<!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->"The person comes out ahead if their personal account exceeds a 3 percent real rate of return, which is the rate of return that the trust fund bonds receive," the senior administration official said. "So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent real rate of return. To the extent that his personal account gets a higher rate of return, his net benefit would increase."
If a worker sets aside $1,000 a year for 40 years, and earns 4 percent annually on investments, the account would grow to $99,800 in today's dollars. All of that money would be the worker's upon retirement. But guaranteed benefits over the worker's lifetime would be reduced by approximately $78,700 -- the amount the worker would have contributed to Social Security but instead contributed to his private account, plus 3 percent interest above inflation. The remainder, $21,100, would be the increase in benefit the worker would receive over his lifetime above the level he would have received if he stayed in the traditional system.
Under the system, total benefit gains may be minimal. The Social Security Administration, in projecting benefits under a partially privatized system, assumes a 4.6 percent rate of return over inflation. Thus gains in an account would be offset by a reduction in guaranteed benefits equal to 70 percent of the account's balance.
The Congressional Budget Office, Capitol Hill's official scorekeeper, assumes a 3.3 percent rate of return. Under that scenario, the full amount in a worker's account would be reduced dollar for dollar from his Social Security checks, for a net gain of virtually zero.
If investments earned less than 3 percent a year above inflation, a worker would do worse in total benefits than he would have done in the traditional system.
In effect, said Democratic economist Peter R. Orszag of the Brookings Institution, the system works like a loan, in which the government grants workers 4 percentage points of their payroll tax to invest in stocks and bonds. The loan would have to be paid back with interest out of workers' monthly Social Security checks.
But Robert Pozen, an investment executive who served on the president's 2001 Social Security Commission disputed that characterization. A worker is simply paying less into the system so he gets less back.
"This is in no way a loan," Pozen said.
Supporters say the system is far better than what had been incorrectly described by the Post. Between withdrawals from a personal account and a Social Security check, total benefits would be the same, whether the loan repayment comes from the account or from the guaranteed benefit. But by leaving the balance of the account untouched, the White House would impart a sense of ownership in the economy, said Stephen Moore, a conservative Bush supporter and author of a book on the president's ownership society. <!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
This is from the Washington Post, but you have to register, so I've cut and pasted this bit for you. (<a href='http://www.washingtonpost.com/wp-dyn/articles/A59136-2005Feb2.html' target='_blank'>Link</a>, if you're so inclined).
So there's this to deal with-- your guaranteed benefits are reduced by the money you would have put <i>into</i> the system, plus interest-- calculated against the return rate of the treasury bonds in which your money <i>would</i> have been invested.
Also, when Bush says that you <i>keep</i> your private account money, it's not entirely accurate-- upon withdrawl (in the current plan[s] being floated), you have to purchase an annuity which-- combined with your remaining guaranteed system benefits-- is indexed to whatever the inflation adjusted poverty level is (looking for link). Annuity principal is <i>not</i> inheritible. Anything in <i>excess</i> in the account is.
During his run for Congress in 1978 Bush proclaimed that Social Security would collapse by 1988-- but Reagan's 1983 Social Security reform (which included increasing the retirement age and payroll tax) made the system solvent again, and if anyone wants to do the math (I'll even spot you Bush's fuzzy, worst-case scenario, sweeping-the-system's-legs-with-tax-cutting-while-fighting-two-simultaneous-wars numbers), tell us how long that held Chicken Little's sky at bay.
Then, of course, the projected costs of implementing the system are potentially in the <i>trillions</i> (including interest on the money we'll have to borrow to set this up and new administration fees). Heck, those brokerage houses don't work for free, of course-- and as someone who used to work for one of the prominent ones, let me tell you: They like to <i>live it up</i>. Of course, my favorite part of the SOTU Address transcript had to be this:
<!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->For example, in the year 2027, the government will somehow have to come up with an extra $200 billion to keep the system afloat -- <!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
Funny that $200 billion is suddenly a <i>scary</i> number again. Hey, I know how we can save <i>at least</i> 200 billion! Now, of course, I <i>do</i> like seeing the people of Iraq voting, but I also like seeing our senior citizens eating. Golly, that's a toss-up. And at least the old folks put a down payment on it. (And can someone explain to me why deficits are bad again? I heard that deficits <b>now</b> don't matter, but a projected deficit thirty or fourty years down the road is bad, bad, news.) <a href='http://www.nytimes.com/2005/02/03/politics/03social.html?oref=login&hp&ex=1107493200&en=cd5916ce33c6185f&ei=5094&partner=homepage' target='_blank'>Even so . . .</a> as the article states:
<!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->A senior administration official put the cost from 2009 through 2015 at $754 billion - $664 billion to pay benefits and $90 billion for interest on the money borrowed. Peter R. Orszag, a Social Security expert who served in the Clinton administration, calculated that the program would cost the government over $1 trillion in the first 10 years the accounts were in place would be over $1 trillion and more than $3.5 trillion in the second 10 years.<!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
Yes, I realize that the 200 billion is the beginning of an <i>annual</i> payment. But the take home message is that they're working off a very <i>conservative</i> estimate for the upfront cost, coupled with a very <i>generous</i> estimate down the road. <i>Especially</i> considering that for two of those six years, a smaller percentage of citizens are eligible (Oh, and that the additional costs magically disappear after 2015). More figures later.
And, though I'm sure Paul Krugman is anathema to many on the opposite side of this issue, he makes a good point about an important <a href='http://www.nytimes.com/2005/02/01/opinion/01krugman.html?oref=login&n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists%2fPaul%20Krugman' target='_blank'>Catch 22:</a>
<!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->In other words, to believe in a privatization-friendly rate of return, you have to believe that half a century from now, the average stock will be priced like technology stocks at the height of the Internet bubble - and that stock prices will nonetheless keep on rising.
Social Security privatizers usually defend their bullishness by saying that stock investors earned high returns in the past. But stocks are much more expensive than they used to be, relative to corporate profits; that means lower dividends per dollar of share value. And economic growth is expected to be slower.
Which brings us to the privatizers' Catch-22.
<b>They can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.
Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.
It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.</b> <!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
And though America's birthrate <i>is</i> down, on the whole, the looming 'disaster' is tightly bound to the retirement of the baby boomers-- but here's a secret:
<span style='font-size:7pt;line-height:100%'>pssssssst: They're not frigging Highlanders. They're all going to die at some point in the not-too-distant future.</span>
I have no problem with choice. Reform of the system is <i>not</i> reflexively evil. AND this is all still sorta speculation, since we haven't been handed a <i>solid</i> plan-- but the ones floating about aren't exactly inspiring a whole lot of confidence. These plans <b>do</b> seem to be of the 'destabilize social security so we can eventually cry about a <i>deeper</i> crisis and finally destory it' variety.
(And people throw around the word 'entitlement' here a bit too much-- our seniors have paid into this system, and deserve their due. If <i>they</i> can't support themselves with dignity, they don't conveniently disappear-- it's up to their kids. So now a percentage of families have to support their kids <i>and</i> their parents). That'll put a crimp in their wallets.
(And how many people in our government-- Republican OR Democrat-- do you think actually <i>know</i>--on some remotely intimate level-- anyone who relies on this system?)
moultanoCreator of ns_shiva.Join Date: 2002-12-14Member: 10806Members, NS1 Playtester, Contributor, Constellation, NS2 Playtester, Squad Five Blue, Reinforced - Shadow, WC 2013 - Gold, NS2 Community Developer, Pistachionauts
edited February 2005
<!--QuoteBegin-Marine0I+Feb 3 2005, 07:23 AM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> (Marine0I @ Feb 3 2005, 07:23 AM)</td></tr><tr><td id='QUOTE'><!--QuoteEBegin--> <!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->I didn't see much of it, cause I was puking my guts out, but this made me scoff a bit. This is what inner city public schools have been trying to do for the last thirty years<!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
Here is a question for you - why the last 30 years? What changed between now and then that has allowed the rise of this kind of behaviour in our schools. You know what my answer will be, I'm interested in your explaination. <!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd--> I'd say the biggest thing is that crack hit US ghettos.
Edit: Second biggest thing: Forced integration caused white people with money to leave the cities, pulling out their tax money, and causing school systems and neighborhoods to collapse financially.
Comments
If a worker sets aside $1,000 a year for 40 years, and earns 4 percent annually on investments, the account would grow to $99,800 in today's dollars. All of that money would be the worker's upon retirement. But guaranteed benefits over the worker's lifetime would be reduced by approximately $78,700 -- the amount the worker would have contributed to Social Security but instead contributed to his private account, plus 3 percent interest above inflation. The remainder, $21,100, would be the increase in benefit the worker would receive over his lifetime above the level he would have received if he stayed in the traditional system.
Under the system, total benefit gains may be minimal. The Social Security Administration, in projecting benefits under a partially privatized system, assumes a 4.6 percent rate of return over inflation. Thus gains in an account would be offset by a reduction in guaranteed benefits equal to 70 percent of the account's balance.
The Congressional Budget Office, Capitol Hill's official scorekeeper, assumes a 3.3 percent rate of return. Under that scenario, the full amount in a worker's account would be reduced dollar for dollar from his Social Security checks, for a net gain of virtually zero.
If investments earned less than 3 percent a year above inflation, a worker would do worse in total benefits than he would have done in the traditional system.
In effect, said Democratic economist Peter R. Orszag of the Brookings Institution, the system works like a loan, in which the government grants workers 4 percentage points of their payroll tax to invest in stocks and bonds. The loan would have to be paid back with interest out of workers' monthly Social Security checks.
But Robert Pozen, an investment executive who served on the president's 2001 Social Security Commission disputed that characterization. A worker is simply paying less into the system so he gets less back.
"This is in no way a loan," Pozen said.
Supporters say the system is far better than what had been incorrectly described by the Post. Between withdrawals from a personal account and a Social Security check, total benefits would be the same, whether the loan repayment comes from the account or from the guaranteed benefit. But by leaving the balance of the account untouched, the White House would impart a sense of ownership in the economy, said Stephen Moore, a conservative Bush supporter and author of a book on the president's ownership society.
<!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
This is from the Washington Post, but you have to register, so I've cut and pasted this bit for you. (<a href='http://www.washingtonpost.com/wp-dyn/articles/A59136-2005Feb2.html' target='_blank'>Link</a>, if you're so inclined).
So there's this to deal with-- your guaranteed benefits are reduced by the money you would have put <i>into</i> the system, plus interest-- calculated against the return rate of the treasury bonds in which your money <i>would</i> have been invested.
Also, when Bush says that you <i>keep</i> your private account money, it's not entirely accurate-- upon withdrawl (in the current plan[s] being floated), you have to purchase an annuity which-- combined with your remaining guaranteed system benefits-- is indexed to whatever the inflation adjusted poverty level is (looking for link). Annuity principal is <i>not</i> inheritible. Anything in <i>excess</i> in the account is.
During his run for Congress in 1978 Bush proclaimed that Social Security would collapse by 1988-- but Reagan's 1983 Social Security reform (which included increasing the retirement age and payroll tax) made the system solvent again, and if anyone wants to do the math (I'll even spot you Bush's fuzzy, worst-case scenario, sweeping-the-system's-legs-with-tax-cutting-while-fighting-two-simultaneous-wars numbers), tell us how long that held Chicken Little's sky at bay.
Then, of course, the projected costs of implementing the system are potentially in the <i>trillions</i> (including interest on the money we'll have to borrow to set this up and new administration fees). Heck, those brokerage houses don't work for free, of course-- and as someone who used to work for one of the prominent ones, let me tell you: They like to <i>live it up</i>. Of course, my favorite part of the SOTU Address transcript had to be this:
<!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->For example, in the year 2027, the government will somehow have to come up with an extra $200 billion to keep the system afloat -- <!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
Funny that $200 billion is suddenly a <i>scary</i> number again. Hey, I know how we can save <i>at least</i> 200 billion! Now, of course, I <i>do</i> like seeing the people of Iraq voting, but I also like seeing our senior citizens eating. Golly, that's a toss-up. And at least the old folks put a down payment on it. (And can someone explain to me why deficits are bad again? I heard that deficits <b>now</b> don't matter, but a projected deficit thirty or fourty years down the road is bad, bad, news.)
<a href='http://www.nytimes.com/2005/02/03/politics/03social.html?oref=login&hp&ex=1107493200&en=cd5916ce33c6185f&ei=5094&partner=homepage' target='_blank'>Even so . . .</a> as the article states:
<!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->A senior administration official put the cost from 2009 through 2015 at $754 billion - $664 billion to pay benefits and $90 billion for interest on the money borrowed. Peter R. Orszag, a Social Security expert who served in the Clinton administration, calculated that the program would cost the government over $1 trillion in the first 10 years the accounts were in place would be over $1 trillion and more than $3.5 trillion in the second 10 years.<!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
Yes, I realize that the 200 billion is the beginning of an <i>annual</i> payment. But the take home message is that they're working off a very <i>conservative</i> estimate for the upfront cost, coupled with a very <i>generous</i> estimate down the road. <i>Especially</i> considering that for two of those six years, a smaller percentage of citizens are eligible (Oh, and that the additional costs magically disappear after 2015). More figures later.
And, though I'm sure Paul Krugman is anathema to many on the opposite side of this issue, he makes a good point about an important <a href='http://www.nytimes.com/2005/02/01/opinion/01krugman.html?oref=login&n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists%2fPaul%20Krugman' target='_blank'>Catch 22:</a>
<!--QuoteBegin--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td><b>QUOTE</b> </td></tr><tr><td id='QUOTE'><!--QuoteEBegin-->In other words, to believe in a privatization-friendly rate of return, you have to believe that half a century from now, the average stock will be priced like technology stocks at the height of the Internet bubble - and that stock prices will nonetheless keep on rising.
Social Security privatizers usually defend their bullishness by saying that stock investors earned high returns in the past. But stocks are much more expensive than they used to be, relative to corporate profits; that means lower dividends per dollar of share value. And economic growth is expected to be slower.
Which brings us to the privatizers' Catch-22.
<b>They can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.
Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.
It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.</b>
<!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
And though America's birthrate <i>is</i> down, on the whole, the looming 'disaster' is tightly bound to the retirement of the baby boomers-- but here's a secret:
<span style='font-size:7pt;line-height:100%'>pssssssst: They're not frigging Highlanders. They're all going to die at some point in the not-too-distant future.</span>
I have no problem with choice. Reform of the system is <i>not</i> reflexively evil. AND this is all still sorta speculation, since we haven't been handed a <i>solid</i> plan-- but the ones floating about aren't exactly inspiring a whole lot of confidence. These plans <b>do</b> seem to be of the 'destabilize social security so we can eventually cry about a <i>deeper</i> crisis and finally destory it' variety.
(And people throw around the word 'entitlement' here a bit too much-- our seniors have paid into this system, and deserve their due. If <i>they</i> can't support themselves with dignity, they don't conveniently disappear-- it's up to their kids. So now a percentage of families have to support their kids <i>and</i> their parents). That'll put a crimp in their wallets.
(And how many people in our government-- Republican OR Democrat-- do you think actually <i>know</i>--on some remotely intimate level-- anyone who relies on this system?)
Here is a question for you - why the last 30 years? What changed between now and then that has allowed the rise of this kind of behaviour in our schools. You know what my answer will be, I'm interested in your explaination. <!--QuoteEnd--></td></tr></table><div class='postcolor'><!--QuoteEEnd-->
I'd say the biggest thing is that crack hit US ghettos.
Edit: Second biggest thing: Forced integration caused white people with money to leave the cities, pulling out their tax money, and causing school systems and neighborhoods to collapse financially.