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.
Paulie B - 07:01am on 01/31/2007
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.
FlyOnTheWall - 08:01am on 01/31/2007
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.
Bat One - 08:01am on 01/31/2007
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.
Hoodlumman - 09:01am on 01/31/2007
Bat, I guess you should have just written the post.
The Whistler - 09:01am on 01/31/2007
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 - 10:01am on 01/31/2007
Kbiel: I think it became a crisis again when it became known that Bush had dropped his position on privatization.
The Whistler - 10:01am on 01/31/2007
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.
jpe - 10:01am on 01/31/2007
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.
Bat One - 10:01am on 01/31/2007
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.
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.
Next, Kudlow outlines what he considers to be the real problem with Social Security, the lack of any meaningful return on investment.
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,
A perfectly reasonable solution.
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.
Bat, I guess you should have just written the post.
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.
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.
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.