Bush warns of US pension crisis

Discussion in 'Current Affairs, News and Analysis' started by PartTimePongo, Jan 16, 2005.

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  1. http://news.bbc.co.uk/1/hi/world/americas/4178453.stm


    I don't know enough about the strange way the US social security fund works , to make a comment., but Bankruptcy of this fund can't be a good thing can it?
     
  2. Funny he kept this quiet until after the votes were cast.... :roll:
     
  3. By current calculations it will take 46 years for the system to become insolvent. Bush wants to reform the system now rather than letting the problem fester. When social security was first enacted there were 16 workers supporting every recipient. Now its something like 3-1 and as the population ages that will drop. The Bush solution is to allow a portion of a worker's social security account to be invested in the stock market. Based on market growth over the decades it is estimated that a worker will have a much larger account than is currently the case. Right now based on the contributions a worker gets a 1% return and under the propsed system it may be higher than 10%. The average US social security recipient receives $800 -$1000 a month. Those with higher lifetime earnings might get $2000.
    By the way the concept of social security was intended to suppliment one's retirement and not to be a worker's sole retirement account.
     
  4. It is a fraud that depends on sheer brazeness, together with somnolent, obedient, ignorant "news" media, for its continued existence. I believe it was Josef Goebbels who remarked to the effect that it is the really big lie, if sufficiently repeated, that stands the greatest chance of popular acceptance. People who expect, and accept, petty dishonesty in others are stunned to learn of grand scale perfidy.

    Social Security jargon lulls most into the view that there exists, somewhere, a "Social Security Trust Fund," funded with payroll deductions, that will finance their retirements.

    The "Social Security Trust Fund" corresponds to reality in the same fashion as unicorns and leprechauns.

    Since at least as early as the Lyndon Johnson administration, FICA ("Federal Insurance [sic!] Corporation of America] payroll deductions, and employer contributions, are paid out in current Old Age, Survivors and Disability (OASD) benefits, and the balance is "loaned" to the general fund from which Congress makes all other appropriations.

    In other words, the "Social Security Trust Fund" is nothing but a pile of IOUs signed by the U.S. Congress.

    When Social Security was first enacted, there were approximately sixteen workers for every retired payee. This relatively favorable ratio has deteriorated down to about 2:1.

    The unsoundness of this wholly unfunded arrangement will become obvious when things reach a point such that current withholdings and contributions are less than current benefits.

    If, as Pres. Bush proposes, younger workers will be allowed to allocate part of their FICA withholding toward stock market accounts, every dollar thus sent to Wall Street will be one less dollar for Congress to "borrow."

    How might Congress make up this lost stream of "borrowing" proceeds? It can either:

    a. curtail spending (fat chance);

    b. raise taxes, or:

    c. increase borrowing.

    I have read estimates of the estimated future increase in federal borrowing ranging between one and two trillion dollars over the next decade.

    Such an increase in federal borrowing would come at a time when lenders are starting to regard U.S. Treasury bonds with skepticism.

    A large volume of stock purchases means a chance to unload a large volume of inventory on the ill-informed new "investors" and a large volume of brokerage commissions. Naturally, Pres. Bush's plan is favorably viewed by Merrill Lynch, Goldman Sachs, et al.
     
  5. I have read such calculations.

    All that I have seen rested on the assumption that the "assets" of the "Social Security Trust Fund" were real, in the same sense that, say, a pile of gold bullion is real.

    A "Social Security Trust Fund" credit balance with the Treasury can only be redeemed to the extent that Congress raises the money to redeem it. (Or, alternatively, the Federal Reserve System "prints" the money to redeem it.)

    The prospective obligations of the Social Security Administration are unfunded obligations. If, by the expression "insolvent," you mean a situation in which the capitalized future liabilities of the system exceed the capitalized value of future revenues, Social Security won't become insolvent in forty-six years. Rather, it's insolvent right now.
     
  6. Soc Security [to take the DC jargon] is utter b@lls. When concieved during the FDR reign it was funded on future contributions...meaning there was nothing there yet they started issuing soc security checks. The funding was on the backs of those currently working, and off course the ratio was much better then today.

    Through out the years the program has taken on more and more liability [read recipients] not just through old age but broadening the definition of disability. If your a drunk and can't work you get a check, if your a drug addict that has self induced delussions...you get a check. Even illegals and others are tapping into the system. This all coupled with the fact that the people in general stopped saving for their own retirement, because of the soc security saftey net.

    In the 80's a similar crisis arose and the solution then was to raise the FICA withholdings of the workers and lower the benefits for the recipients. That non-sense is not going to fly again.

    The fact of the matter is that more and more people are invested in some form of retirement account [IRA, 401K, 403B...] already. The problem is that the govnt has promised people money based on the fact that they contributed to a program that started with nothing yet gave to people that never paid in...and to keep that promise the Dems want to rob from the working and give to the retirees, while the Reps vision is to invest a small percentage of the contributions else where and achieve higher returns.

    If the Reps win on this the program will over the next few years transition from a "steal from Peter to pay Paul", to a program where the work will pay in to an account that is "his", thereby owning his retirement.
     
  7. No he didn't, it was a topic of his first election run, and this last one
     
  8. It has been known for years. SSA is the only pyramid scheme allowed. 12.3% of your income for a 2% return. Even just investing the 6% from your paycheck in tresury bills will get you a better return then SSA can get you. And then you at least have the ability to transfer your wealth to your family if you die before spending it all. Die before retirement age and your family gets nothing
     
  9. I drink say twice a week with a retired Wall Street Broker, late 40s made his million or so.
    Ultimate capitalist, Adam Smith wrote the bible we should live by.
    One flat rate of tax with no, none, zero, zilch other deductions. High starting point for start paying tax of say 30% and he says it woud work.
    john
    If there's one subject I know F all about it's high finance and how to make the ACC a practical member of HM.s Armed Forces.
     
  10. So just like our national insurance scheme then a sort of tax.
     
  11. It's not my subject. Bush is talking about introducing it. My Wall Street Broker says it would work. It does away with massive numbers of government employees who just consume high wages chasing tax.
    As I understand and the following is just figures.

    Start pay tax on over 10K
    All tax at say 30%
    No exemptions no claims for Anything.
    This soaks the rich, theos on low income pay nothing.
    Thousands of civil servants released from Government payrole as no tax fiddles.
    john
    I do remember one year when Lord Vesty paid quite legally, under £2 in income tax and he was one of the richest men in country.
     
  12. I think John is refering to flat rate income tax.
    Not a bad idea, hated by the Democrats
     
  13. Ah the word flat tax...and a rate of 30%????

    The problem with the current flat tax propsal is the rate, and jon mentioned a min limit before you pay. I am for a "consuption tax" of 1%...how does it work you ask? Simple every good and service is assesed 1% NO EXEMPTIONS {FULL STOP}

    Currently businesses in the US do not pay sales tax on "things" they buy to make other "things". For example: Coca-Cola buys 10 million dollars worth of sugar...they pay no tax, because the sugar makes a "thing" Coca-Cola. Only the end product is taxed, not what makes the end product.

    So you assess a 1% tax on good and service, that means Mr Slub buys a trailer in back woods West Virginia for $10K and pays 1% = $100, Mr Snotty-Rich buys a mansion for $1M and pays 1%= $10000. Same for cars, food, phone, electricity....everything everyone everytime money changes hands

    No fairer tax system on earth, everyone pays...but the key here is NO EXEMPTIONS, ever.
     
  14. at 1% on everything, for every transaction, even your Coca Cola sugar example, (which will drive up the retail price of every item) you will be paying more tax per year, as well as more money for the base cost of everything.
    Then of course this is a Federal tax you are talking of, and every State will still have their own tax as well.

    The flat tax schemes I've heard talked of were suggested at a rate lower than 30%, more like 10 or 15%
     
  15. The consumer takes it in the shorts any way so what's the difference...ok then make it 0.01 % still gives the Fed more then they need and the state can tack on another up to an additional 1%.

    The key is absolutely no exemptions for no one ever, no tax credit nothing everyone pays.