Who are these people? Can you name someone who refuses to accept that Social Security will never ever ever require any changes whatsoever? That's a fairly radical position, far more radical than disliking welfare (which is quite common). I would like to hear who this is, so that I can be reasonably assured that you're not just bullshitting.
Krugman, writes for the NYTimes I beleive.
Morgan, economics prof here at U of M.
Some of Degans sources certainly read like that.
Please note I'm saying the people who oppose any form of privitization or investment. Individuals who oppose certain forms of investment are the bulk of the populace and economists. Individuals willing to hash out some type of compromise between the extremes are who I hope will prevail.
These jokers can't even cook the books right! All their projections for SS assume an average growth rate in the economy of 1.5%. We've averaged 2.9% since 1932, which includes the Great Depression and three recessions that were FAR worse than the one we had in 2000-2001.
Have you ever heard of a safety margin? Besides which US economic growth following WWII is among the LEAST historic in history, it is not every century that the rest of the civilized world will wage a brutal war leveling huge swathes of industry, killing off entire generations worth of productive workers and go into massive hoc to you to pay for the pleasure. I might throw in the potential global economic retardants of global warming, the ever rising price of oil, or even an incompotent president who dicks over the economy. While no one can predict the exact impact any of these major economic concerns will have, they are reason to follow sound egineering principles when desiging the system to err on the side of caution.
This is my biggest problem with a pay as you go system. The only way to make up for a problem like prolonged recession caused by global warming would be to increase taxation or float debt. Assuming that both of these options are always going to be viable is a bad idea. Investment gives the system more breathing room, which is why virtually every private entity that offers retirement funds opts NOT to establish a pay as you go system. Indeed most private systems have room to add a decent PROFIT on top of the system because it performs better.
No, it is not a gamble most people win. They certainly do not win it during periods of an extended bear market or when the values fluxuate wildly. But nice try arguing purely from theory as opposed to actual practise.
Obviously investing in the stock market for your retirement is a bad idea because an extended bear market of wildly fluxuating values is much less efficient than investing in bonds. This is why every reputable retirement management firm abhors stock investment and encourages prospective retirees to only invest in bonds. Likewise corporate retirement plans hold no stocks because the risk is too great
Wildly fluxuating values? Sell out over a long period of time thus such swings will be averaged out.
A protracted bear market? Is offset by a protracted bull market and during that period in time the government will collect more revenue.
It is not like a pay as you go system has no worries on the flip side. Protracted high unemployment? Oh damn falling revenue with steady or growing outlays.
Or how about a real shocker, falling wages? Long term decrease in revenue, real winner there.
I have few problems with a government run investment program so that the program can actually compound interest at something better than treasury rates and use its size and longevity to average out market flucuations.
Uh huh... As for this latest drivel of yours:
Allow me to refresh:
You: " The only "crisis" truly looming is the fact that the most recent two generations haven't had the same bump in growth as the Baby Boomers did. "
Me: The fiscal crisis gets worse after the baby boomers are dead and gone.
A full hundred years from now the system has a shortfall and the trendline is for an INCREASING shortfall as time goes on.
Now for your sources:
Social Security is going to get more expensive over time, but it's not going to keep getting more expensive forever. Starting in about a decade costs will go up, but then, after about 20 years, they'll flatten out.
BS. The actual source material from the CBO says otherwise, after 2055 the costs will slowly rise.
What's more, when you start to study the trustees' projections, you realize that even their "intermediate" projection is pretty conservative. It's quite possible that if we leave the system completely alone it will be fine. And even if it's not, there's plenty of time to make the small tweaks necessary to keep it properly funded.
Small tweaks? In other words leave alone for now and then when you have less time for things interest compounding, possibly a worse global economy
It may come as a surprise to many readers that the main reason for this projected shortfall in the second half of the seventy-five year planning period is not the retirement of the baby boom generation. Actuarially, the main reason is that people are living longer.
Oh yes the only problem is the baby boom
But it's a problem of modest size. The report finds that extending the life of the trust fund into the 22nd century, with no change in benefits, would require additional revenues equal to only 0.54 percent of G.D.P. That's less than 3 percent of federal spending - less than we're currently spending in Iraq. And it's only about one-quarter of the revenue lost each year because of President Bush's tax cuts - roughly equal to the fraction of those cuts that goes to people with incomes over $500,000 a year.
In other words in order to fund the benifits of people who paid in now, the future workers will have to pay in more. What Krugman implicitly grants here is that in order to maintain the same level of benifits, workers of the future will have TO BE TAXED MORE.
As I said before if a pay as you go system is going to give a positive return you have two options:
1. Have an expanding base of people paying in.
2. Have the new guys pay in more.
These IOUs, however, are U.S. Treasury bonds, considered far and wide to be the safest investment in the world. In times of grave national crisis, from the Revolutionary War to World War II, the federal government has financed its activities be issuing these bonds -- and they've always been repaid.
Sigh, as I noted before bonds carrying their own risks ... notably inflation. Unless social security is sitting on nothing but I-bonds (and making far less in interest) you run the risk that those bonds will lose real value to inflation. Also the problem of general default cannot be overlooked. One can talk about how the deficit is Bush's fault all you like, but the debt market has to remain stable for the next 50 years out. Assuming that past performance is an indicator of future returns, particularly given the fiscal stupidity congress spews out these days, is not my idea of a robust system.
Oops, look at that —the header of the chart seen at the CBO website says "Potential rate of Social Security Outlays and Revenues UNDER CURRENT LAW. That means, to any reasonable person who has reading/comprehension skills, that the projections are what is assumed if nothing is done to change the present laws under which Social Security operates. The "perpetual shortfall" occurs only if the government does absolutely nothing to fix things.
Notice the bloody trendlines Degan. Outlays are on a slow rise, due to greater longevity if nothing else. Krugman's solution is quite simple: ask the new guy to pay in more.
has been knocked down by both Kuttner and Krugman
Krugman's "solution" is option A. Wait until the problem cannot be ignored, then increase the funding to social security either threw general budget outlays or increases increases in the assbackwards payroll tax.
Who cares what you call the system? Private insurance companies manage to continue to pay out claims even if their customer base shrinks, they do so with, as your own article cites, with 10x higher administrative costs, and to top it all off they turn a profit. That is a robust insurance system. How do they manage to do that? By
investing the money they take in as premiums until they pay it out as claims. Show me a single damn private insurer, profit/nonprofit I care not, who operates their insurance in this manner and I'll conceed that you might have a damn point here.
the investment plan you've got fails, or some crisis forces you to cash it in early, and that nest-egg you were counting on is depleted, and there's nothing else to make up for it, THEN WHAT'S THE BACKUP PLAN?
Let me ask you a question. You have a pay as you go system, you have no assets, population growth is near zero and there is a precipitious surge in unemployment that last long term. THEN WHAT'S THE BACKUP PLAN? Or let's suppose you have several trillion socked away in bonds to cover an impending shortfall, but inflation triggerd by an oil shock eats away at their value. WHAT'S THE BACKUP PLAN?
It doesn't matter if you have a pay as you go system or an investment system, there dangers that can screw over either. The pay as you go system shines when you have a high rate of population growth, which is why it could even manage to outperform the stock market. But with a stable population both systems have weaknesses. The difference is that an ideal stable pay as you go system breaks even, an ideal investment system accrues interest.
"Cashing in early" is BS. In an investment plan you AT LEAST HAVE THE OPTION to do so. In a pay as you go system, even if you have valid fiscal reasons to cash out early you can't do so. So please stop relabeling a strength of an investment system (that one has the option to cash out early if needed) as a weakness.
But what is the backup plan? Well the likely compromise I see coming out of Washington is for either government regulated and insured accounts or a government investment program (rather than individual accounts). Essentially part of the superior interest made through investment will be taxed, hopefully not in the assbackwards regressive manner of payroll taxes, and that will be used to cover those few individuals who fail to make average returns. Regulations would prohibit obvious losing strategies like all your eggs in one basket or not slowly cashing out to smooth price flucations. Insurance would be run somewhat similar to FDIC.
If the economy steadily decreases. If the birthrate continues to fall. And if we sit here, doing absolutely nothing, for three decades.
If the economy doesn't grow as fast as it did last century when Europe conveniently bombed itself into oblivion, oil prices fell in real terms, and half the wealth in the word at one point in time was owned by Americans.
Birthrates most likely will continue fall, why exactly do you beleive they would rise?
As far as sitting here doing nothing, exactly when should we begin to care about the problem? In 10 years? In 20 years? Every year action is delayed, be it simply the idiotic step of increasing the payroll taxes a percentage point, is making it harder on tommorrows workers who will have to pay more and have less time to compound interest to fix the problem?
The mere fact that a percentage point difference in growth is make or break for the system aught to say something about how robust it happens to be. The fact that every governmental study of the system states that eventually it goes red and the problem gets worse from there aught to say something about why it might be a good idea to act now rather than later.
Very funny, Scotty. Now beam down my clothes.
