Thread: Social Security reform
#1 Social Security reform
12-23-2010, 10:09 AM
- Join Date
- Nov 2009
I found this really interesting, from the CATO Institute, an article back in 2001:
"A president decides that Social Security is in need of radical reform. He assembles a team of experts to examine the issue and they conclude that allowing workers to privately invest a portion of their Social Security taxes in individual accounts is a viable way to solve the program's financial problems, increase the rate of return to young workers, and allow low income workers to accumulate real wealth. They conclude that most criticism of individual accounts -- they would be too risky, too costly to administer -- is unfounded. The president leans toward quick implementation.
George Bush? No. Bill Clinton. So much for the myth that Social Security privatization is a "partisan" or "conservative" issue.
According to three former top administration officials, President Clinton was strongly considering the partial privatization of Social Security prior to his impeachment in 1999. The revelation was contained in a paper delivered by David Wilcox, an assistant treasury secretary, Douglas Elmendorf, a deputy assistant treasury secretary, and Jeffrey Liebman, an aide with the National Economic Council, at a Harvard University conference last month.
Michael Tanner is director of the Project on Social Security Privatization at the Cato Institute.
More by Michael D. Tanner
According to these officials, the Clinton administration spent nearly 18 months secretly studying issues surrounding individual accounts and concluded that:
Individual accounts were administratively feasible and would likely cost $20-30 per year per account to administer. However, to hold down costs, individual investment choices would have to be limited until accounts accumulated some level of minimum balance, perhaps $5,000.
Market risks were not a sufficient reason to oppose individual accounts. Administration analysts found that long-term investment was, in reality, relatively safe. The administration also noted that the current Social Security system contains political risks that may well be worse than market risks.
Concerns over redistribution could be addressed through the adjustment of benefit formulas, matching contributions or other means.
Wilcox, Elmendorf, and Liebman confirmed what many in Washington have whispered about for some time, that, while some in the administration -- -notably Vice president Al Gore and Treasury Secretary Robert Rubin -- -strongly opposed individual accounts, Clinton leaned in favor of them. Indeed, Clinton had his staff consider whether the administrative structure for individual accounts could be set up before Congress acted on any legislation to ensure that the accounts would be in place before Clinton left office. However, Clinton's plans were derailed by his impeachment over the Monica Lewinski affair. Faced with a need to strengthen his liberal base, Clinton abandoned any proposal for significant Social Security reform.
The revelation of Clinton's support for individual accounts is the latest example of the broad-based support for giving workers more control over their retirement funds. Washington has always found it easy to put short hand labels on things: left, right, Democrat, Republican. Therefore, the idea of Social Security privatization is called a "conservative Republican" proposal. But the truth has always been far more complex, with support for individual accounts cutting across ideological and party lines.
Perhaps that is because the facts are neither Democratic nor Republican. Social Security is facing a serious financial crisis, running a shortfall as soon as 2016. In fact, Clinton warned that there were only three possible ways to reform Social Security: 1) raise taxes, 2) cut benefits, or 3) find a way to receive a higher rate of return through private investment. Payroll taxes are already so high and benefits so low that young workers receive a rate of return on their taxes of barely more than one percent, far below market returns. Raising taxes or cutting benefits will only make that bad deal worse.
At the same time, the other flaws of the current Social Security system are becoming increasingly apparent. The program penalizes African-Americans, women, and low-income workers. Benefits are not inheritable and workers have no legal property right to those benefits, leaving their retirement at the mercy of politicians.
Only the third option -- private investment -- solves all of those problems. It preserves Social Security's solvency and increases returns to young workers while allowing workers to accumulate real and inheritable wealth.
Bill Clinton wasn't able to follow through on Social Security reform. That responsibility has now fallen to President Bush. But if workers are given ownership and control over their payroll taxes -- if Social Security is updated and modernized -- that may ultimately be a surprising part of Clinton's legacy."
12-23-2010, 10:11 AM
Sounds like a good topic for Economics. ;)
12-23-2010, 10:16 AM
- Join Date
- Nov 2009
And this expanded piece on it from US news, 2008:
12-23-2010, 12:04 PM
‘Social Security Is Going Broke’...and Other Lies
Social Security is the only income for 14 percent of seniors. For half of elderly unmarried women and widows, it provides more than 90 percent of income.
The Big Lie technique is working. Polls show that six out of ten Americans who aren’t yet retired think Social Security won’t be there for them—with the youngest workers the most pessimistic. And more than half of current retirees predict their benefits will be cut.
When your co-workers tell you Social Security is a bankrupt lost cause, set them straight. Here are the facts.
Lie #1: Social Security is going broke.
Fact: Congress planned ahead in 1983 for the retirement of the baby boomers. The system has been collecting extra payroll taxes since then. For example, in 2008 Social Security took in $49 billion more in payroll taxes and $131 billion more in interest and other income than it paid out in benefits and expenses.
That foresight has enabled Social Security to amass a $2.3 trillion surplus now, and by 2024, the surplus will peak at $4.2 trillion. There’s plenty to keep paying benefits with no cuts for decades.
As MoveOn says, “Any politician who insists Social Security is broke probably wants to break it themselves.”
True, the baby boomers will eventually create a strain: beginning in 2037, the surplus will be gone, and Social Security’s revenues will only be enough to pay 78 percent of scheduled benefits. But that shortfall is easily fixable—read on.
Lie #2: We must cut benefits today if we want to have any money left for our kids.
Fact: There’s an easy and equitable solution: make high earners pay their fair share. Today, most workers pay the 6.2 percent FICA tax on their entire incomes. But the fortunate ones—roughly the top 6 percent of earners--pay FICA only on their first $106,800. Eliminate that cap, keep their benefits the same, and we’d end up with another surplus after 2037.
In a July Gallup poll, two-thirds thought abolishing the cap was a good idea, including a majority of Republicans. Doing so seems especially fair because in recent years those at the top are just about the only ones whose income has increased—and the only ones whose life expectancy is going up, too.
In that same poll, 63 percent thought raising the retirement age was a bad idea.
One other revenue source: put a tax of just half of 1 percent on each stock transaction. That would cut down on Wall Street speculation and produce enough money to make Social Security solvent for the next 75 years—and raise benefits, too.
Lie #3: The government has raided the Social Security Trust Fund to pay for other programs; there’s nothing left but IOUs.
Fact: The Trust Fund contains interest-bearing U.S. Treasury Bonds, generally considered the safest investment in the world, backed by the “full faith and credit of the United States.”
Lie #4: Nobody relies on Social Security anyway.
Fact: The biggest whopper yet. Nearly two out of three seniors depend on Social Security for more than half their income, and for 14 percent of seniors it’s their only income. It’s obvious how important Social Security is to keeping people out of poverty.
Social Security is especially crucial for women: for half of elderly unmarried women and widows, it provides more than 90 percent of their income. And that’s with women’s average annual benefit only $11,000!
It’s worth mentioning that retirees and those nearing retirement have been the primary victims of the economic collapse that began two years ago: they’ve lost more than $10 trillion in the value of their houses and stocks--which they don’t have years to recoup. Attacking these folks’ Social Security would be a double whammy.
Lie #5: Social Security payments add to the federal budget deficit.
Fact: By law, Social Security must pay its own way. It has its own Trust Fund separate from the federal budget. See Bipartisan Fervor to Whack the Old Folks.
Lie #6: There’s nothing we can do to stop Congress from messing with Social Security.
Fact: In 2005 unions and a host of other organizations mobilized to stop George Bush and his friends on Wall Street from throwing Social Security’s money into the stock market (how’s that idea looking today?)—and succeeded.
We’re doing it again—big coalitions have formed to fight back. See StrengthenSocialSecurity.org.
Too many people have too big a stake in Social Security to let it be the sacrificial lamb in a new austerity offensive. This year 52.7 million people, or about one out of six U.S. residents (one out of four families), received benefits, including retirees, the disabled, and survivors, including children.
Sources: Gallup Poll, Economic Opportunity Institute, Congressional Research Service, Social Security Administration, AFL-CIO, Center for Economic and Policy Research, National Academy of Social Insurance.Originally Posted by Adam Smith - Wealth of Nations
12-23-2010, 12:47 PM
It doesn't matter which site publishes the material, the the sources are cited and they are credible sources, or if the material used is given and you can read the actual studies.
I always hear this "it's a liberal site!" as if that means anything at all about the validity of the studies they are citing.
This only demonstrates you placing a higher priority on the person doing the speaking rather than what is being said.Originally Posted by Adam Smith - Wealth of Nations
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