OK, so now it’s become imminently clear to me what’s going on in Washington. Sure we know that this administration somehow can’t tell the truth. Honestly, at first I thought Dubya was just a complete moron. But now I see that he embodies the evil that he projects onto the leaders of countries like Iran and North Korea. These lies that he and his administration are on a tear to dismantle this country and put it in the hands of the corporations.
We all know by now that the administration lied about the WMDs. But what irks the hell out of me now, after hearing about the budget they just submitted, has to do with the lies they tell about the costs of their programs. First, they told us that the Iraq war was only going to cost US taxpayers a couple billion dollars, and that oil revenues would pay for the rest. Well, we’re now talking in the hundreds of billions of dollars. Whoops, small rounding error. It’s interesting to note that the administration plans to submit a request for another $80 billion for the war, yet that amount is surprisingly absent from the budget.
Next was Medicare reform – adding the prescription drug benefit. First it was going to cost $400 billion. I seem to recall that someone in the administration informed them that it would cost a lot more, and that person was fired. No undying loyalty to Dubya, no job. Surprise, surprise, the administration letter fessed up that the plan would cost $534 billion. And now, today, they tell us it will cost more like $724 billion. Another rounding error. And now Bush says we’ll need to address this problem. Or is it a “crisis”?
If you add to this the fact that the administration was told that we would need a lot more troops in Iraq than they actually sent in and you can see that they’ve got a problem grasping the truth when it doesn’t fit in with their plans.
Now they want to reform Social Security. Private accounts, they say, are the answer, yet they won’t explain how much it will cost. And if they did come up with a number, they’ve got no credibility, so how can we believe them.
Here’s what I have come to realize. There is a method to the madness here. The idea here is simple. Right wing Republicans have always wanted to shrink the size of government. OK, so I don’t have a problem there if there’s a good reason to do it and it actually makes sense. But not when it’s simply based on a belief that our way is the way things should be and that's that. First they increase the size of government by adding tremendous costs to Medicare. Then there’s the cost of the war. And don’t forget the tax cuts, which drove up the deficit to record numbers. If you consider the tremendous cost of their Social Security plan, all of a sudden there's too much money going out and not enough coming in. We’ve got ourselves a financial “crisis” that needs some tough actin’ cowboy to fix it. Voila, now Dubya’s got the justification he needs to cut government programs. Pretty ingenious. Run up huge debts and then claim there's a fiscal crisis.
Honestly, if he had his way, he would get rid of Medicare, Medicaid, Social Security and every other program that seeks to protect those in need from succumbing to lives in poverty. Everyone should be able to take care of him or herself without government sticking their noses in. That’s what Dubya would say. Too bad that he never really had to fend for himself in all of those failed business that he got bailed out of. Oh and I’m sure he got his Yale degree and MBA because he was gifted student.
Don’t let these guys fool you into believing there are crisis-like problems with government programs. They actually run pretty efficiently, from a cost perspective. Let’s not forget that the Medicare reform that was passed prohibited the government from negotiating the prices of prescription drugs. Where’s the benefit to Medicare recipients there? And the answer to the Social Security problem is to give that money to private investment firms. Weakening environmental regulations because they cost companies too much. Isn’t government supposed to protect its citizens? It’s not supposed to be all about putting money into the hands of big business. I’m pissed, can you tell?
Wednesday, February 09, 2005
Monday, January 24, 2005
Social Security Crisis My Rearend
OK, let’s get back to business here. I know it’s been a while, but I’ve been busy. Reading. And reading. Most of you probably aren’t as obsessive as I am, but that’s good, right? You gain the benefit of my need to read by checking in here from time to time. So enough of the pleasantries, let’s get on to today’s big questions:
Is there a Social Security “crisis” as our fearless leader claims? Contrary to what approximately 45 % of the country believes, according to Time magazine, No.
Is there a problem with Social Security? Possibly, but not at the moment.
Do we need to take action immediately and change the Social Security system? No.
Do we need to create private savings accounts in order to “save” Social Security? No.
Will private savings accounts solve whatever “problem” there may be? No.
Should you be worried about Social Security? Sure, why not? I am, but not for the reasons you are probably thinking.
Should you do something about it? Yes. Contact your representatives in government and let them know how you feel.
There. Done. No need to read further, if you just want to take my word for it. But if you are interested in seeing me back up my conclusions, then read on.
So you know what Social Security is, right? For most of us and our parents, it’s the monthly check that comes once a month after we reach the government dictated “retirement” age. According to the New York Times, there are about 47 million people who receive a Social Security check each month. Everyone who works…on the books…has money deducted from their paycheck every week. Most of this money goes to pay benefits that are currently due to people who are entitled to receive Social Security benefits. That’s how the system works. It’s a “pay as you go” system. Currently, there is more money coming into the system than is paid out every month to beneficiaries. The excess money is used to buy US Treasury securities. Bonds. These bonds are part of the “trust fund” that was such a big part of the discussion during the 2000 presidential campaign. These bonds are essentially just IOUs from the federal government. The money is actually spent by the government for current expenses, like Medicare, the Iraq war, tax breaks for the rich. But I digress.
There is no current crisis with Social Security. I can’t say that loud enough. If nothing at all is done, there is enough money coming into the system every month to pay Social Security benefits for the next 13 years, according to most estimates. The prediction is that the Baby Boomers will start retiring en masse around 2018, at which point it is also estimated that there won’t be enough money coming into the system to pay the benefits that will become due. Oh lawdy, so there is a problem coming up soon! Um…no.
After the Baby Boomers retire, and at the point where there’s more money scheduled to be paid out than there is coming in, we’ll just need to start cashing in some of those Treasury bonds. The Social Security Administration itself estimates that there are enough of these bonds to keep the system solvent until 2042, a full 37 years from now. The Congressional Budget Office puts that date at 2052. Doesn’t sound like a current crisis to me. After that, there will only be enough money to pay about 70% of benefits, according to estimates. Conservative estimates. More optimistic projections indicate that Social Security, if left untouched, would be able to pay full benefits for all for at least the next 75 years.
Dubya and his cohorts in Congress think that private savings accounts will solve the problem. But they won’t, at least not by themselves. Remember that I said the money that comes in pretty much goes right out to pay benefits? If you are allowed to divert part of your Social Security taxes into a private account, there won’t be enough money coming in to pay current benefits, so the government will have to borrow money to make up the difference. And, according to Federal Reserve Chairman Alan Greenspan, extra borrowing could raise interest rates, and that could put a crimp on the economy. In addition, by all estimates, Social Security benefits that younger workers will receive when they retire many years from now will still have to be reduced.
Republicans hate to increase taxes. In fact, there are a number of Republicans in Congress that have actually pledged never to raise taxes. Really. See “BREAKING THE CODE” from the NY TIMES, January 16, 2005. One of the solutions put out, mostly by Democrats in Congress (who, truth be told, don’t have as many qualms about raising taxes) is to raise Social Security taxes about 2%. Another solution is to make Social Security taxes more progressive. At the moment, we all pay Social Security taxes on the first $90,000 of our income. This number is adjusted over time to keep pace with increases in wages. Kind of odd, in my opinion, that the tax cuts off at a certain income level because income taxes don’t cut off at any point. So increasing the amount of income subject to Social Security taxes is another proposal. I kind of like this one. And, apparently, so does at least one Republican Senator, Lindsey Graham, of South Carolina, who, according to Time magazine, proposes raising the income cut-off to $200,000. Way to go, Lindsey.
Now, lest you think I’m just a bleeding heart liberal, I don’t have any hard and fast objection to personal savings accounts. Apparently other countries are doing it. And, if it can be done better than Social Security does it, cool. But Social Security is incredibly efficient in terms of the expense of running the system. With private accounts, money will be handled by private parties, like Vanguard and Fidelity (just examples, these are not companies named in any plans), that charge management fees. And, if the Bush Medicare drug plan is any indication (the government can’t negotiate for a lower price with pharmaceutical companies), any changes that are passed by this Congress are likely to favor businesses, so who knows what kind of fees these firms would charge. One estimate that I have read indicated that a management fee of 1% of assets would reduce money in the affected accounts by 20% over time.
According to Business Week (January 24, 2005 issue), Wall Street doesn’t have a lot of interest at the moment, because there is concern that, if private accounts come to pass, the options for individuals will be limited to index funds and other low margin accounts. But the choices are likely to increase over time, so Wall Street will be all in, believe me. Again, according to Business Week, if funds charged just 0.8% of assets, Wall Street could rake in $940 billion in investment fees over 75 years. Holy crap!
I think what it comes down to is this. Republicans hate big government. Social Security is a big government program. Hence they want to get rid of it. Even if it works. A 70-year-old program created by a Democrat that has been successful and will be successful for at least another 37 years by conservative estimates? According to the New York Times, for about 2/3 of the elderly, Social Security supplies the majority of day-to-day income, and for the poorest 20%, about 7 million, it’s all they’ve got. Yeah, it makes total sense to phase it out.
We already have risk in our 401(k)s. Social Security is that stable portion of retirement planning that used to be provided by corporate pensions. Let’s not risk the security of many millions of people.
For what I think is a pretty good article (sorry, it’s the economics geek in me), by economist Paul Krugman, op-ed contributor to the NY Times and a professor of economics at Princeton, check out The Economists Voice at www.bepress.com/ev.
Is there a Social Security “crisis” as our fearless leader claims? Contrary to what approximately 45 % of the country believes, according to Time magazine, No.
Is there a problem with Social Security? Possibly, but not at the moment.
Do we need to take action immediately and change the Social Security system? No.
Do we need to create private savings accounts in order to “save” Social Security? No.
Will private savings accounts solve whatever “problem” there may be? No.
Should you be worried about Social Security? Sure, why not? I am, but not for the reasons you are probably thinking.
Should you do something about it? Yes. Contact your representatives in government and let them know how you feel.
There. Done. No need to read further, if you just want to take my word for it. But if you are interested in seeing me back up my conclusions, then read on.
So you know what Social Security is, right? For most of us and our parents, it’s the monthly check that comes once a month after we reach the government dictated “retirement” age. According to the New York Times, there are about 47 million people who receive a Social Security check each month. Everyone who works…on the books…has money deducted from their paycheck every week. Most of this money goes to pay benefits that are currently due to people who are entitled to receive Social Security benefits. That’s how the system works. It’s a “pay as you go” system. Currently, there is more money coming into the system than is paid out every month to beneficiaries. The excess money is used to buy US Treasury securities. Bonds. These bonds are part of the “trust fund” that was such a big part of the discussion during the 2000 presidential campaign. These bonds are essentially just IOUs from the federal government. The money is actually spent by the government for current expenses, like Medicare, the Iraq war, tax breaks for the rich. But I digress.
There is no current crisis with Social Security. I can’t say that loud enough. If nothing at all is done, there is enough money coming into the system every month to pay Social Security benefits for the next 13 years, according to most estimates. The prediction is that the Baby Boomers will start retiring en masse around 2018, at which point it is also estimated that there won’t be enough money coming into the system to pay the benefits that will become due. Oh lawdy, so there is a problem coming up soon! Um…no.
After the Baby Boomers retire, and at the point where there’s more money scheduled to be paid out than there is coming in, we’ll just need to start cashing in some of those Treasury bonds. The Social Security Administration itself estimates that there are enough of these bonds to keep the system solvent until 2042, a full 37 years from now. The Congressional Budget Office puts that date at 2052. Doesn’t sound like a current crisis to me. After that, there will only be enough money to pay about 70% of benefits, according to estimates. Conservative estimates. More optimistic projections indicate that Social Security, if left untouched, would be able to pay full benefits for all for at least the next 75 years.
Dubya and his cohorts in Congress think that private savings accounts will solve the problem. But they won’t, at least not by themselves. Remember that I said the money that comes in pretty much goes right out to pay benefits? If you are allowed to divert part of your Social Security taxes into a private account, there won’t be enough money coming in to pay current benefits, so the government will have to borrow money to make up the difference. And, according to Federal Reserve Chairman Alan Greenspan, extra borrowing could raise interest rates, and that could put a crimp on the economy. In addition, by all estimates, Social Security benefits that younger workers will receive when they retire many years from now will still have to be reduced.
Republicans hate to increase taxes. In fact, there are a number of Republicans in Congress that have actually pledged never to raise taxes. Really. See “BREAKING THE CODE” from the NY TIMES, January 16, 2005. One of the solutions put out, mostly by Democrats in Congress (who, truth be told, don’t have as many qualms about raising taxes) is to raise Social Security taxes about 2%. Another solution is to make Social Security taxes more progressive. At the moment, we all pay Social Security taxes on the first $90,000 of our income. This number is adjusted over time to keep pace with increases in wages. Kind of odd, in my opinion, that the tax cuts off at a certain income level because income taxes don’t cut off at any point. So increasing the amount of income subject to Social Security taxes is another proposal. I kind of like this one. And, apparently, so does at least one Republican Senator, Lindsey Graham, of South Carolina, who, according to Time magazine, proposes raising the income cut-off to $200,000. Way to go, Lindsey.
Now, lest you think I’m just a bleeding heart liberal, I don’t have any hard and fast objection to personal savings accounts. Apparently other countries are doing it. And, if it can be done better than Social Security does it, cool. But Social Security is incredibly efficient in terms of the expense of running the system. With private accounts, money will be handled by private parties, like Vanguard and Fidelity (just examples, these are not companies named in any plans), that charge management fees. And, if the Bush Medicare drug plan is any indication (the government can’t negotiate for a lower price with pharmaceutical companies), any changes that are passed by this Congress are likely to favor businesses, so who knows what kind of fees these firms would charge. One estimate that I have read indicated that a management fee of 1% of assets would reduce money in the affected accounts by 20% over time.
According to Business Week (January 24, 2005 issue), Wall Street doesn’t have a lot of interest at the moment, because there is concern that, if private accounts come to pass, the options for individuals will be limited to index funds and other low margin accounts. But the choices are likely to increase over time, so Wall Street will be all in, believe me. Again, according to Business Week, if funds charged just 0.8% of assets, Wall Street could rake in $940 billion in investment fees over 75 years. Holy crap!
I think what it comes down to is this. Republicans hate big government. Social Security is a big government program. Hence they want to get rid of it. Even if it works. A 70-year-old program created by a Democrat that has been successful and will be successful for at least another 37 years by conservative estimates? According to the New York Times, for about 2/3 of the elderly, Social Security supplies the majority of day-to-day income, and for the poorest 20%, about 7 million, it’s all they’ve got. Yeah, it makes total sense to phase it out.
We already have risk in our 401(k)s. Social Security is that stable portion of retirement planning that used to be provided by corporate pensions. Let’s not risk the security of many millions of people.
For what I think is a pretty good article (sorry, it’s the economics geek in me), by economist Paul Krugman, op-ed contributor to the NY Times and a professor of economics at Princeton, check out The Economists Voice at www.bepress.com/ev.
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