Congressman George Miller, chair of the House Education and Labor Committee has called 401k)s a big failure. According to the Wall Street Journal, he recently held a hearing to ponder alternatives to them. One of those alternatives would be to nationalize pensions and replace them with special bonds administered by Social Security. Does that sound familiar? Argentina is in the process of doing just that. They plan to seize all the private pension assets and promise benefits paid out of the Social Security system there. This is being done because the government of Argentina has a big cash need.
Of course, if the government in the USA did seize the assets in pension plans there is no guarantee that anyone would ever see them again. They would be spent on current government needs and we would get a promise of future benefit, unfunded. Sounds like piling onto a currently very broken system to me.
Don't let this happen. Let your congressmen know that you want to retain ownership of your possessions.
Save Social Security, Now
Thursday, November 6, 2008
Saturday, October 25, 2008
Another Message to Younger People
The following is a column by Robert Samuelson. He is urging young people to take charge of their futures and not say simply that they do not expect Social Security to be around for them. I agree with him that AARP is a very powerful lobbying organization and that it is well known that AARP wants to protect the system as it now stands. You will be the ones to pay for this and it is not clear that you will get much out of the system. Urge your representatives to think of your interests too. A complete overhaul is needed before it is too late. I know this a scary time in the market but markets have always recovered in the past. There is some combination of solutions, including private accounts, which is needed sooner rather than later. Every year that passes before we come up with a solution is a year closer to a very poor retirement for you and your children.
Save Social Security (but don't let it just go along unchanged)
Aging Boomers Leaving Young Holding Bag
By ROBERT SAMUELSON Posted Thursday, October 23, 2008 4:30 PM PT
To: Voters Under 35
Subject: Your Future
Recommendation: Get Angry
You're being played for chumps. Barack Obama and John McCain want your votes, but they're ignoring your interests. You face a heavily mortgaged future. You'll pay Social Security and Medicare for aging baby boomers. The needed federal tax increase might total 50% over the next 25 years.
Plus there's the expense of decaying infrastructure — roads, bridges, water pipes. Pension and health costs for state and local workers have doubtlessly been underestimated. All this will squeeze crucial government services: education, defense, police.
Guess what? You're not hearing much of this in the campaign. One reason is that you don't seem to care. Obama's your favorite candidate (by a 64% to 33% margin among 18- to 29-year-olds, according to the ABC News/Washington Post poll). But he's outsourced his position on these issues to the AARP, the 40-million-member group for Americans 50 and over.
Don't believe me? Go to the Web site, www.aarp.org. On Sept. 6, both Obama and McCain talked to an AARP convention celebrating the group's 50th birthday. Click on the Obama video (go to "Voter Guide"). You'll see some world-class pandering.
There are three basic ways of reducing the costs of Social Security and Medicare: increase eligibility ages; trim benefits; and require recipients to pay more for their Medicare benefits (higher premiums, co-payments or deductibles). In his talk, Obama effectively rejected all three.
Or look at the September-October issue of AARP The Magazine, which has a "voters' guide." In it, Obama and McCain receive the opportunity to check boxes agreeing or disagreeing with the AARP's positions on 11 issues. Obama checked agreement on 10.
He's not an agent of change but a staunch defender of the status quo. Indeed, he would expand subsidies to the elderly by exempting from federal income taxes anyone 65 and over with $50,000 income or less.
McCain pandered too. In his video, he praised the AARP effusively. He didn't mention benefit cuts. But he hedged. He said today's system is "broken" and shouldn't be inflicted on future generations. In the voters' guide, he didn't check "agree" or "disagree" but merely described his positions.
The hint is that, as president, he might try to curb retirement spending. There's a precedent; McCain voted against the Medicare drug benefit.
I am 62. Most of my friends are in their 50s, 60s and 70s. I wish everyone a pleasurable retirement. But we need to overhaul our government retirement programs for the common good and not for just the elderly. We have now waited so long that there's no way to do this without being unfair to someone — overburdening the young or withdrawing promised benefits from older Americans.
This financial crisis, by reducing retirement savings, has made a hard job harder. Still, these federal programs began as safety nets for the needy; now they've become subsidies for living long, regardless of need.
What the debate has lacked is a moral dimension. Obama says it's OK to raise taxes on those with incomes exceeding $250,000. Well, why should Social Security and Medicare beneficiaries with incomes of $250,000 get subsidies from the young making less? How about $200,000 or $100,000? What are acceptable eligibility ages? People live longer; they can work longer. Boomers cannot be excluded; they're the problem.
There can be no "rewriting of the social contract" without benefit cuts, because paying today's benefits inevitably involves much higher taxes, massive deficits or draconian cuts in other government programs. Even with sensible benefit cuts, taxes will have to rise and there will be pressure on other programs.
What should you do? First, get angry — at the media and think tanks for discussing this problem in misleading euphemisms (for instance, the problem is not an "entitlements crisis"; it's excessive benefits for the old); at the candidates for exploiting your innocence; and at yourself for your gullibility.
Next, start picketing the AARP. It's the citadel of seniors' political power and the country's most powerful "special interest." It wields a virtual veto over roughly two-fifths of the federal budget. Your activist groups ought to be there every day with placards reading "Give Us Generational Justice" or "Get Off Our Backs." Ask direct questions of federal candidates about what benefits they'd cut, which they'd keep and why.
You need to appeal to the shame and guilt of older Americans by reminding them that their self-absorption is not a victimless exercise. Only if older Americans act on their rhetorical pledges of worrying about their children will the political climate change.
If you don't stand up for yourselves, believe me, your elders and politicians won't.
© 2008 Washington Post Writers Group
Save Social Security (but don't let it just go along unchanged)
Aging Boomers Leaving Young Holding Bag
By ROBERT SAMUELSON Posted Thursday, October 23, 2008 4:30 PM PT
To: Voters Under 35
Subject: Your Future
Recommendation: Get Angry
You're being played for chumps. Barack Obama and John McCain want your votes, but they're ignoring your interests. You face a heavily mortgaged future. You'll pay Social Security and Medicare for aging baby boomers. The needed federal tax increase might total 50% over the next 25 years.
Plus there's the expense of decaying infrastructure — roads, bridges, water pipes. Pension and health costs for state and local workers have doubtlessly been underestimated. All this will squeeze crucial government services: education, defense, police.
Guess what? You're not hearing much of this in the campaign. One reason is that you don't seem to care. Obama's your favorite candidate (by a 64% to 33% margin among 18- to 29-year-olds, according to the ABC News/Washington Post poll). But he's outsourced his position on these issues to the AARP, the 40-million-member group for Americans 50 and over.
Don't believe me? Go to the Web site, www.aarp.org. On Sept. 6, both Obama and McCain talked to an AARP convention celebrating the group's 50th birthday. Click on the Obama video (go to "Voter Guide"). You'll see some world-class pandering.
There are three basic ways of reducing the costs of Social Security and Medicare: increase eligibility ages; trim benefits; and require recipients to pay more for their Medicare benefits (higher premiums, co-payments or deductibles). In his talk, Obama effectively rejected all three.
Or look at the September-October issue of AARP The Magazine, which has a "voters' guide." In it, Obama and McCain receive the opportunity to check boxes agreeing or disagreeing with the AARP's positions on 11 issues. Obama checked agreement on 10.
He's not an agent of change but a staunch defender of the status quo. Indeed, he would expand subsidies to the elderly by exempting from federal income taxes anyone 65 and over with $50,000 income or less.
McCain pandered too. In his video, he praised the AARP effusively. He didn't mention benefit cuts. But he hedged. He said today's system is "broken" and shouldn't be inflicted on future generations. In the voters' guide, he didn't check "agree" or "disagree" but merely described his positions.
The hint is that, as president, he might try to curb retirement spending. There's a precedent; McCain voted against the Medicare drug benefit.
I am 62. Most of my friends are in their 50s, 60s and 70s. I wish everyone a pleasurable retirement. But we need to overhaul our government retirement programs for the common good and not for just the elderly. We have now waited so long that there's no way to do this without being unfair to someone — overburdening the young or withdrawing promised benefits from older Americans.
This financial crisis, by reducing retirement savings, has made a hard job harder. Still, these federal programs began as safety nets for the needy; now they've become subsidies for living long, regardless of need.
What the debate has lacked is a moral dimension. Obama says it's OK to raise taxes on those with incomes exceeding $250,000. Well, why should Social Security and Medicare beneficiaries with incomes of $250,000 get subsidies from the young making less? How about $200,000 or $100,000? What are acceptable eligibility ages? People live longer; they can work longer. Boomers cannot be excluded; they're the problem.
There can be no "rewriting of the social contract" without benefit cuts, because paying today's benefits inevitably involves much higher taxes, massive deficits or draconian cuts in other government programs. Even with sensible benefit cuts, taxes will have to rise and there will be pressure on other programs.
What should you do? First, get angry — at the media and think tanks for discussing this problem in misleading euphemisms (for instance, the problem is not an "entitlements crisis"; it's excessive benefits for the old); at the candidates for exploiting your innocence; and at yourself for your gullibility.
Next, start picketing the AARP. It's the citadel of seniors' political power and the country's most powerful "special interest." It wields a virtual veto over roughly two-fifths of the federal budget. Your activist groups ought to be there every day with placards reading "Give Us Generational Justice" or "Get Off Our Backs." Ask direct questions of federal candidates about what benefits they'd cut, which they'd keep and why.
You need to appeal to the shame and guilt of older Americans by reminding them that their self-absorption is not a victimless exercise. Only if older Americans act on their rhetorical pledges of worrying about their children will the political climate change.
If you don't stand up for yourselves, believe me, your elders and politicians won't.
© 2008 Washington Post Writers Group
Friday, July 25, 2008
Treasury Issue Brief No. 5
The US Treasury has issued its 5th issue brief outlining a proposal for reducing the growth of future benefits as a means of assuring the solvency of social security for future generations. You can look at it at http://www.treas.gov/press/releases/reports/ssissuebriefno.%205%20no%20cover.pdf
As with the previous four briefs, it is very detailed and thoughtful, if somewhat difficult to digest. At least they are thinking about the issue.
Saves Social Security Now
As with the previous four briefs, it is very detailed and thoughtful, if somewhat difficult to digest. At least they are thinking about the issue.
Saves Social Security Now
Monday, July 21, 2008
Social Security Bonds
Following is a article from Investors Daily from February, 2008. (I just came upon it.) While many say that the Social Security program is funded with government bonds, this is still a huge tax problem waiting for the future.
Entitlement Time Bombs Threaten Uncle Sam's 'Full Faith And Credit'
By TIM PENNY AND CHARLES STENHOLM Posted Tuesday, February 05, 2008 4:30 PM PT
In case you missed it, Moody's Investors Service recently said that the bonds issued by the U.S. government may not be a completely safe bet in the future. Why? Because of the trillions of dollars in unfunded obligations to the Social Security and Medicare programs.
"These two programs are the largest threats to the long-term financial health of the United States and to the governments' AAA rating," Moody's Vice President Steven Hess said in the agency's annual report on the U.S. issued last month.
If this sounds serious, it is.
Moody's, the universally accepted credit rating service, rates corporate and government bonds based on the ability of the borrower to repay the money. Simply put, when our government borrows money, bonds are issued to the lender. These bonds are promises to pay the money back in the future, with interest. Until now, our government's bonds have carried the highest rating quality: triple-A.
As a result, institutions, individuals and foreign governments who want a guaranteed return on their money have turned to U.S. government bonds.
However, there is another kind of U.S. government bond that the public can't purchase. Each year since 1984, Congress has taken the surplus Social Security taxes — tens of billions of dollars — and spent them on other government programs. In exchange, the Social Security Trust Fund is issued government bonds, with interest. When Social Security needs more money to pay the benefits of baby boomers, it will go to the U.S. Treasury to cash in these bonds.
But where will the money come from to repay the Trust Fund?
That nagging question is the reason Moody's is cautioning that the credit rating of U.S. bonds may be reduced.
"We decided to raise the flag," said Tom Lemmon at Moody's, "because the underlying credit rating of the U.S. government faces the risk of downgrading in the next 10 years if solutions are not found to our growing Medicare and Social Security unfunded obligations."
Faced with rising entitlement spending due to baby boomer retirements and surging health care costs, Moody's is rightly reconsidering its confidence in the U.S. government's ability to repay its debts. Tens of trillions of dollars in unfunded Social Security and Medicare obligations mean the government must choose between higher taxes or lower spending on these programs.
For years, however, politicians in Washington have simply failed to make a choice. But failing to choose is, in fact, choosing to increase the implicit debts owed to these programs, which grow by trillions each year.
A downgrade in the ratings on government bonds means higher interest rates — much higher. Higher interest rates will mean massive increases in the cost of servicing the government debt, and thus an even greater squeeze on the federal budget. As bad as things look today, with government actuaries and economists warning of large future budget deficits, things will be even worse if the country's credit rating tanks and its ability to borrow is reduced.
Making matters worse, higher interest rates on government bonds may increase rates elsewhere in the economy, from mortgages to car loans to credit card debts.
Can't Congress and the president do something about this?
Sure, and they should. Unfortunately, partisan politics has so far prevailed. It's easy to attack the other side for proposing solutions, but much harder to come up with solutions yourselves.
And even as the body of evidence has mounted, Congress has repeatedly chosen to ignore the facts. President Bush's attempts to address Social Security went nowhere, and the current batch of presidential candidates is saying little of real substance. One candidate from our party even said that this is "a back-burner issue."
The warning from Moody's shows that runaway entitlement spending isn't a far-off problem with little impact on Americans today. Within a relatively short time, the "full faith and credit" of the U.S. government could come at a much higher cost, and that cost will be passed on to all Americans, today and in the future. The time to act is now.
Penny is a former Democratic congressman from Minnesota and current chairman of the national advisory council of For Our Grandchildren (ForOurGrandchildren.org), a bipartisan organization working to fix Social Security. Stenholm is a former congressman from Texas who was the leading Democratic member of the House in drafting and sponsoring Social Security reform legislation. He currently serves as a spokesman and adviser for For Our Grandchildren.
Saves Social Security now.
Entitlement Time Bombs Threaten Uncle Sam's 'Full Faith And Credit'
By TIM PENNY AND CHARLES STENHOLM Posted Tuesday, February 05, 2008 4:30 PM PT
In case you missed it, Moody's Investors Service recently said that the bonds issued by the U.S. government may not be a completely safe bet in the future. Why? Because of the trillions of dollars in unfunded obligations to the Social Security and Medicare programs.
"These two programs are the largest threats to the long-term financial health of the United States and to the governments' AAA rating," Moody's Vice President Steven Hess said in the agency's annual report on the U.S. issued last month.
If this sounds serious, it is.
Moody's, the universally accepted credit rating service, rates corporate and government bonds based on the ability of the borrower to repay the money. Simply put, when our government borrows money, bonds are issued to the lender. These bonds are promises to pay the money back in the future, with interest. Until now, our government's bonds have carried the highest rating quality: triple-A.
As a result, institutions, individuals and foreign governments who want a guaranteed return on their money have turned to U.S. government bonds.
However, there is another kind of U.S. government bond that the public can't purchase. Each year since 1984, Congress has taken the surplus Social Security taxes — tens of billions of dollars — and spent them on other government programs. In exchange, the Social Security Trust Fund is issued government bonds, with interest. When Social Security needs more money to pay the benefits of baby boomers, it will go to the U.S. Treasury to cash in these bonds.
But where will the money come from to repay the Trust Fund?
That nagging question is the reason Moody's is cautioning that the credit rating of U.S. bonds may be reduced.
"We decided to raise the flag," said Tom Lemmon at Moody's, "because the underlying credit rating of the U.S. government faces the risk of downgrading in the next 10 years if solutions are not found to our growing Medicare and Social Security unfunded obligations."
Faced with rising entitlement spending due to baby boomer retirements and surging health care costs, Moody's is rightly reconsidering its confidence in the U.S. government's ability to repay its debts. Tens of trillions of dollars in unfunded Social Security and Medicare obligations mean the government must choose between higher taxes or lower spending on these programs.
For years, however, politicians in Washington have simply failed to make a choice. But failing to choose is, in fact, choosing to increase the implicit debts owed to these programs, which grow by trillions each year.
A downgrade in the ratings on government bonds means higher interest rates — much higher. Higher interest rates will mean massive increases in the cost of servicing the government debt, and thus an even greater squeeze on the federal budget. As bad as things look today, with government actuaries and economists warning of large future budget deficits, things will be even worse if the country's credit rating tanks and its ability to borrow is reduced.
Making matters worse, higher interest rates on government bonds may increase rates elsewhere in the economy, from mortgages to car loans to credit card debts.
Can't Congress and the president do something about this?
Sure, and they should. Unfortunately, partisan politics has so far prevailed. It's easy to attack the other side for proposing solutions, but much harder to come up with solutions yourselves.
And even as the body of evidence has mounted, Congress has repeatedly chosen to ignore the facts. President Bush's attempts to address Social Security went nowhere, and the current batch of presidential candidates is saying little of real substance. One candidate from our party even said that this is "a back-burner issue."
The warning from Moody's shows that runaway entitlement spending isn't a far-off problem with little impact on Americans today. Within a relatively short time, the "full faith and credit" of the U.S. government could come at a much higher cost, and that cost will be passed on to all Americans, today and in the future. The time to act is now.
Penny is a former Democratic congressman from Minnesota and current chairman of the national advisory council of For Our Grandchildren (ForOurGrandchildren.org), a bipartisan organization working to fix Social Security. Stenholm is a former congressman from Texas who was the leading Democratic member of the House in drafting and sponsoring Social Security reform legislation. He currently serves as a spokesman and adviser for For Our Grandchildren.
Saves Social Security now.
Friday, June 20, 2008
Removing the cap on Social Security wages
There is a proposal from one of the presidential candidates to remove the cap on all or some wages above the current level of approximately $102,000. This is proposed as a way to solve the fiscal crisis in Social Security. Unfortunately, according to the Social Security actuaries, even this draconian measure would not solve the problem, merely postpone it. Furthermore, in order to preserve the fiction that this is a retirement program, rather than a welfare program, it would be necessary to raise benefits for the group of people whose wages would be subject to the increased withholding. The actuaries did not address the effect of this on the ultimate problem.
Somebody is not thinking these things through before proposing them.
The best long term solution is private accounts invested in a limited range of funds.
Save Social Security Now
Somebody is not thinking these things through before proposing them.
The best long term solution is private accounts invested in a limited range of funds.
Save Social Security Now
Friday, May 2, 2008
Treasury Publishes 4th Issue Brief - True Pre Funding
The US Treasury has published its fourth issue brief on Social Security. You may find it at www.treas.gov/press/releases/reports/ss_issuebrief_no.4.pdf. This brief discusses mechanisms for achieving true pre-funding. Treasury considers the current "trust fund" which is held off the books of the government not to be true pre funding. Treasury takes the position that if a portion of Social Security tax was placed into individual accounts in the name of each taxpayer, the debt obligation would move onto the books. While it would still be the government which owes the Social Security benefits, such a move would make it apparent that the debt exists. The funds could not be diverted for general governmental purposes as is done now. The issue brief does not contemplate individual direction of the investment of the accounts; rather the funds would be invested in regular US Treasury obligations and would be administered in the aggregate. This would keep the economic distortion to a minimum and would not result in large administrative costs. Benefits would be paid as annuities, similar to the current system. The issue brief cites the "Nonpartisan Reform Plan" as an illustrative mechanism for true pre funding. The Nonpartisan Reform Plan may be found at www.nonpartisanssplan.com.
This proposal is a long way from true ownership of the assets one accumulates in the Social Security program and certainly does not resolve some of the equity issues but, in my opinion, it provides a reasonable and thoughtful way to commence the discussion. Importantly, it contemplates solvency in the long run. I urge interested readers of this blog to review the two reports.
Save Social Security Now
This proposal is a long way from true ownership of the assets one accumulates in the Social Security program and certainly does not resolve some of the equity issues but, in my opinion, it provides a reasonable and thoughtful way to commence the discussion. Importantly, it contemplates solvency in the long run. I urge interested readers of this blog to review the two reports.
Save Social Security Now
Tuesday, April 15, 2008
Generation X Pessimistic About Ability to Retire
According to a news story published by Reuters on April 14, 2008, two-thirds of the members of Generation X don't think they will be able to retire. The information is the result of a survey by Scottrade and BetterInvesting. These young people, age 27 to 42, believe it will be impossible to accumulate enough money to retire at any age.
According to the article, champions of the Social Security system say that financial problems for the system will not arise until at least 35 years from now. Even if that were true, a debatable proposition, thirty five years is right in the eye of the retirement storm for Generation X.
Historical market returns show that money invested conservatively in the market over the 35 to 40 years of a person's working life would permit accumulation of significant retirement income. Raising the tax on wages or raising the amount of wages subject to the tax will not solve the problem but will only defer it.
This is really important.
Save Social Security Now.
According to the article, champions of the Social Security system say that financial problems for the system will not arise until at least 35 years from now. Even if that were true, a debatable proposition, thirty five years is right in the eye of the retirement storm for Generation X.
Historical market returns show that money invested conservatively in the market over the 35 to 40 years of a person's working life would permit accumulation of significant retirement income. Raising the tax on wages or raising the amount of wages subject to the tax will not solve the problem but will only defer it.
This is really important.
Save Social Security Now.
Saturday, April 5, 2008
Social Security Trustees Report
For those of you who may be interested, the Trustees of Social Security have published their annual report. It can be found at http://www.ssa.gov/OACT/TR/TR08/tr08.pdf You can copy and paste the address to navigate to the report. As in past years, the Trustees once again raise concerns about the funding issues and the ability of the programs to pay promised benefits in the future.
Save Social Security Now
Save Social Security Now
Wednesday, March 12, 2008
"Stop the Raid"
Senator Jim DeMint (R. SC) has offered an amendment to the budget bill currently under consideration. The amendment provides that surplus funds derived from social security taxes not currently required to pay benefits must be used only for future social security benefits; i.e., the money may not be loaned to the federal government and used for general budgetary purposes. The bill is co-sponsored by Senator Claire McCaskill (D. Mo). While it is true that the social security actuary expects that there will be no surplus funds after 2017, at least these 9+ years will provide some cushion while we wait for a solution to the problem.
This blog is being posted on March 12, 2008. If you read it within a few days of posting, contact your senator and urge him or her to support it.
Save Social Security.
This blog is being posted on March 12, 2008. If you read it within a few days of posting, contact your senator and urge him or her to support it.
Save Social Security.
Tuesday, March 4, 2008
US Treasury Issue Brief 3
For those who have been following the US Treasury's series of issue brief regarding the Social Security situation, the third brief has been issued. It can be found at www.ustreas.gov/press/releases/reports/ss_issuebriefno.3.pdf (The blank space in the address is an underscore.) The brief illustrates various proposals for adjusting benefits and tax rates in the future to attempt to provide some equity between groups affected by the shortfall in projected funding of $13.9 trillion dollars.
Contrary to some suggestions, simply removing the cap on wages subject to Social Security taxes falls very short of solving the problem. Without significant changes in the program young workers will see both an increase in taxes and a decrease in benefits. There are many alternatives for addressing this issue but one thing is clear, delay does not make the problem easier to solve. We need to get to work sooner rather than later. Young workers should not be content to say that they do not expect to receive Social Security benefits. They pay a great deal for this program, regardless of their income level. They should demand change.
Save Social Security
Contrary to some suggestions, simply removing the cap on wages subject to Social Security taxes falls very short of solving the problem. Without significant changes in the program young workers will see both an increase in taxes and a decrease in benefits. There are many alternatives for addressing this issue but one thing is clear, delay does not make the problem easier to solve. We need to get to work sooner rather than later. Young workers should not be content to say that they do not expect to receive Social Security benefits. They pay a great deal for this program, regardless of their income level. They should demand change.
Save Social Security
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