The Future of Social Security: Not Good

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Paul of Iowa, you are quite correct. If retirees get support then it is the workers who are providing that support. Under the scheme Bush was pushing the money from workers would come, mostly, from dividends on stock. The value would be created by their labor and flow to the retirees. Juat as you say.
In my earlier post I said that the scheme Bush was pushing would result in a crash because when workers started cashing in assets those sales would drive down prices. That's how markets behave.
If you look at what Bush actually said you will see that the planners behind what Bush was pushing anticipated that crash. Bush said several times that retirees would not have access to their principle during their lifetimes. There was a feel-good promise of letting retirees pass on the assets to their heirs but if the heirs can sell (and do) then the crash still comes. The restriction on access to the principal would delay the crash. They could see it coming. Instead of dropping the scheme they simply crafted it to last a little longer before the crash hits. No friends of ours.
Just how comfortable should anyone be with politicians who try very hard to sell them on a scheme but who do not tell the truth about that scheme?
I can feel some sympathy (a tiny bit) with those who are upset about tax money being used to support retirement. The scheme Bush would use to replace that would lead to the collapse of the entire economy - and would still be using the FICA tax. I have no warm place in my heart at all for a scheme that would destroy general retirement security and take the entire US economy down with it.
The biggest problem through all of this is that (a) those in positions of responsibility provided no real analysis of what Bush was trying to get implemented and (even worse) (b) almost 100% of the US population failed to demand that they be given a real and honest analysis of what Bush would use to begin the destruction of Social Security. The topic is general retirement security, which for each worker is that worker's own retirement security. The workers need to watch out for themselves. Letting politicians get away with restricting discussion to the propaganda level is immensely dangerous.
(I say "almost 100%." Who has ever demanded a real analysis of what Bush was pushing?)

not-humble-enough of WI 4:30PM June 16, 2009

If the government would pay back to these funds the amounts it helped itself to the funding would probably be sufficient for several more years. Our government has consistently helped itself to money from these funds and, to the best of my knowledge, has never paid it back. This has been going on since the inception of SS, Medicare and Medicaid.

Pat of IL 4:17PM June 16, 2009

I'm a retiree, collecting SS and also paying into Medicare Part B. It has always galled me that we have to get part B Medicare at age 65. I had good insurance before I turned 65 and I wanted to just keep that insurance. Well, I found out the hard way, that my insurance co. "counted on" the fact that I should be on part B Medicare after 65. so reluctantly, I had to sign up to pay for part B, even though I am fairly healthy.
Regarding SS, I have a seed of an idea that needs to be developed, that we should "start a new SS" that all young people under the age of 35 should fund instead of the current SS. This new SS could be phased in so that current SS recipients will still continue to receive from the "old" SS and eventually, the "new" SS would take over for the younger generation.
It's only an idea, but why continue to pay into a bad system? Additionally, instead of payroll taxes, I would propose a general sales tax (federal) that would supplement SS.

Merrily Hardy of NM 11:54AM June 16, 2009

Our rulers will not take care of us in our feudal society where the many serve the few

Yonder Hero of FL 10:13AM June 16, 2009

The first is that SS can't "go bankrupt" (in the sense of not paying any benefits at all). The Old Age portion of SS collects taxes equal to 10% of covered payroll, that is a lot of money ($575 billion in 2008) and hence SS will always be able to pay a lot of benefits. The only way the program can die is if Congress kills it.
Second, all retirement systems are pay-as-you-go from the perspective of the total econmy, regardless of whether they use SS, informal gifts from children to parents, private DB pensions, private savings, mandatory savings in gov't accounts, or whatever. In every case, retirees aren't producing any economic goods, but they are consuming goods produced by current workers. The different systems are just different ways of getting current workers to part with some of their production to help retired workers. No system has a clear economic advantage.

Paul of IA 10:08AM June 16, 2009

Under current law, income taxes paid on SS benefits are "transferred to the trust fund". This has the same effect as your suggestion on reducing benefits. You can see the number in the Trustees Report - it was $15.6 billion in 2008. Table IV A1 at: http://www.ssa.gov/OACT/TR/2009/IV_SRest.html#260055

Paul of IA 9:54AM June 16, 2009

Ladies and Gentlemen...Tonite's Top 10 List....The top 10 things Social Security Execs say to 20 somethings 10. Now, that didn't hurt, did it. 9. Bend over and touch your toes 8. That's just a banana in my pocket 7. Here's a copy of "Social Security for Dummies". 6. It isn't so bad if you don't think about it 5. Of course your Mommy knows that you're here with me 4. Let me help you take that off 3. You're pretty big for your age 2. I'm sorry, it slipped And the number 1 thing SS execs say to 20 somethings: 1. Between the lips and over the tongue, look out stomach here it Comes!

Tom Goss 11:09PM June 15, 2009

What a nice group of good comments! A lot of people see through the fog of misinformation being broadcast in support of a right-wing agenda that wants only individual responsibility and privatization of current government "entitlements."
What is not said from the right is that France--heavily into birth to grave security for everyone--is doing a lot better than the U.S. economically despite the obvious burden of that security. Then there's Canada, which only recently came out of the fiscal doldrums, entitlements intact, and is forging ahead fiscally while here in the U.S. we argue and argue while Canada thrives.
Those on the right are so worried about socialism that they're blind to the obvious--pure, unrestrained capitalism works no better than pure, unrestrained socialism. It's a proper mix that works, not strict adherence to conservative "principles'!

Ron W. Smith of UT 9:33PM June 15, 2009

"Not only ... but they also seem likely to pay higher taxes and perhaps receive lower benefits from these entitlement programs."
If the program is pay-as-you-go and if the demographics of the US population are changing (they are) then it is inescapable that either taxes must go up or benefits go down or a combination of both. (That is, if the demographics are such that the population is aging, which it is.)
The cost of retiree support is the same if the retiree support is the same. Cato and a huge squad of right-wingers are doing all they can to create obfuscation and fear with respect to Social Security. What they don't admit is what is most glaringly true: the fear-mongers are precisely the ones who would, through the politicians they support, eliminate Social Security, thereby cheating younger workers. They would be the agents of what they tell younger workers to fear.
The intent of their incessant propaganda is to wear younger workers down so that they will accept being screwed while creating the illusion that it is others who will do the screwing. Well, younger workers, pay attention. Ask, even: ask Cato and the rest if they favor preserving Social Security for younger workers or if they are not in fact the very ones who would destroy the program.
When they blather about investing in financial markets instead of retaining the current system ask them for an analysis as detailed as that done annually for Social Security. The most they will supply (probably) is a half-baked projection based on the obviously flawed notion that market performance during a period in which markets were not the source of general retiree income can predict performance when markets are the major source of such income. In other words, they ignore that when retirees sell assets the market values will go down as a result. (Some will say the markets can "accommodate" such sales. Well, yes they can. Markets accommodate sales by lowering prices. As a homework question consider this: what will happen when all investors perceive that prices are falling and that they will fall for a long time into the future? That matters.)
(Answer: a crash. The scheme Cato and others would foist onto young workers is a government-mandated, government-managed crash. That crash will hit all investors in the financial markets used by retirees, not just the retirees.)

not-humble-enough of WI 6:55PM June 15, 2009