Re: Wall Street performance since inauguration
- From: McDuck <wallyDELETEMEMcDuck@xxxxxxxxxxx>
- Date: Sun, 22 Feb 2009 13:58:47 -0500
On Sun, 22 Feb 2009 09:44:09 -0800 (PST), John Vamp
<jvampatella@xxxxxxxxx> wrote:
On Feb 22, 12:02 pm, McDuck <wallyDELETEMEMcD...@xxxxxxxxxxx> wrote:
On Sun, 22 Feb 2009 05:31:38 -0800 (PST), John Vamp
<jvampate...@xxxxxxxxx> wrote:
Even with the stock market doing what it's doing right now, I bet if
you asked most people if they'd rather have money taken from them and
put into Social Security (which will pay them less than a 2% return,
adjusted for inflation) or they could do with it what they wanted, the
vast majority of people would take the latter, even given the risks of
the stock market.
You still don't get it. That is so frustrating about you. You finally
get a point, and then you go read some nonsense on a right-wing news
group and it is back to square one. Can't you keep in your head for
more than an hour the simple point that SS is not an investment
system. No money (aside from a small stabilization fund) is invested.
You do not get a "return" on an investment. Again, no investment ---
the money goes straight to those collecting SS currently. To me, for
example.
I completely - totally - understand this, McDuck. The money I put
into SS goes towards today's retirees, and my kids' (and grandkids')
SS money goes to me. I understand this. We are always a generation
"behind" since the very first recipients of SS did not pay a dime into
the system. You need not repeat this to me, because I fully get it.
Yet the government *DOES* give you a slight return on the SS money you
put in. And it is sold that way to millions and millions of people.
No no no no no. There is no "return" on the money you put in. None. It
is just like Iraq. As far as you are concerned, it is down the tubes.
You say you get it, but you don't. there is NO return on SS
"investment". It is not an investment. compare it to a welfare program
or a war program, not to an investment.
Now, you are right that SS is often described as an investment, or at
least an insurance program, which in some respects is an investment
program. but that is a political fiction, which you have acknowledged.
Iraq was sold as an anti-terrorism measure. Politicians lie, or at
least spin. But we know SS is not an investment program, so comparing
returns on SS with an investment program is silly.
Some quotes...
"Social Security is a mandated supplemental retirement system in the
US that was established in 1935 as part of Roosevelt's New Deal. It
was motivated largely by the events of the Great Depression, which saw
many Americans out of work and the nation's retired elderly often left
in the direst of poverty. The intent of the Social Security program is
to ensure a threshold subsistence level below which any worker who had
paid into the program cannot fall." (from: http://www.wisegeek.com/what-is-social-security.htm)
True, not an investment program --- a welfare program.
"Critics of Social Security claim that it gives a low rate of return,
compared to what is obtained through private retirement accounts. For
example, critics point out that under the Social Security laws as they
existed at that time, several thousand employees of Galveston County,
Texas were allowed to opt out of the Social Security program in the
early 1980s, and have their money placed in a private retirement plan
instead. While employees who earned $50,000 per year would have
collected $1,302 per month in Social Security benefits, the private
plan paid them $6,843 per month. While employees who earned $20,000
per year would have collected $775 per month in Social Security
benefits, the private plan paid them $2,740 per month, at interest
rates prevailing in 1996. While some advocates of privatization of
Social Security point to the Galveston pension plan as a model for
Social Security reform, critics point to a GAO report to the House
Ways and Means Committee, which indicates that, for low and middle
income employees, the outcome may be less favorable." (from:
http://en.wikipedia.org/wiki/Social_Security_(United_States))
Silly nonsense. If you can not pay your taxes and invest the money,
you will have whatever investment gains or losses you get on your
investment. And you will lose the safety net. Yes, you can do the
numbers, as above. Someone wit the choice to opt out ought to do those
numbers --- guessing what the market rate will be against the pension
that SS will pay, subject to political decisions in the future. But it
is not a comparison of two investments --- because, as we have agreed,
SS is not an investment.
Obviously, SS goes broke if a significant number of people are given
the in or out option. In the old days, governments had their own
pension plans, so SS was not needed. Then, when SS needed money, it
took away that "out" for government workers (mostly, with some
grandfathering). But the whole premise of the above piece you quote is
wrong. The Galveston plan cannot be an option for the country unless
we plan to stop paying current pensions.
"Social Security provides a guaranteed income each year for more than
47 million retirees, family members of workers who died and people
with disabilities. About 30 percent of Social Security beneficiaries
receive survivor or disability benefits. Nearly two-thirds of
retirees count on Social Security for most of their retirement
incomes." (from: http://www.aflcio.org/issues/retirementsecurity/socialsecurity/ss_whatis.cfm)
- note: the AFL-CIO is hardly a "right wing" organization, and *THEY*
acknowledge that SS payments are critical for one's retirement.
True. What is your point of quoting this language? No one doubts that
SS pays out benefits. It does not pay out investment yields to
contributors, however, I assume you, the AFL-CIO knows that it is a
transfer program.
All of these sites (and many more) show that part of the benefit of
Social Security is, obviously, a monthly payment. That monthly
payment is given to people based on what they pay in, of course (there
are other benefits as well), but when inflation is factored in, people
generally receive back what they put in at an additional 1-2% above
inflation. If I put in a dollar now and get back a $1.02 (or whatever
it would be when I retire), that's an *investment*. I'm receiving
back more than I put in. Even AARP, for crying out loud, tells its
members that SS payments are a key component of their retirement
plan.
Okay, so, despite saying above that you "get it" you do not get it.
You cannot get a return on investment without investing. Is that
really too hard for you to follow? SS gives you a right, subject to
political decisions in the future, to a transfer payment when you
retire. The amount depends on political decisions, not on investment
yield. As in the Galveston case, you can compare what you expect from
SS to what you expect from an investment, and, if you are given the
choice of either one, you can pick. But the country cannot be given
that choice because there is no money to invest. The money all goes to
current beneficiaries.
So, McDuck, I completely, utterly, understand that my money right now
is paying for current retirees' Social Security. But as I pay in,
there's an implicit promise that I will receive back what I put in,
and a tiny bit extra. Therefore, it is sold to the American public
that *my* SS payments are critical for *my* future.
Really? Any such selling is just nonsense. Your SS payments are
critical to current beneficiaries getting a SS pension. There is no
implicit promise of what you will get back. I don't know your age, but
I doubt you will get back what you put in, assuming the tax on what
you put in is taken into account. Possible if your income is low
enough, but even then, that assumes current payout patterns continue,
which is unlikely.
There is an implicit promise that you will get a pension, based on the
number of quarters you paid in, etc. And there is a lot of stuff about
"social insurance" etc., initially designed to take the welfare sting
off of socieal security for a generation (the Depression cohort) who
disliked the idea of welfare. Brilliant politics, but you should not
be fooled by it 70 years later.
I am saying that, as such, it is a lousy retirement investment, given
what I *could* be earning if I took my SS money and put it into a
personal IRA or something.
And you are 100% wrong. Not even a fig leaf of truth. As I said, it
is as nutty as saying that the Iraq war was a bad investment for you
because you could get more if you had kept "your share" of the taxes
used for that war and invested it. Yes, not paying taxes and investing
the money is better for you than paying and not getting to invest.
As a social matter, SS is one of the best "investments" this countrey
has ever made. It saved two generations of abject poverty in their old
age. It held a country together, greating a bond between generations.
But it is not an invididual investment plan, and any comparisons are
misleading.
You correctly stated what SS is above but then you cannot accept the
logical implications of what you said. And THAT is because you still
think that the Bush "plan" was attractive. It was totally a political
game. If it was soo good, why didn't Bush move forward with it when he
had majorities in both Houses of Congress? The reason is the same as
why he did not do the Flat Tax. Both were politcal initiatives that
attracted votes and campaign contributions. But once they had to be
converted to an actual bill, the limlicit lies become explicit. The
Flat Tax, popular at 15%, becomes insanely unpopular with the middle
class at the more realistic 28%. And the SS plan becomes roundly
unpopular when it ends up meaning that current benefits cannot be
paid.
You need to let go of the politics. It repeatedly blinds you to the
logic of your own positions.
You were wrong. Well, you were definitely right to oppose the tax
I am suggesting that there has to be a way to pay everyone what
they've put in, but over time, allow people to opt in our out. I
would love for us to get out of the "one generation behind" situation
we're in. I thought that, when Bush took over and inherited sizeable
budget surpluses, that *that* was the opportunity to do it right, and
I opposed Bush's tax cuts.
cuts. But you were wrong to think that the surplus was enough to make
a major dent in the amount needed to change SS from pay-as-you-go to
an investment system. The surplus that Bush inherited, properly
computed, was perhaps $100 billion. You need over $2 trillion to
"catch up" with the need to pay current beneficiaries.
Of course, to get that money, we need to tax people. So, you are
arguing to tax people under the general income tax (for example) and
use that money to pay SS benefits and then not tax people under SS. I
would consider such a plan, since the tax probably would be more
progressive than FICA. But not what the RW people in the Bush
whitehouse had in mind.
Anyway, the argument for making SS an investment program has nothing
to do with the numbers you gave about the relative benefits of SS vs.
IRAs. It is about what kind of tax you want. (See above.)
By the way, I have no strong objection to building a compulsory IRA
component into the national pension system. It might improve our low
national savings rate. Not now, of course, b/c right now we need to
discourage savings and encourage consumption, due to the recession.
And national savings is a bit of a mislabel given the way savings
moves around globally these days. But the beginning of wisdom in
considering such a plan is to understand that SS is not an investment
program.
.
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