Posted on 02/03/2005 7:14:21 PM PST by kcvl
Oh! Her dog was blind, too.
What? You want responsible accounting? You want to know how we recapture the couple trillion necessary to fund the transition to personal accounts? You want to know how we maintain government bond yields for payout to personal account holders while at the same time underwriting the personal accounts with diluted government bonds? What are you, some kind of liberal?
Don't know about you, but that sure made my day.
CHILE RETIREMENT ACCOUNTS On Social Security and Pension Reform: Lessons from Other Countries
The Cato Institute | July 31, 2001 | L. Jacobo Rodríguez
Posted on 02/03/2005 5:30:45 AM PST by Liz
STATEMENT of L. Jacobo Rodríguez Assistant Director, Project on Global Economic Liberty The Cato Institute On Social Security and Pension Reform: Lessons from Other Countries before the Subcommittee on Social Security of the Committee on Ways and Means United States House of Representatives
The Current State of Chile's Private Pension System July 31, 2001
http://www.freerepublic.com/focus/f-news/1334960/posts
Since I was so successful at debunking the WaPo article, I'll take a stab at answering your question: WHAT shortfall in payroll taxes?
You see, it is all a semantics game. Most people are under the illusion that the "premiums" you and your employer pay into your "account" go into the Social Security Trust Fund or into AlGore's Lock Box. You think you have an "account" since you get an annual statement just like you get from your IRA or 401K - of course there are no earnings listed on it, only the amount paid in. In simple terms, private accounts lets you vest for 1/3 of your future balance (the 4% they are talking about) and will give you a few choices of where to invest that portion; very much like the IRAs and 401Ks of which so many Americans are now familiar.
OK, but where is the shortfall? Well the sorry truth is that there is no Trust Fund and there is no Lock Box, at least not in the standard meaning of those terms. Even though we are given the illusion that the payroll tax nee FICA tax is earmarked for SocSec, in fact it is treated as general revenue and from a budget standpoint, is fully spendable as if SocSec didn't exist.
Sure, if you wanted to color the payroll tax dollars red and trace them, you would see the current recipients paid in red dollars, but there would still be a pile of red bucks left over. This "excess" pays for roads, planes, and John Kerry's unearned salary, among other things; it is ALL spent as soon as it is received. The SHORTFALL is that private accounts exposes this little trick and suddenly the "red" money isn't available for KKK Byrd to spend on West Virginia projects bearing his name. Our Congresscritters are crying foul, saying "you blinded me with accounting!"
The real problem that this diversion of "excess" payroll tax dollars into the general fund for spending purposes is that in order to keep up the sham, there is some little bureau buried deep within some little agency that writes special IOU's on fancy paper. Those IOU's, treated as special gubermint bonds, bind future generations to raise non-payroll taxes to redeem them when all of the "red" dollars go to pay then current recipients and someone says, "whoops, not enough red dollars." You see, these IOUs are a generational transfer payment and represent the financial rape of our grandchildren.
GWB and the republicans mark the date that we first run out of red dollars and have to dip into these IOUs as the start of bankruptcy of the system; democRATs mark the date that we run out of IOUs as that start. Of course, long before we run out of IOUs, we'll run out of tax payers and our grandchildren will be forced to euthanize us or their children. Guess which chioce they'll make?
OK, to be fair to your question some of the "red" money will disappear from the current spending budget. As I explained above, this money wasn't Congress' to spend in the first place but they are spending it and we didn't stop them. The answer from the democRATs and from some RINOs like Olympia Snowe of Maine is "get the money from the people in the form of additional taxes." Now whether you call them payroll taxes, income taxes, or sales taxes ... they are taxes. The other side of that equation is to cut spending. Yes, there will be a budget hit, but the reality is that this hit should be on the current generations who are doing the spending and reaping the benefits. The Intergenerational Transfer Payments must stop.
The shortfall you ask about is a current budget shortfall, NOT a payroll tax shortfall. One way out is to make one of the funds available for private accounts a fund that invests in these special gubermint IOUs, but if there is a choice of more than one fund, that won't work! I guess what this long-winded response shows is that there is no easy answer and we will see taxes increase, likely by adjusting the cap on income subject to payroll taxes. In other words, tax the rich.
Of course.
The account -- and everything in it -- is yours.
It makes no sense any other way - now what of taxes? It should be tax free - and insurance if investments made in good faith fall below 3% return.
...according to Rush today...they did...on their website....
The left is in full panic right now as they see an end to one of their socialist pets.
How dare they create a second class of citizens when it comes to our retirement income especially when they opted out of the defunct social security system.
I say, demand that they must go back to FDR's social security plan, since they all want to bow down at his statue, tell us how great the plan is while ignoring that they opted out of it and wail that President Bush can't touch it.
Bob Shrum thinks we are all too stupid to handle our own finances. He as much as said so tonight.
Well I hope it goes even further until they scrap SS altogether.
I see it differently. The current plan is a pure Ponzi swindle which depends on the ability of the Federal government to redeem a huge debt it is accumulating in Social Security Trust Fund "assets" - assets, so called, which are mere instructions to the Treasury to find the money somewhere else. This Ponzi swindle is, currently, masking the actuarial deficit in the federal government accounts. The current-income dollars are used twice - once when they are sent to current retirees, covering the outgo of the SS program, and again when they are "invested" in government bonds in the SSTF. Full stop.So the federal budget is in a severe actuarial defict, but that is being concealed by the "SSTF" smoke and mirrors. And any system of "safely investing" payroll tax revenue in government bonds will have the self-same effect. If you are to actually invest the money, you have to put it in instruments which will pay money to the government with interest in the future. That means private institutions, and that ineluctably means risk.
But that "risk" belongs in quotes because, as we have seen, it must be compared with the current system in which today's payroll dollar pays yesterday's retiree and does nothing to help your grandchildren when it comes time for SS to pay for your retirement. Now that is what I call a risky scheme. So "risk of private investment" is a straw man. SS investments must go into the real economy in order to do what investing is supposed to do - if it is to prevent the government from strangling the economy with taxes to pay for your retirement.
OK. But, you ask, why allow private accounts rather than having the government do the investing? Great idea - if your objective is to put the government in direct control of the board of directors of each of the largest corporations in the country. But if that isn't what you want - if you want a free enterprise system for your grandchildren - the investments have to be in the name of the beneficiaries. You gotta have your own account. Which is the only possible true "lockbox" to keep the politicians from controling, and raiding, the money.
You will ask, "where is the money gonna come from for the private accounts?' I answer, it will in the first instance
throw the budget out of balancereveal the existing imbalance in the budget. But the very question reveals that, to anyone who gives it a moment's thought. It is only as the private accounts reveal the actual deficit that real pressure for discipline in federal spending will begin. And therein lies the actual motive for the reactionary attitude of the Democratic Party.An honest investment regime for Social Security offers Congress nothing but blood, sweat, and tears. But those will come, soon enough, even if Congress does nothing at present. The cash flow of SS is reliably predicted to go negative in less than 15 years. That's an actuarial heartbeat, and from then on the Congress will be fighting the battle of the budget in earnest, trying to redeem the debt in the SSTF sinkhole and still find enough to buy reelection (and, incidentally, maintain a Department of Defense and a few other odds and ends). The temptation to strangle the economy completely with tax increases will be the bane of our grandchildren's existence.
The 'explainer' was a real professor type expert who talked and giggled like he was talking to six-year-olds, so I know he had to be telling the truth!
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