Posted on 08/18/2002 7:58:19 AM PDT by 2Trievers
THEY REALLY SHOULD know better. The issue is not that difficult to understand. Social Security is going bankrupt. In one sense, it already is. According to the deputy director of the Congressional Budget Office, "Even calling it a trust fund can be misleading and confusing to retirees, members of Congress and the media alike. The trust fund holds not money but IOUs from the government to itself. No matter how healthy the trust fund is claimed to be, the economy must generate the cash needed to pay these IOUs to fund claims to eligible beneficiaries." The Democrats have offered no solution for ensuring that Social Security becomes solvent. President Bush, with the help of a bipartisan commission co-chaired by legendary former Democratic Sen. Daniel Patrick Moynihan, has. In response, all Democratic candidates do is try to scare the elderly by misrepresenting the President's proposals. "Privatizing Social Security is a bad idea, not only because it is risky but because it will require raising taxes, cutting benefits, or both," Gov. Jeanne Shaheen has said. This is not true. The only option that requires "raising taxes, cutting benefits, or both" is doing nothing, which is exactly what the Democrats are doing. Every one of the current Social Security reform plans pushed by Republicans would increase benefits for future retirees. How do we know this? Actuaries for the Social Security Administration have certified that each of the plans would do so. "Privatizing Social Security through the establishment of private investment accounts will divert over one trillion dollars over the next 10 years away from current beneficiaries, creating a shortfall that can only be made up in one of three ways – higher taxes, reduced benefits, or huge deficits," said Martha Fuller Clark. We've already addressed the lie that diversifying Social Security accounts by allowing people the option of putting some of their funds into stocks or bonds would raise taxes, cut benefits or both. What about the $1 trillion claim? Not true. The Fuller Clark campaign says it got this figure from a December 2001 report by the Washington-based Center on Budget and Policy Priorities. We looked at that report. Far from saying that privatizing Social Security will drain $1 trillion from current beneficiaries, the CBPP report says the $1 trillion over 10 years is only a possibility and that the money would come from Social Security funds, a combination of additional payments individuals make into their private accounts and extra money transferrred from the federal budget. A Katrina Swett press release said that allowing people to invest some of their Social Security contributions in private accounts would "play stock market roulette with Social Security funds." Let's consider which is more risky, allowing individuals to diversify their Social Security funds by diverting up to 4 percent (the maximum amount that could be "privatized" under the Bush plan) or keeping the current system intact. An individual retiring today would have realized a 1.74 percent annual return from Social Security, after inflation. Had that same individual invested only in the stock market, his return would have been almost three times as much, even after the past year's market declines, a Cato Institute analysis found. Over the long term, stocks can be considered less risky than other investments. Wharton Business Scool finance professor Jeremy Seigel studied the stock market's history and found that over any 30-year period, the lowest stock market return was a 2.6 percent gain. The worst 30-year performance of Treasury bills was a loss of 1.8 percent. The worst 30-year performance of bonds was a loss of 2 percent. A Brookings Institution study found that even a worker retiring in 1933, when the stock market was at its lowest point in history, would have received an annual average return of 4 percent. Under the bipartisan plans offered by the President, Social Security benefits would increase, individuals would have the option to invest a maximum of just 4 percent of their Social Security funds in private accounts, those private accounts would be the personal property of the beneficiary, and the system would not go bankrupt. Under the current system, benefits are not guaranteed, the system will be unable to pay benefits by the time today's college graduates retire, and payroll taxes would have to be increased by more than $23 trillion to continue the current level of benefits. Whether one calls it "privatization" or "personalization," allowing individuals to invest a tiny portion of their payroll tax money in an individual account is a great idea. Think of it this way: Would you invest all of your retirement money in one place? Of course not. So why let the federal government invest it that way? What is called "privatization" is better termed "diversification." Everyone knows that you should diversify your retirement investments. Why do the Democrats want to prevent people from doing this?
Sounds like "Enron" accounting to me.
Right. Further worth pointing out that the 7.65% that comes directly out of my and your income, which we never see, is still subject to income tax.
That's exactly the way to think about it.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.