While I can't claim to know everything about this issue (but who can, other than Greenspan?) Greenspan doesn't know crap about this. He should stick to monetary policy. Greenspan has been a libertarian on economics and a concervative since as a young man he literally hung around Ayn Rand in a small group of devoted followers. What do you expect? Greespan supported giving the surplus which was earned by the whole American economy and could have insured the solvency of the system for many yearsback to the upper couple percent. Now he is concerned about deficitis. Too bad you young guys, including some liberals, have fallen for the crap about social security put out by the conservatives on this issue. ************** July 19, 2001 Social Security's Real Problem -- Trust Fund Theft by Mark Weisbrot and Dean Baker Not since Gary Condit ran for office with the slogan "Setting a Good Example" has the public been presented with an image that begged so much to be tarnished. The "President's Commission to Strengthen Social Security" is anything but that, and its interim report -- released this week -- is truly shameful. The whole enterprise is a web of deceit, starting with its fundamental premise: that Social Security is not sustainable in its present form. The standard projections, which are used by the Commission, assume the slowest economic growth in the nation's history. Yet they still show that all promised benefits will be paid for the next 37 years without any changes at all, and that the program will always be able to pay a larger benefit than current retirees receive. Even if we assume the Commission's pessimistic assessment of the future is correct, the projected size of the shortfall over 75 years is less than we dealt with in the 1950s, 1960s, 1970s, or 1980s. We are talking about a small potential problem several decades from now, brought on by the cheery fact that future generations will be living longer lives than we do. Our descendents -- hopefully with more honest political leaders -- will have to decide how much of their longer lives they wish to spend in retirement, and how they will pay for it. We are confident that they will be able to handle these choices. But the Commission is determined to manufacture a mountain from a molehill, in order to prepare the public for its real goal: privatization. To do this, they have adopted some sleight-of-hand that Social Security's more shameless detractors have been practicing on talk shows for years. It's called "Dumping the Social Security Trust Fund in the Trash." It's easy: just pretend that those hundreds of billions of dollars that Social Security has been piling up to help finance the baby boom retirement don't exist! Since 1984, Social Security has been collecting more revenue than it pays out. The surplus, as required by law, is invested in US Treasury securities. It currently stands at more than $1.1 trillion (approximately $8,000 per worker), and is expected to triple (in real, inflation-adjusted dollars) before it is drawn down to help finance the benefits of the baby boom generation. The Commissioners would have us believe that all that money taken out of our paychecks over the last decade and a half, and loaned to the Treasury, is as good as gone. Nice try! Sell that story to Citibank, or Bill Gates, or any billionaire or pension fund that has loaned money to the government and received a US Treasury bond in return. If they could pull off this heist, the Commission would move Social Security's troubles up to 2016. This would provide a time frame that Americans who are not regular science-fiction fans might be able to take seriously. Of course, even if Social Security did have a problem, privatization would only worsen it. Diverting a chunk of Social Security's revenues into private individual accounts would mean that the program would either have to raise taxes, borrow, or cut benefits. It's clear which direction this Commission would take: they would cut benefits. Hence the need to convince the public that Social Security is facing serious troubles up the road. Unfortunately, many Democrats gave this notion a bi-partisan stamp of approval a few years ago, for their own political reasons. They thought that they could beat the Republicans' proposed tax cut by arguing that the revenues were needed to "save" Social Security. It wasn't true, nor was it clever: the tax cut passed, and now most Americans think that Social Security is financially unsound. But Social Security is still immensely popular -- it keeps half of our elderly from falling below the poverty line, and for the majority of seniors it is actually their main source of income. And the truth has a way of leaking out, over time. Those who would harm this program, including the President and his Commission, had better look over their shoulders. Until recently, Social Security was commonly known as the "third rail" of American politics. At a Harvard conference this month, economist Jeffrey Frankel, an adviser to President Clinton, said that Clinton had "shut off the power in the third rail." We'll see about that. link
glynch, I wish I could agree with you, but unfortunately that "surplus" will not last long: link You may not agree with privatization as an answer, but you should admit that SS is going to become a huge problem. It would probably be a problem anyway, since like any ponzi scheme, the first people get money that didn't pay in, so someone eventually will put money in and not get any out (theoretically, paying for the first people.) Add to the fact that people are living longer, and there is one huge generation about to retire, and we've got a problem.
P Moon, you have chosen to cite from the Cato Foundation, the extreme Libertarian think tank that has been heavily funded to start the whole social security privitization. Naturally they would try to say their is a crises. You should look beyond the "facts" they cite.
ECONOMY The Class Warrior After supporting tax cuts for the wealthy which have already blown a gaping hole in the federal budget, Federal Reserve Chairman Alan Greenspan told lawmakers that Congress should extend the cuts indefinitely – at a cost of $1.5 trillion over the next ten years – and pay for it by slashing Social Security. Greenspan's comments were particularly surprising because our current budget problems are completely unrelated to Social Security. A recent Center on Budget and Policy Priorities study reveals that, in the last three years, the nation's long-term budget projection has gone from a $5 trillion surplus to a $4.3 trillion deficit and tax cuts were the single largest factor behind that decline. The large role of tax cuts in the deficit has been confirmed by the President's own budget analysis. Social Security, meanwhile, continues to run a surplus. Greenspan's recommendation amounts to a huge transfer of wealth from future retirees to the very rich. The President, for his part, dodged a direct question yesterday about whether he believes, as Greenspan does, we should scale back Social Security to deal with the rising budget deficit, saying he needed to "see exactly what [Greenspan] said." GREENSPAN FLASHBACK – WE NEED TAX CUTS TO REDUCE REVENUE: Yesterday, Greenspan argued that the tax cuts should be extended because allowing them to rise to their previous levels would "pose significant risks to...the revenue base." But when he argued in favor of Bush's first tax cut in January 2001, he made the opposite argument – that lowering tax rates was necessary to reduce revenue. Greenspan was worried that the government would quickly pay off the entire deficit and be awash in so much money it wouldn't have anywhere productive to spend it. The WP reported on 1/27/01 that Greenspan "justified his support of tax cuts by focusing on a problem that may not even emerge until the end of a possible second Bush term – the government being forced to buy private assets because it had paid off all the national debt and still had buckets of cash left over." Given the dramatic turnaround in the nation's fiscal health – a $9.3 trillion turnaround in just three years – Greenspan's prediction was horribly wrong. GREENSPAN FLASHBACK – WE CAN AFFORD TAX CUTS AND SOCIAL SECURITY: When he was aggressively pushing the President's massive tax cut in 2001, Greenspan was directly questioned about its effect on Social Security. On 03/02/01, Rep. Carolyn McCarthy (D-NY) asked Greenspan, "Do I want tax cuts?...this is my problem: there's such a considerable measure of uncertainty in the projections over the course of the baby boomers' retirement that how are we going to prepare for this?" Greenspan responded that there was no reason for concern because "despite the fact that there is a very dramatic rise" in the retiring population from the Baby Boom, "the effect of [the] acceleration in productivity" will mean that revenues will be "more than adequate to meet that big surge through a goodly part of the decade subsequent to 2010." GREENSPAN FLASHBACK – NOT EVERYONE WAS FOOLED: While Greenspan claims that his recommendations are in response to recent budget deficits, cutting Social Security was on his agenda long before deficits emerged. The WSJ has complied a litany of such comments dating back to November 1997. In 2001, when Greenspan became a champion of the President's tax cuts for the wealthy, Rep. Robert T. Matsui (D-CA) predicted Greenspan's desired outcome. On 1/27/01, Matsui told the WP: "What [Greenspan's] done is created a situation where we'll have benefit cuts in Social Security. That's inevitable if you have a $2 trillion tax cut. And maybe that was his ultimate goal." GREENSPAN TODAY – WHITEWASHING JOB LOSS: Yesterday, Greenspan tried to whitewash the Administration's job crisis, saying "progress creating jobs has been limited." But since the Administration has taken office, the economy has shed more than 2 million jobs and, at the current pace of job creation, it would be May 2007 before the first net new private-sector job was created. Meanwhile, the WP reports, "More than 2,400 employers across the country reported laying off 50 or more workers in January, the third-highest number of so-called mass layoffs since the government began tracking them a decade ago." The Administration attempted to eliminate the statistic in 2002, until stopped by Congress. link
glynch, are you not citing opinion pieces from a left-wing economic site? Also, the "facts" come from the SS Board of Trustees 2003 report . Are they libertarian as well?link
I changed my mind a little, I wouldn't mind welfare for old people who need it, just let's call it what it is.
What would you tell baby boomers who paid their share into the system over their lifetime while being promised a certain level of benefits by their goverment. Had there been some inkling of the government renigging on the deal they would have flexed their considerable clout to change the rules on their contribution side. Thanks for 12% of your income your whole life but , uh, er, we are not going to provide benefits for you at 62 like we said. You'll have to wait till 72. Oh and if your not living below the poverty line we just aren't going to give you anything. I agree the system was based on some stupid assumptions about mortality rates , population and economic expansion but a deal is a deal right? ( I'm just playing devil's advocate here but there are going to be some real age clashes coming in the near future and young people don't have the political clout or savy of the boomers yet. Their best bet may be to talk us into the Soylent Green option)
GP, you're exactly right, this is all about politics. The reps and dems won't touch this issue with a 10 foot pole.
So now I'm putting in 12.4% of my pay (I'm self employed) into a system and now some of you want to say I can't have any of it because I saved enough to build up my own retirement? But the money will go to the people who could have made as much money as me but blew it all before retirment? That is the stupidest idea I have ever heard. The only good thing of the plan is that you would have every person near retirment blowing ever dime they have saved in order to get their SS back which would stimulate the economy. For all of you worried about thresholds, be aware that the goverenemnt does tax (part or all) social security for people with other income coming in. So do what you want to do but saying if you have $x saved then yyou can't get any SS, well that is a bad idea.
In one of my economics classes in college we discussed how ridiculous this is. At a time when we desperately need people to work longer, we're taxing their SS benefits if they do.
This is a lot of jumping to conclusions but Greenspan says to cut the deficit, SS benefits must be cut as well. This implies that he is acknowledging that we use SS tax income for general revenue costs, and he is implicitly condoning it's use for that, and recognizes that it cannot continue in this manner, since we are in a roundabout way funding the tax cuts by stealing the SS surplus. The other way to look at this is to say using SS income for general revenue should be repealed - SS income should never be used for general revenue.
Thanks for reminding me Gene. The Bushies just put that idea out of its misery. Greenspan does the math and raises an alarm. It's quite amazing to me that no one opposing Bush can be bothered to point out this bankrupt policy. http://slate.msn.com/id/2093707/ . . . The accounting for Social Security surpluses has always been dishonest. But in the past few years, the Bush administration has made this shady accounting a central pillar of its fiscal strategy. The unprecedented reliance on these funds hides the failure of the administration to ensure that there is some reasonable correlation between the resources it has at its disposal and the spending commitments it makes. Bush & Co. have redesigned the tax system so that collections of the progressive taxes that are supposed to fund government operations—like individual income taxes—have plummeted. Instead, with each passing year we rely for our current needs more on the regressive payroll taxes that are supposed to fund our collective retirement. The persistence of the administration and its credulous allies in eliding these facts is flabbergasting. Of course, for the Bush administration to give an honest accounting of the deficits, and of the role that Social Security surpluses play in keeping them down, would be to admit the fundamental bankruptcy—no pun intended—of its adventuresome fiscal experiment.
If the richest country in history of the world can't afford to make sure it's elderly live with some modicum of dignity, then something is seriously wrong with the system. We can have a productive, market-based economy, that rewards individual hard work and initiative, while still making sure that all of our people are fed, housed, and have access to medical care. But we have to see the system with clear eyes and recognize that it is rigged to disproportionately benefit a small percentage of the population. One big part of the answer is robust campaign finance reform.
Sadly if you combined the money blown on Iraq and the money given back to the rich in Bush's tax cut. (Remember how Bush acknowleged per his Treasury Secretary O'Neil that the first and second tax cuts were just that) we could extend social security for many years. It is true that if people live rountinely to 95 or whatever the retirment age must be raised for full benefits, but that isn't a problem as people are healthier. No we must cave in to the financial industry's cash given to the Cato Institute to privatize and let them make money off social security moneys. **************** ... Our present Social Security System has an administrative cost that is just 0.7% but by contrast the U.S. life insurance industry's operating costs average 12-14% and often exceed 40%. A "privatized" retirement system in Chile, often pointed to as an example by supporters of "privatization", runs close to 30% of revenues due to the fact that the competing mutual fund managers and portfolio managers all have their fees. The Chilean model is based on a compulsory IRA scheme in which all covered employees put 10% of their earnings into one of several approved mutual funds which invest their holdings in the stock and bond markets. Chilean employers are relieved of making any matching contributions. So much for the advertized "efficiencies" of privatized systems over Social Security's more than 60 year history of paying its pensioners without the volatility and scandal associated with the financial markets in the U.S. It is conservatively projected that as many as half of all future Chilean retirees will draw a poverty level pension and the poorest of them will receive a public pension check equal to less than $2 a day. Waste, mismanagement, and fraud among stock brokers and brokerage firms concern securities regulators. Privatization will put tens of millions more unsophisticated investors in the position of dealing with fraud and chicanery without the resources to sue brokerages on an individual basis. What will be the effects of dumping Social Security Trust Fund Reserves out of US Government Securities and into individual Stock Accounts? It will depress the value of US Government Securities and push interest rates for these securities up. Increases in interest rates of US Government Securities will force mortgage rates up. Increases in interest rates of US Government Securities will force interest rates on bonds for schools, roads, and other local infrastructure needs up. Increases in interest rates of US Government Securities will drive taxes up for our wage and salary earning citizens or result in the deterioration of needed public services on the local level. It will risk the financial security of retiring working people on the ups and downs of the stock market. A great deal of money is being spent by the financial services industry in trying to generate and market the idea of a Social Security "crisis". Wall Street aims to convince the public to accept the idea of gambling with the Social Security Trust Fund in the stock market. This will transfer a major portion of the funds earmarked as a safety net for American wage and salary earners into the pockets of already rich owners of investment and brokerage firms. The owners of the financial, imvestment, and brokerage firms can not and will not guarantee that it wiil make up any losses to the Trust Fund suffered by their handling of the Social Security funds. It was the American tax payers who bailed out the speculating done by the financial and investment company managers during the Savings and Loan and Junk Bond fiascos. The tax paying public are still making up the losses suffered by savers and small investors. The owners of the speculating firms did not have to make up the losses from the profits and assets accumulated in the course of their management of funds entrusted to them. Financial services and investment firms have teamed together and funded a $2 million "privatization project" at the Cato Institute, a think tank in Washington, D.C. (which is advised by a former Chilean cabinet minister who guided the "privatization" in Chile). The team composed of the mutual fund industry, Merrill Lynch, the National Association of Manufacturers, and other investment-finance industry corporations are engaged in trying to steam roller "privatization of Social Security " through Congress. Their motivation is the opportunity to divert a portion of the $1.2 trillion to $4.2 trillion (based on estimated year 2015 dollars) of money paid into the Social Security Trust Fund by workers and their employers to substantially increase the profits of these firms. link
http://www.christiansciencemonitor.com/2004/0227/p01s01-usec.html Baby boomers face retirement squeeze The number of Fortune 100 companies supplying fixed-rate pensions has dropped to 50 percent. By Gail Russell Chaddock | Staff writer of The Christian Science Monitor WASHINGTON – A number of factors - including a sobered stock market, deficit pressures, and corporate cutbacks - may be putting the retirement security of baby boomers at greater threat than at any time in a quarter century. This week's provocative call by Federal Reserve chairman Alan Greenspan to scale back future Social Security benefits to help cover a growing federal budget deficit, is just part of the concern. Evidence is mounting that the other two pillars of retirement security - private-sector pensions and personal savings - are no longer adequate to ensure that most Americans will have enough to live on when then retire. From United Airlines to General Motors Corp., large companies are struggling to meet their obligations to retirees. The federal plan that guarantees these pensions is $11.2 billion in the red. And even as the stock market recovers, experts say that 401(k)s and other personal savings aren't nearly big enough. . . .
Okay glynch, I'll throw you a bone and throw out CATO. How will you discount these liberal and moderate/independent views: Brookings The Independent Institute Progressive Policy Institute Concise Encyclopedia of Economics The Economist Trust me glynch, social security reform is one issue that 95% of economists agree needs to occur.
