Social Security opinions?

I know this was covered at some length here, but I though it was worth bringing up as the debate intensifies. I am curious to know members' opinions on Social Security.


It seems to me the Bush Administration argues there is a looming crisis in funding the current Social Security system. In the next thirty-some years, the current surplus of payroll tax revenue as compared to spending on the program will shift to a deficit. Bush hopes to shift the current system of today’s payroll taxes funding today’s retirees (pay-as-you-go) toward a system of individual investment for future individual benefits. This will allow today’s workers to earn returns on their payroll deductions that are historically higher than the wage-inflation rate at which Social Security benefits increase. In return for the higher returns on investment, individuals will sacrifice a guaranteed pension at retirement.

In order to shift payroll tax revenues to individual accounts, the government will be forced to account for the short-term deficit in funding for current programs. Bush has made it clear he will not raise payroll taxes to cover the shortage and he does not seem to support cutting benefits, which leaves borrowing money to cover the shortfall. He argues that the short-term borrowing will in the long run be offset by the increased revenues of a growing economy no longer burdened by fear of the crisis and by the decreased benefits required by today’s private investors when they retire.

(It should be noted the administration has not yet offered a specific plan regarding Social Security. The case I have presented above is solely as I understand it from statements the President and members of the administration have made during and since the campaign. I am sure that others can clarify and correct any mistakes I have made.)


Opponents of the Bush Administration’s approach cite many reasons for disagreeing, but I think they revolve around two basic points:

1.) There is no “crisis.” Social Security will, at the most conservative estimates, remain in surplus for more than thirty years. At this point, it will not become “bankrupt,” but will instead begin to accrue debt just as the general budget already does. Small alterations to the existing system (payroll tax changes, means-testing of benefits, shifting government employees into the system, etc.) will allow it to continue in perpetuity.

2.) Social Security is based on the premise of offering a guaranteed retirement benefit for all seniors. To shift this to a system of private accounts negates the moral reasoning behind the system. An individual can currently invest for her retirement (and take on the higher risks and rewards associated with that), but all seniors will benefit from the social security system into which they have paid all of their working lives. It is not a welfare net to aid those in need, but instead a reward for those who have “worked hard and played by the rules” for forty or fifty years.

(The same qualifiers apply to my presentation of these arguments as apply to the Bush ones.)


So who is right and why?

I don't know how anyone can say there isn't a problem with Social Security. It WILL go bankrupt at some point in the not-too-distant future (meaning a couple of generations or so at most, I believe.) Why wait to fix it when we know that it WILL break? As if the future isn't bleak enough..

Regarding point 2, I think it should be partially privatized. I think it needs to be available for everyone, but also with personal accounts. If you worked your whole life, you deserve your money more than someone who didn't. I'm not trying to neglect the needy or anything, but honestly. People who work do so for a reason, and they should reap the rewards. (Obviously there have to be lines and limits and all that mathematical shit, but I don't think I could even begin to guess what those numbers should be... everyone gets X amount for N number of years.. personal accounts would have Y dollars (x% of income, I guess) per year set aside for each year of employment.. blahblahblah.)

And on another point, I almost hate to say this, but I thought of it.. you know, there are people out there who aren't very giving. They won't drop any change in Santa's bucket outside Target or whatever. And that's their perogative. Why should they HAVE to support someone else? I'm not saying that they aren't greedy.. because they probably are.. and I'm not saying they're right, but if it's not ok for Bush to push morality on us, it's not ok for anti-social-security-reform liberals to push morality (spirit of giving to the needy.. social security, welfare, etc) on us, either.

[Edited on Dec 19, 2004 by sarahg]

Scial security is a safety net, it's not just old age pension, it's in case you ever fall upon bad times and need help to survive. A 'greedy' person who doesn't give to charity would still want to be fed and clothed if he or she was in a car accident and left unable to work or if he/she had a child with a disability who would be reliant on care for his/her life. Social security is also necessary economically and it should include trainng and education programs for people who find their skills redundant or if there is not a demand in their area for the skills they have.

Treating social security like a savings account ignores what it is, and unless you want to condenm people to death if they ever go bankrupt or get sick, then you need some kind of universal social welfare.

This is always an interesting argument to me. I think there is a vast difference between those who look at social programs as a burden to them personally and those who see them as a benefit to our community. Generally speaking, the mindset of the former is usually that of self-empowerment, self-centeredness, (neither good or bad) individual rights and praternal authority. The later think in terms of community, cooperation, and can even view the equation in terms of that community being similar to a family in which the members care for one another. This view is more maternal. For good insight into this read George Lakoff's "Moral Politics - How Liberals and Conservatives think." Who's right? Probably both. Perception is reality.

The point of social security is NOT that you are supporting someone else but that you are supporting YOURSELF in the future throught your contributions to the fund throughout a lifetime.

It's less about imposing morailty upon an unwilling populace than creating some kind of social order and stability for it's citizens without which the cost to society might be much, much higher.

Some people say that the character of a nation can be judged in the pains taken by it to care for its young, old and poor. I tend to agree. So if privatizing SS is more effective at doing this...I say go for it. Somehow I'm skeptical that it will.

privatising Social security will be one heck of a risk to take in hte name of experimentation. Stay the way things are until it is proven with numbers and reason, that social security will work better through the private sector. I can not imagine how that could be though.

This is not the way social security was originally sold. It was to be your retirement. You were not to need anything other than retirement. Just the fact that some people only see it as a safety next now is a perfect example of how bad the current system is. As of right now it will go bankrupt. The return on your investment in SS is only about 1%. You can get more than 1% in a regular savings account now days. If I had a choice I would opt out of SS and take care of retirement on my own.

There I said it, I'm pro choice!

Gosh, then should the government not punish murderers, since that's just "pushing morality" on people?

Of course, there's just a wee bit of difference between pushing a moral code that involves often-radical restrictions to life and liberty and one that involves a minor restriction to property.

Oh, and I love how nobody mentions all the disabled people who'd be completely fucked by Bush's privatization plan.

I also love the blind faith people have in the stock market, and the hyping of a Social Security "crisis" that's been caused not by some failing of the Social Security program (which has been running at a profit since it was introduced) but by SS funds being used to pay for other government expenses.

Not the last time I checked.
The other problem with this change is the supposed $2 trillon cost, to go from the current system, to Bush's system. I'm not an economist, but the system has been working pretty well up until now. I think it make more sense to modify the current system so it works, than starting something completely new. Well, working well except for how hard it is for disabled people to get benefits.

It doesn't matter how it's sold, social security IS a safety net, that is what it's there for. if you opted out today and got your 4% instead of 1% but had a traffic accident on wednesday and needed to live out your life in care or left your young children below the poverty line would you still be pro choice when nobody decided to choose to offer some of their money to help you or your family out.

Social responsibility is not a choice people should be trusted to make, not under this current system. We are not individualistic, we need each other to survive. the greediest person in the world would suddenly develop a social conscience if he/she is struck down early and then refused assistance. if this is the kind of world you want to live in then go ahead, privatise social security. It's ironic that those who are so pro privatisation are also supportive of massive military expenditure to provide security against something that is extremely unlikely to happen (that you will be involved in a terrorist attack or invaded by a foreign country) but you are not prepared to invest for security against something that is much much more likely.

I urge all people to read:

Paul Krugman in the editorial section of your paper if you want a well informed, and intellegent assesment of our current sittuation with SS.

I think most people would be surprised to find out how much it is going to cost us the tax payer, the government, and the future generations to completely "privatize" SS.

Put it all on "poppa's Moustache" in the third.

He has written three columns now for the New York Times--on 12/7, 12/10, and 12/17--that lay out the whole issue pretty nicely, I think.

Unfortunately, the first two are now archived so I can't link them, but I agree with heresy200 that it's worth taking the time to read these articles if you want to cut through the smokescreen surrounding SS and cover your ass.

No one should gamble money they can't afford to lose.

The stock market is not FDIC - insured and investments can and do lose value, including principal. Ask anyone who invested in Pets.com.
The greater the risk on the investment, the higher the the payout - which is great if you're rich and can speculate in junk bonds - losing your entire investment here and there to get the big payout other times. If you need every penny of that money to pay rent and buy food, however, it's a recipe for disaster.

Bush's plan will cost insane money to get started and he hasn't said word one about where he'll make up the huge amounts of lost money. If he dosen't raise taxes or cut benefits dramatically, that means he will have to borrow the money, increasing our already-insane defecit and the stress on our straining capital system. If investors continue to abandon the dollar in favor of the Euro, or feel we're over-leveraged, they will demand an increase in Treasury securities' interest to compensate them for the increased risk - which will raise our government's cost of funds and feed the vicious cycle of needing to borrow still more money to pay the bills.

Bush's plan is fiscally irresponsible, morally questionable, radically increases debt and helps remove a safety net needed by tens of millions of working, poor and disabled Americans.

Surprise!

I wish it was welfare! Then I could get behind it. Unfortunately it's just mandatory insurance not a "safety net."

Truth is, Social Security is viciously regressive. The first dollar is taxed at full rate. The last dollar is capped. The poor start work earlier, retire later, and die younger. Pay-back is not related to present income or wealth, but rather to prior pay-in. If it does any sort of "redistribution" then it's taking money from black men and giving it to white women that don't need it.

There is definitely a going to be a big problem when boomers retire. And it isn't just SS. It's everything. Medicare too. And it isn't just the US. Europe and Japan have huge postwar population booms too.

Even though I'm for privatization in theory (it worked in Chile), Bush's plan sounds terrible. Like they say about a little education being a dangerous thing, a little privatization might be just as bad. What's going to have to happen is obvious and it's going to suck probably no matter what anyone does. If you want SS to remain solvent you're going to have to cut benefits and/or raise taxes. It's about as inescapable as losing weight by eating less and exercising.

1: Man, I am not sure if I understand a gawdamn thing about Bush's plan. Seems horrible to me. I don't think I have the aptitude to study stocks and make informed decisions on them any more than a stock investor would be able to come into the studio and EQ and compress a vocal correctly.

Why would I want this???

2: Maybe the reason Bush says there is an impending bankruptcy coming is because he is in charge of the country and is familiar with how things go with him in charge. His business track record speaks for itself.

In recent years, the argument for privatization is always that its much more efficient if its privately done (keep in mind, many governmental agencies are typically run at a loss intentionally) But if the nature of modern business has been any indication, it would be that they would do as much as they thought they could get away with, while making benefits for those who need it as difficult to get to as possible, because of the bottom line.

has anyone considered the bubble effect of sudden mass privatisation on stocks and shares? If there is suddenly billions of extra investment capital in the U.S. stock exchange competing to purchase limited shares the prices will go up in the short term, creating a bubble where companies are valued higher than their physical assets are worth meaning they are gonna have to come down some time. people will end up buying high, selling low and theo only ones to benefit will be the cleverer or luckier speculators and the CEOs of the major corporations who will see their companies swell in value due to Bushs 'plan'

it's SUCH a bad idea.

And whoever used Chile as an example of how it should be done, remember argentina? the jewel in the IMF's crown until one day the bubble brst and the house of cards came crashing down. Chile is on a similar path methinks

how about we start with not loaning the current yearly social security surplus back to the government in the form of buying t-bills with it and go from there?

Would those in favor of private accounts be willing to fund them with a tax increase? Many would argue (including the President's 2001 panel on SS) that borrowing the $1-2 trillion to finance the shift will eventually become a tax increase (even if it is pushed off into the future). Could the private accounts or some experiment in that direction be funded through an increase in payroll or income taxes today? Is that a fair trade-off?

How do those opposed to private accounts feel about means-testing benefits? SS is supposed to be a retirement insurance program that supports all seniors who have paid into it (and thus allows for the dignity many would argue disappears with welfare payments). Should the program transform into a just a safety net?

Also -- what should be done with the present social security surplus if it is not transferred to the general budget? Could it be invested in a manner similar to a pension fund in order to harness the benefits of the market?

True, but it all depends how the plan is put into effect.

Here's a quote from James Glassman:
"Jeremy Siegel, an economist at the Wharton School of the University of Pennsylvania, looked at vast amounts of data on U.S. stocks and bonds going back to 1802. He wrote, in his groundbreaking 1995 book, Stocks for the Long Run, that "the safest long-term investment has clearly been stocks and not bonds." He found, for example, that there has never been a period of 17 years or longer in history in which stocks did not produce a positive return after inflation. Bonds are another story entirely. Looking at every overlapping 20-year period (that is, 1802-21, 1803-22, up to the present), Siegel discovered that the worst period for stocks produced a total return of more than 20% after inflation. Bonds? Minus 60%!

Even in the short and medium term, bonds have proven quite risky. Long-term Treasuries suffered losses in three of the past ten years (the same record as stocks), and research by Ibbotson Associates has found that for 10-year periods between 1926 and 2003, a portfolio composed 90% of stocks and 10% of long-term Treasury bonds has never lost money, while 100% bond portfolio has."

So you see that while investing in a few stocks is risky, investing in a highly diversified fund of stocks is actually a pretty good long term investment.

It all depends how they do it.

"past performance is not a guarantee of future results" - that disclaimer is on every prospectus out there.

Words to live by.

IMHO, uninformed people tend to go for the highest return, while overestimating their tolerance for risk and loss, and when everyone dumps money into the market at once, a bubble is created that will burst, creating massive losses and ruining people's retirement plans. Just look at the dot-com bubble and the greater market bubble that accompanied it.

It wasn't such a huge deal if you are a young worker with a decade to recoup your losses, but it killed the folks who were planning to retire in the following 5 years. Now the bubble is repeating in the real estate market, since everyone pulled their money from the stock market and dumped it into the real estate market after the dot-com bubble burst.

Once again, you don't gamble with money you can't afford to lose.

Yeah.. the whole "everybody invest in the same thing" idea is really fucking dumb.

Hey America.. ever hear that little "don't put all your eggs in one basket" phrase?

technically the idea is that the debt incurred by shifting the future financial obligations into current liabilities should in effect be a push. that makes sense on paper but aslo assumes that there is a great deal of confidence in the financial integrity of the social security system. considering that the design bears a strong resemblance to a ponzi scheme more than any sustainable system that is a big assumption.

this is not true - the social security system has no surplus and no debt. the 'surplus' is nothing more than the government's financial promise that the funds will be available. all the revenues from the payroll taxes go directly to either paying current beneficiaries or to the general fund. the surplus is essentially borrowed by the governement without generating any interest or return with only the promise that it will be available at a future point when needed.

the problems stem from the change in demographics since the inception of the program. when it was originally institited there were 14 people paying in for each individual receiving benefits. this ratio has already dropped to kts current rate of 3:1. the much talked about retirement of the baby boomers of course exacerbates the problem but in reality the issue has more to do with how much longer the average lifespan now is. no matter how positive the assumptions are about the future economy there is no model that is solvent by the time an 18 year old today reaches the age to recieve benefits.

being a payroll tax it is a regressive tax with the most burden born by the least wealthy. it was never intended as a full retirement plan yet that is what it has evolved into. america has one of the lowest savings rates of any advanced economy and it can be demonstrated that part of it is due to the shifting of money that would have gone into savings into the social security taxes. this in turn goes to retirees who use it to fund their consumption so it directly shifts the savings rate into higher spending. an annuity or other type of retirement plan generally funds its benefits on the return it receives on the capital pooled from a number of individuals not on the contributions themselves.

the goal was more to combat poverty among seniors being one of the more vulnerable groups in society. in that regard it has been a great success. but it was never intended as a full retirement plan and those receiving benefits have actually paid nothing towards their own retirement only for those before them. and it does not justify taking more from those who can least afford it. the ideals of the system are not only honorable but also imperative, its the system itself which is a fraud as defined by the government itself.

[Edited on Dec 22, 2004 by verdegris]

From the original draft of the Economic Security Bill:

Social Security was sold to a desperate population in the depths of the Great Depression as a means of ensuring that retired people would always have an income that they could live on. To that end, the program has been a miserable failure; you simply cannot live on SS income alone. The payments supplement existing retirement accounts at best.

Personally, I'd love to see the government provide an 'opt-out' option, a cut-off date at which new people will cease to contribute money, combined with privatization of the current funds. Stick the profits in a untouchable account that pays off those people who are still in the system, and then finally end the program entirely.