The Cellar Security proposal

[Griff]

The Social Security debate is on, maybe the Cellar should hash out a proposal. Two things I don't want to see are the continuation of a program that does not foster ownership and I don't want to see payroll taxes funneled to a few chosen companies. What don't people want in a new system?

David Brooks has a nice piece mentioning Bob Kerrey's old Kid Save proposal. Fed Gov opens an account for the youts, seeds it with pocket change, and compound interest does the work.

[BrianR]

Perhaps we first should go about getting out from under the current system.

How should it be ended? What would be "fair" to the people who have paid into it and not rob those who need it now?

My modest proposal:

State that as of a certain date, say, March 1, 2005, all children born will not be able to enter the system at all. Those who are already in it (to whatever extent) may opt out but will lose whatever they paid into it. If they choose to remain, they continue to pay at the current rate and receive the promised benefits at the end, but with no guarantee that SS will survive that long. Those who are already receiving SS benefits will continue to do so until death, as promised.

This will take at least a generation to fully implement but it seems to be the fairest I can think of.

Comments?

BRian

[Schrodinger's Cat]

Well, I suppose this will make me sound like a Commie or something, but I say keep the current system with the provision that after Jan 1, 2006, Social Security will become a catastrophic national insurance system. Those who retire at age 65 or more and have less than $12,000 a year from private pensions and investments may tap into Social Security to make up the difference. Same for a worker who becomes disabled before retirement age. Anybody with an income from other sources over $12,000/year wouldn't qualify. Also, stop the government practice of raiding FICA for everything else under the sun EXCEPT social security. Make the government be honest about what that money is REALLY going for. Maybe the big spenders in Washington would calm down if they were actually held accountable and couldn't tell their standard lies about the real use of our tax dollars. If FICA actually only went to social security under the circumstances outlined above, our FICA with-holding would actually be less, and the system wouldn't be broken in the future (it's NOT broken now).

[Elspode]

Someone is going to first figure out how GWB is going to answer to those supporters whom he promised a big open cookie jar to dip into. This isn't about making you or me more secure in our old age. This is about getting all that fallow money into the pockets of people who will use it to improve the economy. Whoops...sorry...I meant to say "people who will use it to improve *their* economy". Damn typos.

The Democrats raid the corporations, the Republicans raid the little people.

[Beestie]

Originally Posted by Schrodinger's Cat

Well, I suppose this will make me sound like a Commie or something... Anybody with an income from other sources over $12,000/year wouldn't qualify....

Well, I'm no commie but I fully support the idea that those whose income is over some basic amount should not be permitted to draw out of the system. The floor needs to be kind of low to avoid providing a disincentive for people who can work and want to work from working.

I don't think that's communist at all.

[smoothmoniker]

Why are people so opposed to raising the benefit age? The system was put in place at a time when people retired at 65 and died at 68. Now many people work well into their 70s, and don't die until 80. The system was never intended to support people for 15 years.

Starting with people who are 30 this year, state that the social security benefit age will be raised by 1 year every two years for the next 10 years until the payout starts at 70.

So if you turn 30 this year, you draw benefits when you hit 66 in 2036. If you turn 30 in 2 years (2007), you draw benefits when you turn 67 in 2039.

Eventually, the system will revert to what it was intended to be - a cushion to keep elderly citizens from dying of starvation in the last few years of their life. It really shouldn't be more than that. Noone should expect to live a reasonable quality of life purely on Social Security benefits.

[xoxoxoBruce]

Now many people work well into their 70s, and don't die until 80.

Zat so, just what do this people do? Sit at a desk? What about the people who actually do physical work. People who after 60 are in constant pain at work and go home swollen and exhausted. I guess they should have chosen their professions more carefully....Oh wait... they don't have professions they have a fucking job...maybe.

Anybody with an income from other sources over $12,000/year wouldn't qualify.

Just like that? Pay in your whole fucking life and because you have a $12k pension you don't get a dime? Remember $12k is $490 BELOW the god damn poverty level for 2 people.

The floor needs to be kind of low to avoid providing a disincentive for people who can work and want to work from working.

I'd say below the poverty level is "kind of low"

Noone should expect to live a reasonable quality of life purely on Social Security benefits.

Why is that?

Remember after you make your Grannie a bag lady she's not going to put a little something in your birthday cards anymore. :p

[Schrodinger's Cat]

Originally Posted by xoxoxoBruce

Just like that? Pay in your whole fucking life and because you have a $12k pension you don't get a dime? Remember $12k is $490 BELOW the god damn poverty level for 2 people.

Remember after you make your Grannie a bag lady she's not going to put a little something in your birthday cards anymore. :p

OK, Bruce, I'll admit that I was just answering off the top of my head. The payment amount should be set to place people just above the current poverty line. You'd also have to make the change a bit more gradual - say everyone who is now 40 or 45 would get their social security benefit, regardless, but the younger members of the work force should not plan on getting social security except under the extreme contingency of being thrown below the poverty line by a disability or retirement without an adequate pension plan. If we were to stop giving social security benefits to everyone, regardless of income, this would lower the cost of the plan, along with the chunk now taken out in taxes. That difference could then be used to invest in the retirement plan of your choice.

I don't think such a plan would be a disincentive for people to save - after all, few of us want to live just above or at the poverty line in our remaining years. Sure, the majority of people would be paying into an insurance plan that they got no money back from, but how is that different than paying car insurance? Maybe you're a safe driver who will never have an accident or become involved in one with a careless driver - still it's good to know that the insurance is there if worst comes to worst.

I generally put somthing in my grandma's birthday card and not the other way around, and she's not even a bag lady, although I know her income is limited.

[xoxoxoBruce]

Exactly my point. Philosophical discussions about how to "fix" Social Security always lose sight of the reality that you're fucking with peoples lives.

[tw]

First solution to a Social Security problem. Any monies taken by the government to pay today's bills are replaced in the SS Trust Fund with T-bills. IOW the government pays the SS Trust Fund interest on the money it takes from that Trust Fund. SS problem now solved.

But this solution would expose another problem. A problem even Ross Perot so accurately noted more than 10 years ago. Government accounting is so corrupt that any corporation doing same would be subject to fraud charges, corporate officer jail, and massive fines. The government hopes even lurkers in The Cellar don't learn this fact. The government takes SS money to pay bills - such as a war in Iraq - and never even leaves an IOU. That is called fraud anywhere else in the United States.

So instead we are going to invest in the stock market to fix the problem? Fine. Instead of giving the government all that SS Trust Fund money, instead, invest it all in index funds. No brokers get commissions. The Fed buys a seat in the markets and invests blindly in index funds. Again, Social Security shortages solved. But the brokers don't get rich? Clearly this solution must be wrong.

So who profits by a George Jr solution? People who will get big commissions and who will contribute even more to the Republican campaign war chests - stock brokers. Noted are those not strongly in favor of this George Jr SS modification. Bond traders. Bond traders would suffer under this 'so called' solution. But it does not matter. The reasons for bond trader objections are too complex for the man who only reads the Daily News or who is informed by Rush Limbaugh types. Ignore the Bond Traders. Only George Jr tells us the truth.

Simple solution. Government must pay T-bill interest rates on money taken (not borrowed - taken), fraudulently, from the SS Trust Fund (and FAA Trust Fund and Highway Trust Fund). George Jr hopes you don't know this little fact and don't learn about this solution. It would expose how much bigger the government debt really is. Ahhh... but Reagan proved deficits don't matter.

[LabRat]

wow, never seen Bruce get riled up so quick !

[Troubleshooter]

Look, just tax everybody at an even 15% nationally, 5% state and give every adult a check for $1000 each month.

You can hippy up and live on that alone if you live with a few other people in just about any part of the country.

Or you can use that as a good way to help pay the necessities while working towards a worthwhile goal.

Who knows? It makes more sense than anything the gov't is going to tell us.

[lookout123]

look - i don't know what bush's plan will really look like so i'm not basing my thoughts on his plan.

despite tw's frequent cries that this is a ploy to make stockbrokers wealthy and HM's concerns that this will screw over the little people, i think individual accounts are a good idea.

1) since tw has brought up the idea of individual accounts making brokers (such as myself) wealthy i'll respond to that. most of us when talking it through have come to the conclusion that a solid ownership system would most likely take clients away from us, not add additional funds to our management. the government system isn't going to call XYZ broker and say "i'll take 1,000 sh of Worldcom" - by necessity, they would have their own licensed traders who will buy straight from the street without the markup of a middleman.
as people get comfortable with the new system, human nature would set in and they would realize that they can invest less $$ in their outside accounts because of the stability within their gov't personal acct.

2) i know that many, like HM, are concerned that people will make foolish decisions with their personal accounts and retire with nothing.
A) If there are only five different options to choose your balance from, and they are all designed by prospectus to be managed in a conservative nature (as are many of the TSP's already in use) then that should alleviate the concern about JOhnny PUblic putting all of his money into a speculative venture.
B) I put together some numbers in another thread that showed what $100/month over a forty year career looks like in a Conservative Equity fund and a conservative bond fund. You can find it here .
C) I would not support anything that completely leaves people hanging in the wind. If at any point in time, a person who starts to withdraw from their personal account would receive a smaller benefit than those who didn't opt-in - then the gov't would have to make up the difference until the personal account returns to a position of strength. In short, it would be impossible to lose real benefits by choosing the personal accounts. That is more a peace of mind measure than anything because participation over a 20/30/40 year period in the individual account system will leave a large enough balance to ride smoothly through the down years.

3) Bruce's hot button is the hardest to deal with, because it is the most emotionally charged. Who gets what? Why does someone born a day later, get something different? There isn't a simple answer for the question. There will have to be a birthday cut off somewhere. i think 55 years old is too late. i think an incremental phase-in system from age 35-50 would be fair, with age 51 and above locked into the existing system with their expected benefits, unless they choose to opt-in. The most important thing to remember is that no one will lose any benefit that they have lived their life expecting.

4) How do we pay for it? well, i would think that my generation will probably pay the most for it. if our SS tax remains the same and roughly half goes into our personal account and the other half goes to the existing obligations, we have enough years to allow our personal accounts to compound and we can honor the promise made to those nearing retirement.

[russotto]

Shut it down cold turkey. Make euthanasia cheap and easy.

The grey lobby isn't going to allow anything useful to be done or benefits to be cut, and in about 10 years payroll taxes are going to have to go through the roof to pay the old farts, fostering intergenerational hatred.

[xoxoxoBruce]

Originally Posted by LabRat

wow, never seen Bruce get riled up so quick !

That's because you didn't see the first toilet seat debate.