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Politics : Sharks in the Septic Tank -- Ignore unavailable to you. Want to Upgrade?

To: Lane3 who wrote (19551)	7/27/2001 11:22:50 AM
From: TimF	Read Replies (1) \| Respond to of 82486

Investing some of your money in stocks does not just increase average long term return it decreases risk. Even government bonds have the risk of negative real return. A diversified portfolio that includes government bonds would have less risk. Also the money in the social security trust fund is not the same as just buying normal government bonds. There is a greater level of political risk, not much risk of direct cutbacks in benefits as a restraint in the growth of those benefits and increasing age requirements to get the benefits. There is also the risk of dying before you receive any benefits or before you receive enough benefits to equal your input let alone a real positive return on your input. You don't own your social security benefits, they are not an asset that can pass on in your estate. You also don't have the luquidity that you would have with actual direct ownership of government bonds. If you think government bonds are going to do poorly in a certain time period you can sell them. You can't convert your future SS benefits to cash. The money flowing in to stocks may decrease there long turn return (for the new money and money after it not for current investments) but the return should still be better then what you can expect from SS. because if hundreds of billions of dollars in Social Security tax revenues are invested in stocks instead of helping to finance the national debt, the government will have to borrow that money somewhere else. Yes, yes, the government could also spend less, but the two issues are unrelated. If we want to cut spending, we should cut spending. Privatizing Social Security itself won't reduce total government borrowing by a nickel. The government can borrow money for SS without showing a budget deficit. This makes it a lot easier for it to increase spending then if it had to borrow all that money in other ways. Also if we do get a true government surpluses we run in to a problem with the current SS system. By law the procedes of SS have to be invested in government securites they can not be privately invested. If the government actually starts paying down most or all of its debt there may not be enough bonds available for SS to buy. Considering both parties propensity to spend this outcome does not seem likely but it is possible. Would such a situation actually force more government spending or would the main government fund buy private or foreign government securities? Or perhaps this money would just be erased from the money supply but that would be deflationary. I do know that the most likely result of the government having a surplus with no debt to pay back would be new government programs to soak up the funds. Eventually the SS fund will need the money back. If new programs have been started with the money it is unlikely that they would then be canceled. Tim

To: Lane3 who wrote (19551)	7/27/2001 11:40:06 AM
From: TimF	Respond to of 82486

A Biased Social Security Report nytimes.com Quotes and my response - >>> The commission's bias shows itself most obviously in an economic analysis that exaggerates the problems facing Social Security in an effort to justify a quick move toward privatization. The analysis maintains that the Social Security system will start to have "cash shortfalls" in 2016, when in fact Social Security's trust fund will cover the differences between payroll tax revenues and benefits until 2038. The commission argues that the trust fund is worthless, since it is held in the form of Treasury bonds that the government would redeem against itself. But these bonds could be sold on the open market at any time to finance benefit payments. >>> SS does not have a trust fund. Social Securitty is part of the government. The government has taken money from one pocket, put it in the other pocket, and then spent it. Now it claims that it has an actual asset it calls a trust fund. It has nothing. Some time in the future, currently estimated at 2016, the Social Security Program will have to spend more then it brings in. When this happens it has no trust fund to go to. All this money has been spent. The SS fund will take money from the general fund. The general fund doesn't have the money sitting in some bank account it will have to cut into a surplus if one exists and it is large enough, or it will have to cut other spending, or it will have to raise taxes. The 2038 date is the date that this theoretical trust fund is supposed to be exausted, but in practice no real change will happen in 2038. The money for benefits would have been comming atleast in part from general tax revenue since about 2016. Another manifestation of the bias is an outrageous misstatement in the report's preface. The commission contends that current benefits end with the lives of beneficiaries, when in fact about 20 percent of Social Security payments are for survivor benefits. It allows a surviving spouse to get benefits. So the commission might have made a technically inaccurate statement. But the important distinction is that SS benefits are not an inheritable asset. If a single beneficiary dies young he can't give his benefits to his girlfriend, his siblings, a niece, a friend, or a child from a previous marriage or from a non marital relationship. If a widow dies neither her survivor benefits nor her own direct benefits continue beyond her death. Tim