I received my quarterly Social Security statement today. And while I usually file these things away unread, watching Bush's SOTU address last night made me wonder if his administration had sneaked any fearmongering language into the standard boilerplate.
Shore 'nuff:
The Social Security system is facing serious future financial problems, and action is needed soon to make sure that the system is sound when today's younger workers are ready for retirement ... Unless action is taken soon to strengthen Social Security, in just 14 years we will begin paying more in benefits than we collect in taxes. Without changes, by 2042 the Social Security Trust Fund will be exhausted ... We will need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations as is has done in the past.I searched Google for the phrase "by 2042 the Social Security Trust Fund will be exhausted" and found the whole text here, along with a few news articles about the controversy.
As I understand it, the next step in the reform is to outfit all Social Security offices with flashing red lights and klaxons, and replace the personnel with 50's era robots that wave their arms above their heads and cry "Danger! Danger 803-64-7707!!"
Posted on February 04, 2005 to Politicsso...the Social Security system going into a deficit in 40 years, and that's a DISASTER. But the general federal budget is in a deficit right now, and that's no big deal. I'm confused. Can anybody explain that to me? Why aren't there 50s robots furiously flapping their metal arms over at the OMB right now?
Also, why exactly should we trust the architects of the current budget deficit to fix some mystical future fiscal crisis?
Posted by: cleter on February 6, 2005 7:18 AMIf you don't like Bush's SS reform plan, you probably hate 401(k)s too, since they are the same thing.
Have you got a 401(k)? I suggest you run with great haste from this corrupt Wall Street program. Take all your money out and put it into a government fund. Several things will happen.
1. The Feds will spend it all immediately.
2. They will give you IOUs that accumulate at 3% interest, and promise to pay you back.
3. But it's not so much as a promise at it is: "We really, really plan to pay you back."
4. They will most likely have to raise your taxes to pay you back.
5. If you die, they keep it all.
Sound good?
Didn't think so.
401Ks are not the same as Bushs plan
Posted by: ortsed on February 6, 2005 10:48 AMHey! That's my SSN!
Posted by: brendan on February 6, 2005 12:04 PMdamnit ....AND I WANTED TO BE BURIED WITH MY MONEY
Under Bush's plan, you invest in 401k - stock market goes boom and you have nothing.
the government has a debt of 7.6 TRILLION dollars. and they're telling us to save?
glass house ... stones everywhere ...
crash crash crash.
Isn't Medicaid / Medicare in much more dire straits than Social Security?
And check out this concept: Those retiring in 40 years, when the disaster of outlays exceeding payroll taxes occurs, would probably just shrug if you told them: "Hey, we're not going to have SS when you retire. Save up!"
Posted by: Lost Poke on February 7, 2005 8:19 AMEither you hate the idea of the gov't having your money, or you don't.
I have a 401(k) and I still don't want this privatization bullshit. Why not? Because SS is supposed to be a safety net, not just for the elderly, but for children and the permanently disabled as well. Fat lot of good a 401(k) does me if I become paralyzed tomorrow and can't get at that money for 29 years.
What I want to know is, if the thing does get privatized, what happens to the money we've all paid in up to this point? Do we get it back? How does that not bankrupt the system?
This is news?
I've been reconciled to the fact that by the time I'm ready to retire, there won't be much of a social security program at all. It will keep running along, full speed ahead, until it collapses under the weight of its own bulk.
Posted by: Ed on February 7, 2005 9:41 AMof course, bush wants everything privatized! that way he and the other five rich bastards that own everything in sight can buy into whatever it is and make EVEN MORE MONEY off the rest of us.
Posted by: mark Q on February 7, 2005 10:29 AMWow. I think everyone's just being way too cynical. George W. Bush isn't looking to make a bunch of money for the corporations that got him elected. He just needs to shore up his cocaine fund. It ain't cheap, people.
Posted by: Joe on February 7, 2005 7:33 PMAh well, so much for reason. You have to wonder if any good legislation will ever be welcome if it comes from the Hellspawn Republicans.
Would it help if you knew that Clinton proposed the exact same thing in 1998 and even 2002? This is fact. But I doubt you'd care. Very sad.
I leave you to your Bush-bashing... but for goodness sake, don't do it in a knee-jerk fashion! Remember to work at it.
And cash in those 401(k)s ASAP!
Posted by: The Man from Guam on February 7, 2005 8:42 PMCan someone explain to me why we, as United States of Americans, have so much Army? It seems like that is the money problem.
-Rob
Hey, The Man... you are full of it. Clinton did not propose the exact same thing. In the 90s, responding to a drop in the period of time SS was solvent, he proposed a raise in the cap on SS contributions, and a slight hike in payroll taxes to bring it into solvency. BOTH of these things are of course off the table with Bush jr. We are only getting dribs and drabs of his plan, but the Republicans have already admitted it will a) require massive borrowing and b) not solve the problem (see recent interview with Dick Cheney over the weekend). Better yet, see talkingpointsmemo.com for more information.
Posted by: Buck on February 8, 2005 12:12 PMThey aren't going to let our generation retire until we're in our eighties anyway and by then we will be dying of skin cancer thanks to the depletion of the ozone layer.
Hey, I come to Defective Yeti to laugh not cry in my beer. :)
Posted by: Kungfukitten on February 8, 2005 12:15 PMLet me get this straight. The SS fund will start running a deficit in 2038 of $200 billion (depending on who you ask). The US budget that Bush sent to Congress this week is running a deficit of double that or more. And I'm supposed to worry about 2038? Excuse me? This is a trick question, right?
Posted by: KittenOnTheKeys on February 8, 2005 9:08 PMHmmm, I should throw away my 401K, a calculated gamble I'm voluntarily taking, because I don't want the governement to force me to gamble the rest of my retirement funds in the same basket. Yeah, good logic.
Here's the deal. To save properly for retirement you need to have multiple pots of money to pull from. These should all be protected from the foibles of the others. Some money into a 401k (within that 401k several different investment funds to maximize profit and minimize loss), some into bonds, CDs, under your mattress, regular savings, commodities, etc. For most folks that kind of diversity is a pipe dream. They simply can't afford to put away that much every month. So, for normal folk they invest at a 401k at work, and depend on the SS benefits to supplement that kind of account. Especially if (when?) the market goes kabloie again and devalues that lovely 401k. So, for what godforsaken reason would I want to put still more eggs into the basket of the market?
A flood of SS money would create an artifical bubble of increased stock prices, but in short order precipitate a drop as the market 'normalized.' I.e. everybody loses value within 1 year of the massive reinvestment into the market.
God, talk about voodoo economics. That's worse than me trying to manage my monthly bills!
Oh, anyone else get the feel that Bush and the legislature are playing Tota, pulling aside the curtain on SS funds so we won't look at the blinding spectre of Oz, the Federal deficit? Heh, stretched that metaphor pretty far!
Posted by: CedrictheBlack on February 9, 2005 8:14 AMIt wasn't just Clinton! It turns out that FDR was in favor of abolishing, I mean personalizing Social Security too!
Posted by: Buck on February 9, 2005 12:40 PMTrying hard to see how allowing people under 50 the *option* of putting a *small amount* of their contribution into a private account is a bad thing. Anyone?
Reading here, the best I can tell the reasons are:
1) SS won't break for until just before we retire, so lets ignore it until it blows up.
2) We aren't allowed to do anything about anything about SS until we are no longer running a deficit.
3) If the tiny wedge of your retirement money that is in a private account goes "belly up", it'll ruin your entire retirement package. For Evah!
4) SS was meant to be a safety blanket for true and for always. This plan isn't warm and fuzzy enough.
5) The US has a big expensive army. Nuff said.
6) It's a Republican initiative - ergo - Rrraawrrrr!!!
Posted by: BillB on February 9, 2005 12:58 PMTrying hard to see how allowing people under 50 the *option* of putting a *small amount* of their contribution into a private account is a bad thing. Anyone?
Reading here, the best I can tell the reasons are:
1) SS won't break for until just before we retire, so lets ignore it until it blows up.
2) We aren't allowed to do anything about anything about SS until we are no longer running a deficit.
3) If the tiny wedge of your retirement money that is in a private account goes "belly up", it'll ruin your entire retirement package. For Evah!
4) SS was meant to be a safety blanket for true and for always. This plan isn't warm and fuzzy enough.
5) The US has a big expensive army. Nuff said.
6) It's a Republican initiative - ergo - Rrraawrrrr!!!
Posted by: BillB on February 9, 2005 12:59 PMYo, guys -- I could say that the fact that it's a Bush initiative makes it bad, because we have a track record of bad faith on their part. Pretending that it's an "add-on" account demonstrates the bad faith pretty well. Benefits for SS will be cut severely, and the "personal account" won't be allowed to outperform a benchmark -- this is the clawback of interest to the government to help make it self-sustaining in 40-50 years. Meanwhile, to get it up and running, will cost anywhere from 1-2 trillion dollars of additional borrowing over the next ten years.
If this plan was so great, why are Republican lawmakers acting like Bush was radioactive all of a sudden? Because unlike him, they want to be around five years from now. The medicare drug benefit debuting this year is already projected to cost TWICE as much as the administration told everyone, and the fallout is likely to hurt those who voted for it last year. The SS plan is timed in the exact same way.
Last post by me -- I want funny, baby stuff (my daughter just turned 4 weeks), and reviews, not swatting wingnuts. I want to revamp SS, but it's got to be done by people who actually give a shit about the program, and Bush and co. aren't.
Posted by: Buck` on February 9, 2005 5:56 PMTo my knowledge there isn't a plan yet. There's a call for reform, and the idea of private accounts is just one angle.
You act as though all the details are sewn up with a pretty little bow - and it ain't so.
Yeah there will be costs. Yeah benefits will probably decrease. The point is if we do nothing the costs will be *greater* down the road. The time to act is now. The status quo is unacceptable.
Bottom line - at least the Republicans are talking about it. The Dems are acting like it's political Kryptonite. Have some stones and act for a change. Stand FOR something rather than against everything. Generate some honest to goodness ideas and maybe they'll have a shot at being electable next time.
Posted by: BillB on February 11, 2005 8:02 AMPeace of Mind vs. a Gamble: The Social Security Debate
The White House has embarked on a mission to convince the people of our country that Social Security is in dire need of drastic change in order to save it for all workers.
In order to convince the American people of the urgency to privatize Social Security, the president has used words such as “crisis,” “bankruptcy,” and “collapse.”
Let’s look at the definition of these three words, according to the Merriam-Webster’s Dictionary.
Crisis: “a situation that has reached a critical phase.”
Bankruptcy: “utter failure or impoverishment.”
Collapse: “to break down completely.”
Is it true that Social Security is in crisis? Is bankrupt? Is collapsing?
The answer is a resounding NO. According to the most conservative estimates, Social Security will be able to pay full benefits for 38 years. In other words, a 37-year-old worker today will get full benefits until he or she is 75 years old if we do nothing to make adjustments to the Trust Fund. A 47-year old worker today will get full benefits until he or she is 85 years old if nothing is done.
So clearly, Social Security is not in crisis, is not bankrupt, and is not collapsing.
Yes, there is a challenge we should address.
Have we ever faced a similar Social Security challenge before? Yes. During the Reagan presidency in 1983. Working together, Democrats and Republicans, we resolved the challenge then just as we can do now. So why would an otherwise optimistic George Bush turn into a prophet of pessimism on Social Security?
Because, his initiative is not about meeting the challenges of Social Security to keep it sound; it is not about bringing together Democrats and Republicans as Ronald Reagan did to ensure that full benefits will be there for all Americans. It is about one thing and one thing only: destroying Social Security.
How do I know that? Am I being partisan? Am I being unfair by stating in a very clear way that I believe the true goal here is to destroy Social Security? Not at all. I am simply telling the truth as told by this very White House.
On January 6, 2005, the White House wrote a Social Security memo. Although marked “not for attribution,” fortunately, we have it.
The most telling sentence in the entire memo is this: “For the first time in six decades the Social Security battle is one we can win – and in doing so, we can help transform the political and philosophical landscape of the country.”
Imagine: for six decades – that’s 60 years – the right wing has been after Social Security.
The memo also lays out the first priority for the White House and that is to “establish an important premise; the current system is heading for an iceberg” – thus explaining the use of the words “crisis,” “bankruptcy,” and “collapse.” By the way, he has also used the phrase “train wreck.”
So let’s talk about these scare tactics for a moment – the “iceberg” strategy. If someone told you that your family would be in solid shape for the next 38 years, you would probably breathe a sigh of relief because that would mean you had done everything necessary to prepare for the next 38 years to pay for your rent or mortgage, feed your kids, take care of your health care, and send your kids to college.
During those 38 years, keeping your eye on the future, you would have to try to earn more, save more, and prepare for that 38th year. You wouldn’t have to throw up your hands and sell your house. And you certainly wouldn’t call your situation a crisis. Frankly, we all face the fact that expenses go up over the years and our families need to prepare for those challenges.
When it comes to Social Security, President Bush not only wants to sell the house, but the car, the antique grandfather clock, and the wedding band. In essence, he is walking away from the foundation of America’s most successful insurance program using scare tactics.
Of course we should be used to this by now from this administration. They are the ones who told us that tax cuts to the wealthiest among us would bring unparalleled economic growth – which hasn’t happened.
They are the ones who told us that $50 to $100 billion of oil in Iraq would pay for all the reconstruction of that country – which hasn’t happened.
They are the ones who told us “Mission Accomplished,” when tragically it wasn’t.
They are the ones who told us that a booming economy would lower our deficits – and they are now the highest in history.
They are the ones who told us that the Medicare prescription drug bill would cost $400 billion over 10 years – when, in fact, it is now reported to cost $1.2 trillion.
So a message I have for the American people is this: beware of scare tactics and false information.
This isn’t the first time that this president has predicted the end of Social Security. In 1978, as a candidate for Congress, he predicted the end of Social Security by the end of 1988. He was wrong then, and he is wrong now.
But what is worse now, is the use of the full power of the presidency to do the following: scare the American people and hold out privatization as the savior of Social Security.
And if he succeeds, this is what will happen: he will turn Social Security from a guaranteed benefit into a guaranteed gamble.
Benefits will be cut an average of 45 percent. Millions will be thrown into poverty. Survivors, including children, who count on Social Security to protect them after the death of the primary earner will be left high and dry. Disabled workers who are protected by Social Security will be left to fend for themselves. Our budget will have deficits as far as the eye can see due to the interest costs on the trillions and trillions of borrowing that will be needed to make private accounts possible.
I can predict these outcomes because of studies that have been done on various privatization plans.
I was a stock broker once. I think there is an absolute place for market investments. But they should never be the basis of one’s retirement. They should be an additional piece on top of a basic, secure, guaranteed retirement benefit.
And, don’t ever delude yourself into thinking that this private account will make you rich. According to a recent study, a typical American who contributes to a private account for 40 years will get about $300 per month during retirement.
It is true that you can gain with a private account. But, you can also lose – and lose big. And when you have to pay the bills – including such urgent needs as food, shelter, and medicine – you can’t count on the stock market.
You can count on Social Security, and with every fiber of my being, I will make sure it is there not only for my generation, but for my children’s generation and for my grandchild’s generation.
Before Social Security, well over half of our elderly lived in poverty. Now, because of the guaranteed benefit – which averages just over $1000 a month for a man, and just under $800 per month for a woman – 10 percent of our seniors live in poverty. This is too high, but this dramatic reduction represents a monumental achievement, which is now in jeopardy.
Twenty-two years ago, a right-wing think tank created a blue print for the demise of Social Security. That blue print says to get banks and insurance companies who will reap the benefits of private accounts behind the effort.
And President Bush and his allies are doing just that. They are getting the financial interests to pour money into a multi-million dollar media campaign to promote privatization and scare the American people.
Here’s what the blue print said: “Not only does business have a great deal to gain from a reform effort designed to stimulate private savings, but it also has the power to be politically influential and to be instrumental in mounting a public education campaign.”
What exactly does privatization of Social Security mean for Wall Street moguls? According to a study by the University of Chicago, Social Security privatization will put $940 billion into Wall Street’s pockets. And this will come out of the pockets of hard working Americans. The same study said that administrative fees for Wall Street firms will cut the value of your private account by 20 percent.
Let’s compare that to Social Security. Social Security does not have administrative costs of 20 percent. It doesn’t have administrative costs of 10 percent. It doesn’t have administrative costs of 5 percent. It doesn’t have administrative costs of 1 percent. Social Security’s administrative costs are one-half of one percent.
So follow the money. It leads straight to strong special interests. And, it was mapped out over 20 years ago.
What else is in that blue print?
The blue print also says it is necessary to buy off the elderly by telling them their benefits won’t be touched.
And that instruction is being followed. In his State of the Union speech, President Bush said that for those 55 and older, “the Social Security system will not change in any way.”
Another message I have today is to people 55 and older: don’t believe a word the President says about your benefits being safe.
It simply isn’t true. It can’t be. And here’s why: in order to privatize Social Security and continue to pay your current benefits, the federal government will have to go into debt up to $2 trillion in just the next ten years – that’s up to $380,000 of debt every minute for the next 10 years.
When the choice is between the 20 percent of the American people who are retired or nearing retirement and the 80 percent of the people who will shoulder the burden of the extraordinary debt through higher taxes and higher interest rates, will the politicians respond to 80 percent of the people or 20 percent of the people? Even if they want to side with 20 percent of the population against the 80 percent, they simply will not be able to do that and remain in office.
Remember, when this borrowing begins – and if we lose this fight, it will be very soon – you will be getting the gold standard Social Security benefit and the rest of the country – nearly 80 percent – will be facing a benefit that is 45 percent less than yours. And for that hit, they also have to carry the burden of paying for your benefit through massive borrowing.
You don’t have to have a degree in Political Science to sense the outcome. If you’re 55 and older, you can’t count on a thing.
And, how cynical is it, that this White House believes that people over 55 only care about themselves. There are a lot of 75-year old seniors who care very much about what happens to their 45-year old sons and daughters. They care about their kids retirement. But, it’s a lot more than that – because Social Security is a lot more than that.
We should not forget that Social Security is not just a retirement policy. It is an life insurance policy. It is a disability insurance policy.
So in summary, I am making seven points here today.
1. There is no crisis in Social Security. Scare tactics are being used to frighten the American people in an attempt to end Social Security.
2. Privatization is being pushed as a solution, when in fact, private accounts push Social Security over the edge.
3. The White House is following an ideological blue print that has been around for decades as the right-wing has been planning to end Social Security, in their own words, for six decades.
4. If privatization succeeds, the average retirement benefit would be cut by 45 percent.
5. There is a very wealthy coalition working now to end Social Security – because they would make tremendous financial gains with private accounts.
6. The people over 55 should not be lulled into believing that they are safe from this ax, which is being wielded against Social Security.
7. Because Social Security is much more than a retirement plan, widows and orphans and disabled workers will be in an economic free fall.
Under Bush's plan, you invest in 401k - stock market goes boom and you have nothing.
IMHO, it's not likely we'll ever have a crash on the level of 1929 again, due to rules that were put in place to prevent exactly that. A 1987-style correction, in which the Dow loses 20%-ish and recovers within two years, is possible, but what a two-year downturn really represents is a buying opportunity. Those who continued investing during the 1987 downturn not only recovered their previously existing value back within two years, but they made more than 25% on money they invested at the market's lowest point. Then, as the market continued to rise, they made even more in the bull market that followed.
The keys are: 1) Diversification. Invest in mutual funds that invest in large numbers of companies so that if there's another Enron, you don't lose all your money. Index funds are good. Invest in the S&P 500 and you'll do all right. If you like to take a little more hands-on approach, right now I like natural resource indexes (due to the increasing price of oil and a predicted long-term bull market for raw materials fueled by China's growth) and foreign indexes (due to the dollar's recent decline). 2) Cost averaging. Invest small amounts of money at regular intervals so that a market downturn works to your advantage. It also means that when the market goes up you're not making as much as you could have had you invested the sum all at once at a lower price, but it makes even fairly major market fluctuations basically disappear over a long enough term, which is good for skittish investors.
The biggest problem I see with Bush's Social Security reform is that it will cost us a fair amount of money up front to privatize any portion of it -- the government has to keep paying benefits while contributions decline precipitously -- and we just don't have the money. But we don't have the money for a lot of things we do, so it's not like that's stopped Bush before. That said, I am generally in favor of privatizing my own retirement to the extent that I can, since I trust the market more than I trust the SS bureaucrats. Still, it's probably not the right answer for everyone.
Posted by: Jerry Kindall on February 13, 2005 11:27 PM