Posted on 12/04/2002 4:04:03 PM PST by xsysmgr
THE NEWLY elected Republican Congress has not even taken its seats yet, but one key GOP objective that most Republican candidates ducked during the campaign is already back in play - Social Security. The White House has let it be known that privatization could be on the agenda as early as next year.
Historically, tampering with the popular universal retirement system has been seen as a political ''third rail.'' So unpopular is the idea that some Democrats this past year actually tried to force a vote on privatization, but Republicans blocked it because the timing was wrong. Many GOP candidates succeeded in blurring differences and cast themselves as stewards of the present system. So you would have to conclude that in the 2002 election, Republicans got elected not to privatize Social Security but because they succeeded in persuading voters that they would do no such thing.
But that was then. Privatization is back - the only question is when.
Though details have not been formalized, Bush strategists incline towards a plan that would divert a portion of the 12.4 percent payroll tax into optional private accounts. The theory is that younger investors could then put some of that money into the stock market, and get a better return than Social Security provides.
Leaving aside the politics, the idea has three big problems. First, Social Security is in play because it faces a potential financial shortfall about 40 years from now. After about 2040, its payout obligations are projected to exceed its revenue stream. Supposedly, privatization is a remedy.
The need to fix Social Security's finances is real. But diverting payroll taxes to pay for private accounts is the opposite of a solution because it would worsen that shortfall by several trillion dollars.
Second, as a consequence of problem number one, privatization would leave less money for Social Security checks, unless it increased the national debt by several trillion dollars. (With the looming deficits resulting from the Bush tax cuts, there is no longer a big surplus to apply to Social Security.) In order to cover the shortfall caused by the diversion of payroll tax receipts, privatization plans simply reduce the conventional Social Security checks. The new private accounts would supposedly make up for the loss.
Some versions would add a ''means test,'' which would require pensioners to demonstrate poverty before they can draw Social Security checks. As with welfare, retirees would have to deplete assets to make themselves poor enough to qualify (the genius of the current system is that Social Security is earned, and rich, middle-class, and poor alike are all entitled to checks based on their lifetime income and taxes paid in.)
The third problem is that Social Security and private accounts are simply not comparable. By design, Social Security is social insurance. No matter how long you live, you cannot outlive it, and the checks are guaranteed. With private accounts, once the money is used up, it's gone. And bad investment luck or bad timing relative to stock market performance can leave a retiree with reduced income (ask an Enron retiree.)
President Bush, in carefully chosen language, has promised that no retiree would lose any benefits because of changes in the Social Security system. But many younger Americans, not yet in retirement, would find themselves short-changed by privatization.
America's retirement system, such as it is, combines several elements: personal savings, private pension or 401(k) plans, assets from the sale of a house - and Social Security. It is Social Security that remains the one part of the system that is entirely reliable. Without it, half of America's seniors would be living in poverty. No wonder the two parties compete for the role of its champion. In the election, Republicans largely succeed in blurring differences on Social Security. But the matter will eventually come before Congress. Then the blurring ends.
Bush will try hard to get some Democrats to defect. Polling data suggests that some younger voters want those payroll tax receipts, to play the market. But the challenge for Democrats is not to abandon Social Security, but to strengthen the system's finances and extend social insurance, including health insurance, to younger families.
Despite a lot of nonsense about outmoded Depression-era programs, looming financial disaster, and charges of demogoguery, social insurance is the Democrats' winning card. Shame on Bush for deceptively monkeying with Social Security. But if the Democrats serve as his enabler, shame on them.
Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe.
This story ran on page A19 of the Boston Globe on 12/4/2002.
1. Start means testing of all recipients. Those who have other income will find their SS benefits gradually reduced, with a complete cutoff of benefits for those with incomes of over $20,000 a year. Yeah, I know you paid in; I don't care. You don't get to loot the next generation just because you paid in. Deal with it.
2. Collect no more SS taxes, period. We'll just have to nip this once and for all, and pay for it out of the general fund. If you don't save for your retirement, that's your problem.
So whaddya all think? (ducking and running for cover, as bombs explode in her general direction)...
Oh please, Santa! I have been a very good girl this year and my dream is to be able to keep some of my own hard earned money for retirement
It would be the gift that keeps on giving.
a.cricket
No, we'd like to keep OUR money to make investments of OUR choosing, not to piss it away on some government program that will never be there for us.
SS is a Ponzi scheme, and anyone in the private sector who ran a similar scam (used money from early investors to pay off later investors) would be in jail. The government, however, gets to throw US in jail if we don't comply with their stupid, immoral, and irrational scheme.
Defined Contribution News
12/04/02
--Stan Wilson
The George W. Bush Administration may push for personal accounts in 2003, rather than defer the issue to a second presidential term, said sources that have discussed this decision with Bush advisers. Six congressmen who want the White House to push for personal accounts right away wrote a Nov. 19 letter to the chief executive asking him to make his move now, rather than waiting until 2005. Through personal accounts employees would deposit a portion of their social security payroll tax contributions and have the ability to direct the investment of assets in those accounts. A spokesman for the White House press staff said, "we do not preview decisions." And, inside the White House, the sources said, those strongly favoring Social Security reform were said to be in agreement that the time has come to do it now. This year's elections have been widely perceived to be a referendum on Bush ideas about changing Social Security. Presidential aides who have a personal commitment to the issue are described by outsiders as very encouraged by the election outcomes across the country. As of last week Bush's decision was not yet made, the sources said.
Perhaps the most encouraging for proponents of Social Security change is that people in older age brackets--always the most potent voting block--did not vote against reform as they had done in the past. That, together with GOP control at both ends of Pennsylvania Avenue offers an opportunity that might not soon recur. The six House members, Reps. Jim Kolbe (R-Ariz.), Charles Stenholm (D-Tex.), Nick Smith (R-Mich.), Pat Toomey (R-Pa.), Cal Dooley (D-Calif.) and Allen Boyd (D-Fla.), added another motive, pointing out that "delaying action...until 2005 will make it more difficult to enact reform without affecting near retirees"--the same people whose votes helped Republicans win last month.
According to the sources, those Bush insiders counseling delay until 2005 are, among other things, warning against a repetition of 1994 when election victories tempted Republicans, a source said, to think, "they would remake everything" fast. Instead, an overtly aggressive agenda alienated voters in subsequent elections. This time, some are saying, a go-slow approach on Social Security, hoping to pick up more congressional seats in the 2004 elections, might work better. And then, sources added, there is Iraq. To pass Social Security legislation next year, a source said last week, "would take a fair amount of presidential time and the spending of political capital. It would be very difficult to do both Social Security and a conflict with Iraq."
I like it...run for office. You have my vote.
False.
I know why Kuttner hates the idea; he knows that the vast majority of Americans would be too stupid to take advantage of the program and thus, once again, the wise would triumph over the foolish.
That's easy to answer....
HIGHER TAXES!
MORE TAXES
(Tom T. Hall said it in a song of his....)
(if memory serves)
--verse--
Faster Horses
Younger Women
Older Whiskey
MORE MONEY
(Well, in the Dem's case...I suppose the first line might well be "Faster Whor.....well... you "get the picture", I'm sure...)
(In the case of X42..."Younger Women" is....Hmmmm...need I say more?)
So you would have to conclude that in the 2002 election, Republicans got elected not to privatize Social Security but because they succeeded in persuading voters that they would do no such thing.
Entirely false, as you pointed out.
First, Social Security is in play because it faces a potential financial shortfall about 40 years from now.
No, in less than 20 years benefits will exceed FICA tax revenues. At that point the government will open the "lockbox" and find an IOU written to itself. Oops.
With the looming deficits resulting from the Bush tax cuts
Um, the budget shortfall is far larger than the entire amount of the tax cuts, and he knows it. What an ass.
the genius of the current system is that Social Security is earned
Total BS. Early retirees (i.e., anyone who was alive when SS started) were paid far more in benefits than they put into the system. It was nothing less than a theft from future generations, and now the bill is coming due.
As an aside, it's fascinating how he rails against means-testing of benefits, yet the thought of any tax cuts for the non-poor would have him whining that the "wealthiest 1%" don't "need" to keep the money they've earned.
The third problem is that Social Security and private accounts are simply not comparable
Hey, he's right. Sadly it's by accident.
By design, Social Security is social insurance. No matter how long you live, you cannot outlive it, and the checks are guaranteed.
Gosh, it's too bad nobody in the private sector ever thought of creating an investment program like that. Oh wait.
And bad investment luck or bad timing relative to stock market performance can leave a retiree with reduced income
Whereas having 15% of their income confiscated for a Ponzi scheme will always leave today's workers with reduced future income.
Without it, half of America's seniors would be living in poverty
Without it, many of those seniors could have saved for their own retirement instead of becoming dependent on welfare. But then they wouldn't be reliable Democrat voters, so I see his concern.
Polling data suggests that some younger voters want those payroll tax receipts, to play the market.
If by "some" he means "the vast majority", then yes.
This guy is too smart to simply be mistaken, he is deliberately seeking to have as many Americans as possible dependent upon the government for their retirement. Fortunately, the polls indicate that people are wising up to this gigantic fraud.
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