What do you think of the presidents proposal to fix Social Security ????

Answer 1

Here is another proof that President Bush's designs for Social Security cannot work. This one's not mine. I first heard it from the actor and liberal activist Rob Reiner. Like the argument I have been hawking (see www.latimes.com/proof), this one doesn't merely suggest that Bush is making bad policy. It demonstrates with near-mathematical certainty that the idea he endorses can't work. Period.

Bush might as well be proposing legislation that two plus two is five. And if that happened, there would be no shortage of Republicans prepared to endorse this view, experts on arithmetic to declare that it is a very difficult question, research to indicate that the answer may lie anywhere between 2.3 and 7.09, moderate Washington sages to urge caution, media to report both sides of the question, and media critics to accuse the media of a subtle bias in favor of two plus two is four.

The Meathead Proposition (in honor of Reiner's most famous role) is this. The case that there is a Social Security crisis and the proposal to address it through "personal retirement accounts" both depend on assumptions about the course of the economy over the next few decades. These assumptions are highly speculative, but that's okay. What's not okay is to assume one thing when you claim there is a problem and something different when you claim that you've got the solution.

Actually, Bush abruptly gave up his claim that privatization will solve the problem of a looming shortfall in Social Security funds. The truth is that privatization schemes assume that the shortfall will be addressed -- by borrowing trillions of dollars -- as part of the "transition" to privatization. But Bush still claims that letting people keep and invest for themselves part of what they now pay into Social Security during their working years will leave them better off than if they get the benefits they are now entitled to.

How much better off depends on how much your government benefits will be reduced for every dollar you choose to keep and invest for yourself. That is one of the little details the White House hasn't yet enlightened us about. But this new system as a whole -- Social Security plus the private accounts -- must somehow produce more money than Social Security alone, or there is no point.

My previous argument, in a nutshell, was that even if these private investments do better than the government bonds in which the current Social Security surplus is invested, this won't change the total amount being invested in the private economy, or increase the economic growth that comes from private investment, because the government will just have to go out and borrow elsewhere to replace the dollars it isn't able to borrow from Social Security. And that means that every time someone puts a Social Security dollar into a private account, someone else must be persuaded to take a dollar currently invested in the private economy and put it in government bonds.

To get the scheme enacted, Bush must convince Americans of the exact opposite: that private-sector investment will make them better off than fuddy-duddy old government bonds. Basically, privatization schemes assume that the alleged inferiority of government bonds can be our little secret for the next few decades -- just us folks in the Social Security system. And so we can just unload a few trillion in government bonds on all those two or three Americans who aren't in Social Security, plus maybe some hapless foreigners.

Privatization schemes assume that this will have no effect on how much interest the government will have to pay, or what kind of long-term return you can expect on investments in the private economy. For example the right-wing Heritage Foundation, a major thumper for privatization, assumes that private accounts can earn a long-term, risk-free return of 4.7 percent after inflation, which they say is based on history.

But if free markets work the way they are supposed to -- and I would like to hear the Heritage Foundation say that they do not -- the effect of the government's announcing that government bonds are a bad investment and officially pushing people to put their money elsewhere will be to make it more expensive for the government to borrow money. So even if private stocks and bonds are a better long-term investment than government bonds (after factoring in risk and so on), they won't stay that way for long. Meanwhile, in their latest report, the Social Security trustees assume that growth in the nation's gross domestic product will slow from 4.4 percent to 1.8 percent in 2015 and will stay there for the next six decades. They predict productivity growth of 1.6 percent and average unemployment of 5.5 percent. From this and other data, the trustees predict that the trust fund will earn 3 percent a year (5.8 percent interest minus 2.8 percent inflation). This is their "intermediate" assumption, from which Bush concludes that the shortfall will hit the fan in 2042.

These assumptions about the unknowable are not unreasonable. Nor are the assumptions of the Heritage Foundation. What is unreasonable is using both sets of assumptions at the same time. Can a conservative investment in stocks and bonds grow by 4.7 percent a year, for decades, while productivity is growing by 1.6 percent and the economy by 1.8 percent? Theoretically possible, perhaps. But likely? On average?

If you start by assuming that one investment pays better than another, it's not very surprising (or persuasive) if this is also your conclusion. A dollar a year invested for 37 years (now until 2042) at 3 percent interest produces $66. At 4.7 percent, it's $95. If the Heritage Foundation is right, there is no crisis to fix. And if the Social Security trustees are right, the Heritage fix won't work.

Answer 2

Here's how to do fix it and help the environment at the same time. Start 401-k accounts starting at birth. We already know that interest bearing accounts work best along with the element of time. And who has more time than a baby? Lets require parents to contribute 3 percent of their income towards each of their children's 401-k. We'll call these accounts Spring Board Accounts because a percent of it can also be used for college and another percent for a down payment on the child's first home. After that its just a race to retirement. Perhaps, Grandparents as well as anybody else could be allowed to contribute to a child's Spring Board account too. With this method of fixing social security (as though there is a problem) parents will have to be careful as to how many children they have. This will help keep the population down and our government will not have to worry about its aging population ever again.

Answer 3

I'm totally against it. We need a change but this is a terrible idea. The most vulnerable people are not sophisticated enough to handle the stock market. It is difficult. I worked in investments and banking. I worked in retirement accounts. Some people traded mutual funds daily or almost daily. It was crazy. The expenses went up. It's not a good idea.
I took one graduate finance class so far and it was a tough class. I passed the Series 7 exam the first time. I did very well too. There are shady brokers out there.
I want the government in control but more investment choices, ones that go with what life stage people are in. More aggressive when they are young and more conservative as they get closer to retirement age.

Answer 4

The one that got obliterated in congress? eh. I think if you want to fix something, you take government out of it entirely. We did alright before Social Security, and the way things are going, we'll have to manage without it pretty soon anyway.

Answer 5

I wouldn't believe him if he said the sky was blue. If the last 3 presidents would not have robbed the fund to pay interest on our debt we'd be in a whole other position right now. They should leave their hands off of it.

Answer 6

So many false hoods in the answers!!! Privatizing SS would be a tremendous boost to the system. There needs to be safegaurds in place of course, but it would be better than watching it go down the tubes!!

Answer 7

Something needs to be done. I preferred the option to take 5% of what they were taking out in SS and be able to invest that myself but the dems shot that one down.

Answer 8

I like the idea of using some of it for investments that I generate rathar than having it just sit there!

Answer 9

If Bush,Cheney are involved it'll screw the poor and middle class for sure!They don't do anything that doesn't benefit the wealthy first.

Answer 10

its gonna be over in 2025 so anything that helps it sounds good...but the president es muy estupido en mi opinion.