Re: Privatizing SS will destroy SS

Alan Lichtenstein wrote:

I'm tired of your dribble so I'm going to cut what I want and argue the
points I think are relevant. Don't like it? Then don't answer.

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

A better questions is did YOU look at the data, and did YOU understand
what it means? I doubt it. All it says is that during the boom years,
state governments reduced their funding requirement due to the economic
boom, which resulted in an employer benefit of those defined benefit
plans. Currently, those plans now require greater funding levels due to
the decline in economic growth.

Yes, that they do.

So what? That is the way it has always been and always will be. Your
data shows nothing that hasn't been known for decades.

That's why most private companies are bailing from defined benefit and
going with defined contribution - they don't want to end up sinking
like an airline, a automobile manufacturer....or a city government.

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

Social Security already is a defined benefit to a degree, so I don't
have to argue for something which already exists. All I'm arguing for
is that since it behaves like that type of plan, it should be funded
like plans that promise that. Nothing more.

Then figure out how you will pay for the conversion and the gap. By
definition, defined benefit is not hand to mouth.

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 don't really understand how these things work, do you?

That seems to be a recurring theme of yours. Do you play any other
tune on the heartstring violin?

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

Very simple. For the short term, employer contributions are increased
to generate money growth. Made up during the good times, as you
yourself have cited with your report. This is a normal cyclical
behavior for defined benefit plans. Always was and always will be.

Perhaps you would like to describe the preivious cycles and when they
occured?

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.

Wrong. Privatization is a bad thing, because societal programs are
generated as to what's best for the group as a whole.

Retirement is not a social welfare program as you pointed out.
Therefore, it cannot meet the definition of a "societal" program.

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

(sigh) You simply have NOT understood a word I have been saying. or you
haven't been listening.

There's the violin again.

The City of San Diego added other unnecessary items to the plan and
didn't fund for them. We're not talking about that.

The average police officer, firefighter or clerk retiring after 30
years takes home a one-time $300,000 check from a much-criticized
deferred retirement program established in 1997, plus a $50,000 annual
pension for life, inflation adjusted. A few top officials have left
with $1 million deferred-retirement checks and $144,000 a year for
life.

That is the San Diego problem.

What makes your "trust" approach so special?

Because my fund is far larger than yours. And I don't have to manage it
myself. I have over ten times the professionals that you may have
managing your funds. And because of the extensive capital, these funds
can attract the best of the managers, and they do.

And this was the funniest you have been in a long long time Alan.

Here's why.

You argue that extremely large funds that are fully diversified are
assured of having no risk other than a completely diversified market
risk and as such will return the market rate over time. I agree. That
is EXACTLY what will happen. If the portfolio exactly reflects the
entire investment market it will perform exactly as you say.

Here's the funny part....why do you need a fund manager? All you need
is a geek and a computer to adjust investments as the market adjusts
itself. There is NO decision necessary. In fact, the first time you
deviate from this perfect reflection of the market because you THINK
you can beat it that you fail in matching the market rate at zero risk.

You can't have it both ways.

Now, are we done yet?


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 don't understand that is what your fair share is. Sorry that you
think it's too much.

Like I said, you want me to fund your retirement.

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.

You have continually supported their policies. For one, the
privatization scheme we are discussion here. Silly goose, do you think
we all suffer from short memories?

I said - throw the damned SS away and let me have my money for myself.
How's that for administration policy.

Now, since you are wrong on that account, perhaps other examples are in
order?

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?

A Ponzi scheme is a deliberate action to defraud.

Oh please.

Social Security is a
Polzi scheme only in the sense that there are insufficient people at the
bottom to fund those who are now coming to the top.

You pay defined
benefit plans from reserves, NOT from current contributions.

What you call it is irrelevant to the manner in which it functions.
Unlike other taxes for social welfare programs ALL who contribute to
Social Security receive a return. NOT everyone who contributes taxes is
eligible to receive benefits in a social welfare program.

OK - so it's not a Ponzi scheme but it is failing because it behaves
like one.
OK - so its a defined benefit plan except that it doesn't have reserves
OK - so its not a social welfare program but it treats individuals
differently based on their wealth or lack thereof...

And the violin again....

Far better than you. What you have revealed is that you don't
understand how defined benefit plans function, don't understand how they
are funded, you don't understand the concept of a reserve and you
certainly don't understand the role of interest rate assumption.
And here's the ultra leftists -

And a bit of socialism?

When you continue membership in a society, you become subject to the
decisions made on behalf of the collective society.

Because that the way a democracy functions. It doesn't function on
what's best for YOU. It functions on what it considers collectively
best for most. If that doesn't suit you, then this society is NOT for you.

Money growth comes from investment in OUTSIDE
sources. IOW, from someone else's pocket( the stock market, for example ).

So, T-bills aren't part of your trust portfolio?

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,

Actually, it's not an insurance program either, as I have said.

Yes. Because the trust is improperly funded. Something which I have
been saying from the getgo, and which you apparently have a great deal
of difficulty understanding.

Then how do you propose to fix the funding? Just curious where you'll
come up with the three trillion that you say isn't properly
invested....

Without the mandate, the program goes bust in less than 2 years.

Wrong. the program goes into deficit in 2042. It has sufficient funds
to pay benefits, using the current funding mechanism until then.

But the current funding mechanism is what you say must be changed.

"Because the trust is improperly funded."

If the money going in isn't available to be paid out - if the funding
is such that it is a bonafide defined benefit plan - then the program
goes bust in less than 2 years.

That's the simple math.

And
going into deficit doesn't mean going bankrupt. I trust you with your
economic insight understand that.

Some day I'll remind you of this statement.

That's why its mandated.

Wrong.

Social security taxes aren't mandated?

And if you believe otherwise, then you certainly are naive( or more
likely, as I have asserted, selfish ). Why else does government provide
a police force?

It is a public good.

Why does it provide for programs such as education?

Arguably it should not.

and a host of other services?

Because they are public goods.

Note the key word - SERVICES.

Retirement accounts aren't a service.

And before you go off on a tirade, look up the economic definition of
public good. I don't do politics, I do economics.

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

Unfortunately, that's not for the benefit of most. For the benefit of
most, it is in their interest to have the Government run such a fund.

Why? Efficiency? Expertise? Prior success? Why?

Perhaps its because its the only way you can use my money to fund your
retirement?

And Government is in business to see to the benefit of the majority; NOT
the selfish, suspicious libertarian interests of a tiny minority.

The benefit is insurance against poverty in old age. The benefit is in
disability insurance. Period.

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.

My solution is the best solution. States are like employers, and
recognize only what they feel is good for their pocketbooks.

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

I have done so many times.

Too funny!

You don't understand it because you don't
understand the concept of a reserve. Simply put, investing the surplus
generates income which is used to fund a reserve. That reserve, when
taped provides both a lifetime income according to actuarial factors and
a market interest rate assumption. If Social Security funded reserves
we wouldn't be having this discussion. But it doesn't. Reserves must
be funded via money growth over the long term.

T-bills grow money - at least they do so in my account. Social
Security was never designed to generate a reserve at all. It is and
continues to be a hand to mouth

But for fun, lets do some math. I'm going to use some very round
numbers but for the most part they are pretty close to accurate.

You said..."Simply put, investing the surplus..."

How much "surplus do we have? Well, there are two buckets of surplus -
current paper surpluses, the 1.8 trillion or so that have been
borrowed, and the future surplus, the 160 billion that will flow into
the account this year and some declining amount over the next 11 years
(until 2017).

How much surplus is this? Future contributions sans interest or
inflation, about 1 trillion dollars. Let's put that at a REAL market
return of 2%, 5%, and 7% average per year. We get a surplus of 1.2 to
1.8 trillion.

generates income which is used to fund a reserve.

the 1.8 trillion "new" reserves are sufficient to fund less than 20% of
the cash needs and these cash needs increase at an increasing rate
after 2042. The estimate in 2042 is that the system will be
underfunded on an annual basis by 30% Do the math yourself if you
don't believe it.

That reserve, when
taped provides both a lifetime income according to actuarial factors and
a market interest rate assumption.

No, the math says otherwise. They system is woefully underfunded and
the only salvation is to get out from under the defined benefit burden
- and that is exactly what the government ought to be doing. Get out
of the business of being an investor of choice for iundividual
retirement.

And if you don't agree - then bring on the math.


Now, that's about the first intelligent thing you've said. Sort of
concisely sums up the quality of your understanding on this topic.

Violins.

It is going broke.

Wrong. It is going into deficit. And not for a number of years.

It is going broke.

There is no fix.

Wrong again. I have posted an actuarial authority which indicates that
40% of the projected deficit can be eliminated if certain steps are
taken.

and the remaining 60% disappears on its own?

Other steps will have to be taken as well,

Like cutting the benefit, raising the cap, and screwing the taxpayer
some more?

but once the funding
mechanism is changed, those other steps can be taken which will further
reduce the remaining projected deficit.

Unfortunately, the only way to do that is to raise taxes. Sorry to let
you in on it.

The solution is to have the rich pay for it because they can afford it.
Lovely.

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?

Do you know WHY those private plans failed? I'll give you a hint: Like
Social Security, their employers didn't fund them AS THEY WERE SUPPOSED
TO.

They are unaffordable. Defined benefit plans that define a benefit
that is too large are unaffordable.

There is a fixed pot of resources - you can spend it now or save for
later. There is no magic money tree. You want defined benefit, then
you cut current consumption to fund it to the level you want. You want
defined contribution, then you pick the balance between current and
future consumption.

If you don't put the money in, there's nothing to achieve money
growth. Defined benefit plans always have a future, because properly
funded ones,

There are no properly funded ones.

like virtually every public sector plan, can pay benefits,
because they have sufficient money growth to fund the necessary
reserves. It is only in the minds of the uninformed,

You?

jealous non
recipients( like you )

I have a defined benefit pension.

who made other choices,

You bet - I chose a very long time ago to self-fund my retirement and
not rely on either a pension or social security.

and now find themselves
worse off than others who say otherwise.

I have 40K per month in disposable income. That's a half million per
year in disposable income.

Ta-ta.

You bet. I'm off to the golf course.

.