boring post about social security

[Peter_Puget]

As usual the PP spin game:

1. Only because lawmakers want it to be. The tax revenue for Social Security is drawn from a single source (payroll taxes), there's no reason it need be lumped with the rest of government revenue, except it provides a convenient way to cover for prodigal spending.

There is no trust fund because there is a huge unfunded liability in the future. Current contribution essentially pay for current outlays. The fubnd has a present value of less than zero. Secondly, even if SS was fully funded since the government holds its own debt the trust fund is again an imaginary accounting fiction. I'll get back to your last sentence shortly

 

2. US government obligations are the most secure investment in the world. Would you prefer we invest in Enron stock? Argentine national debt? If you'd prefer that - is the government going to cover your losses?

Cover my losses? Check this out. Fot the average black american the rate of return on social security is negative! For my grandmother who died last year the ROI was astronomical. Doesn't the forced purchase of government securities encourage "prodigal " government spending. See the link I posted earler for a serious examiniation of this.

 

3. Easily changed. 75 year predictions of that sort are economists taking hits from the bong.Not sure if it is easy or hard but critics of SS have pointed out its problems for decades and were shrugged off by comments similar to yours.

4. Any defined benefit pension scheme without a teired age/benefit relationship is necessarily so.? bullshit

5. Gee, can we be like Sweden? It'll make me feel so much better when I can choose how 10% of my retirement account is invested

simple generalization but assuming say 1,000 per year invested until age 67 can easily result in thousands of additional annual income versus the return you'd get on SS.

 

 

You bring up prodigal spending by the government as a problem. Under the current system the incentive will always be to expand benefits to the point where the system is bound to collapse. (see medicare and the recent drug benefit as a related instance of this) Privatisation will, by making the system fully funded, be a real "lockbox" for Social Security by keeping Congress from raising benefits or spending any funds in the "Trust Fund."

 

As for transition costs, check out the Chilean exmple (link above) and remember that from an economic point of view the US Gov borrowing money explicitly to finance cash flow changes brought about by a transition to privatisation would likely be of zero cost and perhaps a benefit as it is merely the trading of a real defined liability for an off balance sheet liability. You brought up Enron earler certainly then you should know about off balance sheet items!

[cj001f]

As usual the PP spin game:

1. Only because lawmakers want it to be. The tax revenue for Social Security is drawn from a single source (payroll taxes), there's no reason it need be lumped with the rest of government revenue, except it provides a convenient way to cover for prodigal spending.

There is no trust fund because there is a huge unfunded liability in the future. Current contribution essentially pay for current outlays. The fubnd has a present value of less than zero. Secondly, even if SS was fully funded since the government holds its own debt the trust fund is again an imaginary accounting fiction. I'll get back to your last sentence shortly

 

2. US government obligations are the most secure investment in the world. Would you prefer we invest in Enron stock? Argentine national debt? If you'd prefer that - is the government going to cover your losses?

Cover my losses? Check this out. Fot the average black american the rate of return on social security is negative! For my grandmother who died last year the ROI was astronomical. Doesn't the forced purchase of government securities encourage "prodigal " government spending. See the link I posted earler for a serious examiniation of this.

 

3. Easily changed. 75 year predictions of that sort are economists taking hits from the bong.Not sure if it is easy or hard but critics of SS have pointed out its problems for decades and were shrugged off by comments similar to yours.

4. Any defined benefit pension scheme without a teired age/benefit relationship is necessarily so.? bullshit

5. Gee, can we be like Sweden? It'll make me feel so much better when I can choose how 10% of my retirement account is invested

simple generalization but assuming say 1,000 per year invested until age 67 can easily result in thousands of additional annual income versus the return you'd get on SS.

 

 

You bring up prodigal spending by the government as a problem. Under the current system the incentive will always be to expand benefits to the point where the system is bound to collapse. (see medicare and the recent drug benefit as a related instance of this) Privatisation will, by making the system fully funded, be a real "lockbox" for Social Security by keeping Congress from raising benefits or spending any funds in the "Trust Fund."

 

As for transition costs, check out the Chilean exmple (link above) and remember that from an economic point of view the US Gov borrowing money explicitly to finance cash flow changes brought about by a transition to privatisation would likely be of zero cost and perhaps a benefit as it is merely the trading of a real defined liability for an off balance sheet liability. You brought up Enron earler certainly then you should know about off balance sheet items!

1. Seperating accounts isn't fiction. I have seperate accounts for seperate spending; I'm not sure why the government can't.

2. Imagine that! In any mutualization scheme someone has to receive less than they pay in. Insurance works the same way.

3. The market for US debt is so large worldwide we don't particularly need Social Security to fund our deficit spending. The Chinese central bank is more than happy to do so.

4. Any plan that has a fixed retirement date irrespective of life expectancy is a transfer scheme. Any plan that allows the average outlay to exceed the average income is a transfer scheme. Politicians have refused to be caretakers of Social Security - held captive by the AARP

5. Truth. Swede's have 18.5% of their paycheck withheld by the government for retirement. They get to invest 13.5% of that in a private account. The average American doesn't have the time to manage their portfolio well; the management costs for a professional manager at $1k/year are a substantial portion of the equity growth for many funds. I'm sure Wall Street loves the idea though.

 

Private Accounts are well and good for the middle & upper classes; they aren't who Social Security is for.