----- Original Message ----- From: "JDG" <[EMAIL PROTECTED]> To: "Killer Bs Discussion" <[email protected]> Sent: Tuesday, January 18, 2005 9:09 PM Subject: Re: Social Security
> At 06:25 PM 1/17/2005 -0800 Doug Pensinger wrote: > >> Well one important difference is that in the case of the former, the SSA, > >> by investing hundreds of billions in equities would be a pretty > >> influential mover of equity markets. In the case of the latter, > >> individualized > >> decision-making woudl presumably iron out those effects some. > > > >Perhaps someone can tell me why that is a major problem. Not because I > >think you're wrong, I just don't know. > > The biggest problem is what happens when the decision maker with hundreds > of billions of dollars in assets picks an investment vehicle for those > assets. Since increased demand boosts price, whomever is currently > investing in the "chosen" assets will probably do pretty well for themselves. > > >> Other than that, though, there were a couple other important points in my > >> post that were snipped. > >> > >> JDG - Reconciling Pay-As-You-Go with Longer Life Spans, Increasing Health > >> Care Options and Medical Costs, and Decreasing Population Growth, > >> Maru.... > > > >And if you had read the whole thread you would know that we have discussed > >the solutions to at least some of those problems - raising the retirement > >age gradually, tying benefit increases to cost of living rather than > >wages, and taxing 100% of SS for retirees above a certain income level. > > All of these proposals provide practical solutions to the immediate > problem. They do not, however, address the fundamental imbalance of the > current system. IN essence, it solves the problem for the immediate > generation, but still leaves a gaping theoretical problem for some still > more-distant future generation. Actually, a number of them result in, given the basic assumptions underlying virtually every preduction for the ecconomy (in particular the mean income will continue to rise) a theoretical problem that asymptotically approaches zero. This is opposed to the very real problem of the money going to investments attacking the foundations of what Social Security is. Let me use Erik's numbers instead of mine...to show this. From: From: "Erik Reuter" <[EMAIL PROTECTED]> Sent: Thursday, January 06, 2005 7:10 AM we have: " Using 8.6y and 4%, we have 34% instead of 49%." Let us consider the case of a worker who makes 20k/year, retiring now, after 40 years of work. His income would then be $6800/year if the portion of his and his employer's SS tax that now go to the retirement fund goes instead to an investment with the mean yield of the last century or so. (I admit that I'm lazy enough to not go back and get the exact time from one of Erik's posts, but he quoted a number of plans which have such an assumption. Such an income, with the present social security, would yield him 10660 per year. This is significantly better. If he were married, and the sole bread earner, then the income would be about 16000/year..more than twice as much as the investment. At 90k/year a single person would do better with the investment: 30600 vs. 25300 for Social Security. (The Social Security numbers used the reference that Erik gave for the present formula.) It should be clear to anyone that looks at the SS formula that it is progressive...it benefits low income people relatively more than high income folks. Bush's suggestion is simply a return on one's own money....so that is removed. The purpose of SS was to provide a floor to keep the elderly and disabled out of poverty. For the most part, it has done this splendidly. But, the upper end is now at the point where someone could live rather handily on SS. Right now, the formula gives about 38k/year for a couple where the husband makes 90k/year when he retires at the SS retirement age. I really don't think that this number needs to go up in real terms. But, I do think it is reasonable for the lower end to go up. (I'm arguing against my own self interest here, I'm closer to the top of benefits than the bottom.) Thus, having a sliding scale between a top that is indexed to inflation and a bottom that is indexed to wages makes sense. The sliding scale could also be tied to inflation, not wages, so all of SS would eventually be tied to just inflation. In the very long run, if wages continue to rise, the SS tax would approach zero. I find it interesting that this aspect of the program is not brought up. My guess is that Democrats don't bring it up a criticism of Bush's plan because it wouldn't have any traction with the middle and upper middle class voters. I'm guessing focus groups indicate they wouldn't mind if the poorer elderly got less....just as long as they didn't. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
