January 11th, 2007

From The Hill newspaper:

Conservatives are particularly incensed about reports that Treasury Secretary Henry Paulson Jr. has had private discussions with Democrats on revisiting a Social Security overhaul and may be open to an increase in the current $97,000 limit on personal income subject to the Social Security payroll tax.

When asked directly about a potential Social Security payroll hike, Rep. Jeb Hensarling (R-Texas), who chairs the Republican Study Committee, came out swinging.

"We want to believe that the president is committed to the supply-side economics that conservatives value when it comes to Social Security," Hensarling said. "If he departs from that commitment, that would be something we would strongly oppose."

It seems pretty unlikely that the tax-cutting president would propose a tax increase, but it is good to know that an attempt to raise or eliminate the payroll tax cap would not be well-received.

Read the rest of the article here.

January 10th, 2007

White House spokesman Tony Snow had this to say yesterday: "We'll let the debate proceed, but you know what the president's bright lines are: he believes it's important to have an investment component that allows people to take advantage of the far superior rates of return that one gets investing in a market place."

Read the rest of the story here.

January 09th, 2007

From The Chronicle of Higher Education:

Ryan J. Sorba stands before a table covered with mini-cupcakes and
whoopie pies, calling out to students as they pass. A sign lists the
prices: $6 for customers under 18; $3 for 19-year-olds; $1 for
20-year-olds; 25 cents for 21- to 39-year-olds; and free to those 40
and over.

"Don't get screwed by Social Security, support private accounts," says
Mr. Sorba, a conservative activist who has come here to Bentley
College's Student Union to help recruit new members for a chapter of
Students for Saving Social Security.

On the floor beside him stands a poster of a wizened man with a scruffy
white beard and a speech balloon that reads, "If my generation had
private accounts, maybe I wouldn't have to eat Alpo."

(...) The group's Social Security reform campaign is not all slogans. David
Finch, a freshman from Bangor, Me., shows students statistics on the
ratio of workers to retirees, and Immanuel Gilen, a 17-year-old Belgian
sophomore whom the other recruiters consider a genius, delivers the
economic argument for privatization.

"If you look at the history of the stock market, the lowest rate of
return has been around 4 percent," he says. "The rate of return on the
current system for a young worker is only around 2 percent."

By the end of the day, the group has collected 83 signed petitions and
75 cents. A success, Mr. Sorba declares.

From the good people at AARP: "If you need a reminder about the importance of saving, consider what time does to money not put someplace where it can grow: Inflation erodes buying power."

This is from page 47 of AARP's January bulletin, which S4 co-founder Patrick Wetherille receives despite being a grad student at Georgetown.  Patrick recently joined AARP to help educate seniors and young people about the group's Social Security hypocrisy.  Here is AARP's take on the power of money:

You can see that gas costs about $2 a gallon more today than it did 50 years ago, and that a dozen eggs is almost three times as expensive today.  More importantly, you can see how AARP proposes that people can offset increases in the cost of living.  That's right, AARP's suggestion for asset growth is to invest in the stock market.  If you can't make it out, AARP wants Patrick to know that $50 put in a savings account in 1957 would be worth $284 today, while $50 placed in a fund tracking the Dow Jones Industrial Average would be worth $1952. 

"Invest in stocks!  Buy our mutual funds!" AARP yells.  But then when people suggest investing a portion of our payroll taxes, something seems to change.  "Oh, ah, it's conf...well, the stock market is risky," they say. 

Let us be clear.  "Smart money management" involves investing in the stock market--this is point #3 above.

Now if only AARP would come out with a clear 3-step guide to explain their hypocrisy.

January 08th, 2007

There were two interesting articles over the weekend about a deal with Mexico to allow illegal aliens from that country to get Social Security benefits (see "In the News," Jan. 6).  According to The Washington Times, the deal would allow the immigrants "to claim Social Security benefits for the work they performed while in the United States illegally, even if the illegal aliens committed felonies by using fraudulent Social Security documents to obtain their jobs."  

Here is another good excerpt from the same source:

Beyond the Senate's reckless decision, which the president, we now know, has supported for years, Social Security passed two other worrisome milestones last year. First, the "assets" in the Orwellian-named Social Security trust funds surpassed the $2 trillion level in 2006. Of course, every dime of those trillions will have to be redeemed from general tax revenues when baby boomers, and, if the president gets his way, former illegal aliens begin depleting the trust funds in about 10 years. Second, when Social Security trustees release their annual report this spring, they almost certainly will report that the present value of Social Security's unfunded liabilities now exceeds $5 trillion. It is simply incomprehensible that the president and so many other Republicans want to add to Social Security's $7 trillion fiscal milestone.

Insolvency may be even nearer than we thought.

January 06th, 2007

"There is a real understanding on both sides of the aisle...that this is a serious problem and there is a real understanding that it can be fixed, but it is going to be very difficult, because the impediments are political." 

U.S. Treasury Secretary Henry Paulson

January 05th, 2007

Courtesy of Yahoo Finance, here is what's happened with the Dow Jones Industrial Average over the course of the last year:

Some people might not think it's very fair to pick out a great year and suggest that this performance is typical.  So here, courtesy again of Yahoo, is what has happened since 1950 with the S&P 500, a stock index with returns similar to what we might expect from investments in a personal retirement account:

Not too shabby.  According to Standard and Poor's, the annualized return since 1926 has been 10.5% (this includes capital appreciation with dividend reinvestment). 

How much return will we see on our Social Security money?  Somewhere around 1-2%.  This isn't just shabby, it's borderline criminal.  

January 04th, 2007

Congratulations to the Democrats as they take control of Congress after being voted out of power in 1994.  Let's see...1994...ah yes.  1994 was the year that the television show Friends debuted, O.J. Simpson's Bronco crept down an L.A. freeway, and NKOTB released Face the Music, their last group album.  Also, a Carolinian with the last name of Aiken won a national beauty/drama queen award that year, but it was Kimberly who took the prize with the Miss America crown.  Clay would have to wait another 9 years before losing American Idol due to voter irregularities.  Man, oh man, the popular vote was his.

It's been a while, anyway, since the Democrats were in charge.  It is sometimes nice to see a change in power, and one can only hope that the new leadership will prove as exemplary as promised.  Some good things are happening already--talk of a longer work week, the cutting back of earmarks, and entitlement reform.  There is a lot to get done, and we're hopeful that the new Congress is up to the task.