Friday, April 29, 2005
Social Security - back to the top of the pile
One of the regular readers and active commenters on this blog, Scriptor of Historium, asked me a few days back “what happened to Social Security”, about which I was blogging extensively through March and into April.
I haven’t consciously dropped the topic, but for the love of humanity, how many different ways can you state the few basic facts involved: 1) the $2 trillion dollar surplus is not a surplus, it is not cash, it is $2 trillion in government IOU’s and therefore actually a $2 trillion dollar chunk of the federal debt; 2) As the baby boom generation retires, there will be more benefits paid out than taxes collected, and those benefits will be paid for longer periods of time as more people live longer; 3) Within the next few years, NOT in 2040 or whatever, the Social Security mess will begin to strangle our economy in the form of higher interest rates; 4) There is NO GUARANTEE associated with receiving social security benefits, and the government is not required to spend social security taxes on social security benefits, and there are two Supreme Court decisions that say so; 5) unless action is taken now it is inevitable that either social security taxes will double or even triple, and/or benefits will be cut from present levels by about 1/3. (This is not, by the way, the elimination of increases the President is calling for, which are of course being called “cuts” by the MSM, this is ACTUAL cuts in present benefit levels. In other words, despite having paid in vastly more than your father ever did, you are going to receive benefits about 1/3 less than he got…if you ever get even that much!) Oh, and you’ll start collecting these benefits later in life, because the retirement age will begin to rise.
I will try to come back later and update this post with links to the original posts which discuss the points above, but in the meantime, regulars know that I believe what the President is proposing is a half-measure, and I’m for all-out privatization of the whole system.
One of the real experts on Social Security is Donald Luskin, a contributor at NRO (among other things). I’m delighted to find (and can’t understand how I didn’t find before this) that Luskin has a BLOG: The Conspiracy to Keep You Poor and Stupid. If you are interested in Social Security, that site is a must-read-regularly. Now I know this is like the little mom-and-pop neighborhood store sending shoppers to the mall for a better selection…but it’s the information that’s important, dang it, so read Luskin’s blog. And start with this item, which discusses the discoveries of NY Times op-ed writer John Tierney, who went to Chile to investigate for himself the reality of the Chilean privatized system, a system which I have previously suggested as a model:
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.
I have some polls I'm looking at that, when looked at closely, provide a surprising glimpse of what the public is thinking on Social Security. I'll get to those later.
I haven’t consciously dropped the topic, but for the love of humanity, how many different ways can you state the few basic facts involved: 1) the $2 trillion dollar surplus is not a surplus, it is not cash, it is $2 trillion in government IOU’s and therefore actually a $2 trillion dollar chunk of the federal debt; 2) As the baby boom generation retires, there will be more benefits paid out than taxes collected, and those benefits will be paid for longer periods of time as more people live longer; 3) Within the next few years, NOT in 2040 or whatever, the Social Security mess will begin to strangle our economy in the form of higher interest rates; 4) There is NO GUARANTEE associated with receiving social security benefits, and the government is not required to spend social security taxes on social security benefits, and there are two Supreme Court decisions that say so; 5) unless action is taken now it is inevitable that either social security taxes will double or even triple, and/or benefits will be cut from present levels by about 1/3. (This is not, by the way, the elimination of increases the President is calling for, which are of course being called “cuts” by the MSM, this is ACTUAL cuts in present benefit levels. In other words, despite having paid in vastly more than your father ever did, you are going to receive benefits about 1/3 less than he got…if you ever get even that much!) Oh, and you’ll start collecting these benefits later in life, because the retirement age will begin to rise.
I will try to come back later and update this post with links to the original posts which discuss the points above, but in the meantime, regulars know that I believe what the President is proposing is a half-measure, and I’m for all-out privatization of the whole system.
One of the real experts on Social Security is Donald Luskin, a contributor at NRO (among other things). I’m delighted to find (and can’t understand how I didn’t find before this) that Luskin has a BLOG: The Conspiracy to Keep You Poor and Stupid. If you are interested in Social Security, that site is a must-read-regularly. Now I know this is like the little mom-and-pop neighborhood store sending shoppers to the mall for a better selection…but it’s the information that’s important, dang it, so read Luskin’s blog. And start with this item, which discusses the discoveries of NY Times op-ed writer John Tierney, who went to Chile to investigate for himself the reality of the Chilean privatized system, a system which I have previously suggested as a model:
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.
I have some polls I'm looking at that, when looked at closely, provide a surprising glimpse of what the public is thinking on Social Security. I'll get to those later.
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