Social Security Reform
There’s nothing scary about plan for Social Security investments
In 1935 Franklin Delano Roosevelt said: “… Any Social Security plan should include voluntary contributory annuities, by which individual initiative can increase the annual amount received in old age. … Government funding ought to be ultimately supplanted by self-supporting annuity plans.”
Could the new Social Security plan be his vision come true?
In the spirit of calming fears on the Social Security front, let’s examine a scare story making the rounds. It is the claim that history all but proves attempting to save enough for a comfortable retirement will be impossible.
Princeton University economist and New York Times columnist Paul Krugman has become a sort of lead alarmist against Social Security savings. He recently claimed the growth of invested wealth won’t amount to more than about half as much as needed, an estimated 6.5 percent a year.
But his own assumed numbers are 3 percent annual growth in dividends reinvested and earnings growth equal to the growth of the economy, which historically has been 3.4 percent.
That adds up to 6.4 percent. Close enough, says frequent Krugman critic and investment researcher Donald Luskin. In fact, 6.5 percent adjusted for inflation is the annual growth rate in securities values over the last 75 years, which includes the Great Depression.
But Krugman is not so easily discredited. He also claims that if the 6 percent-plus return on securities investments were to happen, Social Security payroll deductions would increase so much that the retirement system would remain solvent, without what so many call “risky investment schemes.”
So, either way, there’s no reason to change Social Security, he calculates.
But Krugman apparently neglects to note that benefits owed would soar, too, because our monthly payments would be indexed, or tied to, wage growth nationally. It simply makes sense to recognize that investing some of what we pay would bring us more money in the end than not investing.
It makes sense to put large amounts of money into the economy. It will not only create larger dividends, but will also increase jobs, wealth and security.
February 7, 2005 - 08:52 AM on February 7th, 2005
Reilly- off topic, I think if we serched the archives, we have had a talk or two about Krugman.:wink:
The worse thing you could do to a naysayer is bring FDR into the arguement. It does throw them for a loop. It has been my opinion that they never fulfilled the expectation of how SS was to truly operate. At the time it was working so don’t mess with it. I have never seen such contempt for a voluntary program.
February 7, 2005 - 10:27 AM on February 7th, 2005
Krugman is an idiot. If he wasn’t a tenured professor and a newspaper columnist, he’d starve.
I saw a Wisconsin Congressman take on a Maryland Democrat on SS on O’Reilly, I believe. 2018 is the date the IOUs in the SS fund come due. The idiot democrap dismissed the idea that there wouldn’t be money for the IOUs to be paid. But again, he was a democrap who thinks the public is a bottomless supply of tax dollars.
February 7, 2005 - 10:35 AM on February 7th, 2005
3,
I again ask you to look into the UK’s experience with privatised social security under Thatcher and beyond. Britain, also, did not have to borrow large sums of money in order to put (as Bush suggested yesterday) 1/3 to 2/3 of worker’s contributions into the private sector. I don’t advocate that nothing be done, but I do not agree with this course of action.
doesn’t actually fix
p.s. love the ‘bring it on’ imagery again in this piece. It was so tasteful when he said it last time.
February 7, 2005 - 10:49 AM on February 7th, 2005
I will disagree with you on the bring it on Sandy. I read it that he was saying let’s put your ideas on the table. Let’s talk and do something rather than sit back and watch it collapse.
The government is already borrowing to make the payments. Those surplusses we hear about from the Clinton administration came with the fees that the government had to pay based on intake vs output. The government owes interest on surplusses. Last time I checked we the taxpayer are the surplus interest payer.
February 7, 2005 - 11:36 AM on February 7th, 2005
Uh, sandy, you are only looking on the surface of the situation. The IOUs stuffed in to the social security fund come due in 2018. They must be paid from current TAX Revenue. We are running a deficit now. Where do the democraps think the money to pay the IOUs will come from? Kofi Annan?
February 7, 2005 - 12:38 PM on February 7th, 2005
5,
And President Bush wants to make his historic tax cuts permanent? What’s fiscally conservative about that?
Any comments on the UK’s experience?
February 7, 2005 - 12:39 PM on February 7th, 2005
4,
The government is borrowing money to pay back benefits. Does that mean it should borrow more? Bush’s plan does not fix the crisis that he has outlined. It will also not pass politically.
February 7, 2005 - 12:41 PM on February 7th, 2005
Sandy, I don’t give a rat’s rear anatomy about the UK experience since most of the UK’s economy is socialized.
As far as making the tax cuts permanent, IT IS OUR MONEY, NOT THE GOVERNMENT’S. When you put the citizen FIRST, not a bunch of bureaucrats and government programs, then you will be enlightened, but right now you are a progressive socialist wonk who can’t stand people having and enjoying their own money.
February 7, 2005 - 12:46 PM on February 7th, 2005
7. Sandy, do you know what a Ponzi scheme is? If you don’t ask a Mountie. If anyone other than the government ran it, they’d be prosecuted and put in jail.
Right now social security is a Ponzi scheme, and always has been. Ponzi schemes seem viable as lone as the money coming in exceeds the benefits paid. The money source is drying up, partly as a consequence of using abortion as a contraceptive.
Sandy, like everything else you Liberal/Progressives whine about, if GWB doesn’t propose and operate a perfect plan, you got to bitch and say we can’t do it, but you’ll defend to the death your flawed and failing schemes.
February 7, 2005 - 12:46 PM on February 7th, 2005
8,
Ok. I don’t agree with you about the relevance of the UK example, but that’s fine.
Thanks for the characterisations, but if a government commits to social and other services, it should be able to pay for itself. You and I have very different ideas of what the government should be doing, so that argument is a no-starter. Under Bush’s plan, when you retire, the money goes back to the government, is taxed, and then doled out to you. Doesn’t sound any more ‘enlightened’ than FDR.
February 7, 2005 - 12:48 PM on February 7th, 2005
9,
I’m not defending the Democratic non-plan. I think something should be done, but to rush through a privatization scheme is irresponsible. Especially a scheme that won’t change the bottom line.
February 7, 2005 - 12:52 PM on February 7th, 2005
Sandy, to you enacting any private plan ever is rushing it. That is a non-argument. Also, Social Security benefits are TAXED now as income. Lovely Bill Clinton did that in the first months of his term.
February 7, 2005 - 04:42 PM on February 7th, 2005
A fairly detailed critique of Bush’s plan by Newsweek. If you want a mindless description of Bush’s plan without analysis, read Time.
February 8, 2005 - 01:05 PM on February 8th, 2005
Hi K! I take it you are working on the DOD project at work?
February 8, 2005 - 01:15 PM on February 8th, 2005
Yep, I am working on killing people
February 8, 2005 - 01:15 PM on February 8th, 2005
Well, bad people, anyway.
ops:
February 8, 2005 - 01:19 PM on February 8th, 2005
That sounds like a fascinating job though!
February 8, 2005 - 01:40 PM on February 8th, 2005
13, if I want a mindless whine, I’ll read Liberals/Progressives criticize the Bush budget because there are no alternatives from the other side except: Eliminate defense and homeland security, Tax to the hilt, and spend the government’s brains out.
sandy, don’t quibble. That is an accurate depiction of your ideas.
February 8, 2005 - 07:10 PM on February 8th, 2005
18,
No, its not PCD. Did you read the article I posted?
February 9, 2005 - 08:33 AM on February 9th, 2005
Clinton: President Clinton: “[Investing] Will Earn A Higher Return And Keep Social Security Sound For 55 Years.”(President Bill Clinton, State Of The Union, 1/19/99)
President Clinton: “[W]hat I Believe We Should Do Is To Invest A Modest Amount Of This In The Private Sector, The Way Every Other Retirement Plan Does. The Arizona State Retirement Plan Does; Every Municipal Retirement Plan Does; Every Private Plan Does.”(President Bill Clinton, Remarks To The Citizens Of Tucson On Medicare And Social Security, Tucson, AZ, 2/25/99)
President Clinton: “[E]ven After You Take Account Of The Stock Market Going Down And Maybe Staying Down For A Few Years, Shouldn’t We Consider Investing Some Of This Money, Because, Otherwise, We’ll Have To Either Cut Benefits Or Raise Taxes To Cover Them, If We Can’t Raise The Rate Of Return.”(President Bill Clinton, Remarks Via Satellite To The Regional Congressional Social Security Forums, Albuquerque, NM, 7/27/98
February 9, 2005 - 08:58 AM on February 9th, 2005
20- Oh John
ops:
ops: It only counts if a democrat says it silly!:wink:
February 17, 2005 - 10:02 AM on February 17th, 2005
Margaret Thatcher pushed thru similar ‘reforms’ in the 80’s with the Pension Program (their version of social security, with private accounts.
several other countries have tried it with various degrees of success. in England, it was a massive failure with the upshot being, at present, a majority of elders there also get supplemental welfare in order not to slip into poverty.
administrative fees wound up taking up to 30% of the accounts value. the level of corruption associated with privatizing pensions was historic.
of course some people got rich.
this proposal, more so than the various militaristic adventurism that has & will continue to characterize this administration, will have a deeply profound impact on this country & its social structure.
the possibility that the ‘welfare state’ will, by necessity, have to grow to meet the back end consequences of a hastily passed legislative program changing the social security safety net, should be enough to study the hell out of any proposal put on the table.