Whether you liked it or hated it, I think Mr. Bush's Social Security push is over - at least it seems to be going the same way as his "Men on Mars" initiative. Maybe not ...
If anyone cares, here's my primer: The Problem (and there is a problem): ------------------------------------------------------ Currently SS collects more in taxes that it pays out, but the gov't is using that surplus to cover its current spending. That's not enough to cover all of the spending, though, so Mr. Bush and his Congress also have to borrow $400 million extra. Specifically the federal gov't borrows the money from SS and replaces it with bonds, but the borrowing doesn't raise interest rates because the gov't is borrowing from itself and doesn't have to compete for the money in the capital markets. That's ok today, but it changes about 2011 when the SS surplus starts falling big time so the gov't will have to do something else to get the money it's now borrowing from SS: that means raising taxes or cutting spending or both. In about 2018, when SS starts getting less than it has to pay out, it will have to start cashing in those bonds. At that point the US will have to start raising the capital to pay off the bonds - the sum is whopping. The Proposed Solution: Democrats -------------------------------------------------- Put a 3% - 4% tax on earning over $90,000, the current amount where SS taxes stop. That is, today to cover SS, you pay about 12.4% income tax up to $90,000/yr, but everything above that is exempt from the 12.4%. This is very bad idea because it would kill the already terrible US savings rate and cut take home pay. Further it would do nothing to solve the root of the problem, it would only treat symptoms. Stupid! The Proposed Solution: Republicans (Mr. Bush) -------------------------------------------------------------------- First, the personal accounts. They do nothing to solve anything so let's ignore them for a moment and focus on the meat: benefits cuts. Mr. Bush is proposing that in 2011 SS should stop indexing benefits to wages, and instead tie them to prices which grow slower than wages. This would have a massive impact on SS's numbers: by 2050 SS would be generating huge surpluses. Yea! So it's fixed, right? Unfortunately, because benefits won't outpace inflation, retirees (read that, YOU), will get a horrible return on your 12.4% tax contributions - not near enough to get you what you're promised with today's system. Which get us back to the personal accounts. Currently Mr. Bush is proposing that you get $1,000/yr to "invest yourself" which, he whispers, with the increased returns of "the market", will cover that shortfall. $1000/yr, however, is a pittance and most likely you still wouldn't get you what you're due today plus it would cost A LOT today! Money we don't have because we're already borrowing so much. To fix that problem Paul Ryan (R-WI) and John Sununu (R-NH) are sponsoring a bill that ups the $1000 proposal Mr. Bush makes to 6% of income up to $5000/yr. This would allow all benefits to be fully funded by about 2024. So what's the catch? If the gov't doesn't cut spending, Ryan-Sununu would cost about $200 billion above the amount needed to pay down the bonds and finance the deficit. Read that as, it would cost BIG BUCKS. oops. The Bottom Line -------------------------------- So, there's no easy solution, and our love of borrowing and ignoring the growing debt has put us in quite a pickle. Which means there won't be much appetite for making changes, which means reform is probably dead for now. Again. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Save $10 Download ZoneAlarm Security Suite http://www.houseoffusion.com/banners/view.cfm?bannerid=66 Message: http://www.houseoffusion.com/lists.cfm/link=i:5:148043 Archives: http://www.houseoffusion.com/cf_lists/threads.cfm/5 Subscription: http://www.houseoffusion.com/lists.cfm/link=s:5 Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=11502.10531.5 Donations & Support: http://www.houseoffusion.com/tiny.cfm/54
