Posted on 11/16/2007 10:47:51 AM PST by 2ndDivisionVet
The phrase has long since entered the political lexicon, but it was former House Speaker and Massachusetts Representative Tip O'Neill who first christened Social Security the "third rail of American politics."
The reasoning behind his snide dubbing is twofold: the high political mortality rate of those who suggest change to the program, and avoidance of the issue by even Washington's most forthcoming public officials.
During the Oct. 9 GOP debate, presidential candidate Fred Thompson threw conventional wisdom to the wind and grabbed the rail. Hard.
Thompson called Social Security's current trajectory "unsustainable" and proposed reducing the benefits of recipients to prevent the program from going bankrupt.
"For future retirees, instead of having nothing, which is what they're headed for under the current situation that's unsustainable, they would have protection," Thompson said in the debate.
It may sound technocratic, but Thompson is right. Given the imminent retirement of the Baby Boom generation, Social Security's current benefits structure-whether interim or indefinite-will have to be cut. Either that, taxes must be raised.
Social Security can be fixed by adjusting program benefits and tax rates to avoid a funding crisis while not comprimising the guarantee of payouts.
Thompson's plan would re-index benefits in reference to cost-of-living rather than wages, the standard by which payments are presently calculated. The cost-of-living index grows at a slower rate than wages, so this switch would result in diminished benefits and smaller governmental costs. So far, his plan is the most detailed and viable Social Security policy of all the presidential candidates.
Hopefully, Thompson's bravado will trigger similar responses from other candidates. But given the risk involved with discussing the issue, expedient adjustment of Social Security is still uncertain.
"Nobody's even talking about it, because there are no good options," Rep. Tom Davis (R-Virginia) said in October to The Baltimore Sun. "You are either cutting somebody's benefits or raising somebody's taxes."
BUSH'S PLAN: PRIVATIZE
After being reelected in 2005, President Bush did talk about it. Emboldened by the "political capital" he gained after his successful campaign, Bush presented a plan for reform which included the partial privatization of Social Security.
"We need to act now to fix Social Security permanently," Bush said.
Such a once-and-for-all solution to Social Security's problems is desirable but also unrealistic. Its budget is constantly in flux, ebbing and flowing with the ratio of the country's workers and retirees. The only permanent solution -save the draconian thought of its out-and-out abolition-would be regular adjustments to benefits and collected payroll taxes.
A major weakness of Bush's plan was that it did nothing to address funding solvency. Social Security would still have been fundamentally similar: the federal government would have paid for it.
The centerpiece of Bush's proposition was the establishment of personal retirement savings accounts into which taxpayers could divert Social Security benefits. These accounts could be used to assemble a portfolio of assets in the risk-laden financial markets.
The plan was a foolhardy attempt to merge gambling with a government program whose very purpose distribution of essential resources to retirees-always and without fail. The program would have become a crap shoot.
Franklin Delano Roosevelt, elected president barely three years after the 1929 stock market crash, signed the Social Security Act into law in 1935. FDR would have been aghast at the idea of funneling Social Security monies into the volatility of Wall Street.
Supporters of these private accounts saw the possibility of increased earnings, but a 2001 Congressional Budget Office report said otherwise.
"Corporate stocks deliver a higher expected return than government bonds because they carry higher risks," the study said.
Public response was cool, and both Democrats and generally Bush-loyal Republicans swiftly dismissed the plan.
LEARN FROM BRITISH MISTAKES
The prospect of privatization still abounds, but failed models like Britain's pension reform should teach us to resist it.
In 1986, the country reformed its state retirement benefits program, giving citizens the option to divert money into private investment plans. The result has been "a bloody mess," to borrow the title of a piece by Norma Cohen in The American Prospect.
The British government's irrational, grass-is-greener privatization plan left few Britons satisfied. According to Cohen, "At the exact moment that America contemplates replicating this disaster, many in Britain-some conservatives included-are looking more and more kindly on American Social Security as a model for reform."
There is no justification for tampering with Social Security beyond its funding woes. Conservatives should recognize the risks and nightmarish problems privatization could bring.
BOOMERS ARE ALL GROWN UP
On Oct. 22, Kathy Casey-Kirschling of Maryland became the first baby boomer to start collecting Social Security. Over the next few decades, 80 million more boomers will claim their benefits.
The mass retirement should have been easily predictable, but politicians failed to adjust government policy accordingly. The program will begin consuming more money than it collects in less than a decade, according to the Congressional Budget Office, and it will go bankrupt in 2041.
Although the government has never faced a monumental budgetary problem like the one approaching, it should be cause for change, not motivate hysteria.
The ever-expanding American economy will help alleviate the problem-a raise in gross domestic product makes maintaining the program's solvency feasible.
The US gross domestic product-a good indicator of economic expansion-grew 3.9 percent from July to September.
The country's prospects for economic growth are encouraging, and if this significant growth continues, tax revenues will increase and the Social Security funding gap will shrink in relative size to the economy, making the gap easier to bridge with adjustments to benefits and collected revenue.
The Social Security predicament requires urgent and firm-handed action, but labeling it a crisis and panicking won't help. The widespread citizen satisfaction with Social Security in its present form should dissuade us from making any transformative changes to a long-standing program that merely needs to be fine-tuned.
FACING THE ISSUE
The third rail of American politics is still live, and a corollary can be added to O'Neill's exclamation.
Proposing change to Social Security is risky, but ambivalent silence is even more so. Inaction is the only thing that can bring about a major catastrophe. The Social Security "crisis" is a myth. Simple, regular adjustments to benefits and revenue streams will be enough.
Grab the rail, Washington. And for your sake and the program's, don't let go.
The plan was a foolhardy attempt to merge gambling with a government program whose very purpose distribution of essential resources to retirees-always and without fail. The program would have become a crap shoot.
Why couldn't the investment be limited to U.S. Bonds and such? You would be investing in your country's future and it would also ensure that you would get far more than the >%2 return we're getting from Social Security now.
The big thing is to convince the old timers that nothing will change for them.
The short timers get a little self centered about this issue - not too worried what the program will be doing in 20 years, if you know what I mean.
Saving and Protecting Social Security
A Plan to Ensure Retirement Security for All Americans
http://www.fred08.com/virtual/socialsecurity.aspx
I like it when the press shows their agenda outright without the base alloy of false objectivity.
LEARN FROM BRITISH MISTAKES
How about learning from Chileans successes too while we're at it. Nope, privatization of any type has to be shown as an unmitigated disaster.
Nits in a snit in 5......4.......3.........2.......
Fred deserves to win the nomination for this issue alone. I’ve toyed with the idea of Hunter but Fred is the real thing. Duncan hunter, I have learned, is not a solid fiscal conservative. Duncan voted for the 2002 farm bill and the medicare expansion in 2003. Fred opposed both.
The author is misinformed. His use of the word “gambling” indicates that he does not understand the fundamental difference between gambling and investing. Investing involves expectations about earning returns in the long run. Gamblers expect to lose in the long run. They hope (mostly foolishly) to beat the odds in the short run. Investing for retirement is not gambling.
Moreover, he defends the undefensible. Social security is a combination of a generational Ponzi scheme and government spending scheme. It is a Ponzi scheme because the early contributors made very high returns using the forced contributions of the later participants. It is a government spending scheme because large amounts of excess taxes have been diverted to other government spending. Social security is also huge socialism with gaping loopholes for favored groups, particularly state and local government employees who are not part of the mess.
Large benefit reductions, direct or indirect, are coming. As much as possible, benefit reductions should be voluntary through partial privitization. The rats will not permit any form of privatization. Their solution is a massive tax increase, much of which will be ciphened to other government spending until the baby boom retirement is well underway.
Because the "short timers" failed to make the appropriate incremental changes during their time at the reigns they better get comfortable with the idea that it will indeed "change for them".
Most of us who will be retiring after SS is declared insolvent (2041) are saving our asses off (the smart ones anyway) knowing that it's foolhardy to depend on. We tend to get a little bitter when "short timers" demand benefits they didn't actually pay for (How many years of budget deficits and tapping the SS "lock box"?) and then expect everyone else to foot the bill with an iron clad guarantee to never see a dime.
No, the boomer's screwed the pooch, to borrow from their generational vernacular, by flitting away the years and knowing full well winter was coming. Once the Gen X ants start filling congress and the White House the tax soaking gravy train to maintain "existing benefits" will come to an end. At that point the hungry grasshopper(s) will find their a$$es out in the cold asking for handouts from the ants.
Not a very pleasant legacy to leave behind but I don't see how history will be kind to the generation of free love and free benefits. Frankly it's ridiculously hypocritical for anyone retiring now to expect SS to fully support their retirement. To claim they didn't see it coming is a complete and total lie.
SS is based on a piggybank of IOU’s. It will be insolvent long before 2041. only 2 options will be to either cut the COLA and inflate, or cut benefits.
Did anyone notice she bragged about Tip O’Neill and Reagan ‘fixing’ social security in 1983, and no one questioned her:
If they fixed it then, why does it need to be fixed AGAIN?
The truth is, they raised the payroll taxes to put money in the lockbox for the boomers and true to form, it was spent. A more true fact of why tax hikes never work has ever been presented in a debate and no one picked it up and ran with it. — not unexpected from Democrats whose toolbox only has ‘raise taxes’ on a slip of paper inside — that and the larger than life O’Neill who cannot be criticized by democrats.
[Supporters of these private accounts saw the possibility of increased earnings, but a 2001 Congressional Budget Office report said otherwise.
“Corporate stocks deliver a higher expected return than government bonds because they carry higher risks,” the study said. ]
Does the author really think people swallow this line of reasoning ? The “study” doesn’t refute the “supporters” view at all. The “study” confirms that you should expect a higher rate of return.
That’s why I find it incredible candidates are afraid to address the issue directly. It’s not a surprise to anyone SS is failing and needs immediate reform. There are too many “older” Americans who will fight like hell to prevent their SS checks from being diminished in any way. That means voting for the biggest socialist possible and slandering anyone who suggests any sort of realistic fix to the system.
The writer is very misinformed. Wonder what he thinks would happen to the normal ways of funding SS if the stock market went to 0? We wouldn’t have any tax revenue either. Either way, retirees get nothing. At least if it is in their own account, it becomes their own business and there is less likelihood the government will steal it.
What Chilean success-you didn’t do your homework
When the receipients went to collect their “social security” they were hit with gigantic brokerage fees
Those who remained in the gov’t plan made out better.
Even Boortz never talks about the Chilean disaster
privatization is utterly stupid
It wasn’t that long ago the stock market tanked and the investors lost hundreds of thousands of dollars
What are we all supposed to if that happens again,and it will,bail out all the losers who lost a big chunk of their SS money
Putting money in Ira’s and 401K’s is risky enough,but to put 25% of your SS money in the open market is ludicrous
You can cure SS and Medicare shortfalls by imposing a National Sales tax of 1% on all sales and won’t have to cut benefits or reduce benefits
The long term return of the stock market is around 10%. Even considering market corrections. The long term return of Social Security for workers now entering the workforce will be negative to low single digits.
The difference between privatization and SS on its current trajectory is that with privatization your retirement contributions are subject to market risk - you may win or you may lose. With SS, if you are younger than 53 you will lose with certainty. The only uncertainty is about how much you will lose.
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