Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: TimF who wrote (212545)	12/2/2004 7:14:44 PM
From: Road Walker	Read Replies (2) \| Respond to of 1573094

re: Which would be a reduction in future payments. It might "save" social security, in the sense that the "trust fund" would have enough money to pay back future recipients, but the "trust fund" is an accounting item, not a real pool of money. The actual money has already been spent. If the "trust fund" has to get money back from the general fund then that payback will have to come from taxes. I accept that Bush raided the SS fund, which he promised not to do prior to his '00 election. But the point is that SS is self sustaining if the adjustment is based on inflation not wages. It you would average the formula with a slight increase in FICA, then problem solved! Hardly worth all the hand wringing (and yes I understand that means a reduction in benefits, but NOT a later retirement age). re: If they mean that Bush's plan would require SS taxes go up 50% in order for the social security fund to be in the same situation in terms of solvency that it is now, than their statement doesn't make a lot of sense. The % of SS that would be "privatized" is a lot below 50%, and also the part that would be in individual accounts would reduce future payouts. You don't get it, do you? I thought you understood that we have been in a long period of SS surplus revenue over benefits, and we are entering a period when SS benefits are over revenue. It's not prudent to cut revenue at this point. It's lame brain, unless your intention is to break the system. The solutions are easy. The politics are hard. John

To: TimF who wrote (212545)	12/3/2004 7:10:46 AM
From: Road Walker	Read Replies (1) \| Respond to of 1573094

EDITORIAL A False Start on Social Security nytimes.com Published: December 3, 2004 Even before the debate has truly begun over the centerpiece of President Bush's second-term domestic agenda - creating private retirement accounts within Social Security - White House and Congressional budget leaders have been floating the idea that it won't require a major increase in the federal budget deficit. This is dangerously misguided. Unwilling to raise taxes, Congress and the administration will have to borrow well over $1 trillion to turn the president's wish into reality. For a country that already needs to borrow $2 billion a day just to stay afloat, that gargantuan price tag for privatization is one reason it's a bad idea. It is far from the only reason, and arguably not even the main one. Yesterday, for instance, the president's top economist said privatization would very likely lead to major benefit cuts, which could be devastating for people who lost money in their private accounts. For now, however, the cost issue is moving to center stage in Washington. It is imperative to refute the suggestion that private accounts would somehow, magically, pay for themselves. The issue is how to pay full benefits to people at or near retirement if Social Security money starts going into private accounts. Since current wage earners cover the benefits for current retirees, every dollar workers invest elsewhere has to be replaced. This is the so-called transition cost, estimated at $1 trillion to $5 trillion. To convince the public that those costs won't matter, privatization advocates are concocting a ruse something like this: Borrow, say, $2 trillion today to establish private accounts, with the expectation that they'll generate such tremendous personal savings that the government will be able to cut future Social Security benefits by an even larger amount and use the savings to erase the debt, plus interest, some 40 years down the line. By this sleight of hand, the money borrowed is not new debt, and there's no need to count it toward the deficit. Remember how Enron used off-the-books maneuvers to pretend it had no debt? Remember how well that worked out? For privatization advocates who have been stumped by how to pay for the transition to private accounts, this ploy has significant political advantages: creating the illusion that Social Security privatization entails no cost would bolster the case for privatization for an unwitting public. It would also give political cover to legislators and other policy makers who want to be on the president's team but may otherwise balk at the huge deficits that come with playing along. What accounting gimmickry won't do - and this is crucial - is fool America's lenders, like the central banks of China and Japan, and other participants in the financial markets. Whether it's recorded on the nation's books or not, ever more government borrowing will, sooner or later, reduce lenders' appetite for Treasury debt, forcing up interest rates as the government scrambles to attract the money it needs. This is not a distant and theoretical danger. Last month, Alan Greenspan, the Fed chairman, flatly stated that America's lenders would eventually tire of financing our deficits. Underscoring his comments, the yield on the benchmark 10-year Treasury note hit a four-month high this week, as the ever-weaker dollar continued to lure investors away from dollar-based debt. The immense additional borrowing envisaged by privatization advocates would accelerate and intensify these disturbing trends, precisely the opposite of what the government should be doing. Trying to hide the borrowing would create the impression - an accurate one, as it turns out - that our government is fiscally irresponsible. The global financial community would respond by upping the pressure because lenders demand tougher terms from feckless borrowers. Privatization advocates will tell you that the cost of creating private accounts today must be compared with the cost of doing nothing to reform Social Security. This is specious. First, no reasonable person is suggesting that nothing be done. The proper comparison is between a plan to borrow trillions and a plan to phase in slowly a modest package of tax increases and benefit cuts that would preserve the current system's essential protections without borrowing or dubious accounting. Second, borrowing to finance the transition to private accounts could very well cost more than doing nothing. If private accounts didn't perform as well as their proponents hope - and the proponents are by and large a very optimistic bunch - the government might need to take on even more debt decades hence to rescue the old people who ended up without adequate retirement income. Solid accounting must underlie Social Security reform. Once that's in place, let the debate begin.