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

To: Road Walker who wrote (211832)	11/16/2004 6:08:28 PM
From: TimF	Read Replies (2) \| Respond to of 1584891

The number being bandied about is $2Trillion in transition cost. Is it accurate? "Is it accurate" is a more complex question that it might seem to be. It certainly is not accurate as a cost over a 5 year period. It might be the total cost over a much longer period, when you only consider the initial increase in debt but it doesn't factor in the reduction in future liabilities. If I had the money and paid off my mortgage, it would cost me over $140k upfront but my net worth would not go down at all let alone over $140k. If the amount of the lost tax income is $2trillion than its actually very small compared to the unfunded liability. Of course its impact on the unfunded liability will also be small as people over 50 are still owed just as much and people under 50 only have the amount they are owed cut, not slashed. This proposed change is neither a panacea nor a disaster, its a change at the margin. I know $2trillion doesn't sound like a marginal change but compared to the cost if the payouts to social security over the coming decades it isn't nearly as big as it sounds. I've seen estimates of the net present value for the current unfunded social security and medicare liability of $24 trillion. And that is current liability, that figure keeps going up as more people enter the workforce or just accumulate more time in it (and thus are owed more at retirement) concordcoalition.org Also see Social Security Myths, October 27, 2004 The transition cost myth is one of four Social Security misconceptions that I want to address here. The others are the misconception that Social Security is a pension, the misconception that the Baby Boom is the main problem with Social Security, and the misconception that Medicare is in worse shape than Social Security. ...One way to eliminate the "transition cost" to partial privatization would be to first undertake a transition to better accounting. If the government were to put future Social Security obligations on its balance sheet as debt, then the accounting would be accurate. To borrow a locution from Warren Buffet, if promises to make Social Security payments are not a financial obligation of the government, then what are they? And if a financial obligation of the government is not debt, than what is it? If unfunded liabilities to make future Social Security payments were counted as debt, then partial privatization would be nothing but a debt swap. The government would increase ordinary debt and reduce unfunded-liability debt by an equal amount. The transition cost would be zero. --- Bernard: We will have to pay this cost either way. If we privatize, we start paying it out sooner, but we start getting the returns on the excess savings this will encourage as well. If we don't privatize, we will just have to pay it out later, anyway, by raising the payroll tax or income tax or whatever. Visualize the following (hypothetical numbers): current cost of Medicare/SS is 100. Assume no gains from interest on accounts, but also neglect time cost of money (they partly offset one another) The time series looks roughly like: now: 100, 10 years: 120, 20 years: 140, 30 years, 160 Privatization looks like: now: 120 , 10 years: 125, 20 years: 130, 30 years 145. The extra money early is going to accounts to pay off the later years, kind of like the "Social Security Trust Fund" is allegedly doing, only at the end of the day, the assets in these private accounts will actually exist - putting assets in private hands will actually decrease future federal liabilities. (I am of the "The trust fund is just a way of hiding debt and is actually empty" school - the trust fund is full of federal bonds, when the SS comes to collect, what will happen has to be that the Feds will have to incur debt or raise taxes to pay SS just like they would if the TF didn't exist, but that is irrelevant here.) So at worst you are equally well off as before - at the end of 30 years, the total cost is at worst the same. Preferably, the accounts are getting a return better than the time cost of money and are generating increased savings, and so the 30 year number should look more like 135 or 140 and privatization is long-run cheaper. It is just that you are BOOKING the cost earlier, to avoid a harder hit later. It LOOKS expensive, but in actuality the price is the same, or less. What we are doing now is the equivalent of going to Best Buy and taking the "Buy now, pay nothing until 2010" option. As we all know, those options come with a price tag. econlog.econlib.org Four Myths About Social Security techcentralstation.com Workers per retiree home.att.net Tim

To: Road Walker who wrote (211832)	11/16/2004 6:52:08 PM
From: tejek	Read Replies (3) \| Respond to of 1584891

John, there will not be a draft. Bush said so! Government looking at military draft lists brownsvilleherald.com "“This has nothing to with current events,” Flahavan said. “This is just the periodic renewal of previous agreements — this one is 18 months but normally it runs four years and that’s why we’re doing it now. I’m not quite sure why it’s 18 months versus the normal number of years.”"