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Social Security Reform and the Destruction of the Democratic Party
LFOSpot.com ^

Posted on 11/11/2004 10:40:46 AM PST by sadness in phintown

If the President proposes, as has been suggested, a system in which Americans get to personally own and invest a portion of their Social Security taxes, the results will be nothing short of a revolution in America that will perhaps dwarf the changes brought about by FDR.

The Democratic party is built upon, and has dominated the country for over 50 years based on this one program. Nothing that was done on the political front in the last century even comes close to the impact of the Social Security program on the political landscape. This single program locked in the voting habits of a generation by promising them "savings" which would be paid out upon retirement. This single program spawned an entitlement mentality that has manifested itself in dozens of other programs and has resulted in a slippage in the percentage of Americans who exhibit the unique traits of Americanism that have made America the most economically and militarily powerful country in the world.

But it was all a sham - an intricate and very public Ponzi scheme built on a lie and maintained by self delusion. Still, it is the most powerful vote getting scheme ever to be devised and the Democrats continue to rely on it to this day. Just look at the AARP website and you'll see the power of this program. It is sad to see the World War II generation reduced to claiming on one hand that Social Security has plenty of money for decades, and at the same time, arguing that present workers not be allowed to invest their own money since it is needed to pay present benefits. You'd think it would cause a headache to have two totally contradictory beliefs fighting themselves in your brain at one time, but apparently not.

(Excerpt) Read more at lfospot.com ...


TOPICS: Constitution/Conservatism; Editorial; News/Current Events
KEYWORDS: bush; democrats; reform; socialsecurity
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To: alloysteel

Good post Phins...

Read the whole article at lfospot.

Amen.


21 posted on 11/11/2004 11:11:03 AM PST by xmas
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To: homeless
Would a viable option be to let workers (like me) forgo all future SS payments and their accumulated earnings in their SS accounts in exchange for allowing workers to invest their SS withholdings?

Excellent idea, but one that scares the bureaucrats on both sides out of their socks. They can't afford to stop sucking in the money and, ironically, the votes. They'll keep promising, "The system is fine--it just needs a little tweak," until one day it's far too late.

22 posted on 11/11/2004 11:12:44 AM PST by k2blader (It is neither compassionate nor conservative to support the expansion of socialism.)
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To: meenie

Why not stop SS in it's tracks today? Make retirement benefits a front-end job by investing $2500.00 in an account for every new-born thru seven year-old tomorrow. Make it untouchable for 62 years, or until death, whichever comes first. Individuals would be free to invest more throughout their lives. It would belong to the individual and be part of his estate to pass on to whomever. No government interference PERIOD.

This would kill SS in 55 years.


23 posted on 11/11/2004 11:15:43 AM PST by whereasandsoforth (Second Amendment Spoken Here)
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To: meenie

Just think about it - by keeping all the younger workers in the system, the SS Admin is incurring a higher liability in later years. Letting the younger workers invest some of their own and reducing future liability in SSA lowers the need for more funds later. There are short term deficit increases which will be more than offset by the long term liability reductions created by private accounts.


24 posted on 11/11/2004 11:16:54 AM PST by cinives (On some planets what I do is considered normal.)
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To: sadness in phintown

Here is the core:

The reason this will destroy the modern Democratic party is due to the concept of universal ownership of a growing retirement account by all working Americans. Consider this: the scuttlebutt is that President Bush will propose allowing working Americans to invest 2% of their wages that is now paid into the present antiquated Social Security system, to instead be put into their own private retirement account. Working Americans would still pay a 15% Social Security Tax, but 2% would be yours to invest in your own account. For a 26 year old making $30,000 a year, this 2% would amount to $600. I can hear you now - "heck, that's not much".

But remember, the money is likely going to be invested and earn a return. Assuming a modest return of only 5%, AND that the 2% didn't increase over time (as it should), AND that the 26 year old didn't earn a higher salary as he got older (as he will), then he will have a nest egg of $10,000 in about 12 years. He'll have $20,000 in 20 years. and at 65 years old, he'll have his own retirement fund worth $70,000.

And that's with only 2% being used for his own account. Remember, the government today takes 15%. If, as I hope, the President's plan allows this 2% to be gradually increased over time, every American who works a lifetime, will have a secure retirement fund far in excess of what the Democratic Social Security program ever provided. One more group of numbers for you. If our hypothetical 26 year old was allowed to invest 5% of her wages, AND her average salary was $40,000 over her life, her retirement nest egg would be $240,000. Remember, this assumes a rate of return on investments of 5%. The stock market has traditionally provided a return of just about 10%.

Without trying to run the numbers in any greater detail, the bottom line is obvious and striking - working Americans who are allowed to own a portion of their own retirement taxes will be radically different from the ones who live now.

And they will act differently, think differently, and vote differently. This is what will bring down the Democrats.


25 posted on 11/11/2004 11:20:36 AM PST by Atlas Sneezed (Your Friendly Freeper Patent Attorney)
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To: homeless

Considering the "return" on your SS "contribution" {I mean Ponzi investment} is less than 1% currently, and will be in the negative returns by the time most baby boomers retire, there is no downside to reforming/abolishing this joke. And no, the system would not get "tons of money from current workers opting out" since those same workers are paying today's retirees. That's why most current reform proposals only suggest letting you opt out of part of your SS tax. Your current SS tax is used to pay those retired now - and let's not even mention SSI.


26 posted on 11/11/2004 11:22:20 AM PST by cinives (On some planets what I do is considered normal.)
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To: Koblenz
If the Republicans can even get modest changes, that would be a huge victory. Every time some liberal spoke of health care reform, the stock market would drop, as would their accounts. Everything would be centered on these accounts' returns.

Absolutely true. And the pressure to raise the 2% limit would rise inexorably over the years. If Pres. Bush can somehow get this through, he will be a hero to future generations.

A bit of free advice to the administration: emphasize and repeat ad nauseum that people would not have to invest in stocks. They could in invest in bonds or even savings accounts and still come out in the end with way, way, more retirement money.

27 posted on 11/11/2004 11:27:28 AM PST by SupplySider
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To: nmh
It will be nice if you are right but....

"Social Security reform may not come so quickly. The source said it will be "impossible" to accomplish both tax code and Social Security reform in the next 18 months while another senior congressional staff member told FOX News that "it will be tough to do" both Social Security and tax code reforms before intense politicking geared toward the 2008 presidential elections begins"

http://www.foxnews.com/story/0,2933,137980,00.html

I am very cynical about Bush but he will get a big hurah from me if he puts it front and center. Nothing else is acceptable.

28 posted on 11/11/2004 11:30:29 AM PST by rudehost
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To: cinives
The worker gets to invest his 7.65% and the government would continue to steal (invest) the other 7.65 % from the employer to continue the Ponzi scheme. With no future liability to me, don't you think the govt could pay the current SS recipients?
29 posted on 11/11/2004 11:53:21 AM PST by homeless
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To: sadness in phintown
The Dems are right to fight. Their survival is at stake. If even the smallest degree of privatization (aka personal economic freedom) gets into this program, it will grow and grow and ultimately destroy the Democrat dependency racket.

By the way, I hope the list of proposed choices for these accounts is broad. If choices are limited to a short list of government approved stock and bond indexes, getting your company into the S&P 500 will become a corrupt Washington lobbyist's game that will greatly damage our capital markets.

30 posted on 11/11/2004 11:55:47 AM PST by SupplySider
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To: cinives
Considering the "return" on your SS "contribution" {I mean Ponzi investment} is less than 1% currently, and will be in the negative returns by the time most baby boomers retire

I looked at my statement a couple years ago, and it basically promised a -1% return.

Bottom line, it's an unfunded liability to the tune of trillions of dollars. CFOs are fired for underfunding ("robbing") pension funds. It would be criminal to do nothing!

31 posted on 11/11/2004 12:01:55 PM PST by Fredgoblu
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To: sadness in phintown
I just finished watching MSNBC and Ron Insana interview Stephen Forbes and one of the Sink Emperor's old towel holders on the possibility of change to the tax code and social security.
Forbes has his usual far out ideas, a little kooky but nevertheless interesting and thought provoking. The Clintonoid had nothing to offer other than to re-fight the campaign with the mantra that Bush had shifted the tax burden from the rich to the middle class, yada, yada. Not only that, but evertime Forbes spoke on the split screen, the towel holder sat there, shaking his head in pity at poor old Forbes and smirking until it came his turn to talk.
I thought to myself that they have learned nothing from this past election and if they keep up the this pity and condescension routine, they're going to lose even more elections in 2006.
32 posted on 11/11/2004 12:20:37 PM PST by finnigan2
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To: homeless
Except when you're self-employed, you are cheated of both sides - I pay all 15% myself, almost as much as I pay in federal income taxes.

Studies show it should, as long as those who take this option receive NO benefits from SS. All I can say is, where do I sign up ? I figure if I can save my 7.65% for the next 18 years at a minimum of 5% return (and probably more), then I'd have investment returns greater than what SS would pay me after having paid into it for 40 years.

The study also says the leftover tax could be reduced to 4% until the current SS retirees are gone, after which the tax could be abolished (yeah, right!).

Human Events Online article on the subject

33 posted on 11/11/2004 12:23:29 PM PST by cinives (On some planets what I do is considered normal.)
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To: meenie
The only way to meaningful reform is if the privatization is made from reductions in government. It is voodoo economics to finance privatization by deficit increases. These would have to be paid down the road in more inflation and dollar devaluation.
True - but compared to what? If the privatization were done without offsetting cuts, the only change would be that the accounting would be more honest. That's all. We are already going into the hole, but the magic "SSTF" is masking it. Maybe it has to be done in stages, with honest accounting as the first big step, and reconciliation of the budget for a later battle.

34 posted on 11/11/2004 12:29:13 PM PST by conservatism_IS_compassion (The idea around which liberalism coheres is that NOTHING actually matters but PR.)
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To: homeless
A slightly different take that would save SSA big $'s
The boomers about to retire, generally, have much better retirement plans than their predecessors & could probably live w/o full SS payments.

Give 'em an option

Full benefit - or - a Fed tax credit for ea. $ not taken in a given month/year.
Win Win: the recipient decides, the Fed saves about 75% for $'s applied to tax credit.

35 posted on 11/11/2004 12:33:31 PM PST by TheOracleAtLilac
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To: Beelzebubba
And that's with only 2% being used for his own account. Remember, the government today takes 15%. If, as I hope, the President's plan allows this 2% to be gradually increased over time, every American who works a lifetime, will have a secure retirement fund far in excess of what the Democratic Social Security program ever provided. One more group of numbers for you. If our hypothetical 26 year old was allowed to invest 5% of her wages, AND her average salary was $40,000 over her life, her retirement nest egg would be $240,000. Remember, this assumes a rate of return on investments of 5%. The stock market has traditionally provided a return of just about 10%.

I ran these same numbers years ago. It's staggering just how unproductive our Social Security money is!

Social Security takes 12.4% of your pay: 6.2% from you and 6.2% that you never see, from your employer.

Let's start with a fry cook making minimum wage, $5.25/hr, 40 hours/week, 52 weeks per year. His annual salary is $10,920, and social security payments total $1354. If he works at that job for 45 years, he'll accumulate ~$61,000 (0% S.S. interest). Assuming he gets all of it--NOT LIKELY--he can expect a retirement annuity of $357/month...less than 40% of his final year's monthly wage (5% annuity, 25 years).

If this guy is allowed to take all of his social security payment and invest it, he could accumulate $222,000 at 5%, $467,000 at 7.5% and $1,022,000 at 10%. Think of it, he could be a minimum wage millionaire at retirement...if he could only invest his own money at the average long-term stock market return rate!

The 2% is a good starting point. But you've got to acknowledge people's capacity to contribute, and the number of years to retirement. I'd start out and give the poorest workers a bigger share of their contribution to invest...and I'd do the same for those closer to retirement. Over a generation, those contribution charts would shift until everyone is enjoying the same maximum contribution.

Another alternative would be graduating the privatization scale according to the total contribution. Say, of the first $10,000 in wages, give people their full 12.4%. Of the next $10,000 in wages, give people 9% and let the gov't keep 3.4%...of the next $10,000 give them back 6%...etc., etc. This would put the biggest privatization in the hands of the most needy. Same as above, though. Gradually shift the charts until all S.S. payments are privatized.

There are plenty of ways to do it. The bottom line, though, is to phase it in over a generation, and give the most immediate privatization bang to the most needy...so that people can be weaned from the system as quickly as possible.

36 posted on 11/11/2004 12:44:34 PM PST by Fredgoblu
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To: sadness in phintown


This one change will make all the difference for the American people. It's FAR more important than suffling the deck chairs with tax reform. Go for this first, have a gigantic nationwide debate, and ramrod it thru. As the article says, when Americans see their own private monthly statements start to add up, "they will act differently, think differently, and vote differently. This is what will bring down the Democrats."


37 posted on 11/11/2004 1:59:03 PM PST by trenton1776
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