Say Anything Blog

The only young people who like the current social security system are the those who pay nothing into it.  I’m paying the government money that I will never see.

I used to be a loudmouth liberal. 

Fiscal conservatism hit when I was working a temp job towards the end of college.  Wife, baby, comic book habit totalling $1.25 a month.  I got the paycheck for 4 hours of shovelling rancid hog chow and how much Soc Security pulled from my broke self and family. 

I am no longer liberal.

Two weeks ago, when Fed Chairman Ben Bernanke gave his obligatory, semi-annual, dour assessment to Congress, free market capitalist Larry Kudlow took Bernanke to task for the low-ball economic estimates used by the Fed Chairman to support his pessimistic forecast of impending federal entitlement bankruptcy.

As far as Social Security is concerned, a set of optimistic (yet eminently reasonable and realistic) economic assumptions exist which lead to no bankruptcy and no trust fund exhaustion.

This scenario—one rarely discussed by most—includes slightly less than 3 percent real economic growth, and 2 percent productivity per year. Over the next seventy-five years, this solid growth forecast keeps the Social Security funds alive and well.

(Bear in mind, real GDP growth over the last fifty years has averaged 3.3 percent annually. Why would people assume the future will be the worse than the past?)

Bernanke’s gloomy bankruptcy assumptions—where the trust fund is expected to exhaust in 2040—rely on a rather uninspiring economic outlook of around 2 percent growth. This is rubbish. With low tax rates, high productivity and low inflation, our technology based economy is poised for a long cycle of prosperity.

These doom and gloom Social Security scenarios aren’t worth the paper they’re printed on.

Next, Kudlow outlines what he considers to be the real problem with Social Security, the lack of any meaningful return on investment.

The real problem with Social Security is not bankruptcy. It’s the dreadful investment return (barely 1 percent) that future retirees have to look forward to.

Larry Kudlow is right!  When the return on taxpayers’ investment is less than the nominal rate of inflation, of course the system cannot possibly be self-sustaining.  Kudlow again,

If Americans had the chance to purchase S&P 500 SPDR contracts, and were able to hold them for fifty years, they would receive a real return of at least 7 percent compounded annually based on the history of the stock market. That’s a lot of Benjamins. Heck, even if workers were given a lousy bank deposit option, federally insured by Uncle Sam, they could still count on squeezing out at least 3 percent compound returns.

The real reason we need to reform Social Security is to give American workers a far better retirement nest egg than the current system is capable of providing—not because of some phony bankruptcy driven deficit scenario.

Did someone say personal savings accounts?

Let’s remember that more savings means more investment. This in turn leads to productivity-fueled growth. The end result is we have more revenues to pay off Social Security liabilities over the next seventy-five years and vastly more wealth for retirees.

A perfectly reasonable solution.

“Poverty of goods is easily cured; poverty of the mind is irreparable.”

Bat,

Bush’s and Kudlow’s ideas essentially do the following:  take power from the government and give it to the individual.  Ergo, we have our reason why the Democrats will never support anything along those lines.

Fileitunder.com

Bat, I guess you should have just written the post. 

The Debate is over!  Global Whining has been confirmed.

I must have missed the memo.  I didn’t know that we were back to having a crisis with social security.  I know that we had a crisis in 2000 when Algore wanted to implement the “lock box”, but then the crisis was over in 2005 when Bush wanted to implement reform.  Now we’re back to having a crisis?  I just can’t keep up anymore.

Kbiel:  I think it became a crisis again when it became known that Bush had dropped his position on privatization.

The Debate is over!  Global Whining has been confirmed.

Hoodlumman, if you looked at the big liberal bloggers during the social security debate, you’d see that it wasn’t a question of trust, but a cost-benefit calc.  The concern was with the specific plans on offer - namely, that the rates of return were either worse than SS or on par with SS but with greater risk.  These are pragmatic difficulties, not ideological ones.  (generally, most liberals I’ve read or encountered are open to privatization if feasible)

Politically, Bush mangled the debate by trying to link solvency to private accounts, which are two completely different issues as Kudlow notes.

kbiel,

Yes, Democrats are not only selective about what constitutes a crisis.  They are also astonishingly inconsistent about WHEN it is a crisis and when it is not.

The cause is apparently a viral-like condition, peculiar to Democrats, commonly known as situational ethics.  The long term effects include a near total breakdown in the normal, cognitive processes and a corresponding increase in the frequency and stridency of emotional outbursts.  There is as yet no scientific or medical consensus regarding the ultimate cause of this type disability, with some suggesting this is a learned behavior, while others insist that they are born this way and that the condition is congenital in nature.

“Poverty of goods is easily cured; poverty of the mind is irreparable.”

As presently constituted, SS is a welfare program that needs ever increasing taxation to fulfill its promises.  This is a sign that the program doesn’t work, in simple economic terms.  If redistributing money from working people to non-working people was a good move economically, the tax demand would decrease over time, but since our system is based on reinvestment rather than consumption, SS injures the capacity of our economy to generate prosperity.  It’s not all that complicated.

"If the good men are silent only the wicked are heard.” - Edmund Burke

jpe,

With all due respect, your answer to Hoodlumman above is self-serving crap.

The only Democrat to even begin to engage in any sort of reasoned debate with the administration over Social Security reform, Florida’s Robert Wexler, was summarily shut down by the Democrat leadership and forced to withdraw his suggested alternative proposal from consideration.

Furthermore, to suggest that any sort of cost-benefit analysis was at the heart of the Democrats’ unwillingness to even discuss Social Security is just plain silly.  Democrats are hardly noted for their knowledge of either economics or arithmetic, and obviously Dems who have complained loudly and disingenuously about federal budget deficits can’t expect to be taken seriously talking about ROI when the return on even the average bank account or CD is better than twice the current return on Social Security dollars.

“Poverty of goods is easily cured; poverty of the mind is irreparable.”

Again, I don’t think too many people questions the wisdom to moving to some form of defined-contribution model; it’s a question of how we get there and who bears the loss and risk thereof.

Bat, I was talking about bloggers, not politicians, and particularly the wonkier bloggers (notably Drum & Ezra Klein).

Again, I don’t think too many people questions the wisdom to moving to some form of defined-contribution model; it’s a question of how we get there and who bears the loss and risk thereof.

To be viable, SS needs to be an investment program with a decent return.  It’s that simple.  The govt infrastructure required to run it could be drastically smaller than today’s welfare administration structure, and a cutoff date should be established, along with a buyout schedule.  In other words, the President’s plan.  You just have to do what makes good financial sense.

"If the good men are silent only the wicked are heard.” - Edmund Burke

The Democrats want all the credit for any changes to social security.  This will almost insure that the words “private,” “investments,” and “individual” will not be involved in any legislation.

However, fewer benefits, older ages and higher taxes will be at the forefront of “fixing” social security.  And by fixing, I mean pushing the insolvency date just a little further out.

Again, it involves the position that putting money in the hands of individuals to invest and own in an anathema to the Democratic mindset.

Fileitunder.com

SS needs to be an investment program with a decent return.

The dem bloggers’ criticism was that the private account proposals didn’t meet that basic criterion. Bracketing that for the time being, the biggest hurdle is transition costs and who bears the brunt of those costs (ie, the costs of paying out current recipients to make room for titled accounts.

You’re so full of it jpe, the Democrats that blocked this were not talking about issues like that when they blocked it.

They were talking about George Bush stealing grannies social security check.

Come on try to be honest. 

Your points have to be addressed in any real reform, but don’t pretend that the Democrats thought that far.

Oh, who’s going to pay for those things?  Why it’s going to be the people that are currently working.

The Debate is over!  Global Whining has been confirmed.

The dem bloggers’ criticism was that the private account proposals didn’t meet that basic criterion. This is false on two levels: One, as TW has pointed out, their rhetoric was antiBush and fearmongering about the stock market crashing.  Two, almost any return is superior to the present return on SS funds. Bracketing that for the time being, the biggest hurdle is transition costs and who bears the brunt of those costs (ie, the costs of paying out current recipients to make room for titled accounts.

The working population will always bear all the costs of SS, including the huge infrastructure costs of the present way of doing things.  If SS is changed to yield a 5-6% return(instead of the present 1.6% or so), more funds would be available for any transition costs; in addition, the shrinking of the monstrous and costly infrastructure of even 10% would more than cover any transition costs.  Privatization just makes good financial(and economic) sense.  The increase of available investment funds would also yield overall economic benefit for the entire country.
A rising tide lifts all boats.  The more money we remove from the govt sector and leave in private hands, the more we all benefit.

"If the good men are silent only the wicked are heard.” - Edmund Burke

the Democrats that blocked this were not talking about issues like that when they blocked it.

I see that two times isn’t enough.  Third time: I’m not talking about the democratic politicians; I’m talking about the liberal bloggers and policy organizations.

Third time: I’m not talking about the
democratic politicians; I’m talking about the liberal bloggers and policy organizations.

And how is that relevant to this thread?

"If the good men are silent only the wicked are heard.” - Edmund Burke

I’m not talking about the (D)emocratic politicians; I’m talking about the liberal bloggers and policy organizations.

jpe,

First, please note that I have capitalized the initial “D” in the word “Democratic.” There is nothing democratic about Democrats.

As to the quote above, please explain why the pronouncements of “liberal bloggers and policy organizations” are of any importance since those pronouncements are patently, factually wrong, and said bloggers and organizations are not the ones who actually vote on anything.

“Poverty of goods is easily cured; poverty of the mind is irreparable.”