Pretty Ugly, Pretty Fast (Social Security Reform Debate)

The Washington Post ^ | January 5, 2005 | Howard Kurtz

[The Loan Arranger]

Prediction: The Social Security debate is going to turn pretty ugly pretty fast.

It's quite civilized at the moment, with reporters and op-ed types jousting over economic assumptions and actuarial rates. But New Year's Day brought a Washington Post report that the coming campaign over Bush's privatization plan will take on the coloration of a full-fledged political war, complete with television ads. Such groups as Progress for America (which spent millions on Bush's reelection), the Club for Growth and the National Association of Manufacturers are planning big-budget campaigns, and the AARP is already spending 5 mil on full-page opposition ads over the next two weeks. Total propaganda spending could easily top $50 million.

Perhaps I'm being a tad cynical, but can charges of lying and distortion be far behind? Shots of seniors standing in soup lines while fat-cat bankers count their cash?

[supercat]

If they want to end this thing, no problem, but they either pay it back or there would be *&#@* to pay.

There are three ways Social Security's ponzi-ness can be ended:

1. The government gives people who have "invested" pennies on the dollar for their investments as it liquidates the "trust fund".
2. The government takes large amounts of money from workers and tells them it's being given to the elderly and they're going to get nothing in return.
3. The government reduces payouts and then commensurately reduces taxes, and does so repeatedly year by year such that everybody gets [bleep]ed a little bit, but nobody gets [bleep]ed too badly.

Approach #3 is the only one I can see that can avoid a major uprising. Combined with private accounts, it might even be workable. The key requirement, though, is to acknowledge that the entire current system is based upon debt and that everyone will have to work to repay the debt.

Perhaps a good start to repaying the debt would be to rent hammers at the FDR memorial. If SS is really explained to people, I think such rentals might become quite popular.

[k2blader]

I'm waiting to see if the GOP will wimp out on SS or if they'll stick it out.

[k2blader]

I'm for saving this creaky old ponzie-scheming, socialist income redistribution plan.

Why?

[snowsislander]

FDR was our greatest domestic disaster as President; his contempt for the Constitution was absolute -- it's a wonder he didn't just announce it was "non-operative." (If you want to see this up close, go to an archive of executive orders and read some of FDR's handiwork.)

And Social Security is a Ponzi scheme of the worst type: one funded by the power of the government to tax.

But while all of that is true, we have the equally difficult problem that it is now entrenched, and there are people who depend on it. As happy as I personally would be to relinquish all claim to my contributions to Social Security if it meant that the monster were extinguished tomorrow, it's just not going to happen. President Bush is trying to reform it, and I am willing to go along with what I have heard so far.

This is not a perfect world, and those who wait on perfect solutions to difficult problems generally get to do a lot of waiting.

[Chuckster]

Sounds like a great plan. Wish they'd done it forty years ago when I started working. Even so, I'd be willing to let them kill the whole program right now if the d@mned feds would just get out of my pocket and let me save some of my own money for myself.

[Racehorse]

A real plan would mean everyone contributes 100% of social security money to personally owned retirement accounts, which could be invested in conservative stock, bond, and CD options. This has been a great success in Chile.

Thanks.  When the debate really gets going, in Congress and elsewhere, particularly in this forum, this is the sort of proposal I'll pay attention to.  Some of the other posters in this small thread also have ideas I find interesting and useful.  Perhaps there will be more gold to be mined than I originally thought.

I’ll especially want to know where the plans have been tried, how the “faze-in” has been worked, how the risks have been managed, and how the payouts compare with what was previously promised.  I’ll want to know something about the political and social fallout.

The problem is, proposing mandatory 100% private retirement accounts would inspire the Democrats (including their media wing) to new heights of virulent propaganda, and their lies would scare seniors to death. It couldn't pass.

The Democrats have already started.  But, this time the target audience is not limited to seniors.  Actually, both sides are targeting the younger people.  Confidence in government provided “old-age security” appears to have been demolished, especially so among the younger generations.

If we get 2% going to private accounts, though, year after year people will watch their accounts go up, and the pressure will build for 5%, 50% and eventually 100%. Especially when people notice that the government is cutting their guaranteed benefits to offset the extra income they're making in the private accounts.

In some ways, I’ll show you below, we are turning back to FDR’s original vision for “old-age” assistance.  There was a big difference between what he envisioned and what was politically acceptable to Congress.  We would have been better off had Congress permitted the vision.

What few people seem to know is that bringing the country out of the depression and into recovery, FDR faced some rather serious, radical competition.  Social Security, including pensions, was as much a political answer to the challenge as it was an economic solution.  People only need to learn something about Huey Long, Sharing Our Wealth, and Father Charles Coughlin, Money Changers in the Temple, to understand the consequences of not doing something.  Coughlin was so rabid the Church eventually ordered him off the radio!

Why does this matter?  Maybe it does not.  But, I tend to think, based on the following paragraph from a January 1935 message to Congress, that FDR’s advisors may provide some  useful insight into programs, then rejected, which may, allowing for the passage of time and economic circumstances, now provide a shorthand to evaluating the debate which is surely coming.  I hope I have some luck in finding the reports.

In the important field of security for our old people, it seems necessary to adopt three principles—first, noncontributory old-age pensions for those who are now too old to build up their own insurance . . . Second, compulsory contributory annuities, which in time will establish a self-supporting system for those now young and for future generations.  Third, voluntary contributory annuities by which by which individual initiative can increase the annual amounts received in old age.  It is proposed that the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.

[Racehorse]

Racehorse: I'm for saving this creaky old ponzie-scheming, socialist income redistribution plan.

K2Blader: Why?

Thank you for asking such a simple, open-ended question. I’m tempted to abuse the generosity. I’ll try not to.

For most people I know, a social security pension is a supplement to their basic retirement plan(s). If the pension system collapsed tomorrow, the financial impact on their lives would be minor to minimal. For some, it would be inconsequential.

Others I know depend, for whatever reason, almost completely on their social security checks. From my point of view, they lead minimal lives, but the social security pension does two things: it allows them to live their lives with some dignity; and it keeps them from becoming a rather troublesome and expensive burden upon the rest of us.

That is why I prefer to save the system, if it can be saved.

For the generations who think of retirement as some distant event too far off to take seriously, I don’t see these circumstances changing. Bad investments, failed careers, catastrophic illness, economic misfortune, the reason does not matter, some portion of the younger population will eventually require a basic social security program to provide for their basic old-age needs.

This should be self-evident. The question becomes how do we provide an old-age assistance program at an affordable, sustainable societal cost? With some revision and reform, I think the present program should be salvaged, not savaged.

Those who believe we are a nation of ruggedly capable individuals wholly responsible for our own welfare, and therefore believe limited government has no role to play, have little to contribute to the discussion, I think. Their basic message is simple: You make your bed; you lie in it; it’s not my responsibility to care for you.

Okay. There it is. What more can be said?

Now, the rest of us, we need to talk . . . and talk to our Congress critters.
 

[Wolfie]

The "privatization" plan proposed by Bush is merely an attempt by Wall Street brokerage firms and financial institutions to get in on the scam.

Amen. (But likely to fall on deaf ears).

[jwalsh07]

I don't mind paying a fee to invest my money. Moreover, that is the way capitalism works. What I do mind is the government keeping the money that I have "invested" in SS rather than passing it on to my grandkids when the big one hits.

Bush is making an attempt to move SS toward an investment in ownership.

What exactly do you fellows propose? The elimination of SS is not on the table so please keep your plans in the realm of the politically possible.

[whd23]

I'm waiting to see if the GOP will wimp out on SS or if they'll stick it out.

I'm going to way out on a limb here and predict a wimp out. < /sarcasm >

Seriesly, how can any of us trust the GOP when they couldn't stand up to Tommy Dasshole and a minority of Democrats? The GOP has no stomach for a fight.

[the invisib1e hand]

fights are always ugly. the serpent is feeling the heat. off with its head.

[Wolfie]

Private accounts are fine, as long as I decide what I invest in. No government giveaways to Wall Street.

[wita]

I agree with you. There are precious few people here who remember the devastation of the dirty 30's, maybe not one, but that isn't the issue, when over half of the country is thinking safety net, and the other half is thinking Ponzi scheme. President Bush's idea is to at least begin to put a portion of your money into your own account and control so it doesn't end up being spent by an out of control congress.

I find that idea refreshing but difficult to sell when every lying sack of manure within reach of a microphone is willing to sell his or her soul to the god of deception, in the name of trashing anything that the President attempts to do. I find the AARP as usual on the wrong side of this issue and one more reason I refuse to provide them any money to use as they see fit, to offer nothing to the american people but lies, deception, and mistrust of the american system.

UURP was a huge supporter of Bill Clinton, to the tune of millions, that alone told me what kind of organization they were.

[wita]

I am absolutely certain you have heard nothing of the kind, unless you are listening to rabid democrats, people without a clue, AARP, mainstream media, or a thousand other efforts to deceive the american people into thinking something other than what President Bush has proposed. You are buying into the other lie, and it might be worth your while to find out the nature of the program before dismissing it based on incorrect data.

[Wolfie]

Everything I've ever heard about the proposal is that you will only be able to invest in a certain number of vehichle approved by the government.

[k2blader]

I hear you.

Reforming SS is a huge issue. If the GOP is conservative as it claims to be, it will not pass on it this time.

[k2blader]

the social security pension does two things: it allows them to live their lives with some dignity; and it keeps them from becoming a rather troublesome and expensive burden upon the rest of us.

Well, this is where your argument turns out to be no argument at all. People on SS are already an expensive burden on the rest of us taxpayers. Have you looked at any SS figures recently? The burden is staggering.

[Racehorse]

Well, this is where your argument turns out to be no argument at all. People on SS are already an expensive burden on the rest of us taxpayers. Have you looked at any SS figures recently? The burden is staggering.

You're absolutely right.  It is not an argument.  I was not trying to make one.  In fact, I was trying to avoid making one.

I only meant to tell why I wanted to preserve the present system as much as possible.  So, if it was an attempt at any kind of argument, it was a pseudo-argument based on feeling and opinion.  Around here, I'm fully aware that simply will not do.  But to answer your question, why, I thought that statements of belief and opinion were all that was necessary.  And, for that limited purpose, I believe it was.

When I get around to making an argument, which looks like it will have to be relatively soon, I'll need to do among other things, not only confront the figures you believe are a staggering burden, but I'll need to provide evidence to prove the burden is either justified or it is at least less burdensome than any alternative.  That will take a little attentive care.

[DuncanWaring]

Others I know depend, for whatever reason, almost completely on their social security checks.

You would be referring, I presume, to the social security checks funded by my FICA deductions.

Wouldn't it be more honest for them to just come stick a knife in my ribs and demand it directly, rather than sending the gov't thugs to take it from me on their behalf?

[SupplySider]

The "privatization" plan proposed by Bush is merely an attempt by Wall Street brokerage firms and financial institutions to get in on the scam.

Amen. (But likely to fall on deaf ears).

I disagree, and think the risks of investing in a privately owned account are much less than the risks of giving politcians control over your money.

Having said that, I wouldn't be surprised if this plan gets millions of people into the stock market just in time for a painful, long, bear market. Twenty-year olds who tough it out will still be way, way, ahead in the end with private accounts, but the political fallout could be horrendous.