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.'"
In this country, fools and paid liars say whatever they want about an issue on television and, as far as viewers are concerned, get away with it. The enterprise of journalism, which is suppoesed to help citizens in a democracy sort through the sewer of increasingly sophisticated misinformation that comes from a variety of interested parties is in a state of free-fall, either actively subverted by self-interested and sociopathic organizations and individuals, or simply crumbling under the unique demands and exigencies of continued survival in the mass media marketplace.
The heart of the matter is that when Bill O'Reilly or Sean Hannity lie about something, no one is yet able to mod them down.
Tired of Political Trolls? Opt Out!
The goal of the republicans is not to revamp social security. The goal is to abolish it entirely, along with medicaid. The easiest way to do so is to completely break it by privatizing it, while at the same time bankrupting the government. Then, of course, the private managers will be to blame. Something will have to go to balance the budget... and then they will eliminate social security. Now the tax cuts and war start to make sense. Expect a budget crisis shortly!
Oh I forgot, they never put any of this money away for people's retirement like was originally planned. This money is part of their everyday operating expenses. It's just another way to get more tax money.
It's the battle of the minds, and everyone's unarmed.
no-reg link: http://www.nytimes.com/2005/01/16/magazine/16SOCIA L.html
What you need to know is that if you are under 35, it doesn't take that much saving to be set by the time you are 65.
And don't depend are social security, I know that I am not.
and basically it says that there is a greate deal of misinformation coming from the right.
Over the next 75 years, SS will run at a loss of 3.3T USD. Sounds like a lot huh? Well by comparison, the Bush tax cuts (both of them) will result in less revenue to the tune of 11.6T USD over the next 75 years. So even if you revoke 30% of the Bush tax cut, you can pay for SS over the next 75 years (or maybe a little more to cover interest since they tax revenue and SS benefits demand dont have similar demand curves).
The Doormat
If you're not outraged, then you're not paying attention.
...and it solves both the food and the social security problem in one fel swoop.
Beep beep.
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
It's always the same. Every "debate" or discussion about the numbers behind social security and they never talk about the numbers that matter. For people under 35, the most important number is the number of dollars in an employee's pocket on payday after deductions. As things stand right now, there's at least 30 years - at least seven presidential terms - between now and when those people start collecting. Chances are some politician is going to wreck social security between now and then even if the gloom and doom predictions don't come true. That means on top of the hefty deductions from your weekly paycheck, if you're under 35, you also have to assume social security won't be there for you and you have to put that much more money away personally. That is the number that matters.
As for this article... Solving the social security budget gap by adding 2% to the payroll tax sounds great... Tax the corporations! Well, it would be great, but corporations take the payroll tax into account when they determin how much you cost them as an employee. As far as they're concerned, the payroll tax is part of the employee's compensation package... Raise the tax, and you're going to see a corresponding drop in salaries or a corresponding rise in unemployment over the long term.
see: great depression.
For one, there is no finanical education in school, so something you are responsible for your whole life (your finances) you are not taught at all and expected to know.
Add to the fact, most people would rather buy a new pair of "kicks" compared to saving that $100 while they are 25 for retirement. People don't realize that if you save when you are young, you will be far better off than when you are in your 30's and decide to start saving.
If Social Security is "broken" now, then the rest of the budget is HORRIBLY BROKEN. They currently use the surplus of SS to pay off a large portion of the deficit. The rest of the deficit is being paid for by our children and grandchildren.
It would, after all, be their own fault, for failing to save properly for old age.
Athletic Scholarships to universities make as much sense as academic scholarships to sports teams.
They suffer the consequences of their inaction and/or ignorance? God forbid we expect people to be responsible for themselves...
500GB of disk, 5TB of transfer, $5.95/mo
Because most people have no idea how to save money for retirement. So a few people properly plan their retirement and do better than they would with Social Security, while everyone else blows their money on late night infomercial products or has it swindled away by private enterprises promising you will "Retire with a million dollars!". This puts an additional burden on the welfare system, and worse, these people are retired so they have no chance of going on welfare-to-work programs or similar things. The economic dead weight from letting people blow their retirement savings and then looking for a free handout would be tremendous.
As a 22-year-old full-time worker with a company-sponsored savings plan and a Roth IRA, I would very contently keep the money they take out my check for SS and invest it in my 401(k) or IRA or elsewhere. The return on my investment would certainly promise to be greater than it will be on our current course.
Regardless of the solvency or lack thereof in the system, I want out.
The real problem that I see is that my parents signed me up as a child. I don't want to be in. I don't want to have to be in to get a job.
I think that is the biggest problem. I don't have any choice in the matter, and unlike any other retirement scheme (IRA, Roth IRA, 401k, annuity), I can't get out if or when I want.
So much for Land of the Free.
$u(k 1t!!!!11!
Basically, what's wrong is that many people do not save money for their retirement. No doubt, most of these people do not read /., and yet are probably still aware that they should be saving money for their retirement, but either lack the ability or the will to do so.
The easy answer is to say, "Oh well, that's their fault," but when these people get to be in their 60's, 70's, etc., we as a society are not going to simply let them starve, go homeless, get sick, etc. Social Security could be scaled back by extending the age of collection, etc., and/or it's functionality could be wrapped up into other welfare programs, but it cannot be simply dropped.
Additionally, Social Security is something like a Ponzi scheme, and as such, if you stop paying into it now, then those who have already paid into it won't be able to get back what they put into it. So, it's either tough luck for the under-[insert age here] crowd in the future, or it's tough luck for the baby boomers now. Guess who will win that one?
Ben Hocking
Need a professional organizer?
No additional risk, and with some obvious added benefits. I'd welcome any extra freedom the government threw my way, even if I did not take advantage of it. Not that I personally would invest in US Treasury debt.
The larger fact is that basic problem is a too large federal deficit, not a systemic social security problem, and the proposed "reform" makes the underlying problem worse, not better.
Click here. Used NYT Link Generator.
Ant(Dude) @ Quality Foraged Links (AQFL.net) & The Ant Farm (antfarm.ma.cx / antfarm.home.dhs.org).
Actually, those of us who are just a little over 35 are too.
The problem is that more and more people are drawing on the system because people are living longer. At the time it was passed, very few people lived much past the age of about 60, let alone 65. It was designed as a "pay as you go" system, so your money is not really put aside for you somewhere so that it can earn interest. Your money is used to pay the benefits of those currently collecting. Your benefits (assuming the system is around that long) will be paid by those who are paying into the system when you retire.
I've even tried to look into taking my parents onto my health policy, but federal law won't allow it for the reverse. After years of being on my dad's policy while growing up, I am legally not allowed to take him onto mine now that both he and mom are retired. Wouldn't it be nice to have an option to do something like "no medicare withholding because one or both over-65 parents are classified as dependents"? Sure, the health insurance companies would balk and probably start up all kinds of FUD and lobbying against it. Why? They've become more concerned with making money than doing what they're supposed to do... cover your health care expenses.
OCO is Loco
The short answer is politics. The long answer is that people about to retire believe that their life's worth of social security is in a bank someone, and its THEIR RIGHT to have it. Since they are the most consistent voting block (backed by the most power special interest group- AARP), they get anything they want. The reason that younger people today cannot just do away with social security is because it is their momney that pays the benefits to old people. Since they run the political show (both parties have to lick the senior citizen boot), they can force us to pay them our taxes for their benfits.
Don't like it?
Open Source Sushi
Life is unpredictable not everyone who is down and out is irresponcible. Here is a reality check, you get cancer and your insurance policy drops you, yea it happens. your retirement just went to paying for cemo (sp) the reality is social security is there for a reason. I think you shoudl be allowed to direct the investment of a portion of yoru social security however that should be it.
Social commentary from someone with the username PornMaster that offends as it invokes God? It must be slashdot.
Yes, I'm still a junky. Are you still a bitch?
Well I guess we don't need any help from the women. http://science.slashdot.org/article.pl?sid=05/01/1 8/1317200&tid=146&tid=14
It is in secure, government bonds.
The problem is when the government cannot balance its budget. Then they have three options:
#1. Raise taxes to pay the bonds.
#2. Default on the bonds.
#3. Borrow more to pay the bonds.
NONE of this would be a problem IF the government could balance the budget.
Option #4. Declare that Social Security is in crisis and needs to be scrapped.
Exactly. You have the right to life, liberty, and the *pursuit* of happiness. There's no right to happiness. If you can't plan for yourself, then you either suffer, or look to private charity. The government exists only to protect rights, not to guarantee a level playing field for everyone when they retire.
Show me where in the constitution it says that the government should be setting up retirement funds for people. You can't; it's not there. Government does not exist to do for the people what the people are unwilling to do for themselves, though many people would like to (and seem to) think.
Find out about the Lexus Rx400h Hybrid!
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
To the lonely nerd in the next cube trying to impress a girl with your knowledge of slashdot history and by reading the user comments out loud, please STFU and GBTW. Thanks.
No one was able to mod down Dan Rather either, though I guess he at least had the decency to mod himself down. ;)
All pundits fit this mold and politicians on either side of the fence are often the same.
They suffer the consequences of their inaction and/or ignorance? God forbid we expect people to be responsible for themselves...
Are you really that heartless? Do you think it's good for society to have tens of thousands of elerly people and children starving and homeless? It's too bad they didn't save, or perhaps it's too bad their investments went sour, or they were swindled, or some other circumstance you're not considering. But it's a disgusting to deny help to those who need it because you're deciding not the rest of the population isn't as well off as you are.
the only solution is to raise taxes
Ah, yes. The only solution liberals every put forward. If we only take away some more money from those who are earning it, and give it to those who are not, then everything will be just peachy. Here's a suggestion: instead of raising taxes, those gaseous windbags in Washington could cut bloody spending! But, what am I saying? That would lessen their power, and we can't have that, now can we? The State is mother. The State is father.
the real problem, when it boils down to it, is that if it is completely done away with then you have a problem with people that have put into it all of their lives expecting it to be there when they need it only to find out now the program is done away with. So what do you do then? Just throw them to the curve? Issue them a refund? Unlikely on the refund.. but what then? People that are paying now are supporting those that paid it way back when. It's dying because there are tons of people drawing it that never put in on it. I say that if you are going to do away with it (which I"m all for because I'm still very young) then you should do it in such a way that the first thing you do is cut out people that have never put in on it or put in very little. Then, hey why don't we take away some government corporate welfare that pays for big businesses to do misc things (millions of tax dollars were spent for McDonalds to advertise their BigMac in England for example). Why not cut that out to pay for individuals.. why? Because big business runs this country.. not the people.
The Nomad
"Men of lofty genius when they are doing the least work are most active."-da Vinci
insure domestic Tranquility, provide for the common defence, promote the general Welfare
... general Welfare
provide for the
There's two instances. Of course the Constution leaves out the specific "how", that is left for the Congress, Executive, and Judiciary to hammer out.
I can't believe I'm going to feed a troll, but here goes...
Those seniors have a reasonable expectation that the system they pay into is going to provide for them when they need it; they would not have contributed had it been suggested that they would be no benefits.
Private investment for retirement isn't a bad thing; people are free to do that if they choose. It also means risk however. Social Security reduces risk, but offers a lower rate of return. Think of it as an insurance policy.
It looks like you've bought it hook, line, and sinker. Either that or you work for the NY Times.
Why is it flawed? Social Security has practically eliminated elder poverty. And by poverty, I mean freezing in the streets. If you get rid of Social Security, how are you planning to prevent elder poverty? Think worst-case scenarios wherein everyone loses their savings.
if he ever said one thing that made the remotest of sense. It doesn't take a rocket scientist to figure out that this is a manufactured crisis. They've done everything possible to invent it. The one that gets me is that they're projecting our economy will grow slowly (~1%, slower than historical) while telling us the only way we can save ourselves is investing in the stock market, in which we need to see ~3.5%-4% growth in order to get to the level we would be at if we did nothing. Both of those have to happen simultaneously & they're pretty much mutually exclusive. If Bush is right about their forecast, everybody gets screwed going the privitization route and it's better to stay status quo. If he's wrong about their forecast and the economy improves, it's better to stay status quo. And I haven't even got to mention all the countries that have tried it, only to see it go down in flames.
"At the time it was passed, very few people lived much past the age of about 60, let alone 65."
Actually, much of the deaths would have been very early. If you lived to 50, you had a pretty good chance of living quite a while longer. If you made it to 60, you had a very good chance of getting well past 65.
Another thing to consider, there were more people involved in dangerous occupations, like mining and farming. And worker protections were more lax, and technology was primitive. That would create more people with disabling injuries which would put them on Social Security for the rest of their potentially long lives.
So I'm not sure the point is a good one.
September 2011: Looking for Cocoa/iOS work in Boston area Cocoa Programmer Quincy, MA
This would be a more straightforward discussion if we'd stop taking side trips into the pros & cons of entitlements.
The question ought to be "what do we do with those who can't help themselves?" How they got that way (very old, infirm, unable to work, etc.) doesn't much affect their need for help.
Once you ask the question that way, the Administration's privatization push sounds an awful lot like a proposal to shift from answering "we'll take care of those who need it" to "those that need it can take care of themselves."
I'd rather help folks out, even if it costs me money. If I'm smart, tough & lucky, I won't need social security benefits when I retire - but I want to be able to enjoy my golden years with a clear conscience.
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.
If we don't make some sort of transition then someday a generation will be left holding the bag and it will be ugly.
That said, I agree with other posters that the real problem is the budget deficit. It makes SS look like peanuts.
Lasers Controlled Games!
In principle, I agree with you. You reap what you sow. In reality, though, I realise that some people have not had the opportunity to get my quality of education, had a supportive family when growing up, nor live in a neighbhourhood or environment of job opportunity. Also, those in the 'free and clear' have crap happen to them too -- e.g. "I worked for Enron for 10 years, they just entered Chapter 11, my pension is seized via receivership and I'm back-due several paycheques... and because of corporate malfeasance my reputation is mud on a resume even though I was an honest and loyal employee..." Its not always someone's fault.
Also, if people don't have social security and get REALLY desperate it might get ugly. Crime goes up, riots, neighbourhoods get depressed and real estate prices drop. Think of social security as a 'tax to maintain my lifestyle, not theirs'. Its self-serving, but a realistic perspective. Also, its an insurance policy you never, ever hope to collect upon.
I don't consider Social Security idealistic -- I consider the Horotia Alger myth that anyone can become anything to be idealistic. Social Security is pragmatic, and I think does more for the rich than it does for the poor.
John Maynard Keynes: "When the facts change, I change my mind. What do you do?"
July 27, 1998 Were they singing a different tune back then? Is there only a crisis when a Democrat says there's a crisis?
I'm sorry but "only two people working for every person drawing Social Security" will not work. Social Security will not be able to support itself. Now you may not agree with what has been proposed by the President to reform Social Security, but you shouldn't be so childish and stupid to deny that a problem exists.
--
It works.
Free Flat Screens | Free iPod Photo
infested with jello like fishes no melotron wishes
First off: Lack of foresight is not the only thing that can make you poor when you're old. Lack of income during your working years (let's say you worked for minimum wage). Medical emergencies can suck up even the most carefully-planned savings (esp. if you don't have health insurance--see minumum wage). The market WILL NOT solve this problem for everyone. Some people can get better jobs, some can't. ~5% of the population is ALWAYS unemployed (and looking for work, and not in jail). The free market doesn't even provide minimum wage for them. There is nothing.
So let's say I'm tucked away in my mansion, happily retired. What does it matter to me that there's twenty 65-year-olds starving to death within a block of my house and I have more than enough to feed them for the rest of their lives. What does it matter to me? I'll give to them if I WANT to and I don't happen to want to.
Damn. The old buggers broke into my mansion and took my HDTV, hocked it, and bought (can you believe it) food. Now they're in jail and I'm paying for their food, clothing, shelter, and health care for the rest of their lives. Dang--this sounds like exactly what I was avoiding, except I missed "Everybody Loves Raymond" for like two weeks while my insurance sorted it out, and of course, the poor old people are probably not enjoying my money as much in jail as they would have if they were free.
That's not to say that all starving people will resort to crime--but it's certainly an incentive. Those who die without a fight can still get back at you by having their corpses contibute to the cholera epidemic that sweeps your neighborhood.
As a later poster said: you have the right to life, liberty, and the pursuit of happiness. We're not asking you to make them happy. We're asking you to keep them alive. There are consequences, other than legal and moral, for our not keeping your fellow man alive when you have the means.
We aren't savages.
If we were, then the idea of privitizing Social Security would be no big deal. If someone misinvested by putting all his retirement money into Tyco or Enron stock, fine. We let him die broke and impoverished and that's that.
But we're not savages and we won't do that. If a person screws up and loses all their retirement we'll cover them some other way via state or local government instead of via the Feds. You'll still pay for that person's retirement, just not in a predictable way, and it'll be more expensive as more poverty retakes America's elderly.
Social Security is the SINGLE most effective government program ever. Elderly poverty was endemic in the 1930's and before. Unless you were really rich, you stood a really good chance of dying poor and dragging your children down with you. Now, that's much less prevelant.
You object because you want to invest in a free market? Great. Most investors lose money, but if you really want to invest outside of the SS program, what's stopping you? Go ahead. You just can't risk this small percentage of your earnings. That goes to make sure you won't be too much of a burden on the rest of us when you get old.
the major advances in civilization are processes which all but wreck the societies in which they occur - A.N. White
well, of course, it isn't in the constitution. but the constitution does give congress the power to make laws to deal with the problems of society.
apparently congress thinks it's more important to make sure old people aren't starving on the streets than to give DataStalker an ideological hand-job.
pr0n - keeping monitor glass spotless since 1981.
You're going to pay one way or the other, either you do it in an orderly fashion through a system like Social Security or you pay through externalized costs of destitute elderly. Plan on paying for increases in crime, emergency services, healthcare, etc. Or do you think this nation is going to just let old people starve and freeze in the streets? Would you really treat Veterans who hadn't been able to save enough because of constant medical problems not covered by the VA this way? How do you propose to help people whose pensions the courts have stripped through criminal mismanagement by their former employers? You're method is just tough luck, sucks to be you?
No society has been able to progress and remain competitive with the shortsighted advice you've proposed here. Social Security is just a cheaper way to protect rights than "letting the market take care of it". Wealth equals power, the Social Security payments ensure that old people have the power to defend their rights instead of depending on the government to make sure they aren't violated.
The word justice is all over the Constitution and the Federalist Papers; Social Security fits the Founding Father's idea of justice, hence it's in the Constitution. Your argument about being something that people are unwilling to do for themselves is a canard. Only a half-hearted attempt to understand this nation's founding and history could lead you to the conclusions you've vomited all over this page.
Arrogance is Confidence which lacks integrity. -- me
Because old people should be taken care of by: Themselves, State Government, Local Government, or Private Charities. When the federal government was asked to do it, we ended up with a ponzi scheme that did nothing more than allow federal politicians to spend more money. The MOST incompetent retirement planner is the federal government. You can't even call the federal government a retirement planner, merely a money spender. Some future legislative session will actually to the planning. And it never happens.
If we tax at 0%, revenue is $0.
If we tax at 100%, revenue is $A (where A > $0 - this is basically Communism)
If we tax at something in between, let's say 50% for the sake of argument, revenue is $B (where B > A - this is Capitalism).
Ok, now draw a single line connecting those points. Obviously you can't do it with a straight line, it has to be curved. And therein lies the heart of the matter.
If the tax rate is below a certain point, cutting taxes decreases revenue.
If the tax rate is above a certain point, cutting taxes increases revenue.
You cannot argue that cutting taxes always decreases revenue. You cannot argue that cutting taxes always increases revenue. What's arguable is whether we're currently above or below the point where it switches from one to the other.
> I wonder if your bank cleaned out your account, you would claim it was your own fault, because "I'm a sucker for trusting them with all that money."
You choose an interesting analogy.
If your bank statement said "By 2042, there won't be enough other depositors depositing checks with us to pay all of the balance owed to you. At that point, there will be enough money to pay only about 73 cents for each dollar you deposited with us", would you continue to bank with them?
Whats the saying? Something like "democracy works great until the people realize they can vote themselves lunch."
Crikey. Way past time to just admit that Social Security is a crack-pot idea that only suceeds in making people dependent on government.
Why won't anyone come out and say that it is *NOT MORAL* to take a chunk of a person's income by force, before they even get a chance to see it, for whatever purpose?
If I was that drunk, I would have remembered it -- H. Simpson
Would you rather have a $10K or $7K raise?
You would work harder for the $10K right? Higher marginal tax rates suppress growth.
Would you hire an accountant if he could get you that extra $3K if you only got the $7K? Would you accept $2k in benefits over nothing? High tax rates cause avoidance of taxes. Low tax rates make the cost of avoidance higher than the benefit
Would you be more likely to start a business if you knew that you would be taxed on revenue even before you made a profit, making it a more risky venture? High marginal tax rates suppress growth. Look at Belgium if you're curious about tax evasion.
Decreasing taxes increases growth.
Look here for some more intuition.
The problems with the budget today have to do with overspending, and not under-taxing.
Robo-Blogs of the world: UNITE!
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
State pension systems lack a number of basic features that define Ponzi schemes, and so are fundamentally different:
Gotta disagree with you on this one. Granted SS is not an intentionally criminal enterprise, I think it's intentions are good, but it does have a strong resemblence to a pyramid scheme thanks to demographics. People are living longer which is not compensated for in the plan. To wit:
* 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.
Sure there is a belief. There is a belief that the profits are going to come from future taxpayer dollars. Problem is that people are living longer and the population growth isn't sufficient to maintain this, especially after the baby boomers retire. The only reason it is a "pay-as-you-go" system is because Congress can't help themselves and raid SS for every extra penny that comes in every year for purposes other than Social Security. That money should be invested for future retirees and used for no other purpose but it isn't.
* 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.
There is a continual growth of incoming funds from working taxpayers funding "high" returns for existing retirees (read early investors). Granted it isn't to the level (50%+ returns) one usually associates with a Ponzi scheme but the principle is basically the same. Eventually demographics will catch up and the number of retirees will be too large to be supported by the workers without changes to the program. That's exactly how pyramid schemes fail.
* 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.
If it were truly an insurance program that intended to remain solvent, it would have to adjust either the retirement age or the benefits paid. Besides, do you know how insurance companies work? They take in payments, invest that money and then pay out what they have to in claims. Whatever is left over is profit. But SS money is NOT invested (pay-as-you-go remember?) so it really does not resemble an insurance program at all.
* 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.
The amount of money that comes in from taxes is HIGHLY variable and is not at all easy to calculate. Don't know where you got that idea. The reason California found itself way overbudget these last few years is precisely because they planned to spend money and then ended up with less in tax revenue than expected. Predicting tax revenue is anything but a science. One good recession will screw up even the best models.
* 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.
You ever tried to take away benefits or salary from someone? There is a reason SS is called the third rail. A politician touches it and he dies. True, in theory benefits can be adjusted but the political reality is that taking benefits away from old people is political suicide and not likely to happen anytime soon.
The goal of Social Security has been to say, "We guarantee that our elderly will not be left to starve." It's not the best investment in the world.
If Social Security really were pay-as-you-go, it wouldn't need investing at all: today's money is supposed to meet today's expenses. The Social Security Trust Fund had to be established to make up for the Baby Boomers having fewer children than was necessary to support themselves.
You can formulate that several different ways; having more children wouldn't necessarily put more money into SS coffers. Suffice it to say that too many people were expected to retire simultaneously.
But that money isn't invested except in Treasury debt, which is a rough analog of investing in the GDP (since taxes are roughly proportional to the GDP), and the GDP grows fairly consistently. But the tie is too inexact; better directed investment could yield better results.
The stock market is the obvious place to look, but you can't invest the SS Trust Fiund; it would totally skew the markets to have a single investor make those decisions. So, the Bush administration wants to let individuals make those decisions.
But now we return to where I started. If the individuals make the decisions, some will gamble and lose. What do we do about them? We started this in the first place as a way to make sure our elderly were cared for. It wasn't about returns; it was about care.
That leads into a whole mess of issues, but I'll spare you. But I wanted to be clear on one point: just allowing people to invest in the same safe place doesn't solve the original problem: some people starve when they get old. That is "additional risk" over the current scheme.
The issue should NOT be whether Social Security is solvent or not.
The issue SHOULD be, "you have X years to balance the budget and pay off the Social Security loans so Social Security stays solvent".
The Government BORROWED the Social Security money and now the Government doesn't want to pay it back.
Balance the budget, Bush. The Social Security money is there.
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.
Congress issued bonds against what was the big Social Security cash hoard a while back, no?
So those bonds (or loans, if I'm thinking incorrectly) will come calling sometime in the 2030's?
I think that is the point where many analysts are saying that SS will be calling for the replayment on that.
But who pays it?
The US Taxpayer. Somehow, somewhere, the $ to repay the $ which was taken against the social security funds will need to be repaid.
I think THIS is the bulk of the problem.
Solve this, and make it so that we can't pass expenditures that aren't already funded.... basically cut those government credit cards up.
http://slashdot.org/~tf23/journal
It was an entirely faked document. Right wing overdrive? I guess CBS is part of it (they have fully discredited the story after a review, and fired those responsible), and anyone who thinks that a "historic" document using modern MS Word fonts is fishy must be a "right winger".
Don't blame Durga. I voted for Centauri.
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
I Repeat: SOCIAL SECURITY IS FINE! RTFA!
It was coughing up blood last night...
So if the Republicans increase their majority in the Senate in a couple of years, will the education system get better too?
I think the Democrats just don't want the Republicans writing the reform plan. From the Demodrats' point of view, there's nothing wrong with that. The Democrats don't want the Republicans messing it all up.
The problem is, every politician for the last many years has used the impending retirement of the boomers to try to scare grannie into voting for them. Now they're hostage to the rhetoric that used to serve them so well.
Gen-X'ers had best plan on not having Social Security, if they want to survive retirement.
Uh...exactly who does survive retirement:)?
1998: $68400
1999: $72600 +6.1%
2000: $76200 +4.9%
2001: $80400 +5.5%
2002: $84900 +5.5%
2003: $87000 +2.4%
2004: $87900 +1.0%
2005: $90000 +2.3%
"You're Wrong."
Source: Social Security Administration - Annual maximum taxable earnings and contribution rates, 1937-2003.
Only recently has the cap risen less than the rate of inflation.
Another reason that several people are citing as indicative of SS's future failure is the lack of population growth.
Incorrect.
The population doesn't have to grow, just the payroll base. A working age generation can support a sizable retirement generation IF the folks working are making more money relative to what the retirement generation needs to retire on.
As for me, I'm proud to pay my SS payment because I respect those who have worked hard for 40-50 years: they deserve no less. You can save all you want my friends, but disasters/tragedies/economic collapses happen and you can't guarentee that you'll have savings when you're 65-70. God Bless SS and FDR.
A pyramid scheme falls apart because the potential size of the pyramid is finite. Eventually you run out of participants, and it falls apart.
In Social Security, continuing generations are infinite. So it doesn't fall apart.
That's hardly a minor difference. It makes *all* the difference.
Yes, if earth gets blown up from a meteor, then the younger folks who have paid payroll taxes will be screwed out of their social security. But somehow I don't think they'll care.
skkkoooonnnggggkkk ptui
Actually, you've fallen into Statist thinking yourself: "the Constitution puts some specific limits on what the federal government can do".
That's actually not true, because it's not necessary. The US Government, at least as defined by the Constitution, starts with ZERO. Then the people, by way of the Constitution, delegate a short list of powers to the government.
So saying that the govt's powers is limited is actually meaningless. You have to recognize that we, the people, have all the power except those few things we've explicitly GIVEN to the government.
What a rotten idea. Social Security is supposed to be a pension program, not a welfare program. If you're gonna cap my benefits when I'm old, you can cap what you're taking from me now.
taxing the substantial wealth of the plutocrats, and using that to pay for SS, and many other items. Just a small 1% tax on wealth of the rich would pay for SS, universal healthcare and college tuition for all.
This is a pretty common leftist fantasy that doesn't ever actually work in practice. Rich people aren't working 9-5 like you and me. If the tax system changes, they have the flexibility to change too. Either they'll find loopholes to avoid paying the wealth tax or they'lljust move to another country. Sigh. Maybe A.F. Tytler was right:
A democracy cannot exist as permanent form of government. It can only exist until the voters discover they can vote themselves money, from the public treasury. From that moment on the majority always votes for the candidate promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by dictatorship.
"Once more I say, you hate the idea of Bush fixing the social security system far more than you actually hate the idea of anything to do with Social Security."
Well, the man is a proven incompetent and walking mediocrity, with a track record of failure and destruction.
Given his performance on Iraq and national security, I don't see what evidence exists that the man is competent for any other significant responsibility.
Yes, I hate the idea of such a person taking it upon himself to fix *anything*. I wouldn't trust him to change a tire and do it right.
Given the man in charge, I'm more interested in preventing the inevitable disaster. Cleaning up after Bush would be far more expensive and difficult than doing it right in the first place.
I have had my eyes open, and that has made clear that Bush is lying out his ass, making the baby jesus cry with his deceptions.
A good solution to the Social Security problem cannot be based on lies. Therefore, a good solution cannot be created by George W. Bush.
September 2011: Looking for Cocoa/iOS work in Boston area Cocoa Programmer Quincy, MA
"Fairness" isn't the point of SS. The point of SS to provide a safety net so that a good chunk of our country's elderly don't end up destitute.
"Your staggering level of accumulated hatred is going to hit you up for a pretty big Karma charge, I would prepare for that if I were you."
If you're talking about real-world Karma, you should be warning Bush. I haven't sent scores of people to their execution without even a cursory interest in their cases. I didn't approve torture. I haven't killed thousands of innocent civilians. I haven't courted the approval of bigots and treated a large segment of the population as sub-humans.
I have merely opposed those things. I think my Karma is just fine, thanks. Opposing right-wing authoritarians is good for the soul.
If you're talking about Slashdot Karma, well, I'll earn it back.
September 2011: Looking for Cocoa/iOS work in Boston area Cocoa Programmer Quincy, MA
The truely proposterous idea is an idea that is implicit in this discussion. It's not the idea of whether or not raising/lowering taxes raises/lowers the amount of tax collected by the government, it's the idea that it's the government's job to bleed us of the maximum amount of money possible.
Wh47 d1d j00 541, 31337 15n't t3h r0xor5 ne m0r3???
Taxes of 12-odd percent of our income are taken for SS.
That's 12.4% (6.2% of which is paid by the employer). Unless, of course, you make more that $87,000, in which case, your rate can be significantly lower. Someone with an annual income of $500,000 would pay about 2.16% in FICA Tax (Federal Insurance Contributions Act, a name we will get back to in a minute). Someone with $500,000 of unearned income (i.e. dividends, capital gains) would pay 0.00% in FICA tax. That makes the Social Security tax a regressive tax, in that low wage earners pay a higher percentage than high wage earners.
If you invested that money in private accounts, you'd be wealthy by the time you retired, even if you made some seriously bad investment decisions.
Yes, and if twinkies grew on pine trees, nobody would ever go hungry. The money is not a pension. It is not a retirement plan. It's not even yours. It's a fee you pay for the privledge of working in this country. In addition, it is an insurance policy. (Note the acronym above "Federal INSURANCE Contributions Act") It's poverty insurance. Congratulations! You're covered.
I'll assume you own a home and pay for fire insurance. I would even bet that your state or local government requires that you purchase fire insurance. With a little luck, your house will never burn down. After 20 years of good luck, are you going to start calling your insurance company to demand "return on your investment?" Feel free to try. Give them a call and tell them you're being "ripped off" because you haven't collected on your investment. Tell them that you're tired of them giving "your" money to people who weren't smart enough not to burn down their houses.
There's a difference between an investment and an expense. Insurance is an expense. Get used to it.
I know it's a social program, it's about the social contract and so on, but if the social contract is as one-sided as SS is, well, I want out. Period.
It IS a social contract. And if you want out of the contract move to Argentina, asshole. That's ssuming they'll take you. That's your way out of Social Security. Go somewhere else. Get a job making sneakers for Nike in Southeast Asia. Do it today and you'll never pay another cent in FICA.
I've never understood how so many the rich in this country think that they get no benefit from taxation. Do you think that your investments would be doing well if senior citizens were starving in the streets. Do you think that the social unrest that comes with extreme poverty is going to leave you untouched? (That's not to mention that the rich are the primary beneficiaries of most of the government spending in this country.)
You want to live here, pay your fair share and stop bitching. If you don't want to pay your fair share, what makes you think we want you here?
If you're making over $100K and you can't find another 12% of your income to stash away, you're doing something wrong. If you're making significantly less than $100K, you're probably going to need social security and you'd better hope it's there when you need it.
By the way, I'm rich... I'm also undertaxed.
Support SETI@home
There's a difference between an investment and insurance, yes.
/is/ their investment money. If they had the freedom to invest it as they wanted, everyone would be better off. That's my argument, pure and simple.
But Social Security is bad insurance and a terrible investment. It offers a negative return on your money as a retirement program and negligible benefits as insurance. The death benefit, for example, is $255, which isn't enough even for the most skimpy of funerals.
I have a right to say that I want a specific fire insurance policy. If it's sold, I can buy it.
I have a right to invest with about ten billion companies. If there's an investment approach, there's a fund to support it.
Why is it that there is compulsory social insurance, a package that in my view provides lousy benefits at an extremely high price, that I cannot change?
What if I could invest in anything I wanted under the umbrella of social insurance?
That's what Social Security private accounts would do. In my opinion, it is righting a long-standing injustice, pure and simple.
If society, whatever that is, says we need social insurance, whatever that is, fine. But let us choose the policy that's best for us. At minimum, then, let's choose a policy that actually offers a positive return on our investment, and is not dependent on an increasing population to pay benefits.
That's what Bush is proposing with Social Security Private Accounts. Tell me what's wrong with that. It seems to me that it's common sense that if you invest money for your retirement, or to protect you when you're sick and disabled, you should be able to manage that money on your own.
One size fits all went out with Henry Ford.
D
PS Social Security hurts the poor more than anyone else, since they don't have the investment money we do. SS
The Nobel Prize for economics a couple of years ago went to Daniel Kahneman, who demonstrated that
Kahneman also demonstrated that the Heritage foundation's intuition is poorly suited to understanding the economics and statistics of the real world.
Kahneman showed that people often prefer to choose a pair of gambles that equate to
- 25% odds of winning $240 and
- 75% odds of losing $760
over an alternative pair that equate to- 25% odds of winning $250 and
- 75% odds of losing $750
which violates the fundamental postulates of economic rationality. Specifically, economic preferences are not rational: It is easy to set up choices where people consistently prefer a to b and c to d, but prefer (b+d) to (a+c) (see D. Kahneman and A. Tversky, Eds., Choices, Values, and Frames).Kahneman's colleague Colin Camerer also demonstrated that taxi drivers work longer hours on nights when they make less money per hour and knock off early when they make more money per hour. In other words, the supply of cab drivers increases when the demand decreases and vice-versa!
Camerer's results violate the Heritage Foundation's intuition and suggests that increasing taxes might well lead people to work harder because people often work until they earn a target, after which they decide to knock off early and enjoy their leisure.
In the real world, people's choices frequently violate in a fundamental manner the postulates of economic rationality and thus refute trite intuitive assumptions that people act to maximize their income, wealth, or other measures of utility.
[QUOTE]Would you rather have a $10K or $7K raise?
You would work harder for the $10K right? Higher marginal tax rates suppress growth.[/QUOTE]
Of course this ignores that their is a maximum of the amount of 'hard work' that can be increased, and that each additional dollar is 'worth less' to the individual, and that there will generally be diminishing returns. Look up 'marginal utility' and 'marginal efficiency'. Also look up 'elasticity and utility'.
[QUOTE]Would you hire an accountant if he could get you that extra $3K if you only got the $7K? Would you accept $2k in benefits over nothing? High tax rates cause avoidance of taxes. Low tax rates make the cost of avoidance higher than the benefit [/QUOTE]
Again this deals with marginal utility and marginal efficiency, and the elasticity of utility. Even a low tax rate will have individuals to whom the utility of avoidance will be significant. Some silly examples - for someone making 2$ a year, a tax rate of 100% isn't really worth avoiding since the 2$ have little or no utility. For someone making a billion dollars a tax rate of 1% is worth avoiding. If there is the death penalty for tax evasion, then it might be worth paying more than the tax rate. The utility of avoidance varies with the individuals income, the tax rate, and also with enforcement and expected penalities.
[QUOTE]Decreasing taxes increases growth.[/QUOTE]
Taxes fund things like education, communication and transport infrastructure, the military, financial institutes etc. Thus decreasing taxes can result in increased marginal cost of labor, increased logistics costs, loss of property (or increased cost of protecting property), increased cost of contract enforcement, etc. possibly resulting in a decrease of growth resultant from a decrease in taxes.
Wanniski and Laffer are not sources of quality analysis on economics.
LetterRip
Excuse me? The article from Donald Luskin picks a single point in the article and points out an inaccuracy, and that is called refuting the article. Even if he is correct on that point (don't know, don't care) that does nothing towards critiquing the article as a whole.
And on the other article, the point made by the orignal author is that any estimates into the future are error prone to say the least. Secondly the reality is that crisis only begins when Social Security has run out of money from previous surpluses. Until then it a problem for the govt, and their mis-management of the money that Social Security has so kindly lent them.
I am not a USian. I never wish to be one. I could not care less about Social Security. It is unlikely to ever impact my life in any way shape or form. But please try to examine the facts as they stand from a neutral viewpoint.
meh
Social Security shouldn't be a Right vs. Left issue. It should be a 'This would be a better solution because (insert data and theories here)' issue.
Love sees no species.
The life expectancy calculations you mentioned are a myth. Debunked by the NYT article. Further, the original Social Security estimates of life expectancy were almost spot-on perfect. They actually anticipated a longer life expectancy by a year or two, not a much shorter one.
Similarly, everything you said reads like a talking point list from the Republicans. And without going back and doing a point-by-point analysis of your claims vs the NYT, I think the article refutes every claim you made. If you want to argue this, start the point-by-point, quoting the NYT article or historical documents and I'll willingly commit the effort. But I won't waste my time on something I suspect is partisan astroturfing by an anti-SS advocate.
My take: the republicans have hated Social Security since day 1. They've tried to kill it at least 4 times. Now, they're saying it's doomed to bankruptcy and must be dramatically changed to be saved. Ironically, the remedy is very similar to the previous attempts to destroy it. Hmmm...
Republicans hate SS. They also hate that it's been unassailable (the proverbial 3rd rail). If they are the only ones that say it's doomed, Occam's Razor says they're lying.
Translation: "I got mine, the rest of you can fuck off and die."
As opposed to "You got more than the poor person, so since I'm government and I'm morally righteous I'm going to steal from you and give your money to the poor person (all while I take a cut off the top for myself of course)."
I'm sure "SlashdotMedia" will improve on all the wonders that Dice Holdings blessed us all with
"Over the objections of many of its own employees, the Social Security Administration is gearing up for a major effort to publicize the financial problems of Social Security and to convince the public that [privatized] accounts are needed as part of any solution." (The New York Times, 1/16/2005)
Ok, so one could concievably argue that the employees are worried about losing their jobs, and the SSA is worried about the American people. Publicizing problems - that's a good thing: people should know about the financial difficulties of their retirement fund. Convince...whoa, whoa, wait a minute, there, buster! First of all, precisely what is to be done about Social Security privatization is the business of the legislature, not the SSA. The organization itself should merely provide facts and objective analysis to the discussion, not opinions. If the SSA starts telling us what we should do, then there's a serious conflict of interest: shouldn't its suggestions be ones that would tend to insure the SSA's continued existance? Yes.
Wait! They're not. Now, THAT sounds fishy. Of course, you could argue that the self-devaluing nature of the SSA's recomendations supports their credibility. One could also argue that it shows that they are being manipulated by higher powers, eg the Executive Branch. We'll never know which it is. The only way to have an honest discussion of SS reform is if the SSA stays out of it.
Here is the phone # of the SSA. Tell them what you think of their role in the discussion.
1-800-772-1213
After the greeting, dial 1 for English or 2 for Spanish.
Then press 3.
Then press 0 to speak to a representative.