Posted on 08/27/2002 3:21:15 PM PDT by BlackJack
Aug. 27 — More than 40 million Americans are depending on a little-known federal agency to protect their pensions if recession-wracked companies go belly up and can’t pay retirees what they’ve been promised. The Pension Benefit Guarantee Corporation is the backstop in the event firms can’t pay benefits to retirees. With many corporations sure to report under-funded pension plans by the end of this year, the PBGC is looming larger in importance as the protector of workers and retirees.
Yes, but to assume that government will accomplish this better than private markets is to truly live in Oz. Private investments will increase the GDP which will need to be divided up to provide benefits. Which increased GDP more, the money invested to create Microsoft or the identical amount spent on welfare, the military or a study of cow flatulence?
If we can all invest our own money don't you think that will increase GDP more than the government holding the money and then paying it out at a later date, unless they decide to cut the benefits, which they can do.
If this is the purpose (Frankly, I think they deserve more), why don't you just argue in favor of making and funding whatever level of payments achieve this goal. Why confuse the issue with some off-point retirement scheme. Just figure out what is needed to accomplish the goal and raise that amount from current producers. Whatever that frees up (7.65%, less, more, whatever) is yours to save, spend, or give away. Very simple.
Firstly, as I've been saying, to view what you get from social security as a rate of return on an investment is to fundamentally misunderstand the purpose of the program.
Secondly, to believe you (or Greenspan) can possibly know what that MEANINGLESS number is if you insist upon calculating it requires a forecast of future payments, benefits, inflation, etc. It is impossible to be certain what the "return" will be or whether it will or won't exceed 2.7%.
My best guess is that the opposite is probably true. People bidding up the stock market will have verey little effect on the GDP; if SS surpluses are used to retire the national debt, we would benefit immeasurably, in several forms, one of which would be higher future GDP.
Which increased GDP more, the money invested to create Microsoft or the identical amount spent on welfare, the military or a study of cow flatulence?
People bidding up the stock market will have verey little effect on the GDP; if SS surpluses are used to retire the national debt, we would benefit immeasurably, in several forms, one of which would be higher future GDP.
Not all money that would be invested would bid up the market. Not all of the "bid up" market would be bad or unsustainable.
Think about the rate of return on paying off the national debt. What would that be? The government borrows now at about 4.2% for a 10 year bond. If I have to choose between the government taking my money to save me 4.2% on future interest or letting me keep it to invest in a new business or maybe use it to buy a house and save on rent, or you pick it, don't most riskier investments earn more than 4.2%?
How about letting me keep the money to put my kids thru college? The increase in their future earnings will benefit them, benefit me(in case I need them to support me when Soc Sec goes broke), benefit society (assuming they don't go to Ivy League schools and turn into a--holes) and it even benefits the government because their higher earnings will cause them to pay higher taxes.
Pretty good, probably a higher than 4.2% return.(over a long enough time frame)
He is a shameless POLITICIAN that has done injustice to every principle he has written eloquently about in the past. He will say whatever he needs to to make whatever political point he wants to make.
You beat up on Greenspan, fine, Congress is worse. Now for you to tell me that I should trust them to fund my retirement and that I shouldn't look to improve my return is just silly.
You finally hit on my point
Just figure out what is needed to accomplish the goal and raise that amount from current producers. Whatever that frees up (7.65%, less, more, whatever) is yours to save, spend, or give away. Very simple.
If the government can make a one time lump sum payment to fund every current recipients benefits and allow everyone else to invest their own contributions so that they won't need the government to pay them when they retire, the interest cost to the gov would be 4-6% at current rates. Can't the private sector earn more than that?
We calculate future payments, benefits, inflation etc. everyday. Thats the stock and bond market.The problem is that we calculate them based on a companys ability to make a product, earn a profit and pay dividends and interest. We have some insurance based on the company's assets. Social Security is based on a politicians word that I'll be paid in the future. No thanks.
Like I need another reason to want to keep my money out of that system.
That would be a beautiful thing. I get to invest my own money(and not starve) and the current people don't starve.
So, we agreed all along.
Toddsterpatriot: That would be a beautiful thing. I get to invest my own money(and not starve) and the current people don't starve. So, we agreed all along.
My description, to which you now say you agree, differs from the current system only in DEGREE OF BENEFIT. To wit, the current SS system provides the aged with more than bare subsistence. Therefore, to address the issue directly, you should merely argue for a reduction in benefits, thereby requiring lower taxes, thereby leaving more to you. The "privatize" red herring was invented by snake oil selling politicians who don't have the guts to approach the issue directly.
If I can achieve a higher return ( I know, Social Security isn't an investment and doesn't really have a return) can't we keep the same benefits in place? How should the gutless politicians approach the issue?
By arguing for either a.) reduced benefits, b.) need's based benefits, or c.) alternative nvestment vehicles for surplus
I would be positively disposed to sensible, well thought out proposals along any or all of these three lines.
Capitalism with publik schooled participants looks terrible.
I would be positively disposed to sensible, well thought out proposals along any or all of these three lines.
I thought I was arguing along these lines. Reduce my benefits to zero. Let me invest my own contributions. My need will then be zero. There will be some costs associated with the transition, but this will avoid the demographic disaster we are aproaching.
The surplus that sits in Washington just gives the politicians the ability to spend(waste) that much more on crap.
I think Reagan had the right idea, if we cut taxes thats the only chance to starve the government. If you could borrow at t-bill rates to pay off your credit cards or help your company grow, I think that is a good arbitrage. The added government debt would restrict (hopefully) the wasteful spending and the added growth of GDP would help everyone.
I assume you mean reduce everyone's benefits to zero and provide for some transition. Define the transition, and then pitch it to your favorite Congresspeople. I doubt you will get a single endorsement.
No, my post #75:
Here's my idea, the gov can keep all my employers contributions past and future, I invest my portion (7.65%) and the government doesn't owe me any benefits when I retire.
The gov returns all my contributions. That is the cost. They keep my employers future contributions to help fund current retiree benefits. Any shortfall would be another transition cost. The cost would be front loaded and would eventually disappear as retirees collecting benefits die. When all those receiving benefits are gone, all new retirees have their own self funded plan and the employers contributions would also fund the personal plan.
I agree, Congress would never do it. I'd be worried if they did because that would mean I had sunk to their ignorant level. The problem is explaining the benefits to the people who, after all, have an average IQ of 100. Lower average for democrats, of course.
You say this is not your position, but then go on to describe EXACTLY this position with an explanation of your transition process plus an EXTRANEOUS description of how everybody can be self sufficient by appropriately investing the money no longer contributed to SS. The last part is extraneous because SS is NOT an individual retirement plan. Why isn't that clear to you?
Anyway (and I really hesitate to address this), does your suggestion involve some monitoring, regulating, and administering of these IRAs? Does it include a plan for those whose investments go sour? If your answer is "no" to all of these questions, my characterization of your position, above, is accurate. If your answer is "yes" to all these issues, then you are introducing a gigantic, complex, far more intrusive, new "Big Government" program to replace SS and THAT DOES NOT SERVE THE SAME PURPOSE.
NO. Everyone who is currently getting or scheduled to get benefits, lets say everyone over 40, still gets their full benefits. From Social Security, which I know is not an individual retirement account.
Me, as in I, understand that after getting back my own 7.65% back from the government which I have contributed over the last 18 years do hearby renounce any future claim to receive any money from Social Security.
Future employer contributions still go to Social Security to pay benefits to current and future recipients, like I said, those over 40. No ones benefits are being cut. As recipients die, the need for my employers 7.65% will be reduced, because there are no new recipients. As the trust fund shows a surplus, because employers are still contributing, we can reduce the percentage going into Soc Sec and put the rest into the individual plans.
No ones benefits are being cut. The higher returns in individual accounts raises the average return that retirees get. The only loser is the government which doesn't get to waste as much of my retirement savings.
I hope it's clear to you that its clear to me that Social Security is not an individual retirement account. It is clear to both of us that it has been a transfer between generations. It should also be clear to both of us that it cannot continue as is without huge tax increases, benefit cuts or both. That's what I'm trying to avoid with my suggestion.
Why, do I tend to run on? :^)
does your suggestion involve some monitoring, regulating, and administering of these IRAs? Does it include a plan for those whose investments go sour? If your answer is "no" to all of these questions, my characterization of your position, above, is accurate. If your answer is "yes" to all these issues, then you are introducing a gigantic, complex, far more intrusive, new "Big Government" program to replace SS and THAT DOES NOT SERVE THE SAME PURPOSE.
Of course we need some sort of guidelines as far as appropriate investments. Low cost indexes which blend the Wilshire 5000 with a government bond component would be swell. As people get closer to retirement their bond portion would be increased and the stock would be decreased.
I don't see the government telling you how to safely invest your money is nearly as intrusive as them taking all your money with a promise that (wink-wink) it'll be here when you need it.
As I've said, to continue we need reduced benefits, increased taxes and/or needs based benefits. Proposals along these lines modify but keep SS and its purpose.
Your "suggestion" does not modify SS. It rejects it (after continuing it for people over 40 or some such cutoff). You replace SS with an individual retirement plan. Now, rather than a system that directs money from workers to non-workers you have people saving money for their own retirement and passing it to their heirs if they don't need it. Rather than a new system to achieve an old goal you've scrapped a system with one goal and instituted another system with an entirely different goal. If you said that's what you want to do, I'd just say I disagree completely. But, instead, you keep putting it forth as a new approach to the same issue.
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