Recently we had Trader Jorge, an otherwise smart guy, repeating a common falsehood. Many in the investment community, who are funding the privatization campaign, know that this is a line of bull, but they just want to make commissions and management fees on the billions or trillions they would be allowed to mangage on these privatized accounts. Note I have no reason not to believe that Jorge actually believes this. The misunderstanding that social security only returns 2-3% (I've actually seen even lower argued by privatizers) is repeated until it is believed. 1) The problem is that the privatizers want you to think that your social security funds go into an account that earns a rate of return like a bank account or 401(k). It doesn't. Rougly 80-90% of the taxes collected this month are paid out next month to the current beneficiaries. So only 10% or so is even in an account. The funds that are invested are invested in treasuries, that earn more than 2-3%. 2) Perhaps a more important misunderstanding is that social security does not function at all like a 401(k) for an individual. It functions like a series of fixed annuity and insurance contracts. Among others your social security taxes provide the following benefits: 1) It provides for a fixed annuity adjusted for inflation that provides you benefits until you die starting at 62 years of age or older until you die. To avoid comparing apples and oranges as the privatizers want you to do, you must go out and price such annuities with an insurance company. They are expensive and in order to guarantee your money years in the future the companies should only invest in safe low yielding investments. It is difficult to find or perhaps impossible to find an insurance company that will give you a fixed annuity for life, adjusted for inflation. Of course the US gov is safer than any insurance company. 2) It provides that your spouse with get beneifts till s/he dies. 3) It provides a disability policy that provides a monthly benefit adjusted for inflation for yourself, your minor children and even your spouse if you should become disabled. Again you aren't dependent on the solvency of an insurance company or pension plan. Many of you guys are young so you probably haven't though about it, but try to purchase a disability policy if you've had heart attacks, back surgeries, cancer, mental problems, etc. It can't be done-- or at best they will exclude disability from all your existing problems. No matter how old you are or how bad your health is you can't be denied the social security disability policy like insurance comapnnies do. Quit comparing apples and oranges. Go out and price insurance contracts such as fixed annuities and disability policies, explore what conditins they will cover etc. before you start buying the 2% lie. There are a great many other arguments to be made for keeping the present social insurance system such as. Those of us in our 50's who fell for the Investment analyst and CEO lies and lost 50% or more of our portfolio and are now being told to expect little or no returns for the next 10 years or more are screwed. I have talke to several people in their 50's, including an attorney who has made a couple hundred thousand a year at times, who is glad that he didn't have his hands on his social security mony to have put it in the market. So it really depends on the returns of the last 15 years or so of your work life. In England under Thatcher they did privitization. The little guys got taken to the cleaners with overly risky investments as we've seen recently in the US and now they have a generation facing a mess in their old age.
So what you are saying that 10% or so of the monthly FICA $$$ gets a 2-3% return. That sounds more like a 0.2-0.3% return to me Another point to the SS privatization lunancy is that the SS surplas counts against the deficit. Privatization would mean that SS monies would truly be separated from the federal budget and that the federal deficit would start to grow at a healthy rate again. No wonder the Reps are so behind this issue.
glynch-- While I appreciate the colorful description you provided on how the social security process works, you still can not argue with facts. Government's Investment Alternative: The 10-year treasury note is currently yielding 4.24% according to this morning's WSJ. However, the actual yield on your social security investment would be *lower* than this due to the administrative/transaction/bureaucratic costs of running the social security administration. This after-cost yield would approximate my quoted 2-3%. Trader_Jorge's Investment Alternative If preservation of capital and yield are my two goals, I can go out and purchase units of PVR (Penn Virginia Resources), receive a 10% yield on my units (the dividends are taxed at long-term capital gains rates (20%)), and have the opportunity for capital gains (if I ever decide to sell). For you hard-core investors out there, I would point out that you would be buying common units, which are senior to subordinated units, thus minimizing risk of default. So, let's take a look at the decision: 2-3% Government Yield 10% minimum Trader_Jorge Yield I would also note that with these individual accounts, you have the *choice* to elect an alternate investment. If you want to keep sticking your money in treasuries, you have the freedom to do that. Thus, the argument becomes, "should the government mandate that all citizens have no choice in their retirement savings." The answer is clear -- individual accounts are the best way for Americans to exercise freedom in their retirement savings.
As much as Trader_Jorge and I have disagreed on many issues, he is exactly right on this one. His economic data is sound and he has researched this well. As long as SS is thrown into tthe general treasury it is just another tax -- NOT a retirement savings option. The Dems are leading people to believe that SS is a retirement option in and of itself. This is not true and when these people reach retirement age they will know better. Sure the stock market is down right now...but history shows that if you are in it for 10 years or longer, there isn't a better investment out there, provided your holdings are diversified.
Refman, I find that we rarely disagree when it comes to content of the post -- only on style. I prefer to employ the psychological warfare tactics of belitting people, summarily dismissing opinions, and emphasizing finality of arguments, whereas you like to host more civil debates. I find that when my 'opposition' are thrown out of their comfortable element (peacefulness), and into the mindset of anger and rage, they often make many mistakes which I am able to successfully exploit. We are both hard-core Republicans and economic free thinkers.
As long as SS is thrown into tthe general treasury it is just another tax -- NOT a retirement savings option. The Dems are leading people to believe that SS is a retirement option in and of itself. This is not true and when these people reach retirement age they will know better. The problem is that SS is not supposed to be a retirement savings option. If it were, they would just be retirement accounts. The whole idea behind SS is to ensure that *everyone* has basic money to live when they are old. It's an insurance system moreso than a savings system. If you're going to use your setup, just blow up all of SS and let people keep their SS taxes and place them in their current retirement accounts. You still have to figure out what to do for all of the people who (1) grew up on SS and now are retiring since your money wouldn't be going into a pooled fund and (2) the poorer elderly who the system was set up for in the first place.
Trader Jorge. Thanks for the investment hint. I'll have to check it out. However, nonresponsive, still apples and oranges. How about disability and survivor's insurance guaranteed to keep up with inlfation? How about the screw up in England? You'll excuse us if we take the overoptimism of those in the private financial industry with a grain of salt. I still think you are relying on a Reader's Digest knowlege of the Social Security System.
The problem is that the poorer elderly already get next to nothing. The current system has done a pitiful job at protecting those it was designed to protect and has done a horrible diservice to those who could have done MUCH better on their own. As with any other reform system...it can be phased in.
How is that? He gave you a solid investment alternative in order to avoid the problem which existed in the British system. Sounds damned responsive to me. How about having a policy that all employers falling under the Federal laws much purchase? It seems to have worked for worler's compensation. Just expand that program. As opposed to your vast and endless knowledge of it? Fact is...you haven't a clue as to what he knows and does not know about the system. Neither do I. But since he disagrees with you, you assume he knows nothing about it. Typical.
How is that? He gave you a solid investment alternative in order to avoid the problem which existed in the British system. Sounds damned responsive to me. No he didn't. T_J described an investment system, which Social Security is not. He described a system that is designed to give people the opportunity to maximize individual wealth rather than create a pooled fund to ensure security for ALL retirees and their families. No one's arguing that individuals can't better invest that money if this was an investment system. However, it's not. Social Security is designed to protect the collective good, not the individual good.
I submit to you that SS as it stands now ensures seecurity to NOBODY....ESPECIALLY the poor. The poor recipients of SS get little more weekly than it costs to buy a pack of Care-free and a can of ALPO...much less the cost of sustenance. My point is that SS provides those of means with MUCH less than they should expect and those who need help almost nothing at all. How does that provide security?
My point is that SS provides those of means with MUCH less than they should expect and those who need help almost nothing at all. How does that provide security? Because it provides more than nothing. I agree that SS needs reform. Privatization, though, just exacerbates this problem. The people who may need the safety net the most lose it, while the people who already have extensive savings benefit the most. Social Security was ill-conconceived because it relied on a consistent relative retired-class vs. working-class and the baby boomer generation has / will blow that up. As a result, the retired-class (recipients) is growing and the working class is not.
It's a failure because it was never intended to be a permanent system. FDR enacted it as part of a package to get people through the Great Depression. That is my understanding. When FDR died...nobody wanted to touch anything he did. The system, being short term in its design, understandably broke some time ago.
Here's a description of PVR: Penn Virginia Resource Partners was formed by energy company Penn Virginia Corporation to manage some 50 coal mines in Kentucky, Virginia, and West Virginia. Hmm, it's interesting that you would recommend an alternative that advocates dumping mining wastes in streams and huge weights for truckers. The reason the latter is controversial in WV is because big coal trucks kill people. The only controversy is the mine operators and owners don't want to pay for it. It's also interesting you picked a group formed in 2001. Not a very long track record to bet the difference between living comfortably and living in the poorhouse during your later years. This is from PVR's current SEC filing: Mountaintop Removal Litigation. On May 8, 2002, the United States District Court for the Southern District of West Virginia ruled that Section 404 of the Clean Water Act does not permit placement of coal overburden, which the Court described as "waste," in waters of the United States. This decision currently makes it virtually impossible for coal mining operators to obtain permits for valley fills in West Virginia. While we are not a party to this litigation, virtually all mining operators, including our lessees, use valley fills to dispose of excess mining materials. Accordingly, the coal mining industry, including the mining operations of our lessees, could be significantly adversely affected if this ruling is not overturned or legislation is not passed which limits its impact. The ruling has been appealed to the United States Fourth Circuit Court of Appeals. Legislation of Weight. Upon receiving a report and recommendations from the Truck Safety Task Force, West Virginia Governor Wise called a special session of the legislature in July 2002 to approve legislation addressing the weight limits of trucks transporting coal. After four days of debate and the adoption of an amendment to the Governor's proposed bill, which would have lowered the proposed 120,000 pound weight limit back to the current 80,000 pound limit, the legislature adjourned without taking any action on the matter. This issue remains controversial in West Virginia and will most likely be the subject of future legislative proposals. If trucking weight limits are not increased, our lessee's costs of transportation will increase, which could have an adverse effect on our revenues and our lessees' ability to increase production on our properties. Here's another from their previous filing: The operations of our lessees are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations are conducted. The terms of the Partnership's coal property leases impose liability for all environmental and reclamation liabilities arising under those laws and regulations on the relevant lessees. The lessees are bonded and have indemnified the Partnership against any and all future environmental liabilities. The Partnership regularly visits the coal property leases to monitor their lessee's compliance with environmental laws and regulations, as well as reviewing mine activities. Management believes that the Partnership's lessees will be able to comply with existing regulations and does not expect any material impact on its financial condition or results of operations. The Partnership has neither incurred, nor is aware of, any current material environmental charges imposed on it related to its coal properties. Anyone want to stake their retirement on the notion that no leesees will violate environmental laws and that PVR is truly not liable? Finally, here's the forward looking statement disclosure that so many folks wanted to get rid of after the Enron scandal broke. What they are saying is that the rosy projections may not come true. Anyone want to bet the equivalent of your SS check on this investment after reading this? Forward-Looking Statements Statements included in this report which are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto) are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. In addition, Penn Virginia Resource Partners, L.P. and its representatives may from time to time make other oral or written statements which are also forward-looking statements. Such forward-looking statements include, among other things, statements regarding development activities, capital expenditures, acquisitions and dispositions, expected commencement dates of coal mining by the Partnership's lessees, projected quantities of future coal production by the Partnership's lessees producing coal from reserves leased from the Partnership and costs and expenditures as well as projected demand or supply for coal, all of which may affect sales levels, prices and royalties realized by the Partnership. These forward-looking statements are made based upon management's current plans, expectations, estimates, assumptions and beliefs concerning future events impacting Penn Virginia Resource Partners, L.P. and therefore involve a number of risks and uncertainties. The Partnership cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause the actual results of operations or financial condition of Penn Virginia Resource Partners, L.P. to differ materially from those expressed or implied in the forward-looking statements include, but are not limited to: the cost of finding new coal reserves; the ability to acquire new coal reserves on satisfactory terms; the price for which such reserves can be sold; the volatility of commodity prices for coal; the risks associated with having or not having price risk management programs; the Partnership's ability to lease new and existing coal reserves; the ability of lessees to produce sufficient quantities of coal on an economic basis from the Partnership's reserves; the ability of lessees to obtain favorable contracts for coal produced from the Partnership's reserves; competition among producers in the coal industry generally and in Appalachia in particular; the extent to which the amount and quality of actual production differs from estimated mineable and merchantable coal reserves; unanticipated geological problems; availability of required materials and equipment; the occurrence of unusual weather or operating conditions including force majeure events; the failure of equipment or processes to operate in accordance with specifications or expectations; delays in anticipated start-up dates of coal mining by the Partnership's lessees; environmental risks affecting the mining of coal reserves; the timing of receipt of necessary governmental permits; labor relations and costs; accidents; changes in governmental regulation or enforcement practices, especially with respect to environmental, health and safety matters, including with respect to emissions levels applicable to coal-burning power generators; risks and uncertainties relating to general domestic and international economic (including inflation and interest rates) and political conditions; the experience and financial condition of the Partnership's lessees, including their ability to satisfy their royalty, environmental, reclamation and other obligations to the Partnership and others; changes in financial market conditions; and other risk factors detailed in the Partnership's Securities and Exchange commission filings. Many of such factors are beyond the Partnership's ability to control or predict. Readers are cautioned not to put undue reliance on forward-looking statements. While the Partnership periodically reassesses material trends and uncertainties affecting the Partnership's results of operations and financial condition in connection with the preparation of Management's Discussion and Analysis of Results of Operations and Financial Condition and certain other sections contained in the Partnership's quarterly, annual or other reports filed with the Securities and Exchange Commission, the Partnership does not undertake any obligation to review or update any particular forward-looking statement, whether as a result of new information, future events or otherwise. THANKS FOR PLAYING TRADER. YOU"RE A FIESTY LITTLE COMPETITOR. TRY AGAIN ANYTIME.
Hilarious. I thought you were just a jerk. It's a strategy? To win political debates on a Rockets BBS? Hilarious.
