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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (180950)	1/19/2004 12:32:53 PM
From: Alighieri	Read Replies (4) \| Respond to of 1575602

By not acting to resolve the problem. He had eight years, four of which were as a lame-duck, where he could have politically gotten it done. And he didn't. So now, Bush has to deal with it. The damned Democrats won the battle in Bush's first term, but it is clear Bush will tackle it again after his reelection. Al ================================================= NOTES ON SOCIAL SECURITY A number of readers have posed what is actually a pretty sophisticated question about Social Security reform. They have realized, after reading Martin Feldstein or other sources, that in the long run a pay-as-you-go system can offer retirees a rate of return equal only to the rate of economic growth (work force growth plus productivity growth). Meanwhile, even risk-free investments offer a higher rate of return. Doesn't this mean that pay-as-you-go retirement systems are inherently inferior, and that we should privatize on simple efficiency grounds? It can seem like a compelling argument. But it turns out that there is a catch - roughly a $3 trillion catch. And the deliberate efforts of would-be privatizers of Social Security to hide that catch in the fine print - not to mention their failure to take that fine print into account in other policy proposals - are what get me angry about this whole issue. Maybe the best way to explain what's going on is to take a simplified example. Imagine a static economy - no growth in productivity or wages - in which people live two periods. They work for one period, then retire for the second (so you should think of a "period" as something like 30 years). We assume that the real rate of return on private investment is 100% (remember, again, that these are long, multi-year periods), so that one real dollar invested during working years yields two dollars in retirement. Now suppose that there is a Social-Security type pay-as-you-go system, in which all workers pay some fixed amount - say $1 - which is not invested, but instead used to pay current benefits to retirees. Since given our assumptions the number of workers equals the number of retirees, this means that every individual will put in $1 when young, then get $1 back when retired - a zero rate of return. So there you have it: a zero rate of return on Social Security, versus 100% on private retirement accounts. Clearly privatization is good for everyone, right? But you should immediately realize that there must be something wrong with that argument. After all, there isn't any waste in the pay-as-you-go system - it's just transferring money around. So where does the return go? The answer - which I guess isn't that obvious - is that it goes to pay a hidden debt. When the pay-as-you-go system starts up, there is a generation of retirees who receive benefits without having made contributions. (What this corresponds to in the real world is the very high rate of return received on contributions by early recipients of Social Security.) That debt - equal in this example to $1 per worker - is never paid off; instead, the earnings from each worker's contribution are in effect used to pay the interest on that debt. And that's where the money goes. Or if all of this is too metaphysical for you, let's just ask what it would take to privatize our simplified retirement system. You couldn't just say to workers "OK, you're free to invest your own money"; somehow you have to find the money to pay for the benefits of the current generation of retirees. That is, you have to find a way to pay off that hidden debt. That's why a straight comparison between the rate of return on private retirement plans and Social Security contributions is meaningless. In our simplified example, a transition to a privatized system would require an injection of funds from the rest of the budget equal to $1 per retiree. I haven't been able to lay my hands on a precise estimate for the real Social Security system, but I am pretty sure that the cost of paying off the overhang of obligations would be something north of $3 trillion. Which brings me to the reasons why I am angry with the peddlers of privatization proposals, whether full-scale or partial along the lines of the Bush "plan" (scare quotes because there are no details.) First, the proponents try to pretend that there isn't any cost. In general, they never mention that there is this little debt that needs to be paid off unless forced to. And even then you get a muttered "Well, everyone knows there will be some transition costs", as if we were talking about a minor detail, not a near-doubling of the national debt. Second, if you are planning to privatize Social Security in whole or in part, you should be making allowances for those transition costs in the rest of the budget. If we think of the Bush proposal as a 1/6th privatization, he ought to be setting more than half a trillion dollars aside over and above the Social Security surplus to pay for those "transition costs". In fact, the Bush tax cuts will use up just about all of the CBO's unrealistic estimate of the non-Social Security surplus over the next decade. If you make a more realistic estimate of the funds available - I've just read a chilling paper by Auerbach and Gale, available from www.nber.org if you have a license - there is really less than $400 billion available for fiscally prudent tax cuts, compared with a true cost for the Bush cuts of around $1.7 trillion. And that's before we get to his Social Security "plan". None of this says that privatizing Social Security is necessarily a bad idea. But the way that privatization is being sold is spectacularly dishonest, and to propose privatization and huge tax cuts at the same time is spectacularly irresponsible.

To: i-node who wrote (180950)	1/19/2004 4:06:21 PM
From: Road Walker	Respond to of 1575602

Bush's pro-corporate agenda crowds out GOP principles Fri Jan 16, 6:12 AM ET Add Op/Ed - USATODAY.com to My Yahoo! When President Bush (news - web sites) announced his plan to permit illegal immigrants to work in the USA, he outraged conservatives from radio host Rush Limbaugh to Republicans in Congress. They questioned why Bush would advocate a policy that they say encourages unlawful entry into the country. Viewed in isolation, the proposal does appear to run counter to the Republican Party's tough-on-crime philosophy. But when looked at in a broader context, Bush's plan fits a pattern: Since taking office, he repeatedly has championed big-business interests over other Republican causes. Indeed, business groups have pushed for an open-door immigration policy that increases the labor supply and keeps wages down. Whether Bush's immigration plan goes anywhere is uncertain. But the proposal raises a more vital issue for the GOP. By defining itself through the big-business playbook that the White House is following, the party raises questions about its commitment to the populist values that catapulted Ronald Reagan (news - web sites) into the White House in 1980 and sparked the Republican takeover of Congress in 1994. In fact, such concerns already are being voiced by more than 90 Republican members of Congress. They plan to meet later this month to publicize their dismay over the rapid growth of government under the Bush administration. Their worries may not pose an immediate threat to Bush, who continues to enjoy broad support in polls. But if his narrow focus on pleasing Corporate America continues to collide with a broader party agenda, it could jeopardize the Republicans' ambitions to rule the nation long term as the majority party. While business concerns historically have been a high GOP priority, in recent years the party has focused more on Main Street than Wall Street. The 1994 Republican "Contract with America" - the manifesto it ran on when it seized control of Congress - promised to help small business through deregulation and tax cuts. Now, as conservatives are quick to point out, big business is the primary beneficiary of many administration policies. In addition to the proposed relaxation of immigration policy, other examples include: Corporate welfare. The Cato Institute, a think tank that advocates small government and fiscal prudence, estimates Washington spends more than $90 billion a year on grants, subsidies and loan guarantees for corporations. That's 4% of total federal spending and about three times the budget of the Homeland Security Department. The subsidy will rise by more than $85 billion during the next 10 years because of payments to drug companies, insurers and large corporations under the recently enacted Medicare prescription drug law. The largest subsidies, designed to discourage companies from forcing retirees into the federal insurance program, undermine the conservative principle that Washington should not interfere in the marketplace. They are one reason many conservative lawmakers were reluctant to support the legislation. Wall Street tax cut. At the urging of many corporate leaders, Bush last year prodded through Congress $383 billion in tax cuts over 10 years on income from dividends and gains from the sale of stock and other assets. These tax breaks had little support among rank-and-file Republican lawmakers, who preferred to use the money to reduce taxes further for small businesses and families with children. States' rights. Last December, the administration began threatening lawsuits against states that import medications from Canada, where price caps make many prescription drugs far cheaper than in the USA. In taking on that battle, the administration allied itself with the pharmaceutical industry - which fears a loss of profits - against conservatives who believe Washington should not tell states what to do, particularly concerning such a popular consumer issue. The administration says its pro-business agenda has helped revive the economy and encourage job creation. In that respect, it says support for business dovetails with the broader goal of ensuring that the job market continues to grow. The administration is right that serving the needs of narrow interests also can benefit the broader public. But its eagerness to please the corporate world carries negative consequences, as well. The largesse showered on business contributes to an ever-swelling federal government that passes the bills on to future generations and undercuts core Republican principles. As more Republican conservatives see the dangers in that approach, they recognize that what's good for business is not always good for America - or their party.

To: i-node who wrote (180950)	1/20/2004 2:28:52 AM
From: Amy J	Respond to of 1575602

David, RE: "Over the next 30 years, we would need a FLAT payroll tax rate of 40% or more just to fund social security. JUST SOCIAL SECURITY. The only possible escape is Bush's plan to GROW our way out of this mess." They'll never raise the taxes to 40% - they will either change the outlay amount or the age. I think they'll cut outlays by 1/3 and extend the age to 70. They also won't have increases keep up with inflation (which over time, is the same as reducing outlays.) This is according to a policy maker in SS. I think they should privatize it - take a debt on the 3T transition costs - interest rates are low these days. Regards, Amy J