Mothertree, the 4% is the amount of our income(subject to limits) that we will be allowed to put into personal accounts. So what percentage of the total social security tax does that make up? Social security tax is currently 6.2% paid by employee and 6.2% paid by employer for a total of 12.4%. Of those 12.4 percentage points the plan would allow us to put 4 of them into private accounts. 4 is 32.25% of 12.4. (i accidently used 12.6 in the last calculation sorry) If you use the entire payroll tax (15.3% including medicare etc.) the percentage is slightly smaller at 26.14%. Some people make the mistake that the 4% figure means only 4% of the numerical amount we pay into social security. I thought that is what you ment and was trying to clarify.
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See I thought it might mean 4% of income, but the way it was phrased seemed to mean 4% of the 12.4, which didn't seem like enough to make a difference. So I'm actually relieved at that explanation.
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Holden, My comparison was not meant to be literal, just comparitive in that, supply-side economics aside, there is nothing indicating that our economy is prospering by lowering taxes. Especially if our spending so far overruns the prospective returns of lowering taxes as to negate the supposed effects.
I agree that some level of privatization is necessary, I just don't believe that this plan is the way to go. The funds still disappear before the majority of us have an oppurtunity to use them.
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quote: there is nothing indicating that our economy is prospering by lowering taxes
I strongly disagree. I think that GDP growth to the tune of 4.4% for 2004 would argue in favor of the tax cuts.
quote:I agree that some level of privatization is necessary, I just don't believe that this plan is the way to go. The funds still disappear before the majority of us have an oppurtunity to use them
I'm not sure what you mean by "the funds still disappear." The whole idea is that they won't disappear because they will be in a personal account that the govt can never take. Obviously there is pressure on the system because there will be less money going in for those who are receiving benefits, but the idea is that will be offset at least partially by the reduction in benefits for those who choose the private account route. Maybe I'm missing your point.
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Despite the fact that I know very little about economics, I have come to the conclusion that...well, I know very little about economics.
I don't pretend to know exactly how taxes work, but I do know that the simple "taxes go down, revenue goes down" argument just doesn't work. The government economy is far too complicated for that.
And also know that the majority of those in Congress, and also the President and Vice-President, know a whole lot more about the economy than most of us in here ever could. So I would highly recommend against taking those people aside and explaining their faults. Because they would quietly explain how you are wrong (if these are Republicans you are speaking to). And I promise that the average Democrat's position on the economy is far more complicated than yours.
I don't mean to insult you, THT, I'm just warning you against questioning the intelligence of government officials. You can disagree with them all you want, but if you were to get in a one-on-one conversation with the President about the economy, you would have little to say (as would I).
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As every economist I know is of the strong position that tariffs are bad, yet people in congress and the executive continually put tariffs in place, I am confident that whatever they know about economics the people in the US government are more than happy to ignore it for political reasons.
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But what Congress knows to be bad and what they do anyway are two different things.
Everyone knows that inflating the budget with stupid add-ons on random bills is stupid, but they do it anyway. They know it's stupid - they do it. Not so with supply-side economics. They actually have reasons to believe that it will work, whether they are accurate or not.
And many well-respected economists do believe that supply-side economics work, in addition to the many that don't believe so.
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quote:As every economist I know is of the strong position that tariffs are bad, yet people in congress and the executive continually put tariffs in place, I am confident that whatever they know about economics the people in the US government are more than happy to ignore it for political reasons.
Not that I actually agree with tariffs or know why politicians put them in, but I'd like to point out that being bad for the economy doesn't mean it's the wrong thing to do.
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Name five well-respected supply side economists .
Note, this is not merely people which advocate strong supply side support, but people who are adherents to the "supply side" theory that ignores the demand side.
Krugman has some significant problems of his own, but his criticisms of supply-side economics are generally appropriate. Plus, its worth pointing out that Bush's second round of tax cuts got soundly criticized by conservative think tanks (including a supply side one or two, iirc) for using intentionally deceptive accounting and not being accompanied by spending cut proposals.
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Hobbes: while economists don't like subsidies either, economists are (generally) of the opinion that a subsidy program is better than a tariff program, resulting in basically the same benefits with fewer negatives.
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quote:Everyone knows that inflating the budget with stupid add-ons on random bills is stupid, but they do it anyway. They know it's stupid - they do it. Not so with supply-side economics. They actually have reasons to believe that it will work, whether they are accurate or not.
And voters continually reward those who deliver those add-ons, and punish those who don't.
This is voter problem as much as a politician problem.
quote:Hobbes: while economists don't like subsidies either, economists are (generally) of the opinion that a subsidy program is better than a tariff program, resulting in basically the same benefits with fewer negatives.
I wasn't advocating anything Fugu, just pointing out that there are non-economic or political related reasons to do things [even strongly economicly based things such as tariffs] too. It was an aside, not an attack.
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Dags, yes, but the politicans are the ones making the specific decisions, and so can be brought to task for those, while it is much harder to sway a large mass of voters to stop voting for someone who sends inefficient pork products their way.
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In politics, government, and economics, it is extremely important to be clear, particularly as there's a lot of misinformation out there .
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quote:Dags, yes, but the politicans are the ones making the specific decisions, and so can be brought to task for those, while it is much harder to sway a large mass of voters to stop voting for someone who sends inefficient pork products their way.
Actually, it's much harder to sway the politicians, because as long as the voters behave this way, we'll at best have politicians who refuse pork in for 2 or 6 year terms, and their replacements will revert to the voter preference.
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That doesn't make it easier to sway voters, that makes it more important to sway voters in the long run.
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I never expected to see the benefits from Social Security, but my wife is now eligible because her vision is failing. The more I read, the more that I believe that this is what Social Security was intended to be. A safety net for those who cannot catch themselves, not a carte blanche retirement fund.
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