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

To: RetiredNow who wrote (214596)	1/10/2005 10:43:33 PM
From: TigerPaw	Respond to of 1572391

Bush lost the war, but who won it? Certainly not the Iraqis. Bin Laden is the only one to come out ahead. TP

To: RetiredNow who wrote (214596)	1/11/2005 9:00:30 AM
From: Road Walker	Read Replies (1) \| Respond to of 1572391

The Iceberg Cometh By PAUL KRUGMAN Published: January 11, 2005 Last week someone leaked a memo written by Peter Wehner, an aide to Karl Rove, about how to sell Social Security privatization. The public, says Mr. Wehner, must be convinced that "the current system is heading for an iceberg." It's the standard Bush administration tactic: invent a fake crisis to bully people into doing what you want. "For the first time in six decades," the memo says, "the Social Security battle is one we can win." One thing I haven't seen pointed out, however, is the extent to which the White House expects the public and the media to believe two contradictory things. The administration expects us to believe that drastic change is needed, and needed right away, because of the looming cost of paying for the baby boomers' retirement. The administration expects us not to notice, however, that the supposed solution would do nothing to reduce that cost. Even with the most favorable assumptions, the benefits of privatization wouldn't kick in until most of the baby boomers were long gone. For the next 45 years, privatization would cost much more money than it saved. Advocates of privatization almost always pretend that all we have to do is borrow a bit of money up front, and then the system will become self-sustaining. The Wehner memo talks of borrowing $1 trillion to $2 trillion "to cover transition costs." Similar numbers have been widely reported in the news media. But that's just the borrowing over the next decade. Privatization would cost an additional $3 trillion in its second decade, $5 trillion in the decade after that and another $5 trillion in the decade after that. By the time privatization started to save money, if it ever did, the federal government would have run up around $15 trillion in extra debt. These numbers are based on a Congressional Budget Office analysis of Plan 2, which was devised by a special presidential commission in 2001 and is widely expected to be the basis for President Bush's plan. Under Plan 2, payroll taxes would be diverted into private accounts while future benefits would be cut. In the short run, this would worsen the budget deficit. In the long run, if all went well, cutting benefit payments would reduce the deficit. All wouldn't go well; I'll explain why in another column. But suppose that everything went according to plan. Even in that unlikely case, privatization wouldn't even begin to reduce the budget deficit until 2050. This is supposed to be the answer to an imminent crisis? While we waited 45 years for something good to happen, there would be a real risk of a crisis - not in Social Security, but in the budget as a whole. And privatization would increase that risk. We already have a large budget deficit, the result of President Bush's insistence on cutting taxes while waging a war. And it will get worse: a rise in spending on entitlements - mainly because of Medicare, but with a smaller contribution from Medicaid and, in a minor supporting role, Social Security - looks set to sharply increase the deficit after 2010. Add borrowing for privatization to the mix, and the budget deficit might well exceed 8 percent of G.D.P. at some time during the next decade. That's a deficit that would make Carlos Menem's Argentina look like a model of responsibility. It would be sure to cause a collapse of investor confidence, sending the dollar through the floor, interest rates through the roof and the economy into a tailspin. And when investors started fleeing because they believed that America had turned into a banana republic, they wouldn't be reassured by claims that someday, in the distant future, privatization would do great things for the budget. Just ask the Argentines: their version of Social Security privatization was also supposed to save money in the long run, but all it did was move forward the date of their crisis. A responsible administration would reverse course on tax cuts and the botched 2003 Medicare drug bill, both of which pose much greater threats to the government's solvency than the modest financial shortfall of the Social Security system. But Mr. Bush has declared his tax cuts inviolable, and he says that his drug bill will actually save money. (The Medicare trustees say it will cost $8 trillion.) There's an iceberg in front of us, all right. And Mr. Bush wants us to steam right into it, full speed ahead. E-mail: krugman@nytimes.com

To: RetiredNow who wrote (214596)	1/11/2005 9:08:32 AM
From: Road Walker	Respond to of 1572391

Do you think retirement benefit for service personnel are a fully funded liability? Making the Cuts, Keeping the Benefits By CINDY WILLIAMS Published: January 11, 2005 Cambridge, Mass. — IN an effort to reduce the growth of the military budget, the Bush administration is poised to cut back a wide array of Pentagon programs, from jet fighters to a missile defense system. Pentagon leaders say the cuts will save more than $55 billion over six years. Whether these reductions herald the end of the rapid rise in military spending that began in 1999, however, is open to question. While fewer weapons systems than planned will be purchased during the next six years, in financial terms, putting an end to the buildup will require cutting far more than what is now on the chopping block. One reason is that much of the recent rise in spending has been fueled not by new tanks or missiles, but by new costs associated with military personnel - especially retirees. These costs amount to a permanent increase in the military budget. Unlike spending on equipment, they cannot be canceled or deferred. Since the start of the buildup, the rising costs of military pay, retiree benefits, health care and family housing have greatly outstripped inflation and added more than $40 billion to annual Pentagon budgets, even though the number of active-duty troops has essentially stayed the same. Moreover, the annual costs continue to grow rapidly. The program reductions that are reported to be under consideration would not be enough to offset the growth in spending for military pay and benefits anticipated during the next several years. Even holding the increases in the military budget to the level of inflation would require tens of billions of dollars in annual reductions. To the extent that added pay and benefits ensure the nation does right by the men and women who fight for it, these increases would seem worthwhile. Unfortunately, a large share of new spending is devoted not to helping soldiers serving today, but to improving the benefits for military retirees - that is, the small minority of veterans who stay in the military for 20 years or more and are eligible for immediate benefits upon their retirements. In recent years, Congress has expanded retiree benefits substantially, making them the fastest-growing category of entitlements for military personnel. In 1999, Congress reversed a 1986 law that would have trimmed pensions for retirees who joined the military after 1986. That change costs the Defense Department some $1 billion annually. A health care entitlement granted by Congress in 2000 pays virtually all medical expenses for older retirees and their spouses - including the cost of prescription drugs - that are not covered by Medicare. That entitlement costs the Defense Department nearly $4 billion now and its costs will rise over the coming years. Another benefit, granted by Congress last year and scheduled to be phased in over a decade, will permit retirees who depart the military with moderate to severe disabilities to collect retirement pensions in addition to their disability payments. Its cost, about $500 million this year, will rise to some $2.5 billion a year in six years. In addition, a change authorized in October 2004 will enrich the pensions of spouses who outlive retired service members, at a cost of about $200 million this year and nearly $1 billion in 2011. As expensive as these new benefits are, advocates are pressing Congress for more. These deferred entitlements do nothing to help men and women now in uniform. These members of the military face long and frequent family separations, deployment to distant lands, fighting in a dangerous counter-insurgency and more. Cash bonuses, improved family services, modern and well-maintained equipment and increases in troop strength (which would mean less frequent call-ups and deployments) are far more likely to serve their needs. In fact, most active-duty military will never get anything - because they will leave the service before they are eligible to retire with benefits. Fewer than one in 12 of today's living veterans qualify for retiree benefits, and fewer than one in five of today's active-duty service members are expected to stay for the 20 years it takes to receive them. Moreover, deferred benefits will not help the Army or the National Guard overcome the recruitment and retention problems they face as a result of the war in Iraq. The prospect of receiving such benefits in the distant future is virtually worthless in helping the military to persuade an 18-year-old to join the military or encourage a 23-year-old to re-enlist. The rapid growth of retiree benefits has already greatly complicated the budget picture for military leaders. Even if Congress decides against further expansion of such benefits, the ones it has already granted will make it hard to slow budget growth without further reducing the size of the military. Giving in to pressure for another round of entitlements, in the face of the challenges facing the troops serving in Iraq and elsewhere, would be irresponsible. Cindy Williams, a principal research scientist in the Security Studies Program at the Massachusetts Institute of Technology, is the editor of "Filling the Ranks: Transforming the U.S. Military Personnel System."