Re: Privatizing SS will destroy SS


Alan Lichtenstein wrote:
js wrote:

Alan Lichtenstein wrote:

js wrote:

Alan Lichtenstein wrote:


El Castor wrote:



"Harry Thompson" <me@xxxxxxxxxxx> wrote:

From Brad DeLong's blog:



People have brains designed by evolution to figure out whether it's safe to
leap to the next branch and when the fruit is ripe. They don't have brains
designed to make long-run investment decisions.

Then he points to this depressing study:
http://www.capitalspectator.com/archives/2006/07/selection_risk.html

The subjects are MBAs at Wharton. Read the report and weep.

Hap


I agree with everything -- but those who are opposed to privatization
should come up with their own solution for Social Security. That, they
can't or won't do.

The obvious solution, which has been discussed and posted to, and
supported by the American Association of Actuaries through their Social
Security Game, is to invest the funds through some kind of public trust,
akin to what many large state pension funds do.


With resounding success (see San Diego or the state of C`alifornia, for
example).

Before you become sarcastic, you ought to check out the 'resounding
examples' you cite. In each case, the plans attempted to include basic
medical and prescription drug coverage without funding for it. This is
virtually the same thing as the Republican mantra of fooling the public
by telling people that they can have their cake and eat it too. Doesn't
work for reactionaries, and doesn't work for liberals either.


It plain doesn't work.

Look at the data.
http://rfs.rockinst.org/exhibit/9053/Full%20Text/GovtFinancesBriefPensions1.pdf

Given my assertions and clarifications, isn't that what I said? Now,
when we just deal with pension plans, we see quite different results.

It plain doesn't work. The only way it can work is if you have a deep
pocket.

But then again, you aren't arguing a defined benefit plan conversion of
SS, are you?

Now, if you want to check out the other pension plans which have no such
difficulties, perhaps you will be better informed and have a better
basis to compare. And of course, you'll see that virtually all are on
VERY sound actuarial and financial footings.


And those would be????????

Pick a state of your choice and review the various public pension plans.

Did, thanks. - Illinois, Rhode Island, and West Virginia are way
behind. But take solace, they aren't alone. Defined benefit plans are
not viable for either public or private sector.


You will see that the ones that deal exclusively with retirement
income and nothing else are overwhelmingly on sound actuarial and
financial footing. If you'd like, I can cite various NYS funds for your
review. However, given your skeptical libertarian nature, I suspect
you'd want to review other states. So pick one.

I picked three. Now show data that supports that these three plans are
on "sound actuarial and financial footing."

And that just goes to the old saw that the exception, does not determine
the rule, but the majority. By citing one singular example out of
thousands and attempting to infer that that singular example is the
rule, you demonstrate the logical fallacy of generalizing from the singular.

But of course, you knew that, didn't you?

No response? Cat got your tongue?

Doing so reaps the
benefit of market investment, which over the years has shown long term
growth, giving the benefit of a very diversified and large assortment of
equities and other instruments( well beyond the ability of any
individual to acquire ), and reducing the investment risk to the individual.


Thanks - you go right ahead and do this. I'd rather take personal
responsibility for my money. I want MY account. Not a public trust
account. I want a retirement plan, not a social insurance plan.

Fine. You can do that. There's always those foolish individuals who
somehow think that they with their limited assets can do better than
funds with billions. For the rest of us, who understand that we lack
investment acumen, the general trust will ALWAYS turn out better.
Because it REMOVES investment risk while GUARANTEEING benefits.


Two things I don't want - your acumen and your guarantees. Moreover,
the risk and guarantees cost money - there is no free lunch. What I
want is my name on the money, not yours, not anyone elses.

You don't get to choose what you want.

Sure I do.

That's the one drawback of group
programs. They're made for the group, NOT what each individual wants.

And that's why privatization is a good thing. You can have what you
want and I can have what I want. But you already understand the
problem that poses for you, don't you.

You lose your sugar daddy.

What you want you're not going to get so long as you remain a member of
this Democratic society. You can, of course, relocate.

Its not a question of relocation - its a question of time.


Of course, you prefer to take your risk. And when you do, then don't
come and complain about that those people who chose differently and then
come out better because of it, as you rail now against unions and those
with pensions, that you DON'T have


That is what I am willing to do. Now, if you think YOU can create an
investment vehicle and call it a trust that I can't create for myself,
or have others create as a commercial product, then you go right ahead
and believe it.

Wrong.

Wrong? You mean to tell me that the government is better at financing
than the private sector? Too funny.

You have continuously railed against defined benefit plans that
those who made different choices have.

I am in agreement with the majority of experts - defined benefit plans
are unsupportable in the long run.

As far as the last statement is
concerned, that is PRECISELY what most state pension funds do, and their
results demonstrate that they CAN and DO do it better than you.

No, they do exactly the opposite. They demonstrate that without
manipulation there is no way they can do this. Read the report I
cited. The City of San Diego is the tip of a very large and ugly
iceberg.

And do
you know WHY? Because they have billions in capitalization, can employ
hoards of professional managers which you CAN'T.

But I can and I do.

THAT's why.

But I can and I do. As an individual investor I can diversify my
portfolio to the nth degree and assume only the market risk that you
say is impossible. What makes your "trust" approach so special?

But you're still entitled to refuse to be confused by the
facts, and be obdurate in your libertarian selfishness.

You are being silly Alan. You continually dip into the gutter to toss
out an insult.

The Actuaries Game predicts that investing the surplus will reduce the
deficit by 40% at current rates. This is a far better method than
privatization which does NOTHING to reduce the deficit, but only
TRANSFERS it to the individual. IOW, a scam.


The scam is that my "retirement" is your source of deficit spending.
The scam is that social security is a Ponzi scheme. The money paid in
by workers today is gone - long spent - before they retire. The scam
is that regardless of how you do it, be it a private trust or public
trust, you actually have to invest real money to get these real
returns. That ain't happening without borrowing. So the actuaries
solution is no different in its cost. No thanks. YTou want to make
social security a real retirement program and not some bastardized
socvial insurance program, then let me chose how I want to invest my
money.

First of all your 'retirement' is the source of YOUR deficit spending.


Nope - not mine - I pay my fair share - I have paid my 47K of the
deficit - the deficit is YOURS, not mine.

Wrong YOURS.

No, not mine. One more time, I pay more than I use and have done so
since I started working decades ago. Do the math yourself. If you are
in the top 20% of the income curve throughout your life, you paid 80%
of the taxes.

YOU have continually supported the Republican
Administration and its fiscal policies which have resulted in these
deficits. I supported the Democratic budget surpluses.

Oh please. First off, you have no idea how I voted. Second, you got
the benefits of the spending irrespective of how you voted. Third, had
you paid as much as me, then there wouldn't be a deficit or a debt.

I remind you that under the Democrats we began having surpluses, and it
was under YOUR Republican buddies that we now have massive deficits.


They aren't my Republican buddies.

Could have fooled us. You continually support them.

Silly boy, Alan. But just for grins, why don't you show me where I
have actually made a political statement - granted, I have made a
number of mathematical and data-based statements, but they are math and
economics, not politics.

That clarification made, I agree that it is inappropriate to use Social
Surpluses to fund general expenditures. That can easily be solved by
rescinding the inappropriate Bush tax cuts.


And stall the economy? But that is a diversion and I am not going to
argue tax cuts.

That is a bugaboo which has not been confirmed by the facts. In point
of fact, the economy took off after the Clinton tax increase, and
continued to take off when the surpluses were reported. Perhaps you
like it better now, with the recent results demonstrating that the
market has lost ALL of its gains for the past year?

I said I am not going to argue this strawman. I will point you in the
direction of the FTSE DAX and CAC. Now, how is the US doing in
relative (as opposed to absolute) terms?

That way, Government can
spend only what it takes in, as opposed to borrowing.


I am all far a balanced budget ammendment - you?

You don't need a balanced budget Amendment, nor is one desirable. One
who prides himself on his economic acumen, as you are wont to do, can
hardly fail to acknowledge that there might be time when deficits are
required, such as war, or other emergencies, and a balanced budget
amendment precludes that, and can and will cause severe hardship that is
unnecessary.

Too funny. Which is it - borrow and spend or balanced budget? Seems
you want it both ways.


What IS necessary is a realistic taxation policy which the Republicans
DON'T have.

We are talking about how to define and fund social security insurance.

But of course, you knew that too, didn't you? You're just playing
devil's advocate, you rascal.

You are correct in indicating that Social Security is akin to a Ponzi
scheme. I have said so myself. but unlike you, I understand WHY it
behaves like such a scheme.


I understand exactly why it behaves like a Ponzi scheme - it's because
it is one.

Wrong. It's a Ponzi scheme because of its funding mechanism. You don't
understand that, never understood that, and still don't understand that.

Huh? Let's see if I understand you. I said its a Ponzi scheme. You
say it is akin to a Ponzi scheme. I say that's right, it behaves like
a Ponzi scheme because it is one. You say - wrong? Then say it is one
because it is funded like one? So is it or isn't it a Ponzi scheme?

I don't get it - do you hear voices in your head sometimes too?

And the reason is its funding mechanism.
The funding mechanism for ANY retirement account must be money growth.
Social Security NEVER provided for that, and ASSUMED constant population
growth, an assumption which we now see has proven ineffective.


It is not a retirement account - it is a social welfare entitlement
program - both in its funding and payments.

Wrong again. It functions like a retirement account, albeit a limited
one.

No, it doesn't. It is funded based on taxes at a rate that is set by
the government and a rate independent of the benefits. Money
contributed is paid out in months after it is contributed.

Payments are based on contributions but as contributions increase, the
payout is reduced. The net benefit paid can and often is less than
that contributed whreas in other cases, it is substantially more.

It essentially functions like an annuity, which we all know, is
funded as a consequence of money growth. What you call it is
irrelevant. What determines what it is, is how it functions. Social
welfare programs are funded out of tax revenues

Social security is argued to be a tax. This is especially poignant
when the argument is made about the regressiveness of federal taxes and
the critics of tax cuts argue that the tax "burden" includes social
security" in calculations.

and are limited in
eligibility.

40 quarters.

That difference has been explained to you, many, many
times. Do you not understand it?

Apparently you don't.

BUT, if it is intended to operate as a retirement scheme, I want out.
What's wrong with that?

As far as your last comment is concerned, Social Security has a surplus
and will continue to run a surplus until around 2018. If that surplus
is invested, the deficit which is projected to occur around 2042 will be
reduced by 40%, according to the actuaries. Since the investment will
come from surplus money, there will be NO borrowing. Remember: We're
talking about a legitimate funding mechanism, not Republican borrow and
spend nonsense.


Legitimate? It runs out in 2042. The surplus money is invested in
government bonds. You just don't like the interest rate - but it does
meet your second criterion - guaranteed returns.


the investment I speak of is market investment in equities, just as
virtually every large state pension fund, and all private annuities do.

You haven't been listening, have you. The current budget surplus is
invested in the "market" which in the case of social security is a very
special government T-bill. It is as safe as the government. You just
don't like the rate of return.

As to your final comment, Social Security is a group plan to benefit
society as an aggregate. It is NOT, NEVER has been and NEVER will be an
individual retirement plan.


Then we agree.


Government t benefits the citizenry as a
group, and as a member of the group, the only way you opt out is to
leave the society. So you're stuck with your collective group
responsibility. sorry you don't like it. You'll just have to deal with
it.


If it is a tax, call it that. And then don't pay out for anyone but
the poor. Cut the benefits to anyone over the poverty level. Period.
No questions, no recourse.

It's not a tax, although it's called the payroll tax. Officially, it's
know as FICA, which is technically not a tax, but an insurance premium(
also incorrect ). The only thing about is that the Government makes it
mandatory, because it knows that left to their own devices, people will
not contribute unless forced to do so.

OK - tell you what - for the purposes of this argument I will agree -
FICA is an insurance program. It has three components - insurance
against disability, insurance against poverty at retirement, and
insurance for survivors should I die. In fact,

All three of these insurances are readily available in the private
market. Why do I have to buy your plan? Why can't I buy my own?

The reason is, you need my money to pay benefits to others NOW.
Without the mandate, the program goes bust in less than 2 years.
That's why its mandated. Ity has nothing to do with trust and
capability of the citizens and everything to do with the Ponzi scheme
its built on. If you honestly believe that the government is in the
business to protect you from yourself, then you are extremely naive.

But no, the key to getting everyone to pay in is this empty promise
they'll get it back when they retire. That's bull. Had I invested
what I paid in over the years in T-bills, I'd have a bigger monthly
annuity than I do now.

I agree with you. But that's because Social Security has ALWAYS been
inappropriately funded, IS inappropriately funded and nothing is being
done to change its funding mechanism. That is the entire premise I assert.

And my solution and your solution are no different EXCEPT I want the
government out of the business of selling annuities.

> > What's wrong with a choice? You can buy into the trust fund if
you

want OR you can do it yourself. That was the unbderlying model of the
privatization proposal, by the way.

Government programs are designed as a one size fits all, suitable for
EVERYONE. the fact that you want to act as an individual is NOT the way
majority rule functions in our society. Perhaps in your libertarian
lunacy, that is the way you want it, but if you're going to be a member
of this society, you're just stuck with the programs the society finds
suitable for everyone.


Then call it what it is - a poverty insurance program, and pay out
accordingly.

Wrong. It's a safety net program that provides limited retirement
income and functions like a defined benefit plan, but is not funded as
it ought to be.

And your solution is not a solution. And the states recognize this and
the cities recognize this. In fact, Alaska recognized it a few years
ago and got rid of the defined benefit public retirement plan - and
others are doing the same.

In short, Government programs are not purchased cafeteria style. The
fallacy in that reasoning, is that if we allow individual choice,
there's no reason for Government to provide anything; each individual
can simply keep their money and purchase all their services themselves.
Of course, you know that's not practical, if only from a monetary
standpoint, so if we're going to have collective services so that each
individual's financial contribution is limited, then each individual
gets the group plan.


You are arguing with yourself. You say the actuaries have a fix to the
retirement program called SS and then go on about the collective nature
of funding poverty insurance for the elderly.

You demonstrate your ignorance of how pension plans work. What I have
been describing is precisely that.

Defined benefit annuities? Go from SS to a defined benefit annuity -
try to make it work. I challenge you. Show your math.

In short, you can't have it both ways. THAT'S what's wrong with both
your plan AND your logic.


You can't have it both ways. I don't want it two ways. I want it for
what it is - insurance. I don't want anyone over the poverty line to
get social security. I don't want to pay in any more than necessary to
fund poverty insurance.


But of course, you knew that too, didn't you?


Is it an insurance program against poverty or a retirement program for
the elderly?
It's a retirement program of limited means, which pays out benefits like
a defined benefits program but is NOT funded to generate the necessary
reserves to do that.

Duh. It is going broke. There is no fix. Someone needs to buy up the
liability and that someone is my kids and their kids.

Your defined benefit plan has no future. It will face the same damned
fiscal fiasco. Haven't you figured this out yet or are the examples on
the private side not enough? Will it take San Diego, Illinois, Rhode
Island, and half a dozen other states or municipalities going belly up
on their plans to convince you?

The solution is to fund individual plans for individual people. I
don't care if you mandate it or if you guarantee it - but every cent
paid in goes to that person. Every cent paid in is invested. No
politician should have the right to manipulate these funds for their
political gain or purpose. Period.

js

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