The Fundamental Contradiction of Social Security Privatizers
The Fundamental Contradiction of Social Security Privatizers
The Bush administration is ignoring the 5-year trend of improving Social Security finances. Instead, it has chosen to focus on the fact that this year the trustees’ predicted exhaustion date for the trust fund is one year earlier (2041) than it was last year (2042). Treasury Secretary John Snow said, “the report underscores the fact that the longer we wait, the more difficult the problem becomes.”
There is a big problem with that argument. President Bush is traveling around the country telling people the Social Security Trust fund doesn’t exist. For example, on Monday Bush said, “some of you may think there’s what they call a Social Security trust… But that’s not how it works…what’s left is an empty IOU.” Snow’s rhetoric, while irresponsibly inflammatory, reveals that what Bush is saying isn’t true. If the trust fund was a fantasy, a change in its exhaustion date would have no impact on the program. The fact is, the Social Security trust fund is real — backed by the full faith and credit of the United States — and will help ensure the program can pay full benefits for decades.
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I think President Bush has called into question the ability of the government to fulfill it’s financial obligations. This is an unbelievable turn of events – our President calling into question our ability and willingness to pay our debts. How can we trust anything he says from here on out? (Let alone everything else he’s done).
March 24th, 2005 at 12:12 pmTHE CONTRADICTION IS THAT WE SENIORS SHOULD BELIEVE THAT THE SOCIAL SECURITY CAN BE REDEEMED BY IOU’s.
March 24th, 2005 at 12:16 pmThe contradiction is part of the Republicans’ political agenda and is all part of the BIG LIE: remove all protections from citizens and they will be better off; the free market is always better than a regulated life. This privatization is one step in removing the Social Security safety net. Next, Medicare and Medicaid will be privatized giving insurance companies a lot of new buisness. Then protections will be removed for union actiivites. Then free speach and free press will be limited in the name of national security. We have to draw the line here to prevent the ultimate goal of the Republicans: I’ve got mine; to hell with you.
March 24th, 2005 at 12:20 pmIt is my understanding that if I buy a U.S. savings bond for my son, he can expect to cash it in with added interest in the future. And when the Chinese government buys U.S. treasury bills, it can expect to cash them in down the road and get back the principle and interest. President Bush seems to be telling us that the money that I and the Chinese government invest is worthless, (as is the Social Sucurity surpluss) because our government does not put that money safely away. Last time I checked, my bank deposit is not stashed away in a box with my name on it.
March 24th, 2005 at 12:41 pmUsing this kind of logic, US treasury securities (T bills, bonds etc) would also be “worthless” as they are basically also IOU’s. As there is no longer a ‘gold standard’ , there is correspond ingly also ‘nothing’ standing behind our paper currency, the U.S. dollar, would GWB also have us believe these are worthless? The whole Soc Sec ‘personal’ account bruhaha, imho is a) a tactic to divert the american people away from what is really important and b) payback for campaign contributions from financial institutions. (On such accounts, the commissions, safekeeping fees etc should easily go into the trillions of $, not a bad return for a couple of million in campaign contributions…)
March 24th, 2005 at 12:43 pmQuestioning the bonds in the trust fund is a violation of the Fourteenth Amendment to the U.S.Constitution, and any government official who suggests federal bonds are worthless should be impeached for failing to uphold the Constitution.
March 24th, 2005 at 12:56 pmBush is just a fucking liar.
A cynical, deceitful, smug-ass liar.
March 24th, 2005 at 1:01 pmGreg, Dave, Carol, Sarah, thank you. Bush’s cynical and dishonest attempt to represent Social Security as a pay-as-you-go system is a much larger issue than the “debate” over 2042 and privatization. An effective and principled opposition (us?) would use this opportunity to expose the hyprocrisy of collecting $500M per day in excess taxes from working people to pay in to a trust fund that the President claims is just “empty IOUs”. The trust fund is very real to the people who pay those taxes (us!). Bush has essentially admitted that the Republicans have been using SS as a cover story for a regressive tax system since 1983, and that Gore was right all along: Republican fiscal policies threaten the integrity of Social Security. Why isn’t Dean screaming? The leading Democrats are just standing firm on the deck against benefit cuts while the Republicans drive the whole ship into an iceberg.
March 24th, 2005 at 1:21 pmT-bills held by Social Security are IOUs; T-bills held by banks, mutual funds, and little old ladies are IOUs; checks issued by your empoyer are IOUs; the green dollar bills in your pocket are IOUs. These all function effectively because courts enforce them and because they are backed by the future productive capacity of the nation. Social Security’s T-bills will become worthless only if ALL forms of IOUs issued by the government or the US private sector become worthless — or if the voters elect people who intend to renege on them.
March 24th, 2005 at 1:22 pmComment #2: Bush’s statement that the Social Security trust fund is $11 trillion in the hole comes from a figure published by the Social Security trustees, which extrapolates the status of the trust fund to infinity. While this may be laughable, it is also a clauluation in which the actuaries treat the T-bills currently in the trust fund and expected to exist in the trust fund throguh 2041 as real and meanigful. It is logically contradictory for Bush to argue bith the the trust fund has an $11 trillion hole and that ist T-bills are worthless (just as Snow’s focus on the 2041 date contradict’s Bush’s statement that the T-bills are worthless).
March 24th, 2005 at 1:27 pmComment #3: If Social Security is in deep trouble starting in 2017, when its costs first exceed its dedicated non-onterest revenues, then the Department of Defense has been in deep trouble since 1789, because it has no dedicated revenues and never has; the Department of Education has been in deep trouble since its inception for the same reason; the Veterans’ Adminsitration is broke for the same reason; and so on. Moroever, the federal government as a whole must have gone “flat bust — completly bankrupt” (to quote the president) in fiscal year 2002, under his watch, when its total costs exceeded its total revenues. Surely the deficits that exist right now, caused in significant part because of his tax cuts, are a more important issue than the future and much smaller Social Security deficits.
March 24th, 2005 at 1:36 pmI have been convinced for a long time that the real point of Bush’s Social Security proposal was the destruction of Social Security. Privatization would seriously undermine the financial foundation, giving the neo-cons the “excuse” a few years down the road to say, “see, we told you it was unsustainable” and phase the program out. (Sorry, all you retirees we’re impoverishing – but life is hard and frequently unfair) You don’t have to be a fortune teller to read those tea leaves.
March 24th, 2005 at 2:28 pmHow can they put people in jail for lieing to the justise dept, FBI or to congress and this administration gets off scott free for lieing to the whole world about what it has done the last four years. I for one would not believe this bunch if they swore on a stack of bibles. I think are only hope is the 06 election to change congress and get rid the lemming we now have.
March 24th, 2005 at 2:29 pmRecently learned from my congressman’s office that the “trust” currently has about 1.3 trillion dollars, earning 6.5% interest in gov’t bonds.
March 24th, 2005 at 2:30 pmWhen they increased the rate and cap in 1984 it was the result of a federal study of the “baby boomers” impact in the early 2000’s. I cheerfully accepted the cap increase, even though I had once again stopped paying SS before year end, because I care about the future of our country.
The whole situation is bogus, once we realize that the boomers will start dying off in 2027 and most of the excess retirees will have left us by 2047 or so, we’ll then be back to a normal ratio of workers to retirees..
That, of course, assumes that we’ll have jobs for those workers, and an economy to pay back the federal debt.
What Bush and his privatization crew are saying is that you can’t trust the government to fund its mandatory obligations because people like them don’t want to pay for these obligations, and will always look for ways to get out of their obligations.
When a politician tells you not to trust him, you should listen.
March 24th, 2005 at 3:09 pmThe New York Times reported that “the president’s new budget uses Social Security surpluses to pay for other programs every year through 2013, ultimately diverting more than $1.4 trillion in Social Security funds to other purposes.” (The NYT, 2/06/02) Further there is this quote by Bush,
March 24th, 2005 at 3:39 pm“We’re going to keep the promise of Social Security and keep the government from raiding the Social Security surplus.” The US has the obligation to repay the trillions of dollars borrowed from The Social Security surplus, unless, we are about to become a failed state sometime in the future.
Someone has just suggested to me, that illlegal aliens will now be given Social security benifits without ever contributing to the fund
March 24th, 2005 at 6:36 pmWe have to bear in mind that the “C student” president has but a limited grasp of anything he’s told to talk about … such as macro-economics and fiscal policy. That’s why he hides behind a wall of “belief” that is impervious to “fact”. The SS Trust Fund is but one example. According to the Comptroller General’s recent Financial Report of the United States [ http://www.gao.gov/financial/04frusg.pdf ] we are a nation that is $7.4 trillion in debt. $4+ trillion has been borrowed primarily from foreign banks and nations, including nearly $2 trillion from China. Bush added roughly $2 trillion to this mountain of debt since coming into office. The balance is the amount rifled from the SS Trust Fund…roughly $3 trillion. The Comptroller General’s projection shows that the interest we must pay on our debt will exceed the total cost of government today by 2040. If YOU wanted to protect tax cuts and corporate welfare where would YOU look for several trillion dollars to avoid dealing with our crippling national debt? In the money we owe foreign nations? Or in the money “borrowed” from our own citizens? An easy choice for George “Let Them Eat Cake” Bush, it would seem.
March 24th, 2005 at 6:46 pmHere is my understanding:
Let’s consider three cumulative transactions
-Transaction 1, a citizen pays $1,000 in SS payroll taxes
After that transaction, Govt. owes $1,000 to SS beneficiaries and has $1,000 in the ‘Bank’, plus an obligation to pay SS benefits of an unspecified magnitude.
-Transaction 2, a citizen pays $1,000 to buy a U.S. Bond/Bill. The Govt. now has $2,000 in the ‘Bank’ and owes someone $1,000 + interest, plus an obligation to pay SS benefits of an unspecified magnitude
-Transaction 3, a foreign government pays $1,000 to buy a U.S. Bond/Bill. The Gov’t. now has $3,000 in the ‘Bank’, and owes two entities a total of $2,000 + interest, plus an obligation to pay SS benefits.
At this point let’s say that the government decides to build a, highway or pay farm subsidies or something else that they but in their budget that will cost $5,000. The Govt. has an income from Income taxes but it is only $2,000. At this point, they can a) decide NOT to build/pay for these purchases or they can b) have an UNBALANCED budget and get the needed $3,000 from somewhere else. Let’s say that they decide to go ahead with these purchases and borrow the $3,000 from their ‘Bank’ account and put in a piece of paper saying “I owe you $3,000″.
Now, the Gov’t. still owes $1,000+int. to the citizen, $1,000+int to the foreign government, and has an obligation to pay SS benefits of an unspecified magnitude. The Gov’t. has no money in its ‘Bank’ but it does have a note that says that the Gov’t will pay itself $3,000 AT A LATER DATE.
The general consensus on this web site is that the Gov’t. isn’t broke. That it can fund their SS obligation by cashing in the IOU’s from the Federal Gov’t. But remember, the Federal Gov’t has no money except what it takes in revenue from taxing you and me. So, their only solution is to start increasing taxes over and above the already unbalanced budget to pay for it.
People object to the words “insolvent” or “broke” and whatever, but they are just arguing semantics. The truth is that sometime in the future, these obligations will come due. OUR future generations will now have to pay huge income tax rates to keep the Gov’t solvent.
Whether you are Republican, Democrat, Liberal, Conservative or whatever, you should consider that SS going to cost us a lot of money in the future and we had better stop arguing the semantic and partisan rhetoric and address the problem! It will only get worse.
March 24th, 2005 at 7:39 pmRalph, you are exactly correct. Except for one key point: the problem is NOT a problem with Social Security. No, it is a problem with the overall finances of the government, specifically the $8 trillion in debt that Republicans have borrowed from whoever would loan it to them over 25 years, including $1.6 T from the SS trust fund. I for one agree that the ship is going to hit the iceberg, and SS and everyone else who has lent money to the government (or is responsible for paying that debt) will suffer. What I object to is calling it an SS problem. Why? Because under the 1983 SS reform plan (Reagan and Greenspan), the feds agreed to increase a special tax–the regressive FICA tax—specifically to build up money for Social Security to cope with the demographic bubble that Bush is complaining about now. They have already taxed $1.6 trillion for exactly that purpose! They already “solved” the problem, and we already prepaid the costs! Except that they took the money and spent it, and borrowed another $6.4 T on top of it. Now, it was always the plan to “invest” the money in government bonds, i.e, to borrow it and use it for other purposes. But if that had reduced federal borrowing from other sources, then it would be easy for the government to borrow from those other sources in 2018 to sustain SS. But it didn’t reduce government borrowing…instead, they paid the surplus out in a massive tax cut and trillions in interest on their sick deficits. The government is so far in debt that SS will never see that money we prepaid in taxes. THAT is the problem. Even if we eliminated SS, we would still have to tax ourselves to pay off the other $6.4 trillion in debt someday, plus the almost $4 billion we pay EVERY WEEK in interest payments. Call it semantics if you will, but repeat after me: it is not a Social Security problem, it is a general fiscal disaster, and Social Security is an innocent bystander. They have only one reason to call it an SS problem: to try to place the blame on FDR instead of on Reagan and Bush where it belongs.
By the way, if the US can sustain its productivity trends of the last decade, then Social Security will be fully self-sustaining. That is just a fact. But it won’t matter because the government is so far in debt that it can never make good on its legal and moral obligations to the people who have prepaid those taxes. Gore said it would happen (”lockbox”), and Bush has now admitted that Gore was right. It is really very simple. It is the largest con job in history, and the Democrats and the voters of this country have let them get away with it.
Remember, they still collect $500 M per day in taxes from working people at the bottom of the income ladder to pay into that trust fund. They “borrow” the money and they don’t even count it in the deficit figures. It is unconscionable. If the money is not going to be used for SS, then they should cut that FICA tax tomorrow to restore SS to a true pay-as-you go basis, as Bush falsely claims it is. But it is far more likely that the Democrats will accede to a “compromise” that raises the FICA tax ceiling. That will just extend the con: no amount of taxing today will save Social Security tomorrow if the government is using it to fund a $400+ billion structural deficit with $200 billion in interest payments per year.
End of sermon. If you got this far, thanks for listening.
March 24th, 2005 at 8:50 pmJeff, thanks. As I read comments I was preparing to make the same points. I’ve tried explaining this to people for a long time, and usually get blank looks.
The argument for the ‘83 huge increase in FICA was that when the Boomers retired there wouldn’t be enough people working to pay them, so for the first time we’d pay for those retired, AND put it away for the future. Since the money was used to finance the rest of the governement, it masked that much additional debt they wouldn’t have to acknowledge. But who is going to have to pay off the T bills, but the same too few workers… plus interest.
And the worst of it is that since ‘83 they have been using this most regressive tax to fund the government, which the wealthy have little responsibility to pay since the cut off is $90,000 on FICA.
You’re exactly right. We should return SS to pay as you go, forcing the bloated deficit spending to be paid off with progressive income taxes, if it can be paid off at all.
March 24th, 2005 at 11:13 pmThree things that will “cure” the SS problem:
March 24th, 2005 at 11:44 pm1. Raise the minum wage to $6.15 per hr.(the F.I.C.A tax is 12.4%)
2. Bring back into the country all the jobs off shored.
3. Put a lockbox on all Social security monies.
Many good comments here, but IMHO, many are missing an important point. CHIMPY CAN GET AWAY WITH THIS BECAUSE THE WILL OF THE PEOPLE NO LONGER MATTERS IN “US STYLE” DEMOCRACY!
All they need to do is create an illusion that an “engergized base” is “highly motivated” and that a few “cultural issues” are all that the majority of voters care about. CHIMPY DID NOT WIN IN 2000 and no one can prove he won in 2004.
The public was fed nonsense polls leading up to the election that chimpy was going to win by a landslide — they had to steal FL and OH this time to get the desired results. Are we really to believe that sparsely populated “red states” actually outnumber the rest of America! LOL, except this is going to really hurt….
The audacity of chimpy and his band of thieves knows no limits because they have no reason to be concerned about elections anymore.
March 24th, 2005 at 11:56 pmI thought I was the only one who know about W. and his theives, but now I feel better, at the same time hurt that the keep steeling these elections. We know Jeb won’t be around Fl. to screw up any longer as a govener. I knew it will take yrs. to fix all the mess both the Bushes have done. We should, even though he might screw it up too, elect Ralph Nader. He would put a stop to all this company welfare.
March 25th, 2005 at 5:12 amDoesn’t the president use the surplusses in the trust fund on the revenue side in his 2006 budget? Doesn’t the budget project that revenue out 5 years to include money that will be paid into the trust through future payroll taxes? We shouldn’t let him have it both ways.
March 25th, 2005 at 7:36 amLalage, yes. In essence, Social Security is being used as a cover story for the more regressive tax system the Republicans have always wanted. They tell working people that FICA goes for their SSecurity, but in almost every respect they treat it as general revenue. The only difference is that they issue bonds to the trust fund for the $500M per day in excess FICA taxes….a trust fund they now deny has any significance at all. I say again it is a $1.6 trillion, 25-year con.
My fear is that the Democrats won’t see through the con, and the “debate” over SS will culminate in *raising* FICA taxes, as the Washington Post calls for today in its editorial. George Will called for it in a recent piece, Lyndsey Graham has been calling for it, and the Democrats look like they will eventually cave to “protect the long-term solvency of Social Security”. It is the logical conclusion of their current vacuous stance. That will just let the Republicans keep the con going longer and dig us deeper into a hole. They have another $100B in annual tax cuts in this year’s budget! And another $10B per year in annual interest spending for last year’s deficit. (Those numbers are estimates.)
March 25th, 2005 at 9:12 amBush has something devious up his sleeve that none of us know about. He has lied to the Americans and the world at large since he’s been president. He is lying now and it’s a whopper.
March 25th, 2005 at 10:52 amFDR possessed brilliant far-reaching foresight that few [if any] of our politicians now have. I wish it were possible for him to face off with Bush on this subject. As it is not possible, we, the people, must stop him. I do not believe he is concerned about the 11 trillion he stole from the social security coffers to cover his war on Iraq. Something else is going in in his pea brain.
It seems impossible that congress would allow him to rob Americans whose primary income is SS, but with him in office I believe he’s proven that he’s capable of anything.
A million plus march on Washington might make a dent in his dense skull. It seems the only way we can speak and be heard. Let us plan it.
Afterthought: Bush is the least patrotic American of us all!
March 25th, 2005 at 10:56 amThanks Jeff.
Idid not say it was a SS problem. I tried to say that paying the SS obligation was a problem. I agree with you that it is only part of a much bigger problem and that needs to be solbed through a not-partisan focus on a solution!
I might be wrong, but I thought that the SS program was enacted through the legislature and that it was approved by a majority of the representatives of the people. Later modifications to ways to fund it and the benefits it would provide were also approved by the legislature. The legislature over the years has been composed of individuals from a number of political parties (not just one), and a number of philisophical view points (not just one). So to say it is a problem created by one person (Bush), or one party (Republican). or one philisophical view party (conservative) is inaccurate.
While I agree with you on the essence of your statement, I go back to my main point! A majority of the postings on this web site (see 1,3,6,7,8,12,13,15,18,23,24,25,27) don’t address the problem, they just rant about a percieved conspiracy, or an evil intent of some individual or party.
We, the citiens of this country, need to get off of the rhetorical bashing of ‘the other guy who doesn’t think as I do’ and tell our representative in the US House and Senate that we expect them to stop throwing mud and arguing semantics and come up with solutions. Right now, they are more interested in telling us why the other party is wrong, that their party is correct and that in the future the citizens should vote for their party, and that will solve the problem!
March 25th, 2005 at 12:07 pmSylvia, not 11 trillion. $1.6 trillion in the fund, taxing and growing at $500 million per day. It will be $3 trillion by 2018. And the cost for Iraq is relatively small, on the order of $200 billion so far. Where is the trust fund money really going? I observe that FICA collection rate for the trust fund is roughly equivalent to the interest payments on our $8T federal debt: it is about $170 billion per year, depending on who is counting and how. That debt is the result of 25 years of Republican policies of tax cuts on wealth, huge defense budgets, and refusal to acknowledge or pay for the compounding interest burden. Clinton turned things around and started to pay down the debt, but Bush has washed all that away. Gore said Bush’s policies would threaten SS and he was right. Clinton called it a “risky tax scheme that will blow a hole in the deficit” and he was right. The Republicans are now at least saying “oops” but they still won’t stop. That should be the central issue for the Democratic party and progressive politics.
March 25th, 2005 at 12:12 pmTHERE IS ONLY ONE PLACE WERE THE BUSH CRIME FAMILY WOULD DO THIS COUNTRY ANY GOOD “DEATH ROW”
March 25th, 2005 at 12:22 pmRalph, with respect, I categorically reject your position. The Republicans created this problem. Democrats have fought the fight (not always well) at every step for 25 years. Mondale campaigned on deficit reduction in 1984 and got slaughtered. Clinton’s 1993 budget was approved without a single Republican vote. Gore campaigned on this issue in 2000 and lost narrowly. It is true that there have been a few Democrat defections, and those have enabled Republicans to dictate budget policies for most of the last 25 years, with disastrous results. But no solution is possible until the Republicans face the truth and change their ways, or the voters force them out. We cannot fix the problem of Social Security on its own terms without addressing the larger problem. Consider that what SS really needs is a small increase in the FICA tax, and the Republicans are pushing for that, but they are doing it in bad faith: they just want to use FICA to defer the date when their debt to the trust fund comes due. How can I say that? Because that is what they did last time we addressed this problem in a bipartisan way! Until they are held accountable we cannot repeat the same con again.
March 25th, 2005 at 12:29 pmFair enough Ralph, I will propose a solution. What we need is a plan to pay off at least $3T of our debt to other lenders by 2018 to “restore the SS trust fund balance” before we need to start drawing on it. What will that require? Repeal the Bush tax cuts on wealth and restore the 1993 Clinton tax stance. Add to it a large tax on energy, upwards of $1 per gallon of gas. Clinton proposed it in 1993, and every Republican on Dole’s senate finance committee voted against it. Look at us now: the nation is full of SUVs and we are paying that $1 per gallon and more to the oil barons and the Arabs, then turning around and borrowing the money right back from them with interest so we can pay it back to them again in tax cuts. If we had that tax then we wouldn’t need it now, but it might not be too late. Ralph,. that is what it will take: massive austerity to pay bills coming due from the past, and put us on a footing to pay our new bills in the future.
Second, we will need to address the problem of escalating health care costs. Medicare is a much worse problem than SS, and health care costs are starting to take down large established companies now (look at GM’s recent troubles). Democrats have tried, and Republicans have obstructed.
Third, we need to invest in the productive capacity of our nation: education, transportation, science, technology. Stop starving children or poisoning them with mercury that gives them brain damage. If we can sustain the productivity trends of the last decade, then SS will be fully self-sustaining well beyond 2042 (if the trust fund is protected).
We should be talking about those things: our debt, health care, and investment. Every other domestic issue is just noise, including SS.
March 25th, 2005 at 12:50 pmI would like to thank Ralph (19) and Jeff (20) for crystallizing this issue for me, and I concur with Paul (21) about the blank looks you get when you try to discuss it. I don’t believe I’m exaggerating when I say that there is NO discussion of this in the media. Could it be that George’s purpose of privatizing (oops, personalizing) SS is a pathetic attempt to obscure the fact that he has broken our piggy bank and spent all the money on candy?
March 25th, 2005 at 4:01 pmJeff (post 32), maybe I misstated the last sentence in my post (29). I meant to say “Right now, the elected representatives on all sides of the aisle, are more interested in telling us why the other party is wrong, that their party is correct and that in the future the citizens should vote for their party. Once they are in control all of the problems will be solved. From your post I think you are “categorically rejecting that position”. Correct?
I agree that we need a massive austerity program.
I agree that we need to address the problem of escalating health care costs.
I agree that we need to invest in the productive capacity of our nation: education, transportation, science, technology.
But I don’t understand what you mean by the statement “Until the Republicans are held accountable”.
What would constitute a “being held responsible”. Would it be a letter from the President or the Republican party saying ‘I am responsible for the ills of the country’, or what? And how would this result in a massive austerity program, or address the increasing health care costs, or invest in the productive of our nation?
Not beign a Republican, I am not trying to defend the administration or the Republican party. I still say WE (the citizens) need to get the word to the politiicions that we want solutions. We need to tell them that whatever their policical affiliation, we will no longer vote a straight ballot, Democrat/Republican, but that we will vote for the individual who is showing results. We need to tell them that if they can’t work with their counterparts in the legislature and hence continue to be ineffectual, then we will replace both sides.
Let me know how the “holding the Republicans responsible” would manifest itself!
PS. I would suggest that the problems that GM is facing is their own inability to work with the unions, and not solely a problem of escalating health care costs!
March 25th, 2005 at 4:02 pmI am neither a conservative nor a liberal; I find some good and plenty of fault in the aguements of those with an axe to grind, including many of them in this comment area.
Let’s face it folks. Both major parties are in the makeup of our decision-makers, from President, Cabinet, through Congress. Blaming on part for the last 25 years is invalid. Ask Sen. Harry Reid how to stop politicians from getting their way. It is called lobbying and filibuster and he is very good at it. So, what is the problem and when did it start?
Since FDR introduced Social Security in 1935, no sacred trust fund (lockbox?) was evr established. You might say we had a mistrust fund because income from SS contributions were put into the general treasury account and was squandered by Congress, from the pork-barrell stars to the bleeding hearts to the go-a -long to get-along crowd from both major parties.
Many citizens mistakenly think that a seperate trust was established with their name on it. HAH! The SS system STARTED BROKE! It is a Ponzi scheme, which means a “pyramid”. These plans are illegal for us to run or participate in but it is OK for Congress, the republicrats. So they take income from present workers and pay that out to retired folks. Since the income always exceeded the payout, they got away with it as heroes. But because in 2037, 2041 or 2051 or whatever less will come in than should be paid out. That’s the problem.
Now let’s stop calling names, degrading a President who has no control over the problem but has an idea that he thinks may help. If you spend this energy trying to devise a solution, now you will be a productive citizen, not a wart on the ass of our society.
March 25th, 2005 at 4:44 pmBob Kaytes,
I really don’t agree at all with the description of SS as a Ponzi scheme. Since this explains the differences far better than I can, I’m linking to the Wikipedia defintion of Ponzi schems, as well a quoting the relavent text:
http://en.wikipedia.org/wiki/Ponzi_scheme
**BEGIN TEXT**
Are national retirement programs Ponzi schemes?
Some have argued that many national social security systems, such as the Social Security system in the United States and the National insurance system in the United Kingdom, are actually large-scale Ponzi schemes. One example is conservative economist Thomas Sowell in his book, Applied Economics ISBN 0-465-08143-6.
Sowell and others point out that, under these national systems, incoming payments, made up of taxes and/or other kinds of non-voluntary contributions, are neither saved nor invested. Instead, current contributions are used to pay for current benefits, much like a Ponzi scheme.
Proponents of Social Security change in the U.S., such as Sowell, claim that this “pay-as-you-go” system has begun to show its inherent flaws as North American demographics trend toward more pensioners and fewer workers, because of declining birth rates and increasing life expectancy.
Retirement programs run by national governments, though they involve the taxes paid in by workers being redistributed to pensioners, nevertheless differ in a number of basic features that are usually found in Ponzi schemes, but are not fundamental to them:
They promise a stipend to the country’s retired persons, not the quick and exhorbitant profits that Ponzi schemes invariably offer.
They rely on the taxing power of the state to ensure continuous funding, instead of fast talk alone. Theoretically, general tax revenues could be used to supplement worker payments into the systems, although, since historically in the U.S. Social Security has almost always been in surplus, many observers would view such measures as a collapse. Similarly, the political process could be, and has been, used to raise required contributions via retirement taxes, despite taxpayer protests. The same process could be used to reduce benefits, either across-the-board or just for the relatively more-well-off, despite opposition from those who will get less. Meanwhile, qualifications, such as the age of retirement, could be raised, although those who have to wait longer may not like it.
They pay out an approximately equal amount to what was paid in, per contributer, plus interest. This advantage, however, is offset when pension surpluses are used to cover a government’s current general-revenue shortfall, as has been happening in the United States since 2002. The practice, though not a Ponzi scheme, would be a prosecutable offense in the private sector. Meanwhile, proponents and opponents of reform debate whether contributions invested in private capital and equity markets would provide retirees with a better return.
They are in many ways 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.
Unlike in a Ponzi scheme, government 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. A sudden collapse is therefore unlikely.
The U.S. Social Security Administration provides the following analysis of this “Ponzi scheme” charge as applied to a pay-as-you-go system like Social Security:
There is a superficial analogy between pyramid or Ponzi schemes and pay-as-you-go insurance programs in that in both money from later participants goes to pay the benefits of earlier participants. But that is where the similarity ends. A pay-as-you-go system can be visualized as a simple pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end. So we could image that at any given time there might be, say, 40 million people receiving benefits at the back end of the pipeline; and as long as we had 40 million people paying taxes in the front end of the pipe, the program could be sustained forever. It does not require a doubling of participants every time a payment is made to a current beneficiary. (There does not have to be precisely the same number of workers and beneficiaries at a given time–there just needs to be a stable relationship between the two.) As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system and so it is not a pyramid or Ponzi scheme.
. . . .
If the demographics of the population were stable, then a pay-as-you-go system would not have demographically-driven financing ups and downs and no thoughtful person would be tempted to compare it to a Ponzi arrangement. However, since population demographics tend to rise and fall, the balance in pay-as-you-go systems tends to rise and fall as well. During periods when more new participants are entering the system than are receiving benefits there tends to be a surplus in funding (as in the early years of Social Security). During periods when beneficiaries are growing faster than new entrants (as will happen when the baby boomers retire), there tends to be a deficit. This vulnerability to demographic ups and downs is one of the problems with pay-as-you-go financing. But this problem has nothing to do with Ponzi schemes, or any other fraudulent form of financing, it is simply the nature of pay-as-you-go systems.
**END TEXT**
March 25th, 2005 at 5:55 pmBush has promised employers that he will get the big bite that social security cost them off their backs
March 25th, 2005 at 5:59 pmThey won’t have to contribute dime any more…
And controling the press and national news service doesn’t hurt either
Thomas Kurth (38), I would appreciate a link to the Bush statement on his “promise to employers that he will get the big bite that social securit cost the off their backs”.
Thanks
March 25th, 2005 at 6:46 pmThe American public is getting exactly what it deserves. Our elections are essentially auctions, only half of elligible voters bother, and media has learned it’s place as a good lap dog to whomever is in power.
And so it goes.
“A constitution of government, once changed from freedom, can never be restored; liberty, once lost, is lost forever.�
John Adams
“Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity.”
Martin Luther King Jr. 1963
“Evil is unspectacular and always human and shares our bed and eats at our own table.�
W. H. Aulden
AND FINALLY!!
“If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.�
Abraham Lincoln in his Lyceum address
What goes around comes around.
March 25th, 2005 at 9:05 pmRalph (35), I agree that it would be foolish to expect some sort of apology or change of heart from the Rs, and that we have to muddle through somehow.
But I don’t have any good ideas about how to approach it in a bipartisan way when the Pres is mounting a full-court press of disinformation.
My hope is that Democrats will take the opportunity to use the noise about SS to focus on the larger budget picture and reach consensus on our positions (you know mine). What I don’t want is a bipartisan compromise to raise FICA and throw good money after bad.
Actually, I think the most perceptive comment in the whole bunch is raisin #15. Maybe we should be looking at some form of privatization if it is the only way to protect the trust fund money, or a true pay-as-you-go (Ponzi?) if there is no way to protect the fund. Moynihan came around to that view before he died, and the reading on his conversion is very interesting. Anything is better than a regressive FICA tax underwriting cuts for the high brackets. If SS is dead anyway, then we should at least stop the tax.
Bob Kaytes #32, people will believe what they want to believe, but the facts on the debt and where it came from speak plainly to anyone who will listen.
March 26th, 2005 at 2:04 amThe problem that Bush is not saying, is the Gov does not want to repay the IOUS that are held in the file cabinet in Parkersburg WV that become due starting in 2018. Where is the repay money coming from, borrowed from China, etc because the budget does not have the money to repay.
March 26th, 2005 at 5:46 pmAlso all the money that he wants to invest out of SS will repay wall street for helping put him in office.
Since the Bush “plan” reportedly has many restrictions on how private account participants might invest their contributions, that would indicate to me that they know what is best for those participants. So that leads me to ask why they don’t just go ahead and do it with a part of the SS revenues–invest some of it in something other than government IOUs. It could be given to the trustees of the TSP to invest in the same proportions as TSP investors. This wouldn’t require all the overhead that private accounts would, and the amount invested could be regulated so that it wouldn’t cause trillions in additional debt.
Of course, this might help avoid cutting benefits rather than giving them an excuse to do so.
March 26th, 2005 at 6:43 pmIt boils down to this. If Social Security needs more money, taking money out of it is not the answer in any way, shape, or form. If “all options are on the table,” which is probably empty rhetoric, why not leave Social Security as it is and use the money that would be needed to make up for diversion to private accounts (so present retirees and disabled would supposedly not suffer any change in benefits/COLA) for those private accounts directly? Just watch them run away from that idea. What they want to do is pull the plug and drain Social Security.
March 26th, 2005 at 7:10 pmIt is sad commentary to read the comments in this blog. How otherwise intelligent people can be so sucked in and convinced of the “correctness” of a Social Security “lockbox” or some such device, is simply astounding.
Social Security has been a pay-as-you-go proposition from the first, that is, from its inception to this present day. There has never been a Scrooge McDuck Money Vault that had your “savings” in it. NEVER!
There have NEVER been congressmen of either party setting in Washington, engaging investment counselors and asking how best to “invest” your Social Security money to benefit you the best. EVER. Instead you have elected Congressmen that went to Washington and brought home “The Bacon”. But, you know – it’s funny. These congressmen and women of both parties bring home more than the US takes in income taxes. They bring home real dollars and they spend real dollars and those real dollars came from somewhere. Where did it come from?
Why, bonds and t-bill sales and other such items, of course. Where did the money come from to buy these things? Why foreign investments and sales of savings bonds, t-bills, etc. to citizens of course.
BUT that doesn’t come up with the right amount of dollars, friend. Where did the rest of the real money come from?
Social Security receipts.
Money that comes in that does not go out to SS recipients, is “invested” in t-bills, bonds, etc. This money is then spent for your new road, your new water tower, the new judicial building, the new cars for your government employes, for the salaries for your government employees, etc.
In other words – that money is GONE out of the government. All that’s left is an IOU and if the money quits coming into the government at higher and higher rates, some of those IOU’s are worth less. Or worthless…
With the number of people paying for each SS recipient falling (projected to be approaching 1-1 ratio in the next 35 years) the reality is that reciepts from taxes and FICA are going to go down. If all people have to depend on at retirement is social security, some one is going to start suggesting that this retirement is pushed out a LONG way or the “retirees” will need to quit living for the ‘greater good of society’.
But go ahead and bury your head in the sand. Ignore reality. Act like fools and rant and rave against any changes in this sacred cow. It is YOUR children who are going to bear the burden of supporting your sorry butts when you’re old, or they’ll be faced with getting rid of you as soon as possible.
Think what you wish, but for God’s sake, THINK FOR ONCE!
April 14th, 2005 at 1:07 pmThe measure
of a nation
My father worked in a General Tire factory when Akron was the rubber capital of the world. At one time, the tire industry had some of nation’s best benefits and pensions for blue-collar workers. Of course, his pension never kept pace with inflation. What looked like a good pension in 1967 sure wasn’t much to get by on in 1988 — about $450 a month.
I know firsthand how Social Security sustained him with a minimum of security and a maximum of dignity in his retirement and final years. Not only did it afford him independence, the payments for my mentally retarded brother helped my father take care of his special needs too. People forget that Social Security is more than retirement income — it is disability insurance, too.
This assault on Social Security is not only an assault on the most successful program our great country has created to build a more humane society, it’s an assault on the moral option of Americans taking care of fellow Americans.
Standing behind Social Security ensures we as a nation aspire to those higher moral values, compassion and selflessness. It is a hedge not only against poverty but against a cynical market view of people being worthwhile only as consumers and commodities rather than as deserving of life, liberty and the pursuit of happiness.
George W. Bush’s great disdain for this program and his consistent option for the market and those who stand to benefit from his privatization plan are self-centered and antithetical to what it means to be great in the eyes of the world. Just ask the man who Bush says was his greatest inspiration. I still hear his words clearly: “Whatsoever you do to the least of our brethren, that you do unto me.” I wonder whether our compassionate president is still listening.
May 2nd, 2005 at 2:15 pmBush’s Traveling Medicine Show
The Bush Administration rang the alarm on Social Security and how they will save us from another catastrophe. He took his medicine show on the road like one of those Christian traveling tent revivals held in Akron in the 50’s. His gimmick, “speak loudly and carry big shtick�.
We’ve seen these faith healers come to our town before. We know the scam. Coach a few loyalists to give passionate testimonials. Sign a loyalty oath to attend. Place an African Americans family behind you, white guys in work shirts and name tags who represent the working class, throw in some starry-eyed idealistic twenty-year old students in crisp suits, and neatly place a couple of children behind you for backdrop that will run in full color on the front page of the local newspaper. The corporate-owned media, with cameras rolling, faithfully broadcast the sales pitch on the six o’clock news. To top it off, we, the taxpayers paid for this slick sales pitch and we were to pretend that it was real news and not an infomercial.
The President did not answer impromptu questions from the audience. Civil discourse at the events is not permitted. Just a stack of scripted questions for the screened audience to ask and Bush’s answers already prepared on an 8� x 11� sheet of paper.
The sixty-day tour moved from town to town selling the Republican brand of Jim Jones Guyana Kool-Aid. If you purchased a bottle of the miracle cure called privatization at one of these events I hope you checked to see if your wallet was still in your back pocket.
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