April 29, 2005

Bush Details Social Security Plans
— Ace

Shockingly enough, Democrats attacked his plans, and yet offered no clear alternatives.

Basically, Bush wants to cut the rate of growth in benefits for the top 70% of wage earners, while allowing the bottom 30%'s benefits to grow faster.

Democrats have been clamoring for months for Bush to address the fundamental problem of the system's solvency... well, he did address it, and it turns out they weren't quite so enthused about "making hard choices" as they had previously suggested.

On Matthews' recap of the show, Democrats vaguely referred to their own plans to address the solvency issue, but refused to actually offer their details-- details, you will be shocked to learn, which include large increases in the payroll taxes.

Howard Fineman's take, I think, will be paradigmatic. Rather than praise Bush for having the guts to propose controversial solutions that we all know are necessary to fix a problem that gets worse by the day, he chose to only speak in terms of how unpopular all of this would be -- the "horserace" aspect of it, rather than the substantive policy aspect -- and chided Bush for offering America a chance to "eat their vegetables" (i.e., do something financially healthful but distasteful).

I had one hope for Clinton during his final term... I thought that, unshackled by the need to run for office again, he might actually grow a pair of balls and do the thing he'd been promising since he began campaigning for President (and do the thing that actually made me vote for him): frankly deal with the Social Security crisis, and fix the damn thing, once and for all.

He didn't, of course. As his term was running out, I remember arguing with a liberal (perhaps VonKreedon, actually), about whether Clinton would actually expend some political capital and address this growing financial crisis. The liberal maintained that in the final months of his lame-duck Presidency he would finally get around to it; I, having gotten a better idea of Clinton's priorities, said he wouldn't. I turned out to be right.

Of course.

The goo-goos ("good goverment" types) and the media generally have been whining about the need for some politician to make a brave stand and address this problem -- whatever the political fallout -- for, like, going on 20 years now.

Bush did.

And he'll get no credit for it whatsoever.

Yes... I know you're all terribly surprised about that.

On Gas Prices: The aptly nicknamed Richard "Dick" Durbin, a real partisan hack and .45 caliber pezzanovante as they might say in The Godfather, insists that Bush can lower gas prices simply by "jawboning" the Saudis, and explaining to them that it's really in their interest to make less money and exert less leverage on the West.

When Matthews suggested that Bush really can't do anything about gas prices, Durbin just asserted: "He can't only because he won't."

The Democrats are big on claiming that "diplomacy" can solve every dispute between nations. They seem to forget that there's a perfect defense to diplomacy and "jawboning": that perfect defense is the word "No," or Non, as the French say.

And that's all you have to do: say No.

But the Democrats insist that on this issue, as they insisted all through the buildup to the Iraq War, that all a President needs to do to get people on our side is "talk to them."

Have any of these guys ever been in a relationship, ever? Or are they all virgins and/or frequenters of brothels? Oprah can talk about "communication" all the live-long day, but if a girl doesn't want to do something, she ain't doin' it. And there's no sense in even arguing about it.

More on Social Security... From Meep.

I think I'm one of the few people who knows how Social Security benefits are actually calculated now. There is nothing sacrosanct about that benefit formula. It has been changed =lots= of times throughout history -- and Congress just made the benefit formula richer and richer each time because the payroll tax was more than funding the total SocSec benefits being paid out that year. Not for much longer, though.

To the Treasury, taxes are taxes. It doesn't matter if it's income tax, tariffs, or Medicare payroll tax. It all goes into the same pot. That pot has nobody's name on it. You, the taxpayer, are guaranteed =nothing=, even if you're already collecting checks. It used to be that Congress had to explicitly declare cost-of-living adjustments (COLAs). Now they're built into the benefit formula. But Congress next year could pass a law that made everybody's monthly checks $5.

Changing the benefit formula is actually enough to make the problem not so bad. But people think that benefit formula is a promise. Well, there won't be enough money to pay that particular promise in 40 years' time, when I retire - only a few stupid and/or dishonest people have been making that claim. They wouldn't be able to raise taxes high enough to fulfill that claim. Ask the French people about how sustainable government "guaranteed" benefits are based on raising taxes alone.

But let me get back to the ownership idea. Right now, everybody's SocSec benefits are dependent on the whim of Congress. If there are private accounts, that is something you actually own. Those are actual assets that cannot be taken away without a breakdown in our system of laws. And private accounts are the sugar doused on the medicine of having to eat your vegetables, because there is at least a possibility of accumulating more with your own money than hoping future generations can be taxed sufficiently to meet your future needs.

Posted by: Ace at 06:05 AM | Comments (29)
Post contains 957 words, total size 6 kb.

1 OT:

Anyone seen this?

http://www.rogerlsimon.com/mt-archives/2005/04/an_open_letter.php

Posted by: TheShadow at April 29, 2005 06:20 AM (1R0Ae)

2 Yeah... I'm not sure what I'm allowed to say.

No one tells me anything.

Posted by: ace at April 29, 2005 06:22 AM (Q6+G6)

3 And Bush has antagonized a large part of his base--people who aren't freaking deadbeats and layabouts--by making us carry the freight once again.

You think there's a chance in hell somebody would say, "Hey, the guy's willing to piss his own people off to fix this. Maybe we should STFU and get to work on this?"

Posted by: spongeworthy at April 29, 2005 06:22 AM (uSomN)

4 Sponge,

Yes, but part of his plan is to offer you a chance to divert a sixth of your taxes to private accounts... something that ought to exceed whatever reductions in the guaranteed benefits by a fair amount.

Posted by: ace at April 29, 2005 06:23 AM (Q6+G6)

5 Ace, there's no chance in the world that any sort of private accounts are going to make it through.

Basically, we have another case where the folks who make more money are going to subsidize those who don't. Not only is there no incentive to make more money in this proposal, there's a disincentive.

So, for a guy in my position, I'm looking at pretty much what I had before (which was either nothing at all from SocSec, or a piddling return) plus the bonues of getting even less than piddling if I plan and save and succeed later in life.

What a deal.

Posted by: Jimmie at April 29, 2005 06:26 AM (LIkgw)

6 I think you're looking at it in the wrong way.

Apart from a massive increase in the payroll taxes, everyone's benefits will have to be cut -- or, rather, have the rate in increases slowed, which, yes, amounts to a cut in what you would otherwise have expected.

This is inevitable. Either you want huge deficit borrowing, or you want big increases in taxes, or you're willing to have the rate of benefits-growth slowed.

Now, yes, Bush has insulated the bottom 30% from this. What else can he do?

Be pragmatic. Had he not suggested that low-income people not have their growth in benefits protected, the Democrats just would have, and they would have prevailed.

If anyone has a solution that does not involve massive deficit funding, increasing taxes, or reducing benefits, they're being terribly quiet about it.

Posted by: ace at April 29, 2005 06:31 AM (Q6+G6)

7 Clinton was far too busy negotiating pardon deals to handle the social security problems. Since selling pardons was basically virgin territory, he not only had to test to see what the market would stand, he also had to to run credit checks and read financial statements on people like Marc Rich who have their records structured to make it nearly impossible to find out what they are worth exactly. Throw in having to factor in what any past campaign donations are worth and whether or not being pardoned will enable them to make good on promises for future payments and you have a full-time job right there. That leaves very little time to actually do that pesky presidential stuff. He was much more interested in his own retirement planning than doing anything for the people whose pain he "felt".

Posted by: bullwinkle at April 29, 2005 06:31 AM (7doW9)

8 and... as the poor obviously don't get terribly much paid to them in SS benefits, it's fairly cheap (in relative terms) to hold them harmless through this process.

Will you be subsidizing them? A bit. But in what part of government aren't you subsidizing them?

Posted by: ace at April 29, 2005 06:34 AM (Q6+G6)

9 Actually, the president's proposal is pretty weak tea to many of us who feel that the problems of social security run deeper than most people realize. Even the minor reforms the president is agitating for won't actually fix social security -- you can't polish a turd -- but only push out the inevitable bankruptcy of the system for a few more decades.

The thing about democrats that just turns me incandescent with rage on this issue is the smarmy, "we love the poor" rhetoric they spout. Don't destroy FDR's legacy!, they cry. What they really mean is that they don't want to lose one of the last liberal bastioins of Big Government and control over the "sheeple" (as Kos so lovingly describes them). Let Uncle Sugar take care of you in your dotage, the lefties coo; you don't need to be responsible for anything!

Therefore, it doesn't matter how spendthrift, lazy, unproductive, or dumb you are -- the democrats will still commit to paying your way after you retire. So where's the impetus to save? Might as well buy that big-screen TV and soundsystem now. All those young punks may have work work 80 or 90 hours a week to make sure Gramps gets his, but so what? In this scenario, the young exist solely as an economic crutch to the old.

The democrats are at war not against republicans, but against the very idea of individual accountability. The idea that you should be free to do as you wish with the fruits of your own labor horrifies them.

Gah! I'm choking on my own rage here!

Posted by: Monty at April 29, 2005 06:34 AM (YMMMc)

10 Actually, SS's solvency can be fixed fairly easily... if you're willing to make some politically-difficult decisions, like reducing benefits or opening up the caps on high-income taxpayers.

This problem is only "intractable" because no one has had the political courage to suggest anything like this before.

Posted by: ace at April 29, 2005 06:38 AM (Q6+G6)

11 Yeah, I'm pretty excited about those individual accounts. (Okay, not really since I have as much market exposure as I can stomach.) I understand that's the best way to climb out of this hole.

I am disappointed because even though I knew there was no way we were going to fix this without me taking it in the ass while the shiftless just laugh and laugh, I figured W was enough of a card player he'd give that up in return for something, not just throw it on the table.

The upside is that by this weekend, anybody who wants to speak on this subject and retain anything more than Dowd-type cred is going to have to admit that the Democrats have the next move and it better be a good one.

Look what sacrifices I'll make for partisanship. These people are masters of manipulation through party politics.

What have I become?

Posted by: spongeworthy at April 29, 2005 06:50 AM (uSomN)

12 There's an old maxim that if you want to raise taxes, you go where the money is, and that's the middle class. The poor don't make enough to be worth raising taxes on them, and there aren't enough of the rich to really goose up revenues, without raising rates to unnacceptably high levels.

And if you want to reduce spending, you go to where the money's being spent.

Frankly, it's just not being spent in bucketfulls on the very poor, as far as SS. YEs, we could also reduce their benefits, but it wouldn't save much money, and the political fallout wouldn't be worth it just to achieve "fairness."

Posted by: ace at April 29, 2005 06:54 AM (Q6+G6)

13 Okay, nay-sayers:

Anyone have a better solution?

Don't be like the Democrats; step up to the plate and offer your plan.

Yes, we could also reduce the benefits for the "shiftless layabouts" (excpet they're not-- they're the working poor), but that would end up leaving them with very little SS money at all, not enough to live on.

You really think you could sell that, politically? How, praytell?

Posted by: ace at April 29, 2005 06:56 AM (Q6+G6)

14 Note the "bottom 30%" will in fact include a lot of people who never even paid into SS, and thus won't be getting SS checks anyhow. Or barely paid in, and will barely get anything.

Some of these people may get the Supplmental SS thing (I don't know the details of that), but they were getting that anyhow.

Bush made a big deal about reducing taxes on the very poor. But a lot of those people weren't even paying taxes, or were paying $100 a year or something in fed taxes, so that all sounded better than it really was.

Same deal here.

Posted by: ace at April 29, 2005 07:00 AM (Q6+G6)

15 If only the poor were only being safeguarded I wouldn't be quite as ticked about this. Problem is, they're being safeguarded and their going to get benefit increases. Essentially, SocSec became just another entitlement program I'm going to have to pay for until I die.

What the President hasn't answered to this point - what no one seems to want to answer - is this: pretty much all my working life I've known that I'm not likely to see a single dime in Social Security. The system's going to be seriously hurting (even if this proposal goes through) by the time I get to that point.

What I would much rather have seen the President say is that no proposal right now actually fixes the system because the system, like every other Ponzi Scheme, is unfixable. We ought to have said, first to the old folks, that they'll get what's been promised to them, no matter what the Democrats and the AARP say. Then he should have told the rest of us something like:

"You've been stuck in a bad system and I'm here to tell you that your government has lied to you. You're not going to see any of your contributions come back to you. The cost of fixing this system once and for all is that all the money you've put into it is gone forever and we can't give it back to you. Even worse, we're going to ask that you keep giving us some money to help pay for the folks who are too old to opt out of the system and have any sort of retirement left. But we are going to try to lessen the sting of losing all that money by giving you control of most of your contributions. We're going to let you invest 2/3 of your contribution in one of a series of investments so that when you get to retirement age, you have a fighting chance of getting a good return on your investment. No, it's not the best deal in the world but it's the only one we can offer you right now. You're stuck with decades of people who refused to consider where the system would be when you finally needed it. I think, though, that you will find this deal not quite as bad as my opponents are going to try to make it sound. I will promise you this. If you stick with me here, I won't betray you or sell you out."

I would certainly have gotten behind something like that.

Posted by: at April 29, 2005 07:06 AM (LIkgw)

16 I think I'm one of the few people who knows how Social Security benefits are actually calculated now. There is nothing sacrosanct about that benefit formula. It has been changed =lots= of times throughout history -- and Congress just made the benefit formula richer and richer each time because the payroll tax was more than funding the total SocSec benefits being paid out that year. Not for much longer, though.

To the Treasury, taxes are taxes. It doesn't matter if it's income tax, tariffs, or Medicare payroll tax. It all goes into the same pot. That pot has nobody's name on it. You, the taxpayer, are guaranteed =nothing=, even if you're already collecting checks. It used to be that Congress had to explicitly declare cost-of-living adjustments (COLAs). Now they're built into the benefit formula. But Congress next year could pass a law that made everybody's monthly checks $5.

Changing the benefit formula is actually enough to make the problem not so bad. But people think that benefit formula is a promise. Well, there won't be enough money to pay that particular promise in 40 years' time, when I retire - only a few stupid and/or dishonest people have been making that claim. They wouldn't be able to raise taxes high enough to fulfill that claim. Ask the French people about how sustainable government "guaranteed" benefits are based on raising taxes alone.

But let me get back to the ownership idea. Right now, everybody's SocSec benefits are dependent on the whim of Congress. If there are private accounts, that is something you actually own. Those are actual assets that cannot be taken away without a breakdown in our system of laws. And private accounts are the sugar doused on the medicine of having to eat your vegetables, because there is at least a possibility of accumulating more with your own money than hoping future generations can be taxed sufficiently to meet your future needs.

Posted by: meep at April 29, 2005 07:08 AM (5j3FI)

17 I don't know Ace.

If the goal is Social Security solvency, I suppose it's pretty easy to do, we just have to get through the baby-boomer retirement phase. Personally, though I'd like to see either an improvement of the current system, or complete dissolution of it.

I don't think cutting benefits is going to be particularly popular among any age group since the AARP will rage against any such thing (even if current retirees are exempt from it), and younger people aren't going to want to pay 12% or so of their income over their lifetimes to see a negative or paltry return, plus have to work longer until you can access it.

I have mixed feelings about raising the caps on social security taxes. Ultimately, to save Social Security, it will be necessary, and it'll be hard for Democrats to argue that "Social Security is retirement program, not a welfare program." On the other hand, it will prove that social security is a welfare program, and we hardly need two of those.

Anyway, I think the plan I would most likely support is one that slowly weens us off of Social Security. Bush's plan appears to turn it into more of a welfare program than it already is.

And anything we can do to speed up the ending of FDR's legacy is fine by me.

Posted by: Jason at April 29, 2005 07:09 AM (Y2Bw/)

18 ace:

How much responsibility does the Government have to make sure you have "enough to live on" in your old age? What is an acceptable quality of life? How much responsibility does a person have for ensuring their own upkeep in old age?

This is the age-old argument behind most entitlement programs: who determines what "need" is? How much is enough, and how much is too much?

As a realist, I am aware that there is no way in hell SS is going to be abolished (it will go bankrupt all by itself sooner or later anyway). However, I think that the President's plan is probably the best deal that people like me are going to get; it ain't great, but it's a hell of a lot better than what we have now, and it opens the door to future fundamental reforms. Once people see that private accounts are actually a good thing, there'll be more interest in extending them.

Posted by: Monty at April 29, 2005 07:11 AM (YMMMc)

19 Personally, though I'd like to see either an improvement of the current system, or complete dissolution of it.

... And anything we can do to speed up the ending of FDR's legacy is fine by me.

And if you go carryin' pictures of Chairman Mao, you ain't gonna make it with anyone anyhow.

It's all well and good to talk that sort of, I'm sorry, abject nonsense on a political blog, but in the real world, you're going to have to deal with the fact that SS is very popular and anyone suggesting what you're suggesting won't be elected dog-catcher.

Posted by: ace at April 29, 2005 07:12 AM (Q6+G6)

20 The only part of the "reform social security" plan I liked was private accounts. At least that way when they raise the retirement age to 70-something and I'm dead. I could leave something to my grandkids.

No private accounts then leave it alone and let the whole thing fall on it's ass. At 46 I guess I'm just another member of "Generation F"... See if you can figure out what the F stands for.

Those who are already retired are doing OK but those of use in "Generation F" are $%&*@'d!

Posted by: roux at April 29, 2005 07:14 AM (vWhbj)

21 Monty is entirely correct, and ultimately the American voter is responsible for continuously electing folks who promise us pie-in-the-sky. Especially , from the pockets of someone else.

Even Solzhenitsyn believed that the Russian people had it coming to them for not effectvely resisting.

The only half-way rational solution is a mandated system to base an inividual's benefits on his own contributions made to a plan of his own choice.

Diplomacy? Remember how well Mr. Chamberlain suceeded with Herr Hitler?

Posted by: Mr. Kurtz at April 29, 2005 07:14 AM (u9yCK)

22 It's all well and good to talk that sort of, I'm sorry, abject nonsense on a political blog, but in the real world, you're going to have to deal with the fact that SS is very popular and anyone suggesting what you're suggesting won't be elected dog-catcher.

Some say I'm a dreamer. I'm not the only one.

Anyway, I'm just saying what I'd support, not what I'd propose if I were actually in office. I don't think the public at large would support the idea of weening themselves off of Social Security, but ultimately I think that's what has to happen, at least to some extent. I think personal accounts are simply the beginning of this. People the age of rougly 35-40 or younger are simply going to get a crappy return on their "investment" in Social Security.

That's just the f'n way it is.

So ultimately, the middle class will have to ween ourselves off of it, and it becomes yet another welfare program.

I'm not saying Bush's proposal is bad, I'm simply saying that I don't think much can be done to improve a system that's fundamentally flawed.

Posted by: Jason at April 29, 2005 07:26 AM (Y2Bw/)

23 I believe you must have some kind of filter on comments, because I tried getting into how the benefits are actually calculated and some terms came up that I'm sure must get into comment spam alot.

Suffice to say, go to the website of the Chief Actuary of the Social Security Administration. There is a whole bunch of stuff there if you want to know how things go on.

Points I tried to make:
- there is a minimum Social Security benefit you can get, and there's a maximum
- to be covered by SocSec requires very little in the way of income. The last data I saw was that you had to make at least $740 in one calendar quarter to be credited coverage. If you're not making that much, you're not working. If you want to talk about supporting people who don't work, then we're back to talking about welfare.

Anyway, I am supremely unimpressed with most of those in Congress. The Repubs didn't want to admit that the benefit formula needs to be changed. The Dems didn't want to admit that they'd have to hike up taxes a lot to cover the problem... and that if we hike up taxes now, they'll just spend it on a bunch of non-SocSec stuff.

Posted by: meep at April 29, 2005 07:28 AM (5j3FI)

24 Try the Social Security Game from the American Academy of Actuaries.

These are people who know all the numerical ins & outs of the system. Try some of the proposed solutions over the years. All of these solutions are relatively simple, and they made this thing a couple years ago, I think.

Play around with it. Yes, there's a lot missing here, but you can get an idea of the impact of particular changes.

Posted by: meep at April 29, 2005 07:32 AM (5j3FI)

25 To address your points, Ace, I do think that ultimately to save Social Security, some form of benefit cuts (or raising the retirement age) and raising the cap will have to occur. The private investment account portion of it is just a measure to keep younger workers from being completely screwed. So, all in all, I'm ok with it, as much as I'd rather have all my Social Security money back to invest as I see fit (which, of course, is not even an option).

But if part of my money goes to my own account and the rest goes to keep Gramps in adult diapers and Val-U-Rite gin, I can live with it.

Although, come to think if it, I don't actually pay into Social Security currently. Well, forget it then. It's not like there isn't a war going on anyway.

Posted by: Jason at April 29, 2005 07:46 AM (Y2Bw/)

26 Anyone notice MSNBC's vote on lowering benifits for the more wealthy and give it to the poor ? MSNBC being left of NPR, and the vote is hands down NO.

Thats my experience with the left, it's a great idea if someone else pays for it.

Posted by: gregS at April 29, 2005 08:42 AM (FVNT+)

27 But if part of my money goes to my own account and the rest goes to keep Gramps in adult diapers and Val-U-Rite gin, I can live with it.


My grandads are dead. So are my responsibilities to those dottering fools who didn't plan for retirement.


My best case scencario? Cut me out of the scheme. Hell, I'd give up the money I've put in, just to be free of this bullshit system.

Posted by: brian at April 29, 2005 09:09 AM (sq2UZ)

28 Don't look at me, I like the new plan.

Since I was 16 I figured I'd never see a dime of any of the payments I've been making (17 years & counting). Anything that changes my opinion on the money I've been pounding down the rathole has to be good.

A private account, owned by me, even if I have to be in a "managed account" with "forced donations" and only getting to keep a fraction of the money being taken... well, better than no account, and keeping none of the money.

Covering the short-range shortfall will cause some heartache; but if I get to invest 1/6th of the money before I'm 40, I strongly suspect the private account will pay for most of (if not all, or even exceed) the structured payment I'll receive post-retirement.

Hmm, in the future (assuming this passes) when most retirees are covered by their private accounts (and not the taxes of the current workers) do you think they might re-do this again (adjusting the percentages, etc.)? Just a thought, maybe this is step one of a longer-term fix...

Posted by: GekkoBear at April 29, 2005 01:30 PM (X0NX1)

29 Just wanted to say:

I played the SS Game, and won by answering the first two questions "right" -- raise the retirement age (duh!) and make a tiny cut to COLAs (duh!).

I just want to say about the retirement age -- I often joke to my wife (who doesn't laugh, but I do so anyway) that if current trends continue, I'm immortal. As a young white male, my life expectancy goes up by more than one year, per year. By the time I reach 60, they'll be calling for me to live to a hundred. By the time I reach a hundred, they'll be calling for me to live to a hundred and fifty. Eventually, obviously, reality will set in, but it's insane to keep thinking that people can be retired (e.g., after retirement age but before death) for longer and longer and longer, but keep the system solvent. Just. Won't. Happen.

Posted by: James at May 02, 2005 07:41 AM (FpasZ)

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