Shoud Social Security be Phased Out & Replaced With Private Investments

cpwill said:

No reason to think so. Pensions, IRA's, 401(k)'s and the like own stock now - what portion of the market are they?



:shrug: in most plans, this is forced savings. So the money you are losing to FICA now stays yours, but is diverted to your retirement account.



I imagine they would probably want to regulate it, certainly at the beginning. I've pointed out that the TSP program offers a natural stepping-stone in this regard.

When Deng Xiaoping "opened up" the Chinese economy, he described it as "crossing a river by stepping on stones". That is how I would approach this process - carefully, with lots of natural points where we can evaluate and adjust.



And yet, as I showed, the people who would have retired under this plan in the teeth of that worst-recession-since-WWII still would have done more than twice as well as those who stuck with Social (in)Security.



That is an unfortunate decision. You have no property rights (or, indeed, any other rights) to social security - you can pay in your entire life and the government is free to take it all without giving you a dime. Not only do you have no actual rightful claim on "your" Social Security (meaning that you do not have a "your" Social Security), but the government has already demonstrated it has no intent to make good on it's agreements. Government has already spent the excesses that were supposed to cover the Boomers' retirement, they diverted OASI funds to shore up SSDI last year (and, apparently, will be doing so until both collapse). The plan at current is to start slashing benefits - as I understand it, everyone retiring today is currently scheduled to outlive their benefits. That's going to be an ugly moment of realization for folks who thought they had such a thing as "their" Social Security.

Meaning that the notion that:



Is unfortunately untrue. Because Government is a guaranteed loss for most, and (at best) a guaranteed low return for others.

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I hear you bro at some in the future though don't claim your against deregulation. I'm not totally against the idea but has proposed I am. In the beginning when Social Security was sold to the public, had they made the argument that the government would tax you and then reinvested in an IRA type fund this would have been a Wall Street hustle. This really reminds me of the education system with the voucher program. And that the government provides family vouchers for their children to go to private school instead of to Public School.
This undermines the funding for public schools. So we have a worst public education system because of this.


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Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Visbek said:

While your proposal is not identical to the Bush proposal, it's quite similar, and suffers from the same basic issues:

• If you are diverting payroll tax dollars away from program costs and into an individual investment plan, you are increasing the deficits and shortfalls, which hastens the date at which the Trust Funds fall to $0 balance, and someone will have to pay trillions to shore up the current system until the new system kicks in.

• If you set this up as an additional mandatory payment, then citizens are now paying more (which they might be OK with), but we still have to deal with those deficits.

In other words, unless your plan involves summoning trillions of dollars out of thin air, you don't seem to be acknowledging the fundamental issue -- that SS is running a deficit.



The first article is partially correct. If we had switched to some type of privatized or Australian-style system, eventually we'd save money. The article fails to recognize the shorter-term costs of the Bush proposal, or how adopting it would not have made deficits magically go away. Even so, it admits that the system's overall finances would not have changed -- meaning we'd still face a major inflection point when the Trust Funds fall to $0 (in 2032-2035 or so).

As to the Forbes article, I concur that it was mostly a political failure. As this thread shows, making any changes whatsoever to SS is a hard sell. It's a complicated system that most Americans don't understand. To make matters worse, the Bush administration didn't bother to bring Democrats on board; instead, they proclaimed that the election gave them a "mandate" and they tried to shove the reforms down everyone's throats. So it goes.

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The plan I offered is far different from President Bush's plan. Sorry, but I don't see any reason to accept your word as to the plan's viability.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

LesGovt said:

The plan I offered is far different from President Bush's plan. Sorry, but I don't see any reason to accept your word as to the plan's viability.

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sigh

I'm saying that generally speaking, privatization plans are viable -- in the long term.

The problem, which you keep failing to recognize, is that privatization plans will take decades to close SS's deficit. That means we will have to spend trillions of dollars shoring up the current system, before privatization cuts costs.

It doesn't matter if you believe your plan is different than the Bush plan. It still has this problem. It won't close the deficit. It will probably make it worse. And closing the deficit, no matter how we do it, will cost an incredible amount of money.

Why is this so difficult for you to understand?

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Visbek said:

sigh

I'm saying that generally speaking, privatization plans are viable -- in the long term.

The problem, which you keep failing to recognize, is that privatization plans will take decades to close SS's deficit. That means we will have to spend trillions of dollars shoring up the current system, before privatization cuts costs.

It doesn't matter if you believe your plan is different than the Bush plan. It still has this problem. It won't close the deficit. It will probably make it worse. And closing the deficit, no matter how we do it, will cost an incredible amount of money.

Why is this so difficult for you to understand?

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I understand what you believe to be true.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

LesGovt said:

I understand what you believe to be true.

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I believe it to be true, because... it is true.

• It is a fact that SS is running a deficit
• It is a fact that every dollar we divert away from benefits, increases the SS deficit
• It is a fact that this deficit draws from the Trust Funds
• It is a fact that once the Trust Funds are emptied out, we have to find some other way to either close the deficit, or pay it from other sources (taxes, borrowing etc)

What part of this do you not accept?

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Helix said:

it isn't false. the taxes to pay for it are withheld, and public assistance programs are available now that also didn't exist before the New Deal.

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They got into the general fund at the Treasury, there is no trust fund.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

American said:

They got into the general fund at the Treasury, there is no trust fund.

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Sorry, but that's not correct.

By law, the assets in the Trust Funds are loaned to the rest of the federal government. They're set up as securities, with interest rates set to match inflation rates.

The federal government has never failed to repay those intragovernmental loans. Not once.

So yes, there are still Trust Funds. Most of the assets are in OASI's fund, which has about $2.8 trillion.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Visbek said:

I believe it to be true, because... it is true.

• It is a fact that SS is running a deficit
• It is a fact that every dollar we divert away from benefits, increases the SS deficit
• It is a fact that this deficit draws from the Trust Funds
• It is a fact that once the Trust Funds are emptied out, we have to find some other way to either close the deficit, or pay it from other sources (taxes, borrowing etc)

What part of this do you not accept?

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I have not said that anything you have said is untrue... or true. I have said that I would let the experts, which is not me and is not you, figure out how to make the transition work.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Visbek said:

Sorry, but that's not correct.

By law, the assets in the Trust Funds are loaned to the rest of the federal government. They're set up as securities, with interest rates set to match inflation rates.

The federal government has never failed to repay those intragovernmental loans. Not once.

So yes, there are still Trust Funds. Most of the assets are in OASI's fund, which has about $2.8 trillion.

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I am not sure that is absolutely true, I think there were years where the amount of SS receipts were deemed
by the SS administrator to be in excess of what the fund needed, and were simply applied as deficit offsets.
I will see if I can find an example of this in the Treasury bulletin.
https://www.ssa.gov/oact/STATS/table4a3.html
In 1997 the SS reported adding $88,560 million to the trust fund,
but the Treasury Bulletin, delta between FFO-2 and FFO-3 for SS receipts and outlays show,
$539,371M- $393,309M or $146,062M.
https://www.fiscal.treasury.gov/fsreports/rpt/treasBulletin/b47.pdf
So in 1997 the difference between $146,062, and $88,560 million or $57,502 million simply offset the deficit.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

longview said:

I am not sure that is absolutely true, I think there were years where the amount of SS receipts were deemed
by the SS administrator to be in excess of what the fund needed, and were simply applied as deficit offsets.

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By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.
https://www.ssa.gov/OACT/ProgData/fundFAQ.html

The only disbursements permitted from the funds are benefit payments and administrative costs. Federal law requires that all excess funds be invested in interest-bearing securities backed by the full faith and credit of the United States. The Department of the Treasury currently invests all program revenues in special non-marketable securities of the U.S. Government which earn interest equal to rates on marketable securities with durations defined in law. The balances in the trust funds, which represent the accumulated value, including interest, of all prior program annual surpluses and deficits, provide automatic authority to pay benefits.
https://www.ssa.gov/OACT/TRSUM/index.html

In 1997 the SS reported adding $88,560 million to the trust fund,
but the Treasury Bulletin, delta between FFO-2 and FFO-3 for SS receipts and outlays show,
$539,371M- $393,309M or $146,062M.

Click to expand...

I'm fairly sure the FFO-2 figures are higher because it includes all payroll taxes, including those for Medicare. The SSA's OASDI does not include Medicare revenues.

Also, there wasn't a Social Security deficit to offset in 1997, and it would have been illegal to use any surpluses from payroll taxes to pay down any other type of federal deficits or debt.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Visbek said:

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.
https://www.ssa.gov/OACT/ProgData/fundFAQ.html

The only disbursements permitted from the funds are benefit payments and administrative costs. Federal law requires that all excess funds be invested in interest-bearing securities backed by the full faith and credit of the United States. The Department of the Treasury currently invests all program revenues in special non-marketable securities of the U.S. Government which earn interest equal to rates on marketable securities with durations defined in law. The balances in the trust funds, which represent the accumulated value, including interest, of all prior program annual surpluses and deficits, provide automatic authority to pay benefits.
https://www.ssa.gov/OACT/TRSUM/index.html



I'm fairly sure the FFO-2 figures are higher because it includes all payroll taxes, including those for Medicare. The SSA's OASDI does not include Medicare revenues.

Also, there wasn't a Social Security deficit to offset in 1997, and it would have been illegal to use any surpluses from payroll taxes to pay down any other type of federal deficits or debt.

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The title of the FFO-2 column (22) was "Social insurance taxes and contributions, con. "
Medicare is in column (11)
And I am not talking about surpluses being applied against Social Security deficits, but general budget deficits.
SS ran a surplus (more income than outlay) until about 2010.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Visbek said:

Sorry, but that's not correct.

By law, the assets in the Trust Funds are loaned to the rest of the federal government. They're set up as securities, with interest rates set to match inflation rates.

The federal government has never failed to repay those intragovernmental loans. Not once.

So yes, there are still Trust Funds. Most of the assets are in OASI's fund, which has about $2.8 trillion.

Click to expand...

This is like saying that your checking account has written an IOU to your savings account, therefore you can count the money in your checking, the money in your savings and the face value of the IOU as your assets, rather than correctly measuring the IOU's as a liability against the checking.

Even the reliably left-leaning Factcheck isn't willing to make that argument.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

Visbek said:

sigh

I'm saying that generally speaking, privatization plans are viable -- in the long term.

The problem, which you keep failing to recognize, is that privatization plans will take decades to close SS's deficit. That means we will have to spend trillions of dollars shoring up the current system, before privatization cuts costs.

It doesn't matter if you believe your plan is different than the Bush plan. It still has this problem. It won't close the deficit. It will probably make it worse. And closing the deficit, no matter how we do it, will cost an incredible amount of money.

Why is this so difficult for you to understand?

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You are correct; I"m not sure why he insisted otherwise, except that many seem to think social security is somehow "their" money they are getting "back". It's possible he started with this common mistake in mind.

I would add, only, however, that the deficit can indeed be closed, even the debt reduced, if - again - one takes a long-term assessment v a short-term one.

Re: Shoud Social Security be Phased Out & Replaced With Private Investments

cpwill said:

This is like saying that your checking account has written an IOU to your savings account, therefore you can count the money in your checking, the money in your savings and the face value of the IOU as your assets, rather than correctly measuring the IOU's as a liability against the checking.

Even the reliably left-leaning Factcheck isn't willing to make that argument.

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Please, try again. I'm simply reporting facts about SS.

I am in no way saying that intragovernmental loans don't exist, do not count, and should be counted in triplicate.

American stated that "there is no trust fund." That's incorrect, for the reasons I stated.

To put it another way: As long as the Trust Fund intragovernmental loans are repaid in time to cover Social Security deficits, then for all intents and purposes, accounting and legally, the Trust Funds exist, and are being used exactly as intended.

If that were not the case, then somehow $2.7 trillion or so dollars disappeared, without anyone noticing. I don't think so.


As to the article: Basically what it's doing is treating the federal government as having a "unified budget" -- i.e. treating SS as though it were any other program, and payroll taxes like any other tax. While I'd say that is how we ought to structure the government, that is not how it's actually structured.

Social Security is currently running a deficit (as I've said many times). However, the federal government is not paying for that shortfall from general revenues, not at all. What it's doing is pulling from the SS Trust Funds.

This does have an effect, in that the federal government had to borrow $37 billion more from the public, because it couldn't borrow that amount from the Trust Funds. That means interest payments will be slightly higher. However, that's an extremely small difference, given the low cost of federal borrowing.

This is sort of like looking at a business which operates on an accrual basis of accounting, using the methodology of a cash basis, and using that to criticize the business.

So, until the Trust Fund really does hit $0, then it still exists, it hasn't been "raided" by Congress, and we're still using this odd system where we segregate a specific tax for a specific program, mostly to fool citizens into thinking that Social Security operates like a giant IRA.