View Poll Results: Your Identity and For/Against this SS Reform model

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  • Socialist and Against

    10 10.99%
  • Socialist and For

    1 1.10%
  • Democrat and Against

    21 23.08%
  • Democrat and For

    6 6.59%
  • Republican and Against

    2 2.20%
  • Republican and For

    22 24.18%
  • Libertarian and Against

    9 9.89%
  • Liberarian and For

    9 9.89%
  • I am for it, but with a particular modification (explain)

    11 12.09%
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Thread: Social Security Fix

  1. #331
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    Re: Social Security Fix

    Also worth noting - for the average incoming participant, the system will be entirely self-funding 10 years after that, as that is the cohort that totally replaces their SS check. So those 45 and above would generally still get some form of government aid, and those 45 and below would generally not need it.

  2. #332
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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    Also worth noting - for the average incoming participant, the system will be entirely self-funding 10 years after that, as that is the cohort that totally replaces their SS check. So those 45 and above would generally still get some form of government aid, and those 45 and below would generally not need it.
    "some form of government aid"

    okay everybody, rest easy now.
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    Re: Social Security Fix

    No option for independents = no vote.

  4. #334
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    Re: Social Security Fix

    CPWill,

    You have mentioned Chile a number of times. I can't get much quality information on the subject. I get conflicting data, and little of it is current.

    Here is our piece on Chile And Galveston. You are free to write a counter piece.
    The Results Of Chile And Other Privatization Efforts

    If you are going to use economic returns of the investments, you need to include or at least mention the transition costs create increased income taxes. You need to mention the fact that Chile subsidies its system so the returns are juiced. Again, I can tell you that subsidies exist ranging from 2-20% of the revenue. I have heard that transition costs were as little as selling state industries to as much as yearly expenses that have become a burden to the government. My guess is that the truth is somewhere there, but I don't know what the costs are.

    The guarantees vary in size and scope. I have heard a variety of explanations. I have nothing reliable on exactly what the guarantee covers.

  5. #335
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    Re: Social Security Fix

    Quote Originally Posted by haymarket View Post
    "some form of government aid"

    okay everybody, rest easy now.
    yup. benefit remains guaraunteed. It will just so happen to go up dramatically for future retirees in the context of also saving the system from fiscal collapse.

    you're welcome. I'll be here all week.

  6. #336
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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    yup. benefit remains guaraunteed. It will just so happen to go up dramatically for future retirees in the context of also saving the system from fiscal collapse.

    you're welcome. I'll be here all week.

    While you are here, can you explain what this article is saying : http://www.nytimes.com/2006/01/10/wo...hile.html?_r=3.

    "At the moment, the government pays about 5 percent of gross domestic product, or more than it spends for either health or education, on pensions for the poor, payments into a separate military retirement plan, and so-called transition and administrative costs.

    Supporters of the privatized system argue that the state's burden will diminish as older retirees enrolled in the pay-as-you-go system that prevailed here before 1981 gradually die off."

    It was 2006 which is a long time ago, but it makes me wonder what the success is and where the failure is seen.

    5% sound like a long way from "the system will be entirely self-funding 10 years after that, as that is the cohort that totally replaces their SS check"

    Again, I get conflicting commentary, but it would help to understand why you think the article is wrong.

  7. #337
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    Re: Social Security Fix

    Quote Originally Posted by JoeTheEconomist View Post
    While you are here, can you explain what this article is saying : http://www.nytimes.com/2006/01/10/wo...hile.html?_r=3.
    only got a minute, but I would say that the critical piece is this issue right here:

    ...Other studies, including one conducted by the World Bank, indicate that pension funds retain between a quarter and a third of workers' contributions in the form of commissions, insurance and other administrative fees....
    Meanwhile in the US, managed funds will run you... what? 1%? And broad index funds cost significantly less than that.

    Many young people, who should be enrolling in the system early to accrue maximum benefit, are staying out or paying in very little. Some cannot afford to contribute beyond the obligatory minimum payment, which is 10 percent of wages,
    since our model was actually run with a 10% of wages, I would say we are still good. American wages being rather significantly higher than Chilean ones.

    It was 2006 which is a long time ago, but it makes me wonder what the success is and where the failure is seen
    well, it's an opposing view. This is from just the year prior, where we can probably assume conditions were similar.

    ...After comparing our relative payments to our pension systems (since salaries are higher in America, I had contributed more), we extrapolated what would have happened if I'd put my money into Pablo's mutual fund instead of the Social Security trust fund. We came up with three projections for my old age, each one offering a pension that, like Social Security's, would be indexed to compensate for inflation:

    (1) Retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age.

    (2) Retire at age 65 with an annual pension of $70,000. That would be almost triple the $25,000 pension promised by Social Security starting a year later, at age 66.

    (3)Retire at age 65 with an annual pension of $53,000 and a one-time cash payment of $223,000.

    You may suspect that Pablo has prospered only because he's a sophisticated investor, but he simply put his money into one of the most popular mutual funds. He has more money in it than most Chileans because his salary is above average, but lower-paid workers who contributed to that fund for the same period of time would be in relatively good shape, too, because their projected pension would amount to more than 90 percent of their salaries....
    Again, I get conflicting commentary, but it would help to understand why you think the article is wrong.
    I wouldn't say that they are right or wrong, I would say that they appear to be a 2006 editorial, pushing a program (revamping their private pension system) which apparently wasn't terribly popular, because it didn't happen. I would also say that American wages are significantly higher than Chilean ones, and American fees are significantly lower than their Chilean counterpart.


    Again, I've run the numbers for you multiple times now for regular and low income earners - and compared them to what the social securities' own formula's say they would receive under the current system.

  8. #338
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    Re: Social Security Fix

    Quote Originally Posted by cpwill View Post
    Again, I've run the numbers for you multiple times now for regular and low income earners - and compared them to what the social securities' own formula's say they would receive under the current system.
    You have run them multiple times with the wrong tax rates, wrong time periods, not inflation adjusted, and you compare a nominal annuity with an inflation-adjusted annuity as though they are the same. While I appreciate your time, nothing you have written gives me confidence that the Social Security's actuaries are wrong. I have given you their source material from SSA, and instead of telling me where they are wrong, you go back to your data which wasn't right in the first place. The fact that you haven't even corrected the tax rate which was close to 4% in 1965 tells me that time isn't the problem. The problem is a lack of seriousness.

    No one disputes that a private model is going to be better but the results you claim about low-wage workers is off-the-charts. And the question remains how are you going to pay for the transition. You can't compare SS today vs a privatized model with a soak-the-rich tax structure. You need to compare a privatized model with a STRTS vs Social Security with a STRTS to be apples to apples. Time is not the problem here.

    "but lower-paid workers who contributed to that fund for the same period of time would be in relatively good shape, too, because their projected pension would amount to more than 90 percent of their salaries.... "

    The problem is that lower-paid workers do not participate. Participation in Chile is around 60%. It is 94% in SS. You can't compare these systems. The article you cited compares high-wage workers so it has nothing to do with low-wage workers. The biggest problem here is that the article does not look at the full cost of the system. Pablo may get $100,000 in retirement, but it is meaningless if his taxbill for the legacy costs and subsidies is $100,001. Chile subsidizes its system.

    There is a difference in these articles. One is an agenda driven advertisement. The other asks reasonable questions. I don't get the sense that either of us has the answers, but you at least have to look. The one thing that we know is that the Chilean system was re-reformed in 2008 after both articles.

    The only thing that you have convinced me of is that we should have privatized Social Security back in 1981. But that didn't take a lot.

  9. #339
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    Re: Social Security Fix

    Quote Originally Posted by JoeTheEconomist View Post
    You have run them multiple times with the wrong tax rates, wrong time periods, not inflation adjusted, and you compare a nominal annuity with an inflation-adjusted annuity as though they are the same.


    I ran them as though the accounts were allowed to grow tax free (I see a hard time selling that they shouldn't be), I ran them inflation adjusted (as I have explained to you multiple times), and I assumed an annual 5% removal, which again, adjusts for inflation.

    No one disputes that a private model is going to be better but the results you claim about low-wage workers is off-the-charts
    Actually it's in the charts. Specifically, it is in the charts that I have provided ad nauseum.

    And the question remains how are you going to pay for the transition.
    we covered that as well.

    You can't compare SS today vs a privatized model with a soak-the-rich tax structure.
    When I first sat down and ran the numbers, I tried to figure out at what point popping the cap net cost high-income earners given the 10% savings and tax-free growth. As I recall, all income earners up to about $460,000 a year came out ahead, and then you started on the downside. That's not exactly soak-the-rich, though it will increase the amount deducted from their pay.

    The only thing that you have convinced me of is that we should have privatized Social Security back in 1981. But that didn't take a lot.
    well it would have saved us alot of pain with the Baby Boomers. but better late than never.
    Last edited by cpwill; 05-01-12 at 09:31 PM.

  10. #340
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    Re: Social Security Fix

    Trying to integrate this idea with this one here.

    It seems for purposes of plausibility (hah - as if anything decent is plausible in our sclerotic nightmare of a bungle up there in DC), that we are going to need to make sure that we assign a higher-benefit-default, that the elderly are guaranteed either 50% reimbursement of all income below 200% of the adjusted poverty line, or the guaranteed continual SS payout, whichever is larger. Given that the average social security check is around $1100 or so a month, however I'm thinking that the NIT will remain the bigger bet, for the duration of the adjustment period. This means that raw outlays to individuals will be increased, but that former pure Social Security outlays will count against them, likely making for a net deficit-reduction.
    Last edited by cpwill; 11-08-13 at 06:20 AM.

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