Social (in)Security

[Gimpy]

Originally Posted by SuperScout

Your grasp for the obvious is overwhelming. Not surprisingly, the SS program is 'the most popular' of all giveaways. It is no more different of asking lottery winners if they want the money. Duhhhh!

And some of your responses are totally indicative of your lack of knowledge of finance and economics. For a governmental agency, designed to serve taxpayers with taxpayers' money, to buy government bonds, and then task the verysame taxpayers to pay the interest on the government bonds is akin to the starving man who cuts off one of his toes, cooks it over his campfire in the homeless compound, and then wonders (1) why his foot hurts, and (2) which toe to cut off next. The proof of the lie upon which the SS system was predicated was that workers could start receiving benefits at age 65. Actuarial tables in 1933 indicated that the average life expectantcy was less than 65, meaning that generally only the white collar folks, not the blue collar people or the folks that bought into the drivel that FDR was peddling, would ever benefit by the age 65 entry level. So the 'little people' are taxed progressively higher than the white collar people, and never get the benefit. For the 40+ years that Da Dims were in power, they could have fixed this egregious error, or raised the earning limits, or done a multitude of imporvements to the SS system, but Da Dims sat on their hands and other body parts, kept their collective and collectivist heads up their collectivst arses, and now are unwilling or unable to fix the problem.

Budget surpluses or deficits have nothing to do with the actuarial mess that personifies the SS system. That's a red herring, and anyone with the IQ of a radish would know it.

You really are a comedian, ya know!

You should take your show on the road, away from that "State of Confusion" you're in.

You'd be a riot in most places. Especially at most institutions of higher learning where they offer degrees in "Economics"!

You cannot and WILL NOT change the "F-A-C-T-S" as the MAJORITY of this nations economic EXPERTS have established!

Just because you can't see through your own bias and prejudice don't change the F-A-C-T-S!

I'll be more than glad to produce untold numbers of verifiable evidence to the contrary of your opinion if you persist to offer up more nonsense from the RNC talking points if you prefer?

But, then again----------you STILL would be in that constant "State of Confusion", wouldn't you?

So, why bother, right?

They are ALL WRONG----------and YOU and your minions of propagandists are RIGHT!

Yeah RIGHT!---------Give us a phuckin break, will ya? Don't you EVER get tired of looking so foolish to folks around here???

Just asking.

Yo Frand,

The "FACTUAL" Gimpster

[MORTARDUDE]

Gimpy :

If the IRS had to deal with a private business that ran its accounting system like our government does, it would put them out of business and their owners in jail. Our government is in a debt hole it will never come out of. The Social Security Trust Fund is filled with IOUs that will become worthless. Period. End of story.

This was written 3 1/2 years ago.

".....Government doesn't follow this accounting rule. If it did, the federal deficit in 2004 would be $8 trillion, not $422 billion. The $8 trillion reflects the value of new financial obligations Congress approved without anyway to pay for them, plus the year's operating deficit...."

"....Government accounting rules are more lenient because, unlike a business, Congress can take whatever money it needs through taxes and renege on promises by passing new laws. Theoretically, the President and Congress could end all health care for the elderly tomorrow and cease Social Security payments the next day — or double or triple tax rates to pay the bills....."


http://www.usatoday.com/news/nation/...bt-cover_x.htm

Posted 10/3/2004 11:38 PM Updated 10/5/2004 9:41 PM


The Looming National Benefit Crisis


By Dennis Cauchon and John Waggoner, USA TODAY
The long-term economic health of the United States is threatened by $53 trillion in government debts and liabilities that start to come due in four years when baby boomers begin to retire. (Related graphic: U.S. economy threatened by aging of America)
The "Greatest Generation" and its baby-boom children have promised themselves benefits unprecedented in size and scope. Many leading economists say that even the world's most prosperous economy cannot fulfill these promises without a crushing increase in taxes — and perhaps not even then.

Neither President Bush nor John Kerry is addressing the issue in detail as they campaign for the White House.

A USA TODAY analysis found that the nation's hidden debt — Americans' obligation today as taxpayers — is more than five times the $9.5 trillion they owe on mortgages, car loans, credit cards and other personal debt.

This hidden debt equals $473,456 per household, dwarfing the $84,454 each household owes in personal debt.

The $53 trillion is what federal, state and local governments need immediately — stashed away, earning interest, beyond the $3 trillion in taxes collected last year — to repay debts and honor future benefits promised under Medicare, Social Security and government pensions. And like an unpaid credit card balance accumulating interest, the problem grows by more than $1 trillion every year that action to pay down the debt is delayed.

"As a nation, we may have already made promises to coming generations of retirees that we will be unable to fulfill," Federal Reserve Chairman Alan Greenspan told the House Budget Committee last month. (Related story: Americans' views on the benefit quandary)

Greenspan and economists from both political parties warn that the nation's economy is at risk from these fast-approaching costs. If action isn't taken soon — when baby boomers are still working and contributing payroll taxes— the consequences may be catastrophic, some economists say.

The worst-case scenario is a sudden crisis — perhaps a major terrorist attack or a shutoff of oil from the Middle East — that triggers a loss of confidence by investors in the U.S. economy. Foreign investors refuse to lend more money to the government to finance its deficits; drastic tax increases and benefit cuts occur suddenly; the dollar's value plummets, which raises the cost of imported goods; and a severe recession or depression results from falling incomes.

A softer landing: The USA acts swiftly and becomes more like Europe. Taxes are higher, retirement benefits are less generous but widely distributed; health care costs are controlled; and the economy is sound but less productive.

Big payments on the debt start coming due in 2008, when the first of 78 million baby boomers — the generation born from 1946 to 1964 — qualify at age 62 for early retirement benefits from Social Security. The costs start mushrooming in 2011, when the first boomers turn 65 and qualify for taxpayer-funded Medicare.

Early warning signs

But Americans needn't wait until 2008 or 2011 to see firsthand the escalating costs of these benefit programs. Medicare last month announced the largest premium increase in the program's 39-year history. In 2004 alone, federal spending on Medicare and Social Security will increase $45 billion, to $789 billion. That one-year increase is more than the $28 billion budget of the Department of Homeland Security.

Many economists say a failure to confront the nation's debt promptly will only delay the inevitable.

"The baby boomers and the Greatest Generation are delivering an economic disaster to their children," says Laurence Kotlikoff, a Boston University economist and co-author of The Coming Generational Storm, a book about the national debt. "We should be ashamed of ourselves."

USA TODAY used official government numbers to compute what the burden means to the average American household. To pay the obligations of federal, state and local government:

• All federal taxes would have to double immediately and permanently. A household earning $100,000 a year would see its federal taxes double from an average of about $20,000 to $40,000 a year. All state taxes would have to increase 20% immediately and permanently.

• Or, benefits for Social Security, Medicare and government pensions would have to be slashed in half immediately and permanently. Social Security checks would be cut from an average of $1,500 per month for couples to $750. Military pensions would drop from an average of $1,782 per month to $891. Medicare spending would fall from $7,500 to $3,750 annually per senior. The Medicare prescription-drug benefit enacted last year would be canceled.

•Or, a combination of tax hikes and benefit cuts — such as a 50% increase in taxes and a 25% reduction in benefits — would avoid the extremes but still require painful changes that are outside the scope of today's political debate. Savings also could come in the form of price controls on prescription drugs, raising retirement ages and limiting benefits to the affluent.

Every solution has the potential to damage the economy by reducing disposable income or diverting economic resources.

The estimates computed by USA TODAY are similar to ones by government watchdog agencies such as the Congressional Budget Office and the Government Accountability Office and respected think tanks such as the conservative American Enterprise Institute, the liberal Brookings Institution and the non-partisan Urban Institute.

"Political leaders know this is a big problem," says Glenn Hubbard, chairman of the Council of Economic Advisers for President Bush from 2001 to 2003. "I know the president is keenly aware. But in an election year, it's not easy to talk about. The solutions may be very painful. If he is re-elected, I think he will make this a top priority next year. I hope so."

"Economists agree this cannot go on," says Joseph Stiglitz, President Clinton's chief economic adviser from 1995 to 1997. "We can borrow and borrow, but eventually there will be a day of reckoning."

Economist James Galbraith of the University of Texas in Austin is a rare optimist in this debate. "I'm not at all concerned about Medicare or Social Security," Galbraith says. "Unless the government goes broke, Medicare isn't going to go broke, and the U.S. government isn't going to go broke because it can print money."

Galbraith says the country can handle higher tax rates, as Europeans do, and can save money by cutting spending elsewhere, such as on defense, and by implementing a Canadian-style health care system that uses private doctors and hospitals but has the government set prices and pay the bills.

"We are an enormously rich country," he says. "Providing health care and a modest living for our elderly is certainly something we can afford."

An aging population

Social Security was created in 1935 to help the elderly avoid poverty during the Great Depression. Medicare was established in 1965 to provide health care for the elderly, who were finding it increasingly difficult to afford medical care. But the aging of America and a declining birth rate have put these programs on a collision course with financial reality.

When the government set 65 as the retirement age in the 1930s, most people didn't live that long. But life expectancy for women has increased from 66 to 80 since 1940 and for men from 61 to 75.

Meanwhile, the birth rate has dropped from 25 births per 1,000 residents in the 1950s to just 15 today. The lower birth rate ultimately means fewer workers paying taxes to finance Social Security and Medicare benefits for the rapidly growing population of people 65 and over.

Medicare has had about 3.3 workers paying taxes for every recipient for the past 30 years. Baby boomer retirements will reduce that to just two workers supporting every Medicare recipient in 2040.

Immigration has helped offset some of the decline in birth rates. But immigration rates would have to increase by five or 10 times — above the recent peak of 1.2 million in 2001, legal and illegal — to provide enough workers and their payroll taxes to boost Medicare.

Medicare recipients are growing older and more expensive, too. Annual medical costs for an 85-year-old are double those of a 65-year-old. Federal spending per Medicare recipient will average $7,500 this year. The official projection for 2050: $26,683 per recipient in 2004 dollars.

A problem in plain view

The scope of the problem is no secret in Washington.

Medicare and Social Security trustees report the obvious every year: The system has no way to pay for itself, even under the rosiest scenarios. The Congressional Budget Office regularly updates Congress on the liabilities.

Bush's budget for the fiscal year that began Friday spells out the numbers in detail and concludes, "These long-term budget projections show clearly that the budget is on an unsustainable path."

Comptroller General David Walker, the government's chief accountant, travels the nation warning of the impending crisis. "I am desperately trying to get people to understand the significance of this for our country, our children, our grandchildren," Walker says. "How this is resolved could affect not only our economic security but our national security. We're heading to a future where we'll have to double federal taxes or cut federal spending by 50%."

But documentation of the problem hasn't prompted political action to address it. The $4.2 trillion national debt has generated some debate in Congress and the presidential campaign. But the government's obligations for Medicare and Social Security are 10 times the size of the national debt.

"We have instructed our politicians not to tell us about this problem," says Boston University economist Kotlikoff. "If they even mention cuts to Social Security, we vote them out of office."

Grim financial statement

To bring attention to the problem, USA TODAY prepared a consolidated financial statement for taxpayers, similar to what corporations give shareholders. The newspaper totaled federal, state and local government liabilities, taken from official documents.

Key findings:

•Total hidden debt. Federal, state and local governments today have debts and "unfunded liabilities" of $53 trillion, or $473,456 per household. An unfunded liability is the difference, valued in today's dollars, between what current law requires the government to pay and what current law provides in projected tax revenue.

•Social Security. The retirement program has $12.7 trillion in obligations it cannot meet for current workers and retirees at the current Social Security tax rate.

•Medicare. The health care program has a $30 trillion unfunded liability for people now in the system as workers or beneficiaries. The $30 trillion reflects the value today of the more than $200 trillion in deficits over 75 years to cover current workers and retirees at existing levels of benefits, tax rates and premiums. Medicare's new prescription-drug benefit, which starts in 2006, accounts for $6.9 trillion of the program's financial ill health.

How much is $30 trillion? The gross domestic product, the entire economic output of the USA, was $11 trillion last year.

"These numbers are staggering in their magnitude," says economist Thomas Saving, whom Bush appointed as a public trustee on the Medicare and Social Security board. "But when I testify before Congress, I'm the only one saying, 'We have a funding problem.' Everyone else is testifying for more benefits."

Like a home mortgage

The $53 trillion in liabilities is like a mortgage balance: That's what it would cost to pay off the debt now. The actual cost would be higher because of interest payments. A $100,000 mortgage at 5% interest, for example, actually requires $193,000 in income to repay over 30 years.

Under corporate accounting rules, a corporation would record a $100,000 liability on its books if it promised to pay $193,000 in medical benefits over 30 years. That liability would reduce profits immediately, when the promise was made, although the money would be paid over 30 years. Otherwise, shareholders could be fooled into thinking that the company was better off than it really was.

In fact, the company had committed $193,000 in future revenue — worth $100,000 today — to a retiree and couldn't use the money for shareholder profits.

Government doesn't follow this accounting rule. If it did, the federal deficit in 2004 would be $8 trillion, not $422 billion. The $8 trillion reflects the value of new financial obligations Congress approved without any way to pay for them,plus the year's operating deficit.

Government accounting rules are more lenient because, unlike a business, Congress can take whatever money it needs through taxes and renege on promises by passing new laws. Theoretically, the president and Congress could end all health care for the elderly tomorrow and cease Social Security payments the next day — or double or triple tax rates to pay the bills.

That's why AARP, a non-partisan lobbying group for people over 50, says the unfunded promises of Medicare and Social Security are less worrisome than they appear.

"The reason we make companies fund their pension liabilities is because it's uncertain they'll be around in the future. That doesn't apply to government," says John Rother, AARP's research director. "The size of the liabilities isn't relevant, nor is how much we put aside today. What matters is how healthy will the economy be in the future."

He agrees that Medicare has a long-term funding problem but says the nation's entire health system is the issue, not Medicare.

Alan Auerbach, director of the Burch Center for Tax Policy and Public Finance at the University of California-Berkeley, says people are understandably skeptical about gloomy predictions. But he says these numbers are not guesses.

"We can't predict major wars or major inventions," he says. "But we do know the baby boomers aren't going to disappear. We know pretty well that health care costs will rise because of new technology. I wish these were worst-case scenarios, but they're rather cautious best guesses. It could be much worse."

A bill coming due

The heart of the problem is that the Greatest Generation and baby boomers have promised themselves retirement benefits so generous — and have contributed so little to financing them — that even the most prosperous economy in history cannot pay the bill.

Consider a married couple who throughout their lives earned the median income — the amount at which half of Americans make more and half make less — and who will retire at age 65 next year. They earned $46,400 in their final year of work.

Mr. and Mrs. Median would get a joint Medicare benefit valued at $283,500, the Urban Institute estimates. That's the present value of the benefit — what it's worth today — not the larger amount the government will actually pay over the years. But the couple would have paid only $43,300 in Medicare taxes (valued in 2004 dollars). Taxpayers lose $240,200 on the deal.

But the Medians' good fortune doesn't end there. They also qualify for $22,900 in annual Social Security benefits, which rise annually with inflation.

Present value of the Social Security benefit: $326,000. Present value of Social Security taxes paid over a lifetime: $198,000.

Net loss to taxpayers: $128,000.

And the situation is worse than that. The federal government didn't save the money that the Medians paid in Medicare and Social Security taxes. It spent that money as it came in on other things — defense, education, past Medicare costs, etc. So the Social Security and Medicare taxes paid by Mr. and Mrs. Median won't help offset the cost of their benefits. The Social Security and Medicare trust funds have no money, only IOUs that other taxpayers must repay.

"These mythical trust funds are a financial oxymoron — they can't be trusted and they aren't funded," says Peter Peterson, a businessman and Commerce secretary under President Nixon who wrote the best seller Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It.

Because the trust funds have been spent, taxpayers must come up with the full $609,500 that Mr. and Mrs. Median are entitled to under Medicare and Social Security. And the Medians are a bargain compared with what their 45-year-old children will cost.

Social Security is structured so that future generations get increasingly large benefits. And Medicare benefits rise with soaring health care costs.

The Medians' children would receive Social Security and Medicare benefits with a present value of $884,000 in 2004 dollars when they turn 65, according to the Urban Institute. That's 45% more than their parents would get.

For Hubbard, now dean of the Columbia Business School in New York, the stakes are clear: "The question is whether the political process will make gradual changes or we'll wait for a crisis."

[MORTARDUDE]

"....Foreign investors held more than 38 percent of the $4 trillion in U.S. Treasury bonds....."

This article is from march 2005

http://www.foreignaffairs.org/200503...etch-myth.html


Unpacking the NIIP gives a better sense of the risk it actually poses. It has two components: direct investment, the value of domestic operations directly controlled by a foreign company; and financial liabilities, the value of stocks, bonds, and bank deposits held overseas. At the start of 2004, foreign direct investment in the United States was $2.4 trillion, while U.S. direct investment abroad was about $2.7 trillion. (Direct investment is relatively stable, changing mostly in response to changes in expected long-term profitability.) Removing direct investment from the equation leaves $5.1 trillion in U.S.-held foreign financial assets versus $8.1 trillion in U.S. financial assets held by foreign investors.

This last figure represents a whopping 74 percent of U.S. GDP--a statistic that would seem to give ample cause for alarm. But considering foreign ownership of U.S. financial assets as a percentage of GDP is less enlightening than comparing it to the total available stock of U.S. financial assets. At the start of 2004, total U.S. securities amounted to $33.4 trillion (some 50 percent of the world total). Foreign investors held more than 38 percent of the $4 trillion in U.S. Treasury bonds, but only 11 percent of the $6.1 trillion in agency bonds (such as those issued by Fannie Mae and Freddie Mac); 23 percent of the $6.5 trillion in corporate bonds; and 11 percent of the $15.5 trillion in equities outstanding. These foreign liabilities are the result of a string of current account deficits that have grown from 1.5 percent of GDP in the mid-1990s to an estimated 5.7 percent of GDP--about $650 billion--in 2004. Economists at the Organization for Economic Cooperation and Development estimate that ongoing deficits of 3 percent of GDP would bring the U.S. NIIP to -40 percent of GDP by 2010, and that it would eventually stabilize at around -63 percent. If the deficit remains at today's level, they foresee the NIIP growing to -50 percent of GDP by 2010 and eventually to -100 percent.

[Gimpy]

Sorry it took so long to get back to you on this, I've been out most of the day.


Anyway, here goes.


I'm not saying this country is good shape financially, what I am saying is that there IS a better way to solve our problems than what the neo-con agenda has given us and have proposed. Plain & simple.


Certainly BOTH political partys share much of the "blame" for where we find ourselves now.


But, simple logic and sound reasoning will more than prove that the past 7 to 8 years of Repulican/neo-con policies and agenda has done NOTHING to help our countries financial condition. And, have in fact made things WORSE than they have been since the Great Depression.


And it's not just ME saying this............I have been researching this for a number of years now and have found that a majority of this nations MOST RESPECTED and HIGHLY QUALIFIED economic experts agree with what I'm saying.


The Levy Economics Institute of Bard College is a nonprofit, nonpartisan, public policy research organization. The Levy Institute is independent of any political or other affiliation, and encourages diversity of opinion in the examination of economic policy issues while striving to transform ideological arguments into informed debate.


Their Board of Governors include:

Lakshman Achuthan Managing Director, Economic Cycle Research Institute (ECRI)

Leon Botstein President, Bard College

Bruce C. Greenwald Professor of Finance and Asset Management, Columbia University

Martin L. Leibowitz Managing Director, Morgan Stanley

J. Ezra Merkin President, Gabriel Capital Group

Dimitri B. Papadimitriou President, The Levy Economics Institute, and Jerome
Levy Professor of Economics and Executive Vice President, Bard College

Joseph Stiglitz Professor of Finance and Economics, Columbia University

William Julius Wilson Lewis P. and Linda L. Geyser University Professor, Harvard University


Here is just one "policy statement" they have published on this subject.

###START###


MANUFACTURING A CRISIS:

THE NEOCON ATTACK ON SOCIAL SECURITY



By Randall Wray --- Senior Scholar at LEI and professor of economics at the University of Missouri–Kansas City and research director at the Center for Full Employment and Price Stability.

The Levy Economics Institute is publishing this research with the conviction that it is a constructive and positive contribution to the discussion on relevant policy issues.


For seven decades, the far right has never veered from its avowed mission to gut America’s most comprehensive, successful, and popular safety net: Social Security. While it had won a few small battles (most notably, the Greenspan Commission’s huge 1983 payroll tax hikes and two-year increase in the normal retirement age), its efforts never gained much political traction before 2000. Ironically, the Clinton administration provided some much-needed support to the conservative think tanks’ preposterous claim that Social Security faces financial Armageddon. And candidate Al Gore’s only significant campaign issue involved maintaining “lockboxes” to protect the trust fund by dedicating a portion of projected 15-year budget surpluses to the program.


Those Clinton-era budget surpluses proved to possess a half-life shorter than that of the latest American Idol runner-up (especially under the leadership of G.W. Bush), but the Democratic Party’s fib-and-flub may have done lasting damage to public confidence in the program’s promises. Even as Social Security’s supporters (rightly) object to the use of the word “crisis” in neoconservative propaganda, Republicans (rightly) remind us that President Clinton used the same word.


And given that the Clinton-Gore option of using budget surpluses to “save” the program is now moot, there is little wonder that the plan proposed by Bush’s 2001 President’s Commission on Social Security Reform, which would include a partial privatization, has been resurrected.2 The neocons are quite literally drooling with anticipation in recognition that they are closer than they’ve ever been to realizing their dream of creating a nation free of social safety nets, “one of the most significant conservative governing achievements ever,” as Peter Wehner (Whithouse Budget Director) oozed in his not-for-attribution internal memo.


In truth, all objective analyses show Social Security running huge surpluses through 2018, which will continue to add to the trust fund’s current assets of more than $1.5 trillion; indeed, projected total program revenues will cover all promised benefits for nearly four decades, after which the Social Security trustees’ intermediate assumptions suppose that program revenues will cover about three-quarters of promised benefits.


The White House has apparently enlisted its appointees at the Social Security Administration in its efforts to put a negative spin on these numbers (Pear 2005). They have joined forces with the neocons to talk about 10.5 or 11 trillions of dollars of “unfunded obligations” through a fantastical infinite horizon. However, as the actuary David Langer has long argued, the assumptions used in those intermediate projections have consistently proved to be overly pessimistic, and on more realistic assumptions (what the trustees label low-cost or “optimistic” assumptions—which have, in fact, proven to be spot-on over the past decade), program revenues will be more than sufficient to cover all promised benefits into the infinite future.


Leaving aside commentary on the usefulness of projecting program costs and revenues through infinity (no nation yet has ever persisted through infinite horizons), objective analysts have come up with any number of small adjustments that could eliminate even the trustees’ most pessimistic projections of shortfalls. And while the neocons continually point to an “avalanche” of baby-boomer retirements, simple math shows that Social Security is fine long after most baby boomers are dead and buried—indeed most of the projected shortfall occurs after 2079.3 In truth, any future financial shortfall results from the logic of assumed low economic growth, rising longevity, and continuation of today’s low fertility rates—not from the advertised baby-boomer bulge. Very small changes to any of these variables produce huge changes to projections of program finances carried through eternity.


The neocons nevertheless have provided President Bush with a precise year for Armageddon: 2018, when payroll tax revenues are expected to first fall short of Social Security benefit payments. While it is widely recognized that interest receipts and then trust fund bond sales will maintain program solvency through 2042 (the independent Congressional Budget Office says 2052), Social Security’s enemies argue that the program faces a crisis by 2018, because its trust funds are a fiction.


As I’ve long argued, the trust funds cannot provide external financing for one of the government’s own programs, because this is a case of the government “owing itself.” At the same time, however, this means that it is logically impossible for any one of the government’s programs to face a financial crisis on its own, because it is the overall budget that matters—not a single program’s finances.


The neocons want to have it both ways at once: they argue that because Social Security is a government program, it cannot count as assets claims on the federal government, but at the same time they claim that because Social Security’s finances are separate from the rest of the budget, the program can singly face its own financial crisis.


Logically, if we are going to treat Social Security’s finances as separate, then we must count its trust fund assets (Treasury debt) and interest earnings; in that case, it is impossible to claim that the program will be bust in 2018—it cannot face a shortfall before 2042 (or 2052). On the other hand, if Social Security is a part of the federal budget, then it cannot face insolvency unless the whole government goes bankrupt.


President Bush has willingly granted large tax reductions that amount to a reduction of tax revenue over the foreseeable future five times greater than the sum total of all the “red ink” forecast in the Social Security program by its enemies. He has done so while increasing military spending and creating prescription drug benefits that alone are as large as the Social Security shortfall.


Indeed, the projections show that over the next decade, excluding Social Security’s large surpluses, the rest of the budget will run up trillions in red ink without causing any alarm in Washington or financial markets. If governmental red ink really is problematic, these relatively certain and near-term trillions of deficits should weigh far more heavily on the public consciousness than trillions in a long-distant and highly uncertain future. In truth, a sovereign like the U.S. federal government cannot be forced into involuntary bankruptcy—a point recognized by all major bond-rating agencies. And it is not plausible to believe that either today’s or tomorrow’s policymakers will voluntarily default.


It would be easy to dismiss the current hysteria as much ado about nothing. The Bush administration has floated the idea of drastically cutting benefits in the far future, by eliminating wage indexation, so that future benefits would increase only at the rate of inflation. This would consign future retirees to a living standard that would never rise in inflation-adjusted terms. They would be able to buy only the basket of goods consumed by today’s retirees; hence, their lifestyle would fall farther and farther behind what in the future would be deemed an “American” standard of living. Such an outcome would be patently unfair and would be rejected by tomorrow’s voters.


Indeed, it is just plain silly to think that any “reform” legislated today—whether it is tax increases or benefit cuts—will constrain policymakers in 2042 or 2052.


The neocons know this. Their only real hope is to dismantle Social Security completely and to substitute “privatization” (under the cloak of the neocon slogan “ownership society”), which would produce high management fees for Wall Street and low returns for tomorrow’s seniors. With luck, this gutting of Social Security would produce sufficient hostility to the program that future voters would happily let the whole system die a timely death. While no one has publicly painted such a scenario, it certainly would qualify as the “most significant conservative governing achievement ever.”


Of course, one of the arguments for privatization is that it will somehow spur faster productivity growth. The favored mechanism is through increased saving rates that supposedly spur investment.


This is wrong on too many levels to fully address here.


For starters, however, (1) conventional estimates of increased growth attributed to additional saving are far too low to make much difference; and (2) the Bush tax cuts and Medicare drug benefits have added far more to long-term projections of budget deficits than an unreformed Social Security adds through the infinite horizon. Yet Congress passed these measures with little concern for the impact of “reduced” national saving on productivity growth. Again, all this is so confused that it embarrasses one even to confront the neocons with their own logic.


In fact, budget deficits add to nongovernmental sector savings and allow private sector–led economic growth, a point rehearsed in many Levy Institute strategic analyses and demonstrated again by actual U.S. economic performance in recent years, yet seemingly beyond the grasp of conventional wisdom.


Finally, if we really want to use government to try to encourage saving, we can do that at no additional cost over Bush’s privatization scheme and without dismantling Social Security. The neocon privatizers admit that so-called “transitional costs” could be as much as $2 trillion, as we phase in private accounts while meeting commitments to retirees and those soon to retire (Stevenson 2005). The neocons appear perfectly willing to have the federal government borrow to pay for the transition, on the argument that financial markets prefer $2 trillion of deficits in the near future if this can eliminate the prospects of $10 trillion of deficits throughout eternity—a bizarre claim.


Putting that argument aside, if these transitional deficits directly encouraged saving, and if this led to faster economic growth by raising productivity, then tomorrow’s burden on workers would be reduced. Rather than using this $2 trillion of red ink to finance transition costs, government could use it directly to subsidize voluntary personal saving accounts—by matching dollar-for-dollar deposits into approved financial instruments. This would achieve the objective of the President’s Commission to encourage savings and “ownership,” albeit without destroying Social Security’s promise to provide a safety net for those unlucky in work or investments.


However, if we really want to prepare for tomorrow’s seniors by increasing investment and productive capacity, we ought to do it directly, by putting into place the infrastructure that will be needed in an aging society: nursing homes and other long-term care facilities, independent living communities, aged-friendly public transportation systems, and senior citizen centers.


The private sector will play a role in all of this, but there is also an important role to be played by government—contrary to the wisdom of neocons, who believe that the answer to any social problem is to reduce the size of government.

###END###

Gimp

[Gimpy]

And here's another renowned and respected professional groups position on SS as recent as 2007.


###START###


The Economic Policy Institute is another highly respected nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy.

The EPIs' methods for ensuring that its research methodologies and outcomes are exemplary include the use of highly qualified researchers and multiple reviews by outside experts, including those who are known for disagreeing with EPI's values. In-house researchers maintain their standing in the academic community by publishing findings in prestigious peer-reviewed academic journals, such as the American Economic Review and the New England Journal of Medicine.





December 21, 2007 | EPI Policy Memorandum #122
Retirement Security
by Ross Eisenbrey



The financial well-being of average Americans is under assault. Rising economic inequality and increasing economic pressure on the middle class from globalization, the decline in unionization, and bad public policies are threatening the financial security of average Americans in ways we haven't seen in more than 60 years.


The Agenda for Shared Prosperity is examining every aspect of the American economy to understand its strengths and weaknesses, and to develop policies that will deliver a better result for the greatest number of our fellow citizens. Our guiding principle is that policies have to be at the scale of the problems they address.


As part of this Agenda, we have examined retirement security, and as our new Briefing Papers1 in this area show, the problems are enormous. Retirement security has been a key part of the American dream, and bad public policy is now playing a huge role in undermining it.


Thanks largely to Social Security, most Americans since the Second World War could expect to retire, to stop working before they die, and to enjoy several years of leisure at the end of their life. Increasingly, they could expect enough income from Social Security, pensions and other savings to maintain the standard of living they had while they worked, or at least something close to it. In fact, the average age of retirement fell dramatically from 1950 to 1970, from about 68 years of age to about 62.5 years, before leveling off. With growing unionization came shared prosperity and increasing pension coverage. Americans lived longer but were able to retire earlier.


But those golden years are disappearing. The conservative "you're on your own" philosophy—what we call "yo-yo economics"—has accelerated the decline of traditional pension plans, the disappearance of employer-provided healthcare, and, ironically, an erosion of personal savings. Today fewer than 20% of private-sector workers are covered by a traditional pension, and the national savings rate is near zero.


With fewer financial resources and fearful of losing health insurance, more and more of the elderly are remaining in the workforce. A quarter of those 65 and older worked in 1950, and by 1985 their employment rate had fallen to about 10%. Today it's 15% and rising. If we don't change federal policy, the dream of a decent retirement will be denied to more and more of our citizens, even as the productivity and wealth of the nation continue to increase.


So what's wrong with current policy?


First, Ronald Reagan and Congress weakened the foundation of retirement security by cutting Social Security benefits in 1983, when just the opposite was called for. Those benefit cuts, in the form of a higher retirement age, are taking effect now. Those cuts moved the program toward long-term fiscal balance, yet a two-decades-long campaign by conservative think tanks and politicians has been allowed to use a relatively small potential funding gap to weaken public confidence in Social Security. Thanks to the gullibility or complicity of the media, this effort seems to have been a success:---- most Americans under 50 years old think that Social Security won't be there for them when they need it.


However, far from being in crisis, Social Security today is the strongest part of the U.S. retirement system and will continue to be stronger and more effective than the voluntary employer-based pension system or private savings far into the future. Simple and fair changes in tax law can erase any worry about the program's funding without cutting the already modest benefit levels.


The second big policy problem has been that Congress has encouraged employers to replace traditional pension plans with individual account plans, shifting both the risk of investment loss and the cost of saving for retirement from the employer to the individual worker. A real pension guarantees a steady stream of income to retired workers—it does not shift risk onto individuals who may not be able to adequately manage it.


A 401(k) plan or IRA guarantees nothing. They are, however, cheaper for employers, and they generate tremendous fees and profits for Wall Street and financial firms. They also particularly benefit the well-off. So it's easy to see how they have achieved a measure of political success. But 401(k)s do precious little for the average worker. After 20 years of experience we can say with confidence that 401(k) plans have not built broadly shared retirement security, but instead eroded it. The nation is richer than it was 20 years ago, yet Americans nearing retirement are less prepared than they were a generation ago, and the future looks even dimmer.


Tweaking 401(k)s by making enrollment automatic and by changing their tax treatment can improve them a little, but they will never be a substitute for a defined benefit pension plan or for a strengthened Social Security system, both of which provide a guaranteed benefit at low administrative costs.


A real solution to the problem of secure and adequate retirement income can only come from a universal program, not one that depends both on the generosity of employers and the discipline, good fortune, and foresight of workers.


A new proposal prepared for EPI's Agenda for Shared Prosperity by Professor Teresa Ghilarducci presents this kind of real solution. She proposes a guaranteed retirement account (GRA) that would increase retirement income above and beyond traditional Social Security. Employees and employers would together contribute 5% of pay to the GRA, and would be guaranteed a real return on their savings. Savings would be pooled by independent managers who would be allowed to invest in the stock market, in the same way as other pension fund managers, so as to pre-fund the retirement benefits. Since the return is guaranteed, individuals would not have to face the risk of a market downturn just prior to retirement.


Adding a guaranteed retirement account to a strengthened Social Security is the surest path towards a sound and secure retirement for all Americans.


###END###


Gimp

[MORTARDUDE]

Gimpy :

Thanks for the posts. It still remains a fact that the money in the "Trust Fund" does not exist. There are IOUs, which become worth less by the day,as the U.S. dollar becomes worth less, and which are increasingly owned by foreigners. We have the spectacle now, of our largest mortgage companies kneeling and kissing the asses of oil sheiks to remain solvent. Can our government be far behind ? "Unfunded liabilities" means our government cannot pay these now. Will taxes be raised and entitlements cut to do this ? By whom and when ? With 70 Million folks from our generation looking to get the benefits that they expect and deserve, the federal budget will incresingly become more of a fantasy than it already is.

Social Security is essentially a pay-as-you-go program. In other words, current worker's payroll taxes pay current retirees benefits. But what happens as society ages and the number of retirees, relative to workers, increases? Without reform, there are only two answers: either cut benefits or force workers to pay more and more. Social Security just wasn't made for these times. In 1950 17 workers per one retiree, in 2005 3 for 1.

We are on a sliding road to economic HELL. Anyone that says this OK and we are "solvent" is flat out wrong. Imagine running your household or business like this.

Larry


http://articles.moneycentral.msn.com...lSecurity.aspx

".....What isn't in the trust fund is a big hoard of cash.

Three-quarters of the money that's collected in Social Security taxes goes right out the door again in the form of benefits to Social Security recipients. The surplus that isn't needed to pay benefits is loaned to the federal government to pay for other programs.

In return for this loan, the trust fund gets IOUs in the form of special-issue, interest-paying Treasury bonds. The interest isn't paid in cash, however; the Treasury issues the fund additional bonds for the interest amount. In 2006, the fund was credited with more than $102 billion in interest; the total value of the securities is about $2 trillion.

Critics often deride these bonds as "a bookkeeping entry" or a fiction, but they're real obligations of the U.S. government, said Steve Goss, Social Security's chief actuary. In the past, they've been cashed in when Social Security or its sister program, Medicare, temporarily ran low on funds. The last time was in the early 1980s.

"They're backed by the full faith and credit of the U.S. government," Goss said. "They're every bit as real . . . as any savings bond or Treasury bond any individual might hold in society."

The problem, of course, is that the government now owes the trust fund so much money -- and relies on its surplus so heavily -- that real problems will be created when it comes time to cash in those IOUs. Uncle Sam is going to need to find another source of income to replace the surplus (or cut spending, or borrow money from somewhere else), plus come up with cash to pay the bonds it's already issued...."

Aug 2004

http://www.cbsnews.com/stories/2004/...in638921.shtml

"....(CBS/AP) Federal Reserve Chairman Alan Greenspan said Friday that the country will face "abrupt and painful" choices if Congress does not move quickly to trim the Social Security and Medicare benefits that have been promised to the baby boom generation.

Returning to a politically explosive issue that he has addressed a number of times this year, Greenspan said that it was wrong for the government to hold out the promise of more retirement benefits than it is capable of providing.

He said this issue was particularly critical given the impending retirement of 77million baby boomers born in the two decades after World War II...."


http://www.heritage.org/Research/Soc...rity/em940.cfm

Sept. 2004

"....How the Trust Fund Operates.Workers pay their Social Security taxes through their employers. Each employer periodically sends a lump sum payment to the U.S. Treasury that includes all of the income taxes and Social Security and Medicare payroll taxes paid by both the employer and its employees.

The Treasury both receives the payroll taxes (and income taxes that higher-income retirees pay on their Social Security benefits) and pays monthly benefits on behalf of the Social Security Administration (SSA). The money stays in the Treasury's hands until it is either paid out as Social Security benefits or otherwise spent by the government. In fact, no money ever goes into the trust fund. Instead, the trust fund balance is the result of two accounting entries by the Treasury.

First, the Treasury estimates how much of the aggregate tax receipts are Social Security taxes and "credits" the Social Security trust fund with that amount. Then the Treasury "subtracts" the total amount paid in monthly Social Security benefits from the trust fund balance. No money actually changes hands; these are strictly accounting entries.

Any "money" remaining in the trust fund is converted into special-issue Treasury bonds, which are really nothing more than IOUs. In addition, the Treasury pays interest on the trust fund's balance by crediting the trust fund with additional IOUs. These are also strictly accounting entries, and again no money changes hands. After crediting the trust fund with the proper amount in IOUs, the government spends the extra Social Security tax collections just like any other tax revenue--to finance anything from aircraft carriers to education research.

At the end of 2002, the Social Security trust fund had a balance of $1.22 trillion. During 2003, the Treasury received $544 billion in Social Security taxes and paid out $406 billion in Social Security benefits. Therefore, the trust fund received $138 billion in these special-issue Treasury bonds, resulting in a trust fund balance of $1.36 trillion at the end of 2003.

Why the Social Security Trust Fund Differs from Real Trust Funds. Private-sector trust funds invest in real assets ranging from stocks and bonds to mortgages and other financial instruments. However, the Social Security trust funds are only "invested" in a special type of Treasury bond that can only be issued to and redeemed by the Social Security Administration. As the Congressional Research Service noted in a report on May 5, 1998:..."

[Packo]

I got the solution....let's throw "Universal FREE Healthcare" in on top of all this. Since Medicare is in such trouble, why not include every citizen and 300 million illegal aliens! Ah, the future looks so bright, I gotta wear shades. Well, they'll be a change in who's running things come November and all problems will go away, thank God, since all of this has only hapened in the last 8 years!

Pack the Sceptic

[reconeil]

"The Whole Truth & Nothing But The Truth"

Granted, no perpetual failure-excusing clique and/or staunchly word-twisting ideologues on earth stick together & echo each other incessantly any better, than Democrat Morally Superior phonies.
"They" have had about 60 years or so to become quite masterful at such.

Still, and as to Gimpy's and follower's yardage (both big on paste-ups) regarding quite purposefully deceiving Democrat Bull propagated about Social Security, I will instead DIFFERENTLY state some unarguable & historically accurate truths & facts on the subject.

Besides, believing the likes of Gimpy, Moore, Maher, Kennedy, Clintons, Obama or Fonda (just to mention a few) on any serious matters of national importance would actually be quite stupidly-gullible and/or asininely-idiotic,...if being kind and saying the least.

1. First, foremost & honestly, The Only DEMOCRAT to ever or last do right for The American People regarding their: "Never to be taxed" 50/50 Employer & Employee contributed towards S.S. Retirement Fund, was Franklin Delano Roosevelt. His initial intent was that Trustees of The Fund wisely keep all such F.I.C.A. monies out of grubby, greedy & "Bridge builders to nowhere" type political hands.

2. DEMOCRAT L.B. Johnson & Gang unilaterally (some rightfully say illegally) took Social Security out of its Safe & Secure withTrustees Fund Status, and placed all such monies into The General Fund, just as if merely another Tax Revenue for politicians to toy with as wanted.

"Holy Moly, gee-wiz & SURPRISE, SURPRISE" and wouldn't you know? From that day forward, The Social Security System yearly needed: "FIXING". What a surprise!

3. DEMOCRAT Jimmy Carter & Gang generously decided to give away vast sums of same personally Saved for Retirement Accounts to select foreign nationals: "NEVER HAVING PAID ONE-THIN-DIME INTO F.I.C.A.".

Private Sector executives doing so with their peoples retirement IRA's & 401Ks automatically: "Do Not Pass Go", "Do Not Collect $200" and; "Go Directly to Jail",...and QUITE RIGHTFULLY SO:..."Pilgrims".

4. DEMOCRAT VP Al ("The sky is falling" & planet melting away) Gore cast the deciding vote in The U.S. Senate to tax the: "Never to be taxed (as per FDR)" F.I.C.A. monies.
Such was apparently great for The DEMS,...but tough s--t for: "We The (Schnooks)".

Whatever, The Democrats most certainly prove that Devout Big Brother Socialism trumps
TRUE Democracy in America,...MOST EVERY TIME.

Neil