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August 27th, 2005Listen Up
August 27th 10:43:16 AM
Jonathan will be on Thompsons Primetime tonight, most likely around 9 pm.
Listen live at www.woai.com
Posted by Chris Schrimpf| Comments (0)
August 26th, 2005Democrats Get a Heads Up from Rock the Vote
August 26th 01:08:15 PM
Rock the Vote wants Democrats to be prepared for a "stealth plan" on Social Security, and compares it to the Medicare bill in 2003. They write, "The difference being that the Democrats didn't see it coming that time. The question is, will they see it coming this time, what will they do about it? What can the Democrats do about it?"
We want young people to be prepared to make their voices heard on reform. Young Americans want reform and ownership, we know that no political party can be trusted with our future.
Posted by Chris Schrimpf| Comments (6)
Response to a skeptical visitor...
August 26th 01:01:30 PM
Earlier this week, we had someone stumble across our site who was very skeptical about our position on personal accounts. After a lengthy session of point-counterpoint, the poster forwarded several questions about the system that he or she would like addressed. Below, I have done my best to address the questions raised.
Anyone wishing to read the previous thread may do so at this link:
Old Thread Here
If your organization is truly bipartisan seeking to ensure there will be social security around for today's college students, why have you not considered other potential "fixes" to social security? Such as:
1. Make SS payments means tested. Warren Buffet does not need to be paid SS benefits. I'm sure you know, as a group, the eldery (asset wise) are the richest group of Americans. If Social security is social insurance (as it provides disability and death benefits) it should not be a system that pays hundreds of billions of dollars each year to many who do not need it.
2. Change the retirement age to 70. We are all living longer and healthier and most of us will be working longer. Someone who is 68, in good health, working and making an above average salary does not need to be getting SS payments from the Govt.
3. Remove the $90,000 income cap on the social security tax. If it was taxed on all income, not just the first $90,000, my guess is we could make the SS tax rate a lot *lower* and still have plenty more funding.
Before I attempt to answer your questions directly, let me say that S4 exists for the sole purpose of promoting Personal Retirement Accounts (PRAs) as a solution to many of the problems of Social Security. S4 as an organization takes no position, for or against, with respect to these other proposals.
That being said, it will probably surprise you to know that I don't take issue with two of the three points that you raise. Means testing is by all means "on the table" for any type of social security reform proposal. In fact, President Bush, as part of his plan, advocated that benefits for low-income workers should be indexed to wages while benefits for high-income workers should be indexed to prices. He refers to this as "progressive indexing". The difference between the growth in wages and the growth in prices is considerable, and progressive indexing would amount to exactly the "means testing" that you suggest.
Likewise, raising the retirement age is still "on the table". With Americans living longer and longer (and being healthier longer), it makes sense to raise the retirement age.
Now before we delve into tax policy, we must start from a common point. From Economics 101, it is a fact that long term growth is directly related to the amount of saving and investment in the economy. If saving and investment is high, more capital is available to increase productivity, and increased productivity leads to better standards of living and increased GDP. Secondly, one must also agree that increasing taxes reduces the money available for individuals to save (thereby reducing the amount of money available for investment).
Now, removing the cap would amount to a massive tax increase on many Americans, approaching an increase of 12.4% as income rises. It is no coincidence that the same people who would have these taxes increased are the same people that consitute the bulk of our "investing class". (Keep in mind that in the current pay-as-you-go system, there is no "saving", so every penny of the tax increase would go to reduce national saving). With a much smaller pool of money available for investment, interest rates would rise and make it more difficult for companies to fund capital improvements, eventually leading to retarded economic growth.
I hope that you can see that if one follows the facts, it is obvious that these tax increases would be detrimental to our economy.
Now for your next question...
3. Balance the budget. You know well that the reason the Govt has been stealing the SS trust fund monies and replacing them with Govt IOUs is to fund the huge deficits and debt this country has had since the trust fund concept was created in the 1983 SS reform act. The Government should raise taxes and cut spending, and balance the budget, so they STOP STEALING OUR SS TRUST FUND. I don't care who is in power. Right now it is Mr. Bush and the Republicans in power who stealing $150 billion from *our* SS trust fund every year, so they currently get the blame.
You acknowledged that more than $1.2 TRILLION has been stolen from the SS trust fund. Having those funds available would help the SS situation at least a little, wouldn't you agree?
I agree with you in principle here, but I think you are confused on several points. First, whether the budget is balanced or not has nothing to do with what Congress chooses to do with the Social Security surplus. In fact, if you think back to President Clinton's later years in office, we managed to have a surplus in Social Security payments and a budget surplus, yet Congress still chose to spend the money in the trust fund. I agree that getting closer to a balanced budget would be beneficial, but it has nothing to do with Social Security.
Further, having the 1.2 TRILLION available that has been spent out of the trust fund wouldn't help a little, it would help a lot. Imagine if we had instituted a system of Personal Retirement Accounts back in 1983. Because the assets in a PRA legally belong to the individual taxpayer (as opposed to one's Social Security account, the Supreme Court has ruled that Americans have no legal right to their social security balance), Congress would have been unable to get at the surplus. The result would be, indesputably, that the American people would have a REAL trust fund with at least 1.2 TRILLION in ACTUAL DOLLARS available to fund Social Security.
In fact, you make my point for me when you state, "Right now we should be putting $150 billion a year aside for the SS payments in the future. Instead it is being stolen to fund the deficits caused by tax cuts and increased spending. If we want to save SS, THIS MUST STOP.". The only way to "put the money aside" is PRAs. Everything else is just creative accounting.
Finally, you state a number of problems you have with PRAs. I will briefly address them.
1. What happens if you live longer than your personal account fund? Or your funds are lost through bad investment choices?
If you take a look at the proposals out there, many of them require that upon reaching a certain point, the PRA balance must be converted into an Annuity. This would provide guaranteed income for as long as the person lives.
According to Ibbotson Associates (http://www.ibbotson.com/), the S&P 500's historical rate of return, adjusted for inflation, is approximately 7.7% per year. Further, the stock market has never failed to provide positive returns during any 20-year period going back to and including the Great Depression. Arguing against PRAs by claiming there is going to be some unforseen fiscal disaster in our investment system is almost like arguing against driving a car because of the small percentage of vehicle fatalities each year. The benefits of automobiles to our society has been immense, and I doubt you would find very many people arguing we should go back to the horse-and-buggy because it is less risky. On the contrary, I would argue that failing to provide PRAs has deprived the poorest Americans of the chance to build real wealth and participate in the incredible prosperity that we have seen in the last several decades.
Besides, many of the proposals slowly roll over your portfolio to gradually lesser risk throughout your lifetime. Therefore the amount of security and predictability built into the system increases as you get closer to retirement.
Finally, most of the personal account proposals include a "safety net" guarantee that benefits will not fall below a certain level. In many of them, that level is higher than the current rate of return of Social Security.
2. What happens if someone becomes disabled?
My understanding of the vast majority of proposals is that they would affect only the pension part of Social Security and leave the disability and survivor benefits alone.
3. What happens if a worker dies?
If a worker dies before retirement, he can pass his balance on to his heirs, building generational wealth. If he dies after retirement, he forfeits his annuity, and fares no worse than under the current system.
4. How are SS personal accounts going to solve the funding crisis we have? You are replacing SS tax revenue with personal accounts revenue. What about the millions of boomers retiring over the next 20 years? How will personal accounts plan pay for the boomers' retirement benefits?
We currently pay approximately 12.4% of our earnings to Social Security. Most of the personal account proposals call for investing only the first few percent in personal accounts. The other 10% or so goes to pay for everyone else's retirement. Investing just the 2% in equities allows it to cover the loss of the other 10% over one's lifetime.
5. Why do we need personal accounts? We already have them. Open an IRA and put some money in there. That is what I tell kids coming out of college. If you want people to have personal accounts, just pass a law requiring everyone to put a certain percent of their income in an IRA.
There are people out there who would love to invest in an IRA or 401K system. However, their income is not sufficient to do so (I am one of those people). If we had the *option* of sending some of our earnings to a personal account, poorer people would get the opportunity to become an investor, an opportunity that they are currently denied.
So, again, many of these thoughts aren't the official position of S4, but I just wanted to get the idea across that we sincerely try to be open minded around here, and just because we're not advocating other approaches doesn't mean they don't have a place in a compromise plan that includes personal accounts.
Posted by Jeremy Tunnell| Comments (4)
Both Parties Are To Blame
August 26th 12:43:16 PM
Republicans and Democrats should both be faulted for spending the Social Security Trust Fund. Fortunately both parties can fix the problem together by making it illegal to raid the trust fund and giving individuals ownership of their retirements.
Posted by Chris Schrimpf| Comments (1)
August 25th, 2005Ostrich Awards
August 25th 05:09:26 PM
For, "Commentators and politicians who insist that Social Security doesn't face a crisis. These are the folks who persist in telling us all is fine because the Social Security trust fund will have enough bonds to pay benefits until 2042, but never tell us that when the bonds in the trust fund are redeemed the taxpayers must pay for them."
See the winners.
Posted by Chris Schrimpf| Comments (2)
Is Rock The Vote Warming Up?
August 25th 01:47:02 PM
Does Rock The Vote realize that Social Security is going to be the big issue of the fall session in Congress and that young people overwhelmingly support reform? Their last three blog posts have all been about Social Security. Today they stooped to a new low in propaganda, by posting this picture. Little did Rock The Vote realize that the picture is what our generation will be like when we get old, if we don't get personal accounts. Thanks RTV!
Posted by Chris Schrimpf| Comments (11)
Why Liberals Should Support Reform
August 25th 08:53:38 AM
From Will Wilkinson "Social Security reform isn't just for libertarians. As this paper demonstrates, egalitarian liberals have little reason to defend the Social Security status quo and compelling reasons to promote the adoption of a well-designed system of personal retirement accounts."
Posted by Chris Schrimpf| Comments (0)
In Case You Missed
August 25th 08:30:21 AM
S4 received a nice mention in this article from Cox News Service.
Also quoted is Hans Riemer who says, "As more young people find out about these proposals, the more young people learn about what it means to change Social Security from a safety net into a personal investment, the less they like it," he said. "When they find out about the benefits cuts that comes with private accounts, when they find out the debt that comes with private accounts and the risk to our safety net, they don't want anything to do with it."
As we've been finding out at S4 nothing could be further from the truth. The more young people learn about personal accounts the more they support them.
Posted by Chris Schrimpf| Comments (1)
August 23rd, 2005Irony Award
August 23rd 08:05:24 PM
Rock the Vote criticizes Bush for citing Heritage Foundation research in a speech. How do they refute it? By citing a study by the AFL-CIO.
Posted by Chris Schrimpf| Comments (1)
More On "GROW" Accounts
August 23rd 06:52:59 PM
With "GROW" Accounts looking like a possibility this fall, it's important to remember some facts about them. From Congressman Jeff Flake:
"It is simply wrong that money from the Trust Fund - which comes from taxes workers pay for their retirement - are spent elsewhere, and that they will have to be repaid with more taxes in the future. I applaud my House colleagues for introducing the G.R.O.W. Accounts legislation, which will finally stop the annual raid - and spending - of the Social Security surplus.
I believe that Americans are not pleased with the spending of the Social Security surplus. The only "shell-game gimmicks" (besides pretending that there is not a problem with Social Security) are the Trust Fund IOU's."
Posted by Chris Schrimpf| Comments (1)
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