Why We Need Social Security

[housewolf]

Why We Need Social Security
It has radically reduced poverty in old age. And it protects the middle class against inflation and the ups and downs of the market.

By Paul Starr
Web Exclusive: 01.12.05


For nearly three-quarters of a century, Americans have taken Social Security for granted. Now we had better learn how it works, what it has done, and what the true facts are regarding its future -- or else we are going to lose it.

Super�cially, Social Security resembles traditional employer pensions: Americans pay into the system during their working years and receive a monthly pension during retirement. But the differences are fundamental.

<snip>

That’s why it’s our most successful anti-poverty program. In addition, Social Security bene�ts are indexed against inflation and protected from the ups and downs of the economy and �nancial markets. That’s why the program provides security for the middle class.

<snip>

But what’s wrong with voluntary and partial privatization -- giving people the option of holding back 3 percent or 4 percent of their Social Security contributions to deposit in individual accounts? Although we haven’t yet seen the details of the Bush plan, these proposals typically come with sharp reductions in future bene�ts for younger workers who opt to remain in the system. These are really proposals to cut Social Security in which the individual-account option is an eye-catching decoy. Voluntary in appearance, these proposals would make Social Security such a bad deal that they’d trigger a run on the system: Workers, especially those with higher earnings, would likely not only opt for private accounts but demand that the entire program become optional.

<snip>

Paul Starr is co-editor of The American Prospect.

http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=9002

[chomskysright]

1. 21 reasons why Bush's SS plan sucks

21 REASONS WHY PRESIDENT BUSH'S PLAN FOR SOCIAL SECURITY IS A BAD IDEA AND IN FACT IS MISLEADING :
(WAYS TO INNOCULATE YOURSELF AGAINST THE ONCOMING MEDIA BLITZ):
A story of how Social Security is not like a 'pig in a python' (but that's what Bush and company are telling you)
We are being scammed to pay for the war on Iraq & associated deficits


You will notice that points have references; see those references at the end of these points. This is not intended to be an 'academic presentation'; thus, the URL's which you can check for yourself.



1. WHO WANTS THE CHANGE AND HOW WILL THEY 'FRAME' THE ISSUE? Wall Street wants privatization in order reap a windfall profit. Everyone else should be very suspicious. If the stock market goes down, your benefits go down.

This is what you will hear from Bush and company: "right now we are on an unsustainable course." They say, 'its unfixable as it is.' They will say: 'the problem will just grow and grow as more and more boomers come on board to obtain their Social Security benefits.' They will say: "the trust fund is empty.

Quite the contrary: Social Security funds are actually increasing and....and will actually expand for 10 more years because of the interest it receives from Treasury bonds. Could it be that Bush and company are worried because, "the government has already used the annual surpluses to finance its operating deficits." (Edmund L. Andrews; The New York Times ; Monday 10 January 2005)

That's right: Bush and company have used the surplus which usually accumulates along with the principal money in order to do something about the deficit that they have created over the past 4 years.



2. EVERYONE SEEMS TO BE SURPRISED: WAS THIS 'TWEAKING' OF SOCIAL SECURITY MEANT TO TAKE PLACE PERIODICALLY? : YES "What people forget is that the baby boom is not like a pig in the python," said Kent Smetters, an associate professor at the Wharton School of the University of Pennsylvania and a former senior official in Mr. Bush's Treasury Department. "If you just balance it over the next 75 years, it just means we have to come back and do the same thing all over again about 15 years from now," Professor Smetters said. (Edmund L. Andrews; The New York Times ; Monday 10 January 2005)



3. WHY ARE WE BEING TOLD WE NEED TO 'DO SOMETHING ABOUT SOCIAL SECURITY'? The nation's baby boomers start to retire at the end of this decade and relatedly the cost of retirement benefits is expected to rise much faster than payroll taxes from active workers. Obviously, payments become higher with each generation of retirees, even after accounting for inflation. By 2042, the trust fund will have used up its reserves and payroll taxes will cover only about 70 percent of the promised benefits.


4. WON'T WE HAVE TO PAY FOR CHANGING TO PRIVATE ACCOUNTS?? HOW MUCH WOULD IT COST US? : the Bush administration deems the current system, with its average monthly benefit of $955, as too generous (that's less than $12,000/ year). The Bush Administration wants to cut benefits by more than 40% to help pay the trillions of dollars that would be needed for the creation and maintenance of private accounts. http://releases.usnewswire.com/GetRelease.asp?id=41481

This doesn't make sense given that now Social Security is the most efficient government system ever instigated, utilizing only 1% of the overall funds to manage the monthly Social Security payments for millions of people. More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. The Social Security System is legally separate from the rest of the budget. Bush wants to discontinue that. This will make it difficult it not impossible to track in terms of is the Social Security money really being used for other purposes like making war on Iraq.

Where's all that money right now? "The Social Security trust fund has accumulated more than $1.5 trillion in reserves, held in Treasury bonds." (Edmund L. Andrews; The New York Times ; Monday 10 January 2005)



5. WHO IN BUSH'S ADMINISTRATION IS DRIVING THE MATTER? Karl Rove, Bush's right hand man: He is attempting to convince the public that Social Security is 'heading for an iceberg." )http://www.msnbc.msn.com/id/6791950)


4. WHY WOULD KARL ROVE WANT TO PRIVATIZE SOCIAL SECURITY? Rove sees it as : “one of the most important conservative undertakings of modern times,....“We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course,” the e-mail said. “That reality needs to be seared into the public consciousness; it is the precondition to authentic reform.....government and toward giving greater power and responsibility to individuals,” said Wehner, the director of White House Strategic Initiatives. " Who is this Wehner? : Peter Wehner, the deputy to White House political director Karl Rove. Thus, Rove is attempting to continue the line of 'getting government out of your lives' which is a recipe to allow corporations unbridled power and individuals no retirement through Social Security. http://www.msnbc.msn.com/id/679195


5. WHAT STRATEGIES ARE BEING UTILIZED IN ORDER TO CONVINCE THE PUBLIC OF THE NEED FOR PRIVATIZATION OF SOCIAL SECURITY?: "The administration has suggested that it would be justified in borrowing some $2 trillion to establish private accounts because doing so would head off $10 trillion in future
Social Security liabilities. It's bad enough that the $10 trillion is a highly inflated figure, intended to overstate a problem that is reasonably estimated at $3.7 trillion or
even considerably less. Worse are the true dimensions of the administration's proposed ploy, which were made painfully clear in a memo that was leaked to the press last week. Written in early January by Peter Wehner.".....(Rove's right hand person): http://www.nytimes.com/2005/01/10/opinion/10mon1.html?ex=1106369074&ei=1&en=81cd3e12f07545a0


6. WHAT WOULD ACTUALLY TAKE PLACE RE: THIS PRIVATIZATION EFFORTS PER BUSH/ ROVE / THE REPUBLICANS? : "Revamping the system to allow investment accounts would not shore up the future finances and would make the financial picture worse. The administration is considering borrowing $1 trillion to $2 trillion to continue paying benefits to current retirees while tax revenue is diverted into personal accounts, called transition costs, Wehner's e mail said (per this article, this e mail was verified by the White House). Separately, to address the future financial shortfall, the administration is looking at plans to cut future promised benefits, by 46 percent in some cases, with investments expected to make up the difference." http://www.msnbc.msn.com/id/679195


7. WHO ELSE UNDERLINES THAT THIS IS WHAT WOULD ACTUALLY OCCUR? : " The real impact of President Bush's Social Security privatization scheme: massive cuts in promised benefits. The White House is expected to propose a new system of calculating Social Security benefits called "price indexing." The technical change would mean "cutting promised benefits by nearly a third in the coming decades" – with even deeper cuts in the future. For example, if the "price indexing" change is made, "a retiree in 2075 would receive 54 percent of the benefits now promised." David C. John, a Social Security expert at the conservative Heritage Foundation called the proposal "very much like sticking your hand in a wasp nest.": American Progress Action Fund" <[e-mail]


8. WHAT ARE SOME POINTS THAT YOU MIGHT EXPECT TO HEAR FROM BUSH AND THE REPUBLICANS? Talk about: PRICE INDEXING: The current method of calculating Social Security benefits is adjusted to reflect the standard of living when a person retires. That means when your benefits are calculated based on your average earnings, the salary you made 25 years ago is adjusted upwards to reflect the overall rise in wages (wage growth) since that time. The "price indexing" plan, expected to be proposed by Bush, would make that adjustment based on the rise of consumer prices – essentially the inflation rate. Since wages rise much faster than inflation, that means your newly adjusted salary will be lower. The end result is far lower benefits for every new generation of retirees. If this system had been in place since Social Security's inception, people today would be retiring with a benefit tied to the living standard of the 1930s, when 40 percent of households lacked indoor plumbing.: [e-mail]


9. WHAT ELSE CAN WE EXPECT TO COME OUT WAY RE: THIS PUSH FOR PRIVATIZATION? : You will hear talk about how it will be cheaper in the long-run to privatize at least part of Social Security. Specifically, White House Press Secretary Scott McClellan claims, "The cost is $10 trillion if we do nothing. So what you're talking about would be a significant savings over those costs." There are two problems with this argument. First, the $10 trillion figure grossly distorts the modest long-range deficit of the Social Security program by projecting that shortfall over eternity. (There is no shortfall at all until 2052. Projections beyond 2052, obviously, are extremely unreliable.) Second, and more fundamentally, "borrowing $2 trillion to fund individual accounts does nothing to reduce Social Security's long-term deficit." Under the Bush plan the long-term deficit is reduced through deep benefit cuts.: [e-mail]


10. WHAT ARE SOME OTHER MATTERS ASSOCIATED WITH RETIREMENT SAVINGS THAT WILL BE BOUGHT UP? The Thrift Savings Plan: what is it land what might be the downsides of such a model, which could be part of the Rovian onslaught?
the Thrift Savings Plan could serve as a possible model for personal investment accounts in Social Security.
Numerous readers said the two programs are unrelated and that the TSP, which relies on federal payroll systems for its basic operation, cannot be replicated on a scale as large as Social Security. Others said a column about the plan failed to stress that the TSP is a voluntary savings program that supplements Social Security, a tax-based program. Cavanaugh's paper (The paper, "Feasibility of Social Security Individual Accounts," was published by the AARP Public Policy Institute. AARP is opposing Bush's plan), for example, says that personal accounts in Social Security will cost more to manage than those in the TSP, in part because the TSP can rely on hundreds of federal agencies to administer payroll deductions and provide retirement planning and other services.
http://www.washingtonpost.com/wp-dyn/articles/A61607-2005Jan9.html?referrer=email


11. SO THE THRIFT SAVINGS PLAN APPEARS TO WORK FOR LARGER PERSONAL INVESTMENT ACCOUNTS, YES? The paper also points out that TSP operates on a progressive fee system (usually 60 cents per $1,000 account balance) so that holders of the higher account balances absorb part of the cost of maintaining smaller accounts. Such a fee system would not work in Social Security because too many accounts would be small, the paper contends. Social Security relies on the government to absorb inflation and market risks, while the TSP shifts those risks to individual investors, Cavanaugh writes. "Attempts to combine these two fundamentally different programs are like mating a bear with a bee -- somebody is going to get hurt," he concludes.
http://www.washingtonpost.com/wp-dyn/articles/A61607-2005Jan9.html?referrer=email


12. WHY DOES WALL STREET WANT THE CHANGE? In the background, beyond private accounts, are various proposals to cut guaranteed Social Security
benefits in the future.


13. BUT WE WILL NEVER HAVE ANOTHER DEPRESSION AS IN 1929: wrong: In 1973-74, the stock
market lost 48 percent of its value. The stock market is a very dangerous place to put money



14. WHO DOES NOT WANT THE CHANGE? (1) AARP, the nation's largest seniors organization, is coming out
strongly against President Bush's plan to allow private individual accounts
within Social Security. (2) On January 10, 2005, a NY Times Opinion piece stated this: "In this and other ways, the administration is manipulating
information - a tacit, yet devastating, acknowledgement, we believe, that an informed public would reject privatizing Social Security." http://www.nytimes.com/2005/01/10/opinion/10mon1.html?ex=1106369074&ei=1&en=81cd3e12f07545a0


15. HOW MUCH WOULD IT COST TO PRIVATIZE SOCIAL SECURITY? transitioning to private accounts could cost $2 trillion. See above information also.


16. TO REVIEW, WHERE WOULD THAT MONEY COME FROM? our taxes will have to be increased to make Bush's proposed plan work.


17. THEY TELL US THAT SOCIAL SECURITY IS BROKE OR GOING BROKE?: With all the clamoring about Social Security, a simple fact has been obscured: the Social Security budget is currently running a surplus; [e-mail]


18. OTHER COUNTRIES MUST HAVE SOCIAL SECURITY AND MAYBE THOSE ARE BETTER? wrong: Chile's system, management fees are around 20 times as high. A privatized system will take money from your Social Security check.


19. SHOULD YOU BE WORRIED THAT YOU WILL NOT HAVE SOCIAL SECURITY? Nothing is going to change, in terms of benefits, for people near your retirement age.


20. WHO TAXED SOCIAL SECURITY TO BEGIN WITH? Ronald Reagan, a Republican, began the taxation on Social Security in 1983.


21. IF WE ARE GOING TO 'FIX IT' HOW DO WE KNOW WHAT TO DO AS RELATED TO WHAT HAS BEEN DONE IN THE PAST TO 'FIX' IT? "If you compare its position now with its position at the time of the last reforms in 1977 and 1983, it's clearly better," Professor Diamond said. "Even then, it was readily fixed without radical reforms, and it's obvious that can be done again." (a professor of economics at the Massachusetts Institute of Technology and a co-author of the book "Saving Social Security.")





There is no Social Security crisis, just as there were no weapons of mass destruction. Social Security has provided a lifeline to millions of Americans with
millions of checks, and in more than 60 years has never missed a payment—and this track record can continue. Social Security is basically a sound system
that can meet 100 percent of its obligations for the next 39 years, and with responsible changes it can continue to do so indefinitely.

"Social Security is not a crisis for which enormous borrowing, huge benefit
cuts and risky private accounts are a solution. Rather,
it's a financial problem of manageable proportions,
solvable without new borrowing by a combination of modest
benefit cuts and tax increases that could be distributed
fairly and phased in over several decades, while
guaranteeing a basic level of inflation-proof income for
life." http://www.nytimes.com/2005/01/10/opinion/10mon1.html?ex=1106369074&ei=1&en=81cd3e12f07545a0


And don't forget: It remains a fact that 30% of the votes in this national election were cast, and 80% of the votes were compiled, by three private companies, owned and controlled by conservative Republicans.
http://www.democraticunderground.com/articles/05/01/12_give.html




REFERENCES:




Edmund L. Andrews; The New York Times ; Monday 10 January 2005:

HTtp://releases.usnewswire.com/GetRelease.asp?id=41481

http://www.msnbc.msn.com/id/6791950)

http://www.nytimes.com/2005/01/10/opinion/10mon1.html?ex=1106369074&ei=1&en=81cd3e12f07545a0


http://www.washingtonpost.com/wp-dyn/articles/A61607-2005Jan9.html?referrer=email


[e-mail]

[stray cat]

2. An excuse to drop benefits by 50% by selling it as "privitization +choice"

[Warpy]

3. The worst thing you can do to any insurance program

that affects human life is allow people to opt out of it at any level. Spreading the pool as widely as possible is what results in the lowest rates for all.

Young healthy people resent FICA premiums. They also resent health insurance premiums and have been allowed to opt out of company insurance programs in exchange for a token rise in hourly pay. The result for the company is that insurance premiums rise for the older workers who have realized that having health insurance starting in your thirties and forties is probably a good idea. Once you're out of your immortal twenties, reality sinks in pretty quickly, and then it's too late, because the next crop of twentysomethings is making the same dumb decision you did.

If there's a social security crisis, it's the manufactured crisis of no longer being able to hide the disaster of tax cuts for the rich in the 40% overpayment of FICA that is going into the general fund. That gravy train is about to end and the GOP Congress is panicking.