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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Jim McMannis who wrote (15210)11/9/2004 11:31:49 AM
From: CalculatedRisk  Read Replies (5) of 116555
 
First, I would like to see a real discussion of the issues surrounding Social Security.

When someone writes that "Steady continuous investment in a broad stock index has vastly outperformed government bonds over time" that is true, BUT it has nothing to do with Social Security. All the money that goes into the SS Trust Fund is either paid out as a transfer payment or goes to the General Fund and is spent. These is no "return" or investment. So this is a false comparison.

Second, calling this plan "privatization" is a fraud. It is a MASSIVE NEW government program of forced savings accounts. This plan is being used as subterfuge to cut benefits for those currently 55 and under (according to leaked reports) by up to 40% depending on their age. Why not just say that?

Third, the immediate cost of the program is between $1 and $2 Trillion. The proposal is to take 2% of taxable income and put this into forced savings accounts. The remaining 10.4% of taxable income would be used for transfer payments (both the employer and the employee currently pay 6.2% of taxable income for Social Security). To make up for the shortfall, the Government will need to borrow at least $1 Trillion. We are already in serious trouble due to the poor fiscal policies of the last four years. Why do we want to take on more debt for yet another massive government program?
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