VANITY: Borrowing for Social Security Reform

Okay, I don’t claim to be an expert on Social Security or government spending. However, this story, running on the front page of the New York Times online today, is obviously meant only to frighten those that would otherwise support real reform for Social Security.

They have the basics correct. The way that Social Security currently works, the money that we are paying in today is paying for retirees today. The money that our children or grandchildren will be paying in when they’re all grown up and working will be paying for our retirement if everything stays the same. What this boils down to is that if the President creates private investment accounts for Social Security, many young people will be taking their money out of the pool that is paying for current retirees and investing it for their own future. The money that you invest will be what pays for your retirement…similar to if you had just left the government out of it entirely and invested your own money to begin with. Then again, you’re too stupid to do that, so the government has to do it for you. Right?

This is one of my biggest frustrations with this Administration. They just don’t communicate effictively with the American people. Most people know even less than I do about Social Security (hard to believe, I know) and so stories like the one that the NYTimes is running will be very effective in making them oppose real reform. What the Times isn’t telling you, though, is that according to every account given, our current Social Security system is completely unmaintanable (is that a word?). The gap between the money coming in and the money going out keeps getting greater and greater, and unless the fundamental system is changed it is just going to keep getting worse and worse. The options are to a) change the system, b) cut benefits, or c) raise the retirement age. As far as I know, those are the only options available.

As a conservative, I obviously support changing the system. I just wish that the Bush Administration would communicate the need for reform, and their plan for achieving it, to the masses. I would like to know how the President plans to pay for the gap. If that means more borrowing so that in the long run there will be less of a deficit then fine. I’m not a moron. Explain that to me, tell me why it’s necessary, and enjoy my support.

I think that we can expect a lot more reporting like this on this issue. The Left knows that we have a mandate, “political capital” as the President put it, and that we intend to use it. Their only option now is to scare the pants off of the ordinary Americans that may not understand these issues in hopes of keeping legislators from voting for this. Thanks to the shift in where constituents get their news, it is now up to us in the blogosphere, those on talk radio, and Fox News (sometimes) to make sure that people understand these issues. It’s ok, Mr. President, we’ll do your job for you…

People don't realize that borrowing money and raising taxes are essentially the exact same thing. I'd rather borrow the money and pay it back (with tax money) when the economy is even stronger than it is now and tax revenues don't require higher rates on individuals.

Higher taxes to pay for this is really a kind of "pay as you go" type of system, but higher taxes will hurt the economy at a time that it doesn't need it.

Of course doing nothing is the worst thing as it will require both borrowing money and higher taxes in the future.

President Bush is on the right track. We need this debate to flush out how to pay for it. Everyone knows there is a ton of spending that can be eliminated to help pay for this switch-over.

The problem is that in spite of Fox News and the blogosphere, most people still get their information from the MSM. That's why it's still the MAIN STREAM media.
I know people who are in prison for launching schemes similar to the Social Security System. And as if a government run pyramid scheme isn't enough, the so-called lock box has been raided to the point that it's only full of IOUs.
If the president actually tried to say any of this, he'd be demagogued off the stage.

I think we need to have a grass roots effort to garner support for reform and to educate the masses about what Social Security really is and how it works today. And just a slight correction when you said that the gap between what we pay in and what is paid out keeps growing. Actually, right now we pay more into the system than is being paid out, but the gap is shrinking and the will eventually dry up and we'll be running a deficit in the system in the next 15 years.

A chnage is necessary for some form of Social Security to survive. If we take our time and do it responsibily, fine tuning as we go - it should be OK.

To do this correctly we must maintain Republican Majority in the Congress and a Republican President. If we don't, the SOcialist we get their hands on it and claim it is in disaray and they need to FIX it!! I'm sure additional and unnecessary Governement Programs will sprout off of the Main Program, allowing them to tap into those funds.

What is continually unspoken is that the transition costs arise because given the option most 18-50 year olds would opt out of the system.

This is a tacit admission that social security is a deeply flawed system.If it were a better choice than more would stay in.

The dems don`t give a rats a## about senior financial security,they just need the dependency of some of societies most frail members.

What a bunch of heartless bast##ds.They would rather see someone try to live on 600-1200 dollars a month than have an enjoyable retirement.

Cogent essay. Allow me to suggest that you step back..take a few deep breaths. What you are reacting to is the panic of the left and Dems as they futilely attempt to get out front of this issue and frame public opinion for the debate. But it won't happen..

Look..for years, we were told that SS was the untouchable third rail of politics..Bush touched it in 2000..survived..now he's going forward with it..full steam ahead..andthe Bush plan is brilliant..which is why is scraes the pants of the libs..The initial trial balloons suggest the idea that people under , say 30, will be allowed to direct a portion, say 10% of their SS contributions into private accounts..whatever the age/% is..the genius of the plan is that it really should be called the "camel's nose"..once, enacted, and under the tent..Americans will demand that MORE of them be allowed to INCREASE the % of private accounts...it's like the old saw..you can't be a little bit pregnant..

the argument that you can't spend hundreds of billions to save trillions down the road is equally stupid..and it too, won't resonate..it's the same Beltawy speak that calls a reduction in the rate of growth of spending a "budget cut"..

This too will change...and also..expect to see a lot of innovative programs that haven't been mentioned yet, as the transitions developes. For example..there are many boomers, like myselves, who really won't need my SS..Look ..using round numbers..at 62 I'll get $1000 month for life..forgetting COLA..which also has to be adjusted, BTW...so say I life for 25 years..that's a total payout of $300,000...the present value of which, at age 62..which depends largelyy on what iterest rate assumption you use..might be $180,000. So now at age 57, 5 years before I can draw benefits..would I possibly be willing to forgo ALL my SS benefits for a 5 year tax credit of say..$10,000 per year..In other words..would the treasury take a $50,000 "loss" now to escape a $300K ++++ open ended lability down the road...YUP..and for me it makes sense..becuase I can invest that $10k per year for the next 5 years..and have a lot more ultimately down the road, and, AND, Ican leave to it my heirs, or charity, or whatever..

"I would like to know how the President plans to pay for the gap. "

That's the question, isn't it? The gap will get bigger when illegals are given SS benefits. Real reform must include doing something about the dysfunctional SSAdministration. According to a Sept. GAO report they are paying out billions to unqualified disability recipients.

Totalization: Sellout of American Workers

by Phyllis Schlafly
Nov. 17, 2004
The Democrats are trying to make a campaign issue out of George W. Bush's alleged plan to "privatize" Social Security, scaring seniors into thinking their checks will be cut off. That is a phony issue; all Bush suggests is to offer younger workers the option (not the compulsion) of transferring a very small part of their Social Security benefit into private investments.

The real threat to Social Security doesn't come from giving young people this opportunity. The threat comes from the Bush Administration's plan to load illegal aliens into the Social Security system, an idea that would skyrocket costs and bankrupt the system at the same time that baby boomers flood into their benefit years. http://www.eagleforum.org/column/2004/nov04/04-11-17.html

Any social security reform or privatization involves hard trade offs. Anybody who says different is selling.
Two main points need to be part of any discussion. First, social security is solvent in its present form another 12-16 years. It is solvent after that until 2042-2052, but only if the fund retrieves all the money government borrowed from it to spend on other things. Social security has been so solvent that huge chunks, trillions, has been borrowed by government. Now, hopefully, government will pay it back. But it did not invest this money, it spent it...so it probably will have to borrow to pay back what it borrowed. I think raising taxes to pay for this or cutting benefits or raising the retirement age makes the public pay extra. Note also that social security taxes are paid up to $86,000 of income only.
Second, privatization means the shortfall arrives earlier and less is paid in to meet the obligations to the retired. So, like it or not, the privatization bill must be paid too. Some suggest taking it away from the elderly by cutting benefits, raising the retirement age, or raising the social security tax. Same options as above. Others suggest government borrowing more money to make up the privatization shortfall. Others suggest that we can grow ourselves out of the shortfall and not to worry because if we don't it will be someone else's problem.
As I said, tough choices and hard trade offs.

Two points. 1.) Social security is not a pay as you go system. If it were, there would be no Social Security surplus. There was legislation back in the '80's which "saved" Social Security by making it "accuarily sound." That meant an individual would put in enough to fund his benefits upon retirement. This legislation lead to the creation of the Social Security surplus which the politicians immediately proceeded to spend. They covered their spending with IOUs which means that when Social Security tax receipts do not cover benefits payments, the Congress may do something like raising taxes, cutting benefits, or printing money. 2.) Raising the retirement age is a cut in benefits because an individual will receive less in benefits over his remaining lifetime than he would have under the current retirement rules. Now I suspect a creative politician will figure out that all Social Security payout options (ages 62, 65+, 72) cross at age 75+. So he will propose moving the cross over point further to the right (say age 79) and restructuring the payment schedules to provide the same total benefits over a longer period of time. So you have a cut in monthly benefits but total benefits are unaffected. Simple. And they will spin it such that we will think we are getting more out of the deal.

While the President has made the case for reform, my complaint is that he has not explained the process. How is he going to pay for this reform? What all is entailed? Exactly what is the projected gap? I have yet to hear any of these questions answered by this Administration. Granted, I may have just missed it. However, I am a news/politics junkee that pays a lot more attention than your average American. If I've missed it then there's pretty much no way the average American understands anything about how this is all going to happen. With the MSM constantly trying to scare everyone with misinformation, I would think that it's pretty important that W. communicate the facts.

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