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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Fiscally Conservative who wrote (53643)	2/13/2006 1:18:54 AM
From: GraceZ	Read Replies (1) \| Respond to of 110194

Your views and or ability to ' cut your losses ' is more a reflection of those,who like you,are represented in the upper income tax bracket and justified by like position. You may think you know more than you do about people "like" me. I've spent most of my life working for income below the national median. I've spent 36 years paying into SS and if I work as long as I expect to, I will spend another 24 or so paying into it. Aside from that, it isn't germane to the discussion what level income I made or how long I've paid in, just whether I make valid points concerning the true cost of the system. The price is 12.4% of everyone's lifetime earnings but the real cost is what could have been done with the money if it hadn't been set up as a transfer system. My main argument is that the cost is significantly higher than the price. If the program remains a transfer type program, this will be true in the future as well. The opportunity costs were huge and remain huge. People who want to keep it the way it is because they've already paid so much into it are suffering from what economists would call a "sunk cost". Any rational decision whether to keep or change a program like SS has to made independent of "sunk costs", it has to judged today, by its own merits. A lot of people want to argue, let's just raise the tax on employment and reduce benefits to fix it without ever examining whether or not, knowing what we now know, the program itself is the best way to finance the benefits. In the private sphere, bad solutions have a good chance of eventually dying off or going extinct, it is only in government where inferior solutions find eternal life. The problem I see with all that is the huge hole that would be left for future trust fund liabilities. The benefits promised to workers approaching retirement age have a net present value, an annuity value that is easily calculated. A value which, today, might be lower than the 3 trillion or so in special bonds that are in the trust funds. If workers below a certain age were allowed to have segregated accounts, the government could offer older workers the opportunity to stay in the traditional program using funds from the general fund or opt out by offering them a segregated account with an annuity or one which contained the Tbonds that they already bought with the surplus (no new borrowing needed). The benefit of having Tbonds in segregated individual accounts would be that the government would then be forced to pay actual interest in full public view on the bonds out of the Federal budget instead of simply accruing interest on paper within the trust funds. Those bonds would then come with the same guarantee as any other government obligation.