Awesome Social Security Debate on MSNBC

[NGNM85]

mcgRuaFyIBs

I caught this heated exchange checking out the news highlights and I had to share. Cenk Uyger absolutely decimates Republican efforts to destroy the entitlement program. Ugyer, for those who may be unaware, is the host of satellite radio and YouTube news program The Young Turks, which was formerly broadcast on the now-defunct Leftist radio network Air America. Uyger is friends with MSNBC's Dylan Ratigan who's one of the better personalities in the mainstream media and has done some excellent pieces on the disgusting fraud of the Wall Street bailout. They have starred on eachother's programs, with Ratigan filling in for Uyger on Young Turks, and Ratigan frequently inviting Uyger on MSNBC. This week Ugyer is substituting for Ratigan and he does a fantastic bit here absolutely shredding the attempt by the right to privatize social security, of which congressman Paul Ryan's 'Roadmap' is the latest incarnation.

[#FF0000]

Jesus Christ sometimes Cenk owns.

Even though I have a radically different opinion than him and he's a centrist hack, his heart's in the right place at least.

[Die Neue Zeit]

Social Security needs to re-examine its pathetic investment portfolio as well as scrap the cap.

[NGNM85]

Jesus Christ sometimes Cenk owns.

Indeed.:D


Even though I have a radically different opinion than him and he's a centrist hack, his heart's in the right place at least.

He's not a Centrist, he's a Liberal/Progressive.

[RGacky3]

He's not a Centrist, he's a Liberal/Progressive.

Not really, he's somewhat progressive, he's mainly liberal, but overall I think he's pretty centrist. (I say that from American people standards, not washington standards).

[inyourhouse]

I'd like to make a few comments on that debate. First of all, the host is correct when he says that the Social Security Trust Fund had a $2.5 trillion surplus in 2009[1], but I don't think many people dispute this. The real issue is the long term health of Social Security, which depends on both the annual balance of Social Security (ie. difference between outlays and receipts [mainly from payroll taxes]) and the annual balance of the Trust Fund. Remember that any surplus on the annual balance of Social Security is paid into the Trust Fund and that any deficit on the annual balance of Social Security requires taking money out of the Trust Fund (although the Fund could still grow with annual deficits if interest income is higher than said deficits). Now, the Social Security Administration projects that the annual balance of Social Security will be in deficit this year, but that the deficit will be significantly smaller in 2011, with the annual balance going back into surplus for 2012-2015. From 2016 onwards there is projected to be an annual deficit, increasing in size every year until 2025. At that point, the annual surplus on the Trust Fund begins decreasing until it is exhausted by 2037. So in 2037, expected social security outlays can only be met by raising payroll taxes or reducing benefits.[2]

Now that's not an immediate problem, but the point of reforming Social Security now is that the earlier reforms are implemented, the less painful it is to transition. So going back to the video, people who suggest that Social Security is going broke are not lying as the host suggests. I'm a little confused though because the host then says the Trust Fund surplus has already been spent, which surely means that he thinks it is broke? As it happens, I think he is incorrect because the Social Security and Medicare Lockbox Bill of 2001 prevents the Trust Fund from being used for non-Social Security expenditure.[3] Next he says that the annual Social Security deficit in 2010 is a "blip in the radar", which is true, but it is only goes back to annual surpluses for 3 more years (2012-2015) before falling into annually increasing deficits. The host is disingenuous in ignoring this, although he does rightly point out that the Fund is projected to be exhausted in 2037 (and the Republican is incorrect in disputing these projections). I don't understand why he sort of skips over this point, though. Surely this is the major issue?

Next the host presses the Republican on his plans to reform Social Security. I think the Republican is being quite sensible in keeping benefit cuts and raising the retirement age on the table and it's silly for the host to suggest that he therefore definitely wants to carry them out. The host (who evidently opposes these options) sets out his plan for Social Security: cutting defense spending and raising taxes for rich. The former option I support, but not for reasons relating to Social Security. Although a reduction in defense spending (and a transfer of the savings to the Trust Fund) would provide a one-off extension to the life of Social Security, it doesn't address the problem of annual deficits, which would continue to deplete the Trust Fund over time. Raising taxes on the rich probably does address this problem (dependent on the Laffer curve), but I think this is a bad long term option given the alternatives.

My own preferred solution is to replace payroll taxes with compulsory saving into a special bank account. This account would have either limited or no access until retirement (at which point either full access could be granted or monthly installments could be allowed), so it would grow through payments into it and interest over the course of an individual's life. The individual should also have the option of investing some portion of the accumulated funds in the stock market. The government could "top up" the accounts of those with low funds at the retirement age, so everybody should be provided for. Therefore the only thing the government needs to worry about is its spending on "top ups", which should be much easier to stabilize. Of course, the transition to a system like this would be difficult in the short term. A higher retirement age, benefit cuts, and increased taxes on the rich would all go some way towards supporting that transition, and after a period I think all three could be reversed.

[1] http://www.ssa.gov/OACT/STATS/table4a3.html
[2] http://www.ssa.gov/OACT/TRSUM/index.html
[3] http://www.ssa.gov/legislation/legis_bulletin_032201.html

[RGacky3]

I think the Republican is being quite sensible in keeping benefit cuts and raising the retirement age on the table and it's silly for the host to suggest that he therefore definitely wants to carry them out.

THe nature of the debates makes the host make that assumption, Republicans have been tyring to cut social security for decades.


The former option I support, but not for reasons relating to Social Security. Although a reduction in defense spending (and a transfer of the savings to the Trust Fund) would provide a one-off extension to the life of Social Security, it doesn't address the problem of annual deficits, which would continue to deplete the Trust Fund over time. Raising taxes on the rich probably does address this problem (dependent on the Laffer curve), but I think this is a bad long term option given the alternatives.


For most republicans reform, means cutting benefits. The actual problems with social security, as you pointed out, are comming way in the future and can easily be delt with by taxes on the rich and more importantly cutting defense.

Social security is'nt in a bubble, you can cut other things first.

Also end the cap.


As it happens, I think he is incorrect because the Social Security and Medicare Lockbox Bill of 2001 prevents the Trust Fund from being used for non-Social Security expenditure.[3]

Except it has been used for war, they got around that, that law has huge loopholes.

What republicans want to do has nothing to do with the projected problems starting in 2037, it has to do with cutting benefits because they don't want to give up anything else for social security, which they spent on war, and which WE paid into.


My own preferred solution is to replace payroll taxes with compulsory saving into a special bank account. This account would have either limited or no access until retirement (at which point either full access could be granted or monthly installments could be allowed), so it would grow through payments into it and interest over the course of an individual's life. The individual should also have the option of investing some portion of the accumulated funds in the stock market. The government could "top up" the accounts of those with low funds at the retirement age, so everybody should be provided for. Therefore the only thing the government needs to worry about is its spending on "top ups", which should be much easier to stabilize. Of course, the transition to a system like this would be difficult in the short term. A higher retirement age, benefit cuts, and increased taxes on the rich would all go some way towards supporting that transition, and after a period I think all three could be reversed.


What your doing there is essencially what happened with healthcare reform. Your giving wallstreet a huge amount of citizens money for them to gamble with. Also the topping off part is going to require actually more taxes, so its not solving the problem.

Unless you have major major financial reform thats exactly what its gonna be.

What we need to do is end the cap on high end income (that by itself would probably take care of it), cut defense spending, and have a more progressive tax system, the problem is'nt huge, but cutting benefits is only adding insult to injury.

Social security needs to be exactly what it is, social, it needs to be democratically controlled.

[Bud Struggle]

Great post inyourhouse.

Talking (screaming) heads like those above shed very little light on the subject. That being said it becomes clearer and clearer that the US government (at the very least) really isn't a good provider of general social services like Social Security and Medicare (let alone universal healthcare.) There are too many people in Congress as well as the President who have constant and regular "emergencies" and special needs that come up the the daily course of business (a war here, a rescession there) that see social programs as a constant source of ready and easy cash. One could even presume that without that supply of easy cash that America might not let itslf get involved in its little adventures tht have always caused it so much trouble.

The structure of American politics just doesn't lend itself to Socialist ideals. Either the basic system of American government has to change or the slide to the Left has to stop.

Personally I think it would be best for America if both corporate and social entitlements are limited.

[RGacky3]

That being said it becomes clearer and clearer that the US government (at the very least) really isn't a good provider of general social services like Social Security and Medicare (let alone universal healthcare.)

Compared to who? Look at private pensions, what has happened to those, look at private health insurance, then look at medicare and social security.


There are too many people in Congress as well as the President who have constant and regular "emergencies" and special needs that come up the the daily course of business (a war here, a rescession there) that see social programs as a constant source of ready and easy cash.

Even with those emergencies, it still does better. Plus a corporation does'nt need to justify any emergencies (like ceo pay), the government is democratically accountable.


One could even presume that without that supply of easy cash that America might not let itslf get involved in its little adventures tht have always caused it so much trouble.


Its not little adventures, Americas militancy has to do with imperialistic power, you take the American government out of the corporate hands and into the peoples hands things are different, but what your asking for is putting EVERYTHING into corporate hands, and you do that its not gonna stop militancy, they'll still get that done.


The structure of American politics just doesn't lend itself to Socialist ideals. Either the basic system of American government has to change or the slide to the Left has to stop.


What slide to the left? When has the American government slid to the left in the last 30 years?

The American system dose'nt lend itself to democracy because its corporatist in nature, thats waht needs to change.


Personally I think it would be best for America if both corporate and social entitlements are limited.

So I take it your giving up the claim to social democracy :).

[Bud Struggle]

Compared to who? Look at private pensions, what has happened to those, look at private health insurance, then look at medicare and social security. Private pensions are just fine--or at least the 401Ks and individual personal retirement plans. Corporation are getting out of the business of giving them because the government seems to be taking up the mantle.


Even with those emergencies, it still does better. Plus a corporation does'nt need to justify any emergencies (like ceo pay), the government is democratically accountable. I don't trust the government any more than I trust Exxon.


Its not little adventures, Americas militancy has to do with imperialistic power, you take the American government out of the corporate hands and into the peoples hands things are different, but what your asking for is putting EVERYTHING into corporate hands, and you do that its not gonna stop militancy, they'll still get that done. No. Take everything out of government hands and out of corporate hands--I'm no more a fan of big corporation than you. No--people need to grow up and take care of themselves. They need to learn how to save and learn how to invest for their futures. If they rely in the government or corporation or unions to do that for them, they will be disapointed.


What slide to the left? When has the American government slid to the left in the last 30 years? Medicade/Medicare was the biggest slide.


The American system dosen't lend itself to democracy because its corporatist in nature, thats waht needs to change. Big corporations are as bad as big entitlements.


So I take it your giving up the claim to social democracy :). No. I'm just saying that it doesn't work very well under the American system. I'm sure the system in Norway or Sweden is much better.

[Kotze]

Can't say I like the host's style of arguing with surplus this or that.

Money only appears to be a store of something. While it sometimes makes sense for an individual to put some in a piggy bank for later, the world cannot save in money. When you are young, a part of the stuff you produce goes to people too old to work. When you will be that old yourself, a part of the stuff the young will be producing will go to you. What you will get in the future will depend on the level of productivity in the future and what the political decision about how to divide that cake will be. All that blather about some perceived need to balance some budget now for later is beside the point.
people who suggest that Social Security is going broke are not lyingThe problem with your "analysis" is not that your macro view is wrong in places, the problem is that you don't have a macro view. A government that issues its own currency doesn't run out of its own currency. Taxing has something to do with avoiding too much inflation, not with avoiding bankruptcy. You fail macro economics forever.

[Bud Struggle]

The problem with your "analysis" is not that your macro view is wrong in places, the problem is that you don't have a macro view. A government that issues its own currency doesn't run out of its own currency. Taxing has something to do with avoiding too much inflation, not with avoiding bankruptcy. You fail macro economics forever.

I think inyourface understands economics very well. You on the other hand fail to understand his very cogent point that Social Security was set up to PAY FOR ITSELF.

[RGacky3]

Private pensions are just fine--or at least the 401Ks and individual personal retirement plans. Corporation are getting out of the business of giving them because the government seems to be taking up the mantle.

Corporations are getting out of them because they've hurt unions enough and organized labor, and labor in general that they CAN get out of them, even if the government was'nt in it they would give it up.

BTW, social security was started under FDR 401ks started going under in the 2000s, so your theory is shot down from the get go.


I don't trust the government any more than I trust Exxon.

YOu should trust them government more, because you can vote for the government, and legally at least they work for you. Exxon does'nt even need to pretend to work for you.


No. Take everything out of government hands and out of corporate hands--I'm no more a fan of big corporation than you. No--people need to grow up and take care of themselves. They need to learn how to save and learn how to invest for their futures. If they rely in the government or corporation or unions to do that for them, they will be disapointed.

Thats a great theory except in real life it does'nt work. In todays society you MUST rely on big corporations, because they control the economy, its all good and well to say "grow up and take care of yourself" but in practice you need a job, you need a bank account, you need return you need to interact with society.

Its not a matter of individuals or institutions, the economy is always going to be a social issue, the question is who runs it, the people, or the elite.


Medicade/Medicare was the biggest slide.


I said in the last 30 years, hell since FDR corporate power has been pulling the country more and more to the right.


Big corporations are as bad as big entitlements.

SOcial security is not a hand out, we PAID INTO IT, its OUR money, we are entitled to it.

The question is not the individual vrs society or big government. the question is democracy vrs ologarchy, the proposals you put forward are nothing more than a transfer of power and wealth from the public to the buisiness class, in the name of individuals.


No. I'm just saying that it doesn't work very well under the American system. I'm sure the system in Norway or Sweden is much better.

Why does'nt it work, except for corporate power?

YOu take away corporate power and it works, hell it works even with corporate power trying to destroy it.

The fact is your apeal to individualism is nothing more than an attack on democracy and a defense of corporate power. The rich are very few in numbers but much larger in money, which is why they have a distain for democracy and a love of markets, which is why they want everyone to be isolated as individuals economically because they can rule easily that way, and you and your tea-party ideology simply plays into their hands.

Your argument is really, capitalism ruin democracy, so lets get rid of democracy, well I don't by that, I say get rid of capitalism.


You on the other hand fail to understand his very cogent point that Social Security was set up to PAY FOR ITSELF.

As it does, get rid of the cap and it will do so probably forever.

[Kotze]

I think inyourface understands economics very well.Wow, what a great argument. First, you fav his comment, than you write that you think he understands economics. I am thoroughly convinced. :rolleyes:

You (that's you Bud, inyourhouse, and also the host of that show) are making a very basic mistake if you think and argue about things on the macro level like on the level of a single household. And yes, if you do that you do fail at macro.

[inyourhouse]

The actual problems with social security, as you pointed out, are comming way in the future

I think it's dangerous to think of years like 2025 and 2037 as far into the future because it breeds complacency. As I said before, it's my view that the earlier reform is implemented, the easier it will be to transition. It certainly won't do any harm to prepare for what may happen.


and can easily be delt with by taxes on the rich and more importantly cutting defense.

Cutting defense spending will only ever be a temporary solution because it's a finite budget to cut from. It doesn't address the fundamental mismatch between revenue and expenditure. Raising taxes on the rich would help in the short term (although it would not be sustainable with a continually rising average age), but as I said, I don't see any need for it. I think it's possible to move to a system of compulsory saving and government top-ups (similar to that in Singapore) that will not require cuts in benefits or increases in taxes (in the long run; the transition would probably require both).


Social security is'nt in a bubble, you can cut other things first.

The current structure of Social Security in the US is that it is in something of a bubble, but I agree that it would be prudent to move away from such a system in the short run. In the long run, though, I do think a self-financing system is the only way to go. Otherwise we will end up with Social Security expenditure taking up a larger and larger proportion of the government's budget each year as the average age of the population increases.


Also end the cap.

This is not a long term solution. The Social Security Administration did a report in 2005 estimating that eliminating the cap would prevent the annual balance of Social Security from going into deficit only until 2025. As mentioned in my previous post, with everything as it stands (ie. including the cap) Social Security will start running continuous annual deficits in 2016, so all eliminating the cap does is extend its life by 9 years. Keep in mind that this is also a static analysis and therefore doesn't take into the account the negative effects on growth and productivity of such a large tax increase. You can read the report here (see Table E1 for the figures): http://www.ssa.gov/OACT/solvency/advisoryboard_20050810.pdf


Except it has been used for war, they got around that, that law has huge loopholes.

Perhaps I was mistaken then, in which case Social Security is in a lot more trouble than the projections I listed suggest. Can you provide a link about the Trust Fund being used to pay for war? Also, the host in that debate said that it was used to pay for the Bush tax cuts. Do you agree with that?


What your doing there is essencially what happened with healthcare reform. Your giving wallstreet a huge amount of citizens money for them to gamble with.

I think that's necessary. It seems to me that for a Social Security system to be sustainable in the face of a rising average age, it must earn a return. The smallest and most risk-free return comes from saving, hence my suggestion for compulsory savings accounts. Investment in the stock market earns a higher return in the long run, but it's more risky, so I think it should be optional. I suppose you could consider that giving Wall Street a lot of money, but what matters to me is the sustainability of the system. The current unsustainable system will only hurt the workers who have paid into it; my proposal may help Wall Street, but it would also help workers.

Something I forgot to mention earlier is that a compulsory savings system also has positive macroeconomic effects. The most obvious effect is that it raises the savings rate, thus increasing the capital stock and leading to a higher rate of growth. That would benefit both Wall Street and workers too.


Also the topping off part is going to require actually more taxes, so its not solving the problem.

The vast majority of Social Security would be provided through accumulated compulsory savings. Taxes would only be necessary to top-up accounts, so the overall tax burden would be smaller. Even if you're counting the compulsory saving as a tax, the burden would be smaller in the long run because savings and investments earn a return, so any given level of benefits can be supported with a lower amount of money taken from payrolls.


Great post inyourhouse.

Thanks. I don't post often, but when I do I try to make them as informative as possible.


Personally I think it would be best for America if both corporate and social entitlements are limited.

I agree.


Money only appears to be a store of something. While it sometimes makes sense for an individual to put some in a piggy bank for later, the world cannot save in money.

I'm not entirely sure what you're saying here. It's perfectly possible for the world savings rate to rise.


What you will get in the future will depend on the level of productivity in the future and what the political decision about how to divide that cake will be.

That's a given, but I think people want stability and to know what to expect so that they can make appropriate choices today (e.g. supplementing their Social Security with a private pension). Waiting for the Trust Fund to be exhausted and then suddenly instituting large benefit cuts and/or large tax rises isn't conducive to long term stability. It's also completely unnecessary because there are ways to make Social Security sustainable.


The problem with your "analysis" is not that your macro view is wrong in places, the problem is that you don't have a macro view. A government that issues its own currency doesn't run out of its own currency. Taxing has something to do with avoiding too much inflation, not with avoiding bankruptcy. You fail macro economics forever.

It goes without saying that a government issuing its own fiat currency can increase the money supply as much as it desires, but that is not a sustainable way to fund government spending as it leads to increasing rates of inflation. The only way taxation could prevent this is if the money taxed was permanently taken out of circulation, but in that case there is no point to the whole exercise. The government might as well have just raised the money through tax in the first place.

[Dean]

My own preferred solution is to replace payroll taxes with compulsory saving into a special bank account. This account would have either limited or no access until retirement (at which point either full access could be granted or monthly installments could be allowed), so it would grow through payments into it and interest over the course of an individual's life. The individual should also have the option of investing some portion of the accumulated funds in the stock market. The government could "top up" the accounts of those with low funds at the retirement age, so everybody should be provided for. Therefore the only thing the government needs to worry about is its spending on "top ups", which should be much easier to stabilize. Of course, the transition to a system like this would be difficult in the short term. A higher retirement age, benefit cuts, and increased taxes on the rich would all go some way towards supporting that transition, and after a period I think all three could be reversed.

A ridiculous privatization plan. For starters, individual purchases of health care options will raise prices and costs, a problem already present in a privatized health care system. Furthermore, your plan will have the net effect of depreciation of social security benefits via stock market speculation. I'm not sure why you would promote such a plan unless you had a vested interest in an expanded finance sector.

[inyourhouse]

A ridiculous privatization plan. For starters, individual purchases of health care options will raise prices and costs, a problem already present in a privatized health care system.

I'm only talking about retirement accounts. Funding health care is a different issue.


Furthermore, your plan will have the net effect of depreciation of social security benefits via stock market speculation.

I'm not sure what you mean by this. Are you saying that individuals investing in the stock market would suffer from lower benefits? I don't think that's likely to be the case because stocks have outperformed savings over every 47 year (retirement age [assumed to be 65] minus adult age [assumed to be 18]) period in history. Indeed, stocks have outperformed savings over all periods greater than 5 years. Anyway, in my proposal investing is entirely voluntary.


I'm not sure why you would promote such a plan unless you had a vested interest in an expanded finance sector.

I promote it because I think it is the best Social Security system possible. If you disagree, please feel free to criticize it. I am always open to new ideas.

[Dean]

I'm not sure what you mean by this. Are you saying that individuals investing in the stock market would suffer from lower benefits? I don't think that's likely to be the case because stocks have outperformed savings over every 47 year (retirement age [assumed to be 65] minus adult age [assumed to be 18]) period in history. Indeed, stocks have outperformed savings over all periods greater than 5 years. Anyway, in my proposal investing is entirely voluntary.
Whether it is "voluntary" or not means nothing in terms of what the net effect will be when socsec is privatized.

[RGacky3]

As I said before, it's my view that the earlier reform is implemented, the easier it will be to transition. It certainly won't do any harm to prepare for what may happen.


Sure, take off the cap.


Cutting defense spending will only ever be a temporary solution because it's a finite budget to cut from. It doesn't address the fundamental mismatch between revenue and expenditure. Raising taxes on the rich would help in the short term (although it would not be sustainable with a continually rising average age), but as I said, I don't see any need for it. I think it's possible to move to a system of compulsory saving and government top-ups (similar to that in Singapore) that will not require cuts in benefits or increases in taxes (in the long run; the transition would probably require both).


The government top ups would require some sort of taxes. Cutting defense spending is not really a temporary solution, given the HUGE amount of money wasting on that, also the continually rising age is not indefinate, demographics chage all the time, so even the 2037 prediction is'nt accurate.

Also the taxes on the rich is'nt really short term either, keep in mind 2037 is just when the surplus will end, you still have all that money, so privatizing social security is not only unnessesary, its actually detremental to the budget, because those top-ups won't pay for themselves.


The current structure of Social Security in the US is that it is in something of a bubble, but I agree that it would be prudent to move away from such a system in the short run. In the long run, though, I do think a self-financing system is the only way to go. Otherwise we will end up with Social Security expenditure taking up a larger and larger proportion of the government's budget each year as the average age of the population increases.


What I'm saying is that Social security is'nt seperate from the rest of the budget.

As far as self-financing, your system is'nt self financing, all you've done is privatised it, make it FOR profit (thus your gonna loose some of the benefits), and make the govenrment pay the top offs anyway.

But SOcial security is'nt taking a larger proportion for a long long time, even then, demographics will change.

ALso privatizing it is'nt gonna change the demographics problem, all your doing is adding profit to it and taking out democratic control.


The Social Security Administration did a report in 2005 estimating that eliminating the cap would prevent the annual balance of Social Security from going into deficit only until 2025. As mentioned in my previous post, with everything as it stands (ie. including the cap) Social Security will start running continuous annual deficits in 2016, so all eliminating the cap does is extend its life by 9 years. Keep in mind that this is also a static analysis and therefore doesn't take into the account the negative effects on growth and productivity of such a large tax increase.

Privatising it won't end that, all its gonna do is put a profit motive on it (which means higher overhead) and end up cutting into the budget anyway with the top-ups, thats not a solution.

Tax increases don't have a negative effect on growth or productivity. Trickle down economics have been disproven time and time again.


Also, the host in that debate said that it was used to pay for the Bush tax cuts. Do you agree with that?


I don't have the link off hand right now, but you can look it up. As for the Bush Tax cuts, they arn't paid for, so they are cutting into the budget, had they been in place the Bush tax cuts could have paid for things that the social security fun did instead. So yeah.


I suppose you could consider that giving Wall Street a lot of money, but what matters to me is the sustainability of the system. The current unsustainable system will only hurt the workers who have paid into it; my proposal may help Wall Street, but it would also help workers.

Are you honestly arguing that Wall Street is more stable? And sustainable?


Something I forgot to mention earlier is that a compulsory savings system also has positive macroeconomic effects. The most obvious effect is that it raises the savings rate, thus increasing the capital stock and leading to a higher rate of growth. That would benefit both Wall Street and workers too.


Again, thats trickle down economics, which has been disproven time and time agian.


The vast majority of Social Security would be provided through accumulated compulsory savings. Taxes would only be necessary to top-up accounts, so the overall tax burden would be smaller. Even if you're counting the compulsory saving as a tax, the burden would be smaller in the long run because savings and investments earn a return, so any given level of benefits can be supported with a lower amount of money taken from payrolls.

Considering the way things are now, those top-ups are going to be a large part of it. Savings and investments sometimes earn a return, but who's gonna take most of it (if you guessed the banks your right), and when they don't who's gonna take the hit (if you guessed the taxpayers then your right as well, assuming the accounts are federaly insured, if not, then its just the people).

But either way, the demographics problem does'nt go away.


Are you saying that individuals investing in the stock market would suffer from lower benefits? I don't think that's likely to be the case because stocks have outperformed savings over every 47 year (retirement age [assumed to be 65] minus adult age [assumed to be 18]) period in history. Indeed, stocks have outperformed savings over all periods greater than 5 years. Anyway, in my proposal investing is entirely voluntary.


Except when the bubble bursts.


I promote it because I think it is the best Social Security system possible. If you disagree, please feel free to criticize it. I am always open to new ideas.

Its really just away to stop rich people from paying for poor people, and allow banks to make money from poor people by law.

[Kotze]

I'm not entirely sure what you're saying here.The point is that money doesn't conserve energy.
It goes without saying that a government issuing its own fiat currency can increase the money supply as much as it desires, but that is not a sustainable way to fund government spending as it leads to increasing rates of inflation.The point is that currency devaluation isn't magically equal to the spending/taxing gap. Hence, a government that aims at high employment and low inflation should not aim for a "balanced budget" over any period length, but set taxing and spending according to their impact in respect to these two aims. In fact, terms like "budget" lose their meaning on the macro level.

The overall point is that your statements about the macro level are made like statements that are adequate on the micro level and only there.

[inyourhouse]

Whether it is "voluntary" or not means nothing in terms of what the net effect will be when socsec is privatized.

I don't understand what you mean. If you're worried about individuals losing everything, the government could cap the proportion of total savings available for investment (e.g. 25%). The government could also regulate the diversity of investments (e.g. no more than 1% of the total investment fund in any one company).


also the continually rising age is not indefinate, demographics chage all the time, so even the 2037 prediction is'nt accurate.

This is the crux of the issue, I think. It's why I think cutting defense spending and raising taxes on the rich are not sustainable ways of funding Social Security. If the average age stopped rising, then they would be sustainable ways of funding Social Security. The current evidence suggests that the average age will continue to rise, so I think it's perfectly legitimate to seek reform on that basis, even if the projection turns out to be incorrect. In any case, I do think it would be better to move to a system that is not so vulnerable to changes in demographics.


Also the taxes on the rich is'nt really short term either, keep in mind 2037 is just when the surplus will end, you still have all that money,

2037 is when the Trust Fund is projected to be exhausted (ie. there will be no assets left to fund Social Security). Annual surpluses on Social Security are projected to end in 2016.


its actually detremental to the budget, because those top-ups won't pay for themselves.

Whether the top-ups fund themselves depends on how much the government decides to pay out in top-ups. For any given monthly payment upon retirement, the system I proposed requires less to be deducted from payrolls in the form of compulsory savings than is deducted from payrolls in the form of payroll taxes under the current system. This is because the savings (and investments) in the proposed system make a return. The difference between what is taken in payroll taxes under the current system and what would be taken in compulsory saving under the proposed system can be taxed to fund the top-up.


What I'm saying is that Social security is'nt seperate from the rest of the budget.

It is in the US, which is why the annual balance (receipts from payroll taxes minus expenditure on benefits) on Social Security exists. If it was part of the general budget, an annual balance on Social Security wouldn't make any sense. Nevertheless, I think I understand what you mean: you want other tax revenue to go towards funding it.


As far as self-financing, your system is'nt self financing, all you've done is privatised it,

The system is self-financing because the savings and investments earn a real return. In the literature, this is referred to as a fully-funded system.


make it FOR profit (thus your gonna loose some of the benefits),

The only profit based part of the system is the return on investments, and that part is entirely voluntary; a worker is under no obligation to invest his savings. The main part of the system is compulsory savings, and I don't think that can really be described as for profit. Also, I don't understand how benefits will decrease if the savings are accruing interest.


ALso privatizing it is'nt gonna change the demographics problem,

No, but the real return on savings and investments makes the demographic problem irrelevant.


Tax increases don't have a negative effect on growth or productivity.

The link between higher tax rates and lower economic growth is one of the most theoretically and empirically robust associations in economics. For example, a recent study of the tax structure of 21 OECD countries showed that (from largest effect to smallest) higher corporation taxes, income taxes, consumption taxes and property taxes all have a negative effect on GDP per capita.[1] Now, of course, some level of taxation is necessary for social welfare and that is more important than growth, but that doesn't change the fact that taxes generally have a negative effect on growth.

[1] http://econpapers.repec.org/paper/oececoaaa/643-en.htm


Are you honestly arguing that Wall Street is more stable? And sustainable?

Yes. Stocks have historically outperformed government bonds over every time horizon greater than 6 years.


Again, thats trickle down economics, which has been disproven time and time agian.

This is not "trickle down economics", it's standard macroeconomic theory, shared by Keynesians, neoclassicals, Austrians, the Chicago school, et al. Do you know of any studies showing a negative relationship between increased rates of personal saving and long run economic growth?


Savings and investments sometimes earn a return, but who's gonna take most of it (if you guessed the banks your right),

Savings almost always earns an annual return and always offer a long term return, without exception. Find me a period greater than a few years where saving did not earn a real return. Stock market investments are more volatile, but they outperform savings over every time horizon greater than 5 years. As for the bank taking the return, I'm not entirely sure what you mean, but the government could surely just ban this?


Except when the bubble bursts.

Exactly, hence my "greater than 5 years" comment. I don't think it's wise to ignore the large long term returns on stocks because of temporary blips.


Its really just away to stop rich people from paying for poor people,

This system could be implemented in a country with a highly progressive tax structure or a highly regressive tax structure; it doesn't make any difference to the system itself. Would you accept the system if the effective marginal tax rate on the rich didn't decrease?


and allow banks to make money from poor people by law.

How do the banks make money from them? The only thing I can think of is through charging management fees for investments, but investments are a voluntary part of the system, so they will not be making money from poor people "by law". If you disagree with charging management fees then the government could ban them, in which case I don't see any way for the banks to make money from the poor by law.


The point is that money doesn't conserve energy.

I don't know what that means.


The point is that currency devaluation isn't magically equal to the spending/taxing gap. Hence, a government that aims at high employment and low inflation should not aim for a "balanced budget" over any period length, but set taxing and spending according to their impact in respect to these two aims. In fact, terms like "budget" lose their meaning on the macro level.

So all you're saying is that fiscal policy should be used to achieve macroeconomic objectives? Fiscal policy can do that, but it's very inefficient. It's much better to use monetary policy, and of course if monetary policy is operating properly fiscal policy will have no effect. For example, suppose the central bank aimed to keep total nominal spending (P*Q, which per the equation of exchange is equal to M*V) in the economy growing on a 5% growth path. If the government increased its own spending and through the fiscal multiplier increased total nominal spending above target, the central bank would contract the money supply to put the economy back on its target path. Given the deadweight loss associated with crowding out due to deficit spending, I can't see any reason to favour fiscal policy over monetary policy. I think it's a much better policy to have a permanently balanced budget and a good monetary policy (preferably a nominal GDP target).

[Kotze]

The point is that money doesn't conserve energy.
I don't know what that means.So you admit that you don't know what the difference between micro and macro is?
If the government increased its own spending blahblahblah the central bank would blahOh, an argument assuming that the central bank is really an entirely separate entity from the government, that's cute; but I didn't make such a claim, so if your argument has to rely on that, it's a bit problematic...

If you are unwilling to admit that you don't know the difference between micro and macro, explain what you think the difference* is. I pose that question also to Bud Struggle.

*TOP SECRET HINT: THIS HAS ACTUALLY SOMETHING TO DO WITH WHAT I SAID IN THIS THREAD!!!!1

[inyourhouse]

So you admit that you don't know what the difference between micro and macro is?

Well I did study economics for 5 years, so I think I have some idea of the differences between the two. I just don't remember it ever being explained in terms of conservation of energy. Can you elaborate?


Oh, an argument assuming that the central bank is really an entirely separate entity from the government, that's cute; but I didn't make such a claim, so if your argument has to rely on that, it's a bit problematic...

I don't understand why you are being so hostile. I was merely making a distinction between monetary policy and fiscal policy, as is standard practice. I didn't say anything about whether the central bank is a separate entity from the government, and I wasn't relying on such a claim for anything. All I argued was that fiscal policy is ineffective when monetary policy is operational. Are you disputing this?


If you are unwilling to admit that you don't know the difference between micro and macro, explain what you think the difference* is.

The difference I think you're alluding to is that there is an upper bound on total nominal expenditure at the micro level, while there is no upper bound on total nominal expenditure at the macro level. Is that what you're trying to say?

[RGacky3]

This is the crux of the issue, I think. It's why I think cutting defense spending and raising taxes on the rich are not sustainable ways of funding Social Security. If the average age stopped rising, then they would be sustainable ways of funding Social Security. The current evidence suggests that the average age will continue to rise, so I think it's perfectly legitimate to seek reform on that basis, even if the projection turns out to be incorrect. In any case, I do think it would be better to move to a system that is not so vulnerable to changes in demographics.

Considering the amount of money that would be saved by cutting defense and the amount of money that would be raised by raising taxes on the rich, yeah, it would be a long term solution.

Average age cannot raise indefinately.


It is in the US, which is why the annual balance (receipts from payroll taxes minus expenditure on benefits) on Social Security exists. If it was part of the general budget, an annual balance on Social Security wouldn't make any sense. Nevertheless, I think I understand what you mean: you want other tax revenue to go towards funding it.

If nessesary yes, why is it ok to take out of it, but not ok to put into it?


2037 is when the Trust Fund is projected to be exhausted (ie. there will be no assets left to fund Social Security). Annual surpluses on Social Security are projected to end in 2016.

Actually the first part is untrue, after 2037, the trust fund will no longer have extra in it, but still around 80% of benefits would still be available to give out, WITHOUT any outside increases and WITH the current raiding that happened, and WITHOUT getting rid of caps.


Whether the top-ups fund themselves depends on how much the government decides to pay out in top-ups. For any given monthly payment upon retirement, the system I proposed requires less to be deducted from payrolls in the form of compulsory savings than is deducted from payrolls in the form of payroll taxes under the current system. This is because the savings (and investments) in the proposed system make a return. The difference between what is taken in payroll taxes under the current system and what would be taken in compulsory saving under the proposed system can be taxed to fund the top-up.


Adusted for inflation its very unlikely that a savings account will yield any actual retrun. Also the Trust fund is also invested (safely, not up to bank managers looking for a profit).

As far as the difference, I doubt there would be that much if any, so your gonna have to raise taxes anyway.

Also, this is going to be a HUGE regressive system, i.e. where the poor have to pay more of a percentage than the rich of their income, in order to get even slightly close to the type of retirement the rich have.

Again this is typical right wing, change the system to benefit the rich, enrich capitalists, punish the poor and take democracy out of the picture.


The system is self-financing because the savings and investments earn a real return. In the literature, this is referred to as a fully-funded system.

If its put in savings acounts, not really, if its put in the stock market or derivatives or anything, theres going to come a time where it will be essencially risked away and will disapeare with a financial crash.

The top ups are not self-funded, unless you increase taxes.


No, but the real return on savings and investments makes the demographic problem irrelevant.

And it creates a ton more problems, and essencially takes away social security (its not social security any more than the mandate is public healthcare).


The link between higher tax rates and lower economic growth is one of the most theoretically and empirically robust associations in economics. For example, a recent study of the tax structure of 21 OECD countries showed that (from largest effect to smallest) higher corporation taxes, income taxes, consumption taxes and property taxes all have a negative effect on GDP per capita.[1] Now, of course, some level of taxation is necessary for social welfare and that is more important than growth, but that doesn't change the fact that taxes generally have a negative effect on growth.

I checked the link and there was not graph or anything. What I do know is iceland is'nt doing so well, neither is argentina and the US, all of which adopted the milton freedman approach to economics.

However to suggest that corporations would simply give up on making money even though their taxes are raised and might thus have to make less profits is rediculous.


Yes. Stocks have historically outperformed government bonds over every time horizon greater than 6 years.


Except that every couple years people will loose their pensions when the market crashed.


This is not "trickle down economics", it's standard macroeconomic theory, shared by Keynesians, neoclassicals, Austrians, the Chicago school, et al. Do you know of any studies showing a negative relationship between increased rates of personal saving and long run economic growth?


No the idea that wall street having more money will be good for everyone.


Savings almost always earns an annual return and always offer a long term return, without exception. Find me a period greater than a few years where saving did not earn a real return. Stock market investments are more volatile, but they outperform savings over every time horizon greater than 5 years. As for the bank taking the return, I'm not entirely sure what you mean, but the government could surely just ban this?


Your average savings account has 2% interest, and your average inflation rate is around 3%, so no.

As far as stock markets, every couple years your going to have everyone loosing their pensions (and bankers getting rich).

As for the bank taking the return, what I mean is when they make an investment they pocket most of the return, giving you a small part of it, thats how bankers make money.


Exactly, hence my "greater than 5 years" comment. I don't think it's wise to ignore the large long term returns on stocks because of temporary blips.


ITs not temporary blips, the stock market failed in 1930, due to heavy intervention it survived, in the 80s when it was deregulated it started to fail again in the 2000s. The stock market is'nt overall stable. Capitalism is a failing system.


This system could be implemented in a country with a highly progressive tax structure or a highly regressive tax structure; it doesn't make any difference to the system itself. Would you accept the system if the effective marginal tax rate on the rich didn't decrease?

No because the system itself IS a sort of regressive tax, also no, unless the tax rate actually because progressive I'm not gonna except it, the status quo is radically regressive.


How do the banks make money from them? The only thing I can think of is through charging management fees for investments, but investments are a voluntary part of the system, so they will not be making money from poor people "by law". If you disagree with charging management fees then the government could ban them, in which case I don't see any way for the banks to make money from the poor by law.

Theres a reason banks accept savings accounts, because they make money. How are you going to get banks to play along with the program unless they are going to make money.

[Comrade Anarchist]

Yah privatizing social security is bullshit. It ought to be done away with all together.

[Skooma Addict]

The point is that money doesn't conserve energy.



I don't know what that means.


So you admit that you don't know what the difference between micro and macro is?

Nobody has any idea what it is you are talking about.

[#FF0000]

Yah privatizing social security is bullshit. It ought to be done away with all together.

lol so goddamn cute

[Kotze]

I didn't say anything about whether the central bank is a separate entity from the government, and I wasn't relying on such a claim for anything. O RLY? Let's take a look at an earlier post of yours:
If the government increased its own spending (...) above target [of the central bank], the central bank would contract the money supply
All I argued was that fiscal policy is ineffective when monetary policy is operational. Translation:
I am not making any claim whatsoever about whether the central bank is a separate entitity from the government. Never ever did I imply anything about that. All I say is that if the central bank does everything to counteract the government — whether the central bank can be seen as a part of the government or not, for example let's say the central bank is a totally subordinated and loyal part of the government, but the government wants the central bank to do everything to counteract the government — then wouldn't the central bank counteract the government? So there. Ain't I clever hurf durf.5 years of economics, huh.

The problem with claims like "it would be better to move to a system that is not so vulnerable to changes in demographics" (inyourhouse) or "people need to grow up and take care of themselves" (Bud Struggle) is that they don't make sense from the bird's eye view.

When you talk with an individual it can be sensible advice to tell him to put more aside for retirement than others if he is in the privileged position that he can afford it in the first place, so that he may enjoy a higher standard of living in retirement than others. Now take the bird's eye view. When people grow too old to work they are dependent on other people. Does it go into your head? When people grow too old to work they are dependent on other people, no matter how the system of retirement payments is structured. What old people will get in the future will depend on the level of productivity in the future and what the political decision about how to divide that cake will be.

[inyourhouse]

Actually the first part is untrue, after 2037, the trust fund will no longer have extra in it, but still around 80% of benefits would still be available to give out, WITHOUT any outside increases and WITH the current raiding that happened, and WITHOUT getting rid of caps.

Yes, payroll taxes will still be sufficient to cover benefits if benefits are reduced, but why would a socialist be in favour of that? Under the system I'm proposing, it's not necessary for benefits to be reduced in the long term.


Adusted for inflation its very unlikely that a savings account will yield any actual retrun.

The average annual interest rate on savings between 1962 and 2009 (ie. 47 years, which is the period between adulthood and retirement) was approximately 5.52%[1]. Over the same period, the average annual inflation rate was approximately 3.63%[2]. So the average annual real return on savings was 1.89% (5.52%-3.63%). That calculation was based on short-term savings rates (using Treasury bills as a proxy). However, the accounts in the system I proposed would be more like long term time deposits and would thus attract a higher interest rate.

[1] http://www.federalreserve.gov/releases/h15/data/Annual/H15_TB_Y1.txt
[2] http://research.stlouisfed.org/fred2/data/GDPDEF.txt


Also the Trust fund is also invested (safely, not up to bank managers looking for a profit).

The Trust Fund is invested in government securities so it's essentially just a claim on future tax receipts, which makes it vulnerable to the demographics problem.


As far as the difference, I doubt there would be that much if any, so your gonna have to raise taxes anyway.

If that is the case, at least the tax rises would be less than the amount necessary to keep the current system functioning.


Also, this is going to be a HUGE regressive system, i.e. where the poor have to pay more of a percentage than the rich of their income, in order to get even slightly close to the type of retirement the rich have.

It would be a proportional system (like the current system), where a flat rate is paid on all payrolls into a savings account up to a certain amount (ie. a cap). Essentially it's identical to the current system, except the returns are higher. You could even tax payrolls above the cap to help fund top-ups.


I checked the link and there was not graph or anything.

That's because it's just an abstract from the full article.


What I do know is iceland is'nt doing so well, neither is argentina and the US, all of which adopted the milton freedman approach to economics.

Anecdotal evidence is not a firm basis for an argument. A scientific analysis shows that higher tax rates lead to lower economic growth.


However to suggest that corporations would simply give up on making money even though their taxes are raised and might thus have to make less profits is rediculous.

Nobody has suggested that corporations simply stop making money when taxes are raised.


Except that every couple years people will loose their pensions when the market crashed.

The DJIA, the NASDAQ and the S&P500 have never fallen to 0. In any case, the investment would be entirely voluntary. Those who wish to do so can simply retire based on what they have earned through interest on their savings.


No the idea that wall street having more money will be good for everyone.

I never said that Wall Street having more money will be good for everyone. I said that higher rates of saving and investment would benefit both Wall Street and the general population. It would be fallacious to conclude from that that anything that benefits Wall Street benefits the general population, which is clearly false.


Your average savings account has 2% interest, and your average inflation rate is around 3%, so no.

Where did you get these figures? They differ substantially from the ones I listed above.


As for the bank taking the return, what I mean is when they make an investment they pocket most of the return, giving you a small part of it, thats how bankers make money.

Management fees, yes. The government could cap this amount, though (e.g. a maximum of 5% of the total return goes to the bank).


ITs not temporary blips, the stock market failed in 1930, due to heavy intervention it survived, in the 80s when it was deregulated it started to fail again in the 2000s. The stock market is'nt overall stable. Capitalism is a failing system.

They were temporary blips, hence why the average annual return on stocks over long periods is positive. The stock market is thus stable in the long run, as is capitalism (hence growth being positive in the long run). This is another issue, but what makes growth and the stock market more volatile is poor monetary policy. I'm in favour of the Federal Reserve targeting nominal GDP growth so as to stabilize aggregate demand, which should make recessions much smaller and shorter.


Theres a reason banks accept savings accounts, because they make money.

Yes, they make money because they loan out the funds used, but they do not take money from the saver. The saver always makes a return in the long run.


Translation:

It's clear that I was merely referring to operational independence, which is standard practice in developed economies. In other words, the central bank tries to hit some target (e.g. 2% long run inflation) independent of other factors, such as fiscal policy. Under such a scenario, fiscal policy is ineffective. Yes, you could end central bank independence and control monetary policy directly through the Treasury (although this is vulnerable to abuse for political gain), but the point still stands. If the Treasury is aiming for some target through monetary policy, then that will offset whatever fiscal policy decisions they make. The only way fiscal policy can be effective is if monetary policy has no target, which seems like a dangerous and inefficient method of stabilizing aggregate demand.


When people grow too old to work they are dependent on other people. Does it go into your head? When people grow too old to work they are dependent on other people, no matter how the system of retirement payments is structured.

To some degree any system will be, yes, but every system is not equally vulnerable to demographic change. The system I'm proposing is much less vulnerable because only the top-up part is effected by future taxing and spending decisions. The accumulated savings and investments are there no matter what happens demographically. I'm still not sure about what this has to do with the conservation of energy, however.

[Dean]

Yah privatizing social security is bullshit. It ought to be done away with all together.
Yes, a system of saving which people pay into in the furtherance of retirement benefits should be done away with. How do you plan on compensating those who have paid into the system or those who willingly agree to it?

[RGacky3]

but why would a socialist be in favour of that? Under the system I'm proposing, it's not necessary for benefits to be reduced in the long term.


Because keeping the funds in democratic control is more important, but I'm not supporting cuts even in 2037, at that type thats when the government should start subsidising the social security deficit (top ups, except its not in wall streets hands).


If that is the case, at least the tax rises would be less than the amount necessary to keep the current system functioning.


At the cost of loosing democratic control.


It would be a proportional system (like the current system), where a flat rate is paid on all payrolls into a savings account up to a certain amount (ie. a cap). Essentially it's identical to the current system, except the returns are higher. You could even tax payrolls above the cap to help fund top-ups.


But its a personal account, meaning the the money is'nt pooled, meaning the rich get WAYYY WAYYY more than the poor.


Anecdotal evidence is not a firm basis for an argument.

If empirical evidence is consistant, yes it is.


Nobody has suggested that corporations simply stop making money when taxes are raised.


But the argument is that with taxes, corporations would be disinsnetivized to invest, if there is a market that is profitable, they'll invest, whether the profit is big or small.


I said that higher rates of saving and investment would benefit both Wall Street and the general population.

When banks crash (which happens every couple decades), the tax payer has to bail them out anyway.


Where did you get these figures? They differ substantially from the ones I listed above.


just based on most savings accounts in major banks.


Management fees, yes. The government could cap this amount, though (e.g. a maximum of 5% of the total return goes to the bank).

If a bank is'nt making a real profit it won't participate in the program.

BTW, why not just allow the government to invest social security elsewhere?


They were temporary blips, hence why the average annual return on stocks over long periods is positive. The stock market is thus stable in the long run, as is capitalism (hence growth being positive in the long run). This is another issue, but what makes growth and the stock market more volatile is poor monetary policy. I'm in favour of the Federal Reserve targeting nominal GDP growth so as to stabilize aggregate demand, which should make recessions much smaller and shorter.


When the stock market crashed in 1930, huge regulations were put in place that helped it survive, when it was deregulated, 20 years later it crashed again. The stock market is'nt sustainable without huge government regulation.

But heres a question? Why not juts allow the government to invest social security, in certain investments, that way higher returns, and we keep democratic control?

[Left-Reasoning]

Social Security payments need to be abolished. Increase taxes on the rich to pay for the benefits.

[Dean]

Social Security payments need to be abolished. Increase taxes on the rich to pay for the benefits.

Ah, you're finally rejecting liberal market reform. Refreshing!

[Left-Reasoning]

Ah, you're finally rejecting liberal market reform. Refreshing!

I see nothing reformist about the complete abolition of the State. If anything, my advocacy of Social Security benefits, at least in the short term, they would be unnecessary in a truly Freed Market, is reformist.