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Soc. Sec. editorial from Register-Guard


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Social Security puzzles: Big questions haven't been answered

 

A Register-Guard Editorial?

?

President Bush has raised the prospect of partial privatization of Social Security, but has not offered a specific proposal. This ensures that the debate will be conducted in maddening generalities, often colored by scare tactics and demagoguery. Yet even in making the case for change in broad strokes, the president raises fundamental questions. Here are two of them:

Supporters of privatization suggest that the Social Security Trust Fund can't be relied upon to support future benefits. If that's the case, why should American workers and businesses continue paying into it?

 

For nearly a quarter of a century, members of the baby boom generation have been paying Social Security taxes to support not only their parents' current benefits, but also their own. The surplus money - $180 billion this year - is placed in the Social Security Trust Fund and is invested in Treasury bonds.

 

The trust fund will contain an estimated $5.2 trillion by 2018, at which time retiring baby boomers' claims for benefits will begin to exceed the Social Security system's income from payroll taxes. The system will then begin to draw upon the trust fund, whose assets will be sufficient to cover shortfalls until 2042 or 2052, depending on the projection.

 

Yet Bush and others suggest that the trust fund surplus is fictional - the money has been spent, they say, and in 2018 Social Security's cupboard will be bare. The implication is that U.S. government bonds are worthless, and that surplus Social Security taxes have not been borrowed but expropriated.

 

If the promise of the trust fund will not be kept, taxpayers should no longer be expected to keep their end of the bargain. Social Security payroll taxes for employees and employers alike should be reduced to levels adequate to support current benefits, and not a penny more. Such a tax cut would do more for low- and middle-income taxpayers and small businesses than any of the tax cuts pushed by the Bush administration.

 

Yet bondholders from China to Wall Street believe that Treasury bonds like those in the trust fund have value - and if they do, then Social Security's problems arise in 37 or 47 years, not in 13 years. The 1983 legislation compelling baby boomers to partially finance their own Social Security benefits shows a level of fiscal responsibility that has become alien to the current political culture of Washington, D.C., and represents a commitment to solvency that should be kept.

 

If investing in stocks would yield higher returns for Social Security funds, why not start doing it now?

 

President Bush believes Americans can improve their financial future by investing a portion of their Social Security taxes in stocks, which historically have delivered a higher rate of return than bonds. This advantage could be obtained without creating a system of private accounts. Income to the Social Security trust fund could be invested in a set of broad-based mutual funds. The higher returns could be used to extend the system's solvency, fund benefit increases or finance payroll tax cuts.

 

This concept is not new. State-run pension systems have long participated in the equity markets, sometimes with spectacular results. The Social Security Administration could set up an investment council like the one that guides the investments of Oregon's Public Employees Retirement System, and it could manage a diversified portfolio of investments. Rep. Peter DeFazio supports such a move. The administrative costs of a large Social Security investment pool would be minimal compared to the expense of tracking millions of small private accounts.

 

Federal Reserve Chairman Alan Greenspan, chairman of the commission that devised the 1983 reforms, fears the influence that Social Security funds would have on the capital markers. The concern is well-founded - if the Social Security system owned a large percentage of a certain company's stock, the government would have a powerful interest in boosting the company's profits and protecting it from failure. Strong firewalls would be needed to prevent such political interference.

 

The same risk, however, would attend private Social Security accounts. If a company on which millions of Americans depended for their retirement security was threatened, pressure for regulatory or political intervention would arise. Indeed, the arguments for and against Social Security involvement in the stock market are the same, whether the investments are individual or aggregated. An aggregated investment, however, could be made without diverting funds from the Social Security system as a whole.

 

Other questions also need to be asked, and still more will arise as the details of a privatization proposal emerge. But the concept as presented to date appears to depend on exaggerating the problems of the existing Social Security system, or claiming benefits for a new system that could just as easily be obtained for the current one. Americans will need to keep their eyes open.

 

 

 

http://www.registerguard.com/news/2005/02/...s.jlw.0220.html

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Remember, when Bush was running for office in Texas in the 1970's, he thought that Social Security would be bankrupt by the late 1980's.

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More circumstantial proof of his underlying agenda IMO.

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This whole Social Security debate reminds me of the different claims that various scientists have made over the past century about when the world's supply of fossil fuels will run out. I remember reading that back in the 1950's, some thought that we would run out before the end of the 1990's. Now, it seems like scientists have mixed opinions on when they will be depleted. Some say 20 years, others 75 years or more. It seems to vary from person to person, as there has not been any clear evidence to support a theory.

 

The problem is, Bush knows that he's committed to getting this Social Security agenda of his passed, at any cost. I've been reading that some Republicans will be willing to accept compromises in the deal, as long as they get their private accounts in the end.

 

When I was watching Scarbourough Country the other day, this one commentator who was on the show made a good point, that Bush should have used the surplus that he had when he came into office in 2000 to fix the Social Security situation, instead of waiting so long. That couldn't have been said any better.

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Well what about FDR and Clinton's ideas about reforming SS. FDR said that SS would eventually convert into a system of private accoutns and clinton also said in the mid 90s, during a period of economic boom, that SS needed to be reformed. I'm confused as to why there is no SS crisis now b/c bush is saying but there was one when Clinton said it. Aside from that using the surplus money to 'fix' social security will only prolong the inevitable. I wont say what reform I favor, but the status quo should not be an option.

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Remember, when Bush was running for office in Texas in the 1970's, he thought that Social Security would be bankrupt by the late 1980's.

690937[/snapback]

Its like this - you take hard cash, loan it to yourself and go spend it tomorrow on a new SUV, hard partying, etc. Now when the loan comes due, where are you gonna get the money? You already pissed away the hard cash decades ago and are holding a piece of paper.

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Exactly, there will be a lot of people who won't spend the money properly if they just give it to people.

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Remember, when Bush was running for office in Texas in the 1970's, he thought that Social Security would be bankrupt by the late 1980's.

690937[/snapback]

Its like this - you take hard cash, loan it to yourself and go spend it tomorrow on a new SUV, hard partying, etc. Now when the loan comes due, where are you gonna get the money? You already pissed away the hard cash decades ago and are holding a piece of paper.

694062[/snapback]

Exactly, there will be a lot of people who won't spend the money properly if they just give it to people.

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Yea but bush's SS reform has private accounts that you cant touch until you retire. Its the same as now but with guaranteed money for everyone who works.

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