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March 06, 2005

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Steve Thomma of KR makes the case that the youngest group of voters supports privatization, while everyone else does not, and this may be the bright spot in the Republican clouds gathering on the issue.

If they voted more, and if they didn't age, I suppose that might be true. However... there's no question that if.when Bush's scheme fails, it will have repercussions far beyond the terms of S.S. alone. And as Atrios points out,

Ah, this Social Security thing is going to be the gift that keeps on giving. There's little chance of it passing, and almost every single Democratic challenger is going to be able to run ads saying "Congressman X voted to cut your Social Security benefits..."

I wanted to know if any of you could criticize the S S reform project in itself. I haven't heard any impartial analysis of whats really going on with this plan, its good and bad parts.
Here is what i know:
First, the current SS makes people pay for other people, not just themselves. That's being a nation, "united we stand".
Second SS in not in crisis, but its undeniable that fewer and fewer worker will pay for retirees. How do you compensate for that?
Third the SS money that's goingn to flow into wall street will probably create a growth. Is it going to be the growth without jobs that Krugman loves to talk about?
Last a big problem are the returns. Is there any way not to follow market price and impose a price- less than the current 1%.

I am opposed to the reform for the first reason i mentionned but still knowing what are the solutions to the other issue would make me able to judge the dem's proposition.

there are specific analyses of the plan, such as here by MSNBC or here.

Private Accounts Would Provide No Gain to Workers Unless The Accounts Earned a Rate of Return Equal to More than 3 Percent Above the Inflation Rate.

The senior Administration official revealed that most of the balances in a worker’s account would be recaptured by the government when the worker retired, in order to repay Social Security for the loss of revenue it incurred when a worker elected to direct some of his or her payroll taxes from the Social Security Trust Fund to a private account.

The senior Administration official explained that this repayment would be made by subjecting people who elected the private accounts to an additional reduction in their Social Security benefits (over and above any cuts that may be imposed to restore solvency). The additional benefit reduction would be made by lowering these individuals’ Social Security benefits each month by an amount equal to the monthly income that would come from their account if the account had earned a three percent real rate of return (the assumed rate of interest on Treasury bonds). As a result of this additional benefit reduction, people opting for the accounts would get no net gain from the accounts unless their accounts produced a return higher than three percent above the inflation rate. If the return on their accounts was lower than three percent above the inflation rate, people would lose money as a result of the private accounts, and that loss would be on top of the other Social Security benefit cuts (such as price indexing) to which they were subjected. (The senior official stated in the briefing: “So, basically, the net effect on an individual’s benefits would be zero if his personal account earned a 3 percent real rate of return.” A reporter then asked: “So he would only get a benefit to the extent that his portfolio performed in excess of 3 percent [above inflation]?” The senior official replied: “Right.” See transcript, page 8.)

As a result, for many workers, the private accounts in the plan would not offset any of the reductions in Social Security benefits that would be part of the plan. For these workers, their entire private account balance would be recaptured by the government when they retired.

As to alternate Dem proposals, see Did you know

How sad is it that the presidential ambitions of Republicans hmight help undermine the Bush plan (if "plan" is the right word). Why can't the Democrats use the discussion to articualte an alternative vision of American society, or at the very least, of the role of government in American society? They are missing a huge opportunity.

Hullo, KdmFromPhila. Thanks for stopping by. You are right, although there's time for that. What use of debate until the media is ready to report it? First Bush needs to lose (or be perceived as such, which is beginning to happen) or there's nothing to discuss.

Hey DemFromCT, You make a good point about the timing of the strategy that I'm proposing. I am known to be a bit impatient, so forgive me. Seriously though, I do wonder if the Democrats are willing to think *strategically* about issues like this. Too often, they respond or devise a plan for a single issue rather than painting a big picture.

braq - addressing your points:

First - people helping people: we agree

Second - "fewer workers": Greenspan and Reagan supposedly fixed this with the big FICA hikes in the 80s; this only becomes a problem if growth stagnates. The projection of shortfalls in 2052 is based on fairly conservative assumptions. Things like economic growth or higher wages would solve the problem. Wouldn't it make sense to have the government actually care about those things?

Third - "Wall Street/growth": any growth that occurs will be of the "trickle-down" variety. Rather than borrow trillions to give more money to brokerage firms, why not either forego the borrowing (lower interest rates are a factor in economic growth) or at least invest it in something that will produce even more growth and jobs (infrastructure, R&D).

Fourth: - "returns": I'm not sure exactly what you mean here, but I assume you're talking about what will likely be the poor rate of return on personal accounts. The GOP doesn't have a proposal to repeal the risk/reward ratio - if you want better returns than it isn't going to be an "insurance" program any longer (which is what SS is - OASDI = Old Age, Survivors and Disability *Insurance*). If you want better returns, put money in your IRA, which you can invest freely; even raise the caps for IRA contributions to both traditional and Roth IRAs. Take a look at how much the self-employed can put in an IRA or individual 401k - it approaches $100K annually (income tax but not FICA tax deferred) in some cases.

This isn't "reform" except in the trival sense that "reform" is synonomous with "changing something" - certainly not the semantic "making things better". The GOP proposals have no real purpose in reality - there isn't a problem that any of the GOP proposals address (unless you consider the existence of SS itself to be a problem). For all the talk about crisis, even they admit that nothing they're proposing addresses the crisis claims.

"The merits of any private account deal seems heavily weighted towards saving face for Bush, and may cost too much for conservatives to accept yet another entitlement (this was, of course, originally a Clinton proposal during his term) and will still do nothing by themselves to help Social Security's balance sheet."

What "private account deal" did Clinton ever propose regarding Social Security? None, to my knowledge.

L. Paul, the add-on concept is at least as old as Clinton. however, Bill proposed a real add-on, not a weakening of the system. link

The President and Vice President's framework strengthens Social Security by:

Transferring 62 percent of the projected budget surpluses over the
next 15 years -- more than $2.7 trillion -- to the Social Security
system.

Investing a portion of the transferred surpluses in the private
sector to achieve higher returns for Social Security -- just as any
state or local government, or private pension does -- after working
with Congress to devise a mechanism to ensure that the investments
are made independently and without political interference. We will
support using a broad-based neutral approach managed by the private
sector with minimum administrative costs.

Keeping Social Security solvent until 2055.

Calling for a bipartisan effort to make the hard-headed but
sensible and achievable choices needed to save Social Security
until at least 2075. As part of this effort, President Clinton and
Vice President Gore believe that we must:

Reduce poverty among elderly women -- particularly widows, who
have a poverty rate nearly twice the overall poverty rate for
older Americans.

Eliminate the confusing and out-dated earnings test so that we
stop discouraging work and earnings among older Americans.


Maybe beore we start changing social security we should note that there is a gross predijuce and discriminations against most americans who arn't fortuniate to work for a company that has an employer sponsered plan where with an IRA can only put away $4000.00 with a $500.00 cathchup eah year and in an 401K you can put away 14,000.00 with a $5,000.00 catchup. some of cant change our jobs but would like to save better for our retirement.

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