Slashdot Mirror
Mathematics of the Social Security "Crisis"
ScottyB writes "Here's a good start for reading into the economics and history of the much-discussed 'crisis' in Social Security. It's from the NY Times magazine, so you know the drill...'A Question of Numbers.'"
http://www.google.com/search?q=http%3A%2F%2Fwww.ny times.com%2F2005%2F01%2F16%2Fmagazine%2F16SOCIAL.h tml&sourceid=mozilla-search&start=0&start=0&ie=utf -8&oe=utf-8&client=firefox-a&rls=org.mozilla:en-US :official
they allow google to refer to them registration free.
Runnin' On Empty
Click here. Used NYT Link Generator.
Ant(Dude) @ Quality Foraged Links (AQFL.net) & The Ant Farm (antfarm.ma.cx / antfarm.home.dhs.org).
Your second paragraph bit off your first. I guess you realized what I was going to say in advance: Fox News Network puts paid liars on TV. It lies about its motives and its methods. When it's convenient, its talking heads are "commentators" and are supposed to be excused for their more blatant prevarications. They know full well their audience doesn't understand the distinction any more than they know who was behind 9-11. They just think they are "watching the news."
Making this point in itself is deceptive, since egregious bias in Fox News Network's ostensible "hard journalism" is well-documented.
If you think Conservatism is special and its army of propagandists, advocates, and other helpers would do it for free, you are dreaming.
We have always put journalists on a pedestal in this country, because we understand their importance to our way of life. Bias in journalism is like drunk driving among teenagers. Some conservatives say, let's take away the rules, since "you'll never stop those kids anyway," but I think the adults in the country know better - let alone remember better, from pretty recent times.
Tired of Political Trolls? Opt Out!
NO NO NO NO NO NO NO NO!
Please read this article, it's probably the most well researched and insightful look at the current health of our social security program. The end conclusion: It's Fine. Seriously. No Really. Totally OK.
If you took the worst case scenario given out by the Social Security Trustees as the future exactly as it will happen, Everyone will continue to recieve 100% of benefits until 2048, and then, after that, we'd recieve only 75% of benefits, and the system would continue to hum. That's if the worst case scenario mixture of immigration and ecomonmic slowdown happen, and absolutley NOTHING done to the system. Their realistic scenario call for complete 100% solvency of the system for the next 75 years, again, with NOTHING done to the system.
Social Security is the best running government program ever devised in this country. Everyone here will be able to recieve their retirement benefits that they've been paying into their whole lives.
The Social Security "crisis" stems from that 25% reduction in benefits in 2048. If we were to give everyone 100%, then we'd run about a $3 trillion deficit in SS over the next 75 years, in the mean time, Medicare is projected to start deficit spending in only 10 years, and will run an $11 trillion hole. And both of these self financed systems have a better outlook than out general acocunt budget, the pot of money that pays for the rest of the government. Best guess estimates are that our government will go $15 TRILLION MORE into debt over that same $75 years.
So what is more in crisis, $3 trillion that we don't need to even go into deficit for, or $15 that we absolutely must? Our current $440 billion deficit is the real crisis.
The president and all of the conservative commentors here want to reneg on the deal President Reagan made in 1983 when he reformed social security. He raised payroll taxes beyond the amount needed so we would run a surplus, and that would go into a trust fund that would pay for the burden of the Baby Boomer retirement. That trust fund was mandated by law to buy treasury bills, which have consequently been used to finance the upper class tax cuts. Basically, the president has done a transfer of wealth from the working class who payed more into the system than they had to so the super rich could mooch off the government even more.
I Repeat: SOCIAL SECURITY IS FINE! RTFA!
Th
This is exactly what Presidents Reagan and Clinton did to save Social Security. They raised the upper bracket tax rate from 33 to 35%, and increased the payroll tax to 12.5% to make our nations social contract solvent.
Th
from Wiki:
State pension systems lack a number of basic features that define Ponzi schemes, and so are fundamentally different:
* There is no belief that there are large profits coming from something; rather, it is clear that these are pay-as-you go systems, where workers (at any given time) are providing money to those who have retired.
* There is no growth of incoming funds driven by the enticement of high returns over a short period of time, with new investors continually entering in order to support payouts to early investors.
* State pension systems are in some way insurance rather than investment systems. A person who dies before retirement gets no money back (regardless of what he/she paid in). Someone who lives to a very old age continues to get payments regardless of the amount of money he/she has paid in.
* Because receipts (taxes) and payouts (entitlements) can be calculated quite accurately in the short term (five to ten years), and predicted (with a range of assumptions) for periods beyond that timeframe, there will never be a sudden collapse.
* General tax revenues can be used to supplement worker payments into the systems, although many taxpayers will be unhappy with such supplementation. Similarly, benefits can be reduced through the political process, either across-the-board or by reducing benefits to the well-off, although there will clearly be opposition by those who will get less.
The article briefly mentions that Sweden reformed their pension system a few years ago. Annika Sunden, a researcher at Boston College, has written a rundown of the Swedish Experience (I like the sound of that).
In 2000, the new center-right Swedish government passed a law that mandated private pension accounts. Under the law,Swedes pay an 18% pension tax, 16% goes to the pay-as-you-go system (same as in the US) and 2% goes to private individual accounts.
There are over 650 investment funds you can choose to invest in. You can own up to 5 funds. If you don't activly select a fund, your placed in a "default" fund, that's composed of about 75% stocks, and the rest bonds.
When the program was launched, 70% of people in year one made an active choice and picked their own funds. In subsequent years, only 10% activley select a fund. This can be explained by all the media attention the new law caused, and a government marketing campaign in 2000 urging people to pick a fund.
Most accounts have lost money since they began, and people are starting to question private accounts. Shitty timing to start this at the top of the bubble.
A big lesson here is that if you are going to create private accounts, the composition of the default fund is hugely important. It needs to be very low risk and well diversified. (And, I'd be happy to run it for a mere 0.00001% management fee)
TripInvite.com: Group Travel Made Simple Evit
That's why there's a surplus now. The above is *part of the plan*. Payroll taxes were raised in the '80s so that the trust would have enough of a surplus to cover the baby boomers. The surplus gets drawn down, as you mention, but once the boomers are gone, it shouldn't be a problem.
See here for more information
State pension plans invest deductions from payroll or state contributions in marketable securities. These securities receive interest income or capital appreciation and grow over time. Retirees then draw from this fund in the form of pension payments.
Social security invests NOTHING. Current contributions are immediately paid out to beneficiaries. The only deviation from this is when collections are greater than payouts, in which case the money is forwarded to the "general fund" and spent for government programs. The social security system receives an IOU from the government in the amount of the surplus that is filed somewhere, and is sometimes referred to as a "treasury security". Unlike a treasury security, however, it cannot be traded. It is not marketable in any way. No funds are set aside to meet these pseudo-obligations. As a security, these instruments have zero value and are only a political instrument used to cover the fact that payroll taxes are in excess of what is currently needed, and is used for non-social security purposes.
The social security system really is a lot like a ponzi scheme, but one supposedly supported by the ability of the U.S. Government to raise money (through taxation). As long as the government is willing to support social security when payroll taxes don't cover benefit payouts, we're fine. It's been the other way around for years now. But I sorta doubt that the feds will be able to do that when I retire.
Well, this makes sense only if you use the life expectancy at age 18 (or 21, or whatever your cutoff is for when someone enters the workforce). Life expectancy at birth is a stupid measure to use for this, because having a bunch of children die before the age of 1 affects social security not a bit. (They don't pay in, and they don't withdraw)
So how has life expectancy changed over the last century? Well, in one sense, it's risen dramatically - the life expectancy at birth is now something like 15 years longer than it was in 1940. However, most of that increase is due to advancements in keeping children from dying. At the other end of the spectrum, someone who made it to 65 in 1940 could expect to live, on average, another 12.7 years. Nowadays, they could expect to live another 15.3. That's a whopping 2.6 year increase. (I admit, the increase has been greater for women now that we've gotten better at diagnosing breast cancer - a woman who reaches age 65 now can look forward to 4.9 years more than one could who reached age 65 in 1940)
Remember this: life expectancy for adults today is not radically different than it was 60 years ago. The difference is that today we don't have as many children being wiped out by childhood diseases, so the average looks much higher if you watch the wrong statistic.
Reference: http://www.ssa.gov/history/lifeexpect.html
I guess you passed over the part that went like this:
What's more, there is a strong case to be made that the agency is erring on the side of being overly pessimistic. If its more optimistic projection turns out to be correct, then there will be no need for any benefit cuts or payroll-tax increases over the full 75 years.
The 2018 is pretty much a worst case scenario. If the conditions occured that would make the system run a deficit in 15-20 years, the stck market would also flounder. Meaning private investments and 401K's would not be a great option to social security.
Social Security isn't truly designed to be 100% of retiree income. In fact, if you continued reading:
Social Security does not provide, and was not meant to provide, a satisfactory retirement on its own. The average stipend for a 65-year-old retiring today is $1,184 a month, or about $14,000 a year. About half of Americans also have private pension plans, but for two-thirds of the elderly, Social Security supplies the majority of day-to-day income. For the poorest 20 percent, about seven million, Social Security is all they have. Even those figures understate the program's importance. According to an agency publication, ''Income of the Population 55 or Older: 2000,'' 8 percent of elderly beneficiaries were poor, but a startling 48 percent would have been below the poverty line had they not been receiving Social Security.
So many seniors and retirees did save up, and try as they might, without Social Security, they'd be in poverty.
Th
The coming boom in retirees was forseen twenty two years ago, and they enacted a plan to take care of them: they raised taxes to create the Social Security Surplus.
There is no SS crisis. And the privatization plan being floated cuts benefits more than the "do nothing" approach under the most pessimistic economic assumptions.
There were no WMDs, either. Judge the folks by their track record.
The Economist is also quite good, but not cheap. It seems like they have fewer articles but each leaves you with a decent amount of knowledge about a subject. I also like that on the subjects I know more than the average journalist about, tech and finanacial news, they generally hit the important notes which makes me feel much better when reading an article on Eastern European politics or other topics I know considerably less about.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.