"OK then...you seem to have all the answers...so please enlighten."
Gee, for a second there I thought you actually wanted to have a civil discussion, having posed some interesting questions. Guess you just couldn't resist. Nevertheless, I'll try to address your questions.
"Where do you get all your information on Social Security? How do you know whether that information is correct?"
All of the info about SS that I posted has been widely discussed in the press. That, of course, doesn't make it necessarily correct. OTOH, none of it came from CBS, so it's not starting from zero credibility. But all of it comes from government studies - i.e. the SS Administration, the CBO, etc. Who would you suggest we look to for such estimates and should we hold off addressing the problem until you are satisfied that all projections are 100% guaranteed? Well, orca, that just isn't in the nature of estimates and projections. Stop looking for excuses to sit on your hands.
"Seems like everybody has a different idea as to how much money is left in the SS Trust"
There IS no money in the SS trust fund. Do you not understand that much?
"As for Bush, I have not seen any thing concrete about what to do with Social Security, except for the privatization of SS. So that young folks would not contribute to SS, but to their own self managed retirement plans."
You should have stopped after the first part - you haven't seen "the privatization of SS" OR "young folks not contributing" in any plan from Bush. Actually, as I think you know, Bush has not proposed any specific plan, but rather has said we need to address the problem and wants Congress to develop a preferably bipartisan plan to do so.
There are, however, various plans floating around. One that I read about last fall, from a House Republican whose name I don't recall, that I understand has significant support would give people an option of diverting a portion of their contributions to private accounts in exchange for giving up part of their future benefits. At most, it could be called a partial privatization. It does not, in any case, involve forcing private accounts on anyone, young or old, reducing benefits except by individuals opting for the private account route, or allowing anyone to "not contribute".
"First if the younger folks do not contribute to SS, How will that payment gap be filled for those older SS recipients?"
It's not really the current old folks (or soon to be old folks) whose benefits are in danger, but rather the young folks. In any case, the government will, presumably, honor its promises and pay the benefits. And since they comingle the funds already, you really need only look at overall revenues and expenses of government, including SS revenues and benefits. If "paygo" isn't paying as we go, then general revenues or borrowing will have to cover the shortfall. That's exactly what will have to happen eventually if the Dems get their "do nothing" way, but in vastly larger amounts.
"Second, what happens to the fellow that self directs his retirement down a rat hole with the expert help of Wall Street advisors, the same crew that was responsible for the rapid evaporation of 401k's, SEP's, and IRA's during the last market melt down?"
You anti-Wall Street ranting aside, there would clearly need to be stringent rules as to what kinds of investment vehicles may be used in the private accounts. There is a "moral hazard" problem here if people think the government will bail them out if they reach retirement without adequate assets in their private accounts, but rules can be written to prevent account holders from truly rolling the dice. There has also been talk of firms offering guaranteed accounts where, by using various hedging instruments, fund managers can protect the accounts from losses (though that would result in lower returns, of course). The restrictions on investments can also vary by age of the participant, limiting those closer to retirement age to less aggressive options.
"what effect will all these new funds seeking to grow themselves have on a market where the P/E's are already bloated? Will it contribute to another bubble?"
It is not reasonable to assume that all or even most of this money will go into the stock market. If people have more money under their personal control, it seems likely that they would invest it in much the same way as their existing assets - some in interest bearing deposits (CDs, money markets), some in bonds and some in stocks (mutual funds, actually - I can't imagine Congress passing this with totally self-directed investing for the very reason discussed above).
Besides, as hinted above and noted vociferously by opponents, all else equal, the government's borrowing requirements will be higher for a while as the paygo surplus is, at least, smaller. Where the government was borrowing privately from the SS trust fund, it will then have to do so in the light of day (a good thing, IMO, for other reasons), increasing the supply of government bonds in the markets. You'll have more cash looking for investments to buy and more securities looking for investors to buy them - in approximately equal quantities, BTW.
By the very nature of the markets, funds will flow to where they are demanded. There is no reason to expect a new bubble to form because of private SS accounts.
"Will there be infighting as to who gets to direct these new investments, reap the handling fees..."
One would hope so. Competition makes for efficiency in markets.
"will certain stocks be favored for investment of SS dollars? Will only the S&P 500 and the DJ be favored?"
Are you asking if there should be or might be rules limiting investors to S&P or DJ stocks? I don't think that would be a good idea and I haven't heard anyone suggest it but you.
"Then who will pay for the support of the guys that lose their retirement to the Wall Street wizzards? What happens to the guys that fall through the new holes in the old safety net?"
You're repeating yourself. |
