Social Security as a product.

[maat55]

Social Security is a big part of most Americans life. It currently is a forced insurance policy by the federal government. This insurance policy costs 12.4% of earnings under roughly 110k.

I would like to explore it as a product. I would like to discuss how it is managed and how it performs as an insurance/investment.

First off, I want everyone who posts in this thread to give a yes or no answer as to whether they would approach this company(Government entity) voluntarily with their private insurance/investment dollars.

What is obvious, is that the current government system is a financial train wreck. Over its entire existence, it has had to dramatically raise its rates and clearly has to dramatically raise them going forward while reducing benefits.

Annual Statistical Supplement, 2010 - History of OASDI Coverage, Financing, and Insured Status (2.A1-2.A7)


We will have to ignor the blatant fact that how this system is managed today is criminal, but judge it strictly as a product going forward.

Now, the numbers. As of 2011, between OASI(SS), DI(Disability), HI(medicare) and SMI(medicare supplimental) these entities claim to have 3002.9 billion(3 trillion) dollars in savings(special treasury bonds). I am only going to provide real incomes and outlays(General fund and interest incomes are not real and only add to the national debt, to be passed on as inflation and higher taxes and premiums). In reality, these bonds are worthless. A private company could not claim them.

Payouts between these entities totals: 1,283.3 billion.
Real income from taxes and premiums: 876.0 billion.

Unfunded outlays: -409.4 billion.

Trustees Report Summary

These kinds of numbers are going to be the norm for many more years. To call this a viable company in the free market would be insane. We have seen a smaller version of this company in the name of Bernie Madoff. Many of his investors lost everything and he is now in prison.

The key aspect to take into account in any financial situation is that 0 is the bottom. In your own personal finances, whether it be your bank accounts or your retirement accounts, you only have access to numbers above 0. This makes sure that there are no external victoms(other individuals, institutions or generations) of -0 balances.

Also in this discussion we can explore the "Americans are too stupid to take care of themselves" issue as far as whether either a forced private or government system should exist.

[maat55]

No, I would not invest one penny in a government run system, voluntarily. I strongly believe that freedom and prosperity demand the individual to remain personally independent of a central government. Big government has allowed big corruption and is on path to bankrupt the country.

IMO, the federal government is criminal in how it has managed SS/medicare taxes and extemely incompetent in how it has provided benefits.

I also believe this country would be a far better place had these programs never come into existence. Healthcare would be more affordable and wealth disparity would be more centered.

At this point, after numerous years of social engineering, many Americans are incapable of preparing for old age on their own. This is where a mandated private system would better serve the people. We have far better access to private market products that are far better than a system that is at best, incompetent. While these programs may have had noble intents, they have only caused longterm damage and unquantifiable unintended consequences.

A fully converted private system would not pass debt or demand higher taxes. It would allow the passing of wealth. It would provide better quality of life.

[GrimJack]

Point one - Cicero did not say that.
Point two - you would prefer to bring back the good old days of poor houses, working until you died or suffer 'normal' consequences of having no job, no income and no home.
Point three - it is not necessarily true that "Americans are too stupid to take care of themselves" it is more that there is not enough money available for most people to save for themselves while making minimum wage, keeping their kids fed and clothed, and just staying alive.

[cooliemae]

Questions and Thoughts

I am by no means an expert on Social Security and this will probably become a well read and interesting thread. So I guess I’ll begin with some questions.

Why do you not count in the General Fund and Interest as real. The 103.2 billion that was reimbursed to the Social Security Trust Fund was money that would have been otherwise collected from the public. It was the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 that reduced the employee’s percentage payment to Social Security and not the fault of the Trust Fund. The acts reduced everyone’s tax burden by 2% points, but wasn’t free and the reimbursements reflect the money that would have been collected regardless of the 2010 congressional acts. In essence, the government borrowed money from someone else to pay the difference for the employees of the nation. Good or bad, the money would have been collected anyway. Most private companies are not going to care who pays the money owed to them, only that it gets paid. Last time I checked interest payments were real, though I know the .04 cents I gained last month on one particular account doesn’t seem real when compared to what I was making a few years ago. Interest payments are money owed to the business and once it is in the account, there is no reason not to account for it as real.

Why and how are the special bonds issued by the US Treasury worthless? I think it would be criminal for the Social Security Trust Fund to not invest the 3 trillion dollars they have sitting around. But where can they invest that much money without exposing the money to risk? Perhaps a Treasury Bond that is used the world over as the benchmark for riskless investing. And yes, I understand that there is no such thing as a riskless investment, but treasuries have long been used as the mythical riskless investment example. So the government borrows the money from the trust fund and issues it a bond that can be redeemed at a later date. If Congress didn’t want to borrow the money, then the money would simply sit there and do nothing in an account, but I would rather congress borrow from the fund and pay its own citizens interest versus foreign nations. If the trust fund bonds are not real, then are my EE bonds?

You say that the key aspect is that 0 is the bottom, but is that true? I have access to over $100,000 in credit right now. I’m not saying I’m going to run out and use it, but it’s there if I were to get into a dire circumstance. I would argue that 0 is not the bottom dollar for businesses either. If that were true, then there would be no need for corporate bonds or any other lending vehicle(s) that allow business to continue to prosper.

How do you get to the idea that there would be no external victims to a “0 as the bottom dollar” rationale? I understand the notion of not passing on debt, whether it is to a relative or company, but sometimes that’s the only way people survive. Perhaps it’s because while most decisions in life are going to involve financial consequences not all are financial decisions. My wife and I could have eloped for a couple of hundred dollars versus having the $14,000 wedding. I could opt to not fight cancer because I can’t afford it or I could say we’re going to fight with everything I’ve got and damn the cost. (Just a side note, this is only an example) So I fight and lose, and so do my creditors. Thinking about, I guess your right, if I had stayed at zero there would have not been any external victims. But this underscores the notion that while most, if not all, decisions will have a financial consequence(s) not all consequences are financial.

Why use the phrase “Americans are too stupid to take care of themselves”? I like to think that Americans are simply not educated enough on pensions and retirements. How about we bring back home economics classes and focus on these types of topics. This seems especially important as most companies have moved away from defined benefit plans and onto defined contribution plans which place more emphasis on the individual to plan for their future. A good example is my company that recently changed its policy on 401k contributions because their employees didn’t realize they were losing money. Now the company automatically contributes part of the employee’s salary into the 401k so instead of having to actively start participating in the pension program, employees have to actively quit participating.

I do believe you have some good points about private versus government systems. In general I think both sides have good and bad points to be had. Whether it is a system that focuses on procedure rather than results or a bureaucracy that is so large it cannot support itself. However, I believe that those of us working today have double duty. We owe it to our parents and grandparents to provide them with the services and care that they were promised while at the same time we have to look out for ourselves and make sure that we will have what we need to retire without having to rely on social security.

[maat55]

[QUOTE]

Point two - you would prefer to bring back the good old days of poor houses, working until you died or suffer 'normal' consequences of having no job, no income and no home.

You must have missed where I said a mandated private system could replace the current system. Get real, you like many big government advocates always throw out the worst case scenarios if your policies do not exist. Having Bernie Madoff with a gun should not be an option for Americans old age issues. Who's going to take care of them when we go bankrupt?

Point three - it is not necessarily true that "Americans are too stupid to take care of themselves" it is more that there is not enough money available for most people to save for themselves while making minimum wage, keeping their kids fed and clothed, and just staying alive.

I would think that someone who is a regular at this site would know better. Besides, they are having their hands tied behind their backs funding a Bernie scheme. A mandated system would still have everyone saving at least 12.4%, as they do now(cough,cough).

I don't recall seeing your vote. And, make sure it is genuine for you and not a vote for retaining big government.

[jpg7n16]

You must have missed where I said a mandated private system could replace the current system... Having Bernie Madoff with a gun should not be an option for Americans old age issues.

If it's mandated, doesn't that mean you still have a gun to your head and have to participate?

And who (if not the government) would issue that mandate?

So if the government would have to mandate it anyways, and would highly regulate such an industry (as it's mandated for everyone) why not just have the government run it?

Get real, you like many big government advocates always throw out the worst case scenarios if your policies do not exist.

Umm... that's kind of the point of insurance, to protect against the worst case scenario.

"You people selling term life insurance always throw out the worst case scenario of me dying early in my working years."

-- Well, yes. That's precisely what our insurance would protect against.

Who's going to take care of them when we go bankrupt

The same people who would take care of them when the private company goes bankrupt.

I would think that someone who is a regular at this site would know better.

I think you have the mistaken belief that all Americans are middle class and can afford to cut back when needed.

What of those who are permanently disabled, and therefore have no income? Who puts in their 12.4%? No one. What happens to them in society?

Besides, they are having their hands tied behind their backs funding a Bernie scheme. A mandated system would still have everyone saving at least 12.4%, as they do now(cough,cough).

Just like they would in a mandated private scheme. If it's mandated, you have no choice. Your hands are tied.

As pointed out in other threads, not every cent of the Social Security tax goes to a retirement savings program. There are other programs funded by the Social Security funds.

I don't recall seeing your vote. And, make sure it is genuine for you and not a vote for retaining big government.

[Wino]

...a mandated private system could replace the current system.

So, let me get this straight: we should prevent the elected people from taking our money and spending it unwisely, but then pump 12.4% of the nation's income into the hands of private investors who will miraculously and piously invest it for the benefit of all?

And you don't see this as a way of INSURING we get more Bernie Madoff schemes?

Can you set your "way back machine" to 2007, and pay attention to the bankers giving out known-bad loans, then bundling them into big packages and telling everyone they are "good investments?" Just who made money off of those?

The big investment houses you'd create with your plan would become... "too big to fail."

I would have said, instead, "Too big to be saved. Let the others in the market buy their good assets, and let the investors who bought their stock lose the value just like the system is supposed to work."

Bush and Obama BOTH sold out the middle class with their "keep my rich friends rich" schemes. Both of them accomplished their goals: their rich friends (both groups) got their bad investments back. The rest of us paid for it.

[maat55]

[QUOTE]

Why do you not count in the General Fund and Interest as real.

Where is it coming from?

The 103.2 billion that was reimbursed to the Social Security Trust Fund was money that would have been otherwise collected from the public.

The 103.2 billion is borrowed money for who to pay? SS funds are giving the government an improper slush fund to abuse and pile debt on future taxpayers for todays status quo.

It was the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 that reduced the employee’s percentage payment to Social Security and not the fault of the Trust Fund. The acts reduced everyone’s tax burden by 2% points, but wasn’t free and the reimbursements reflect the money that would have been collected regardless of the 2010 congressional acts. In essence, the government borrowed money from someone else to pay the difference for the employees of the nation. Good or bad, the money would have been collected anyway. Most private companies are not going to care who pays the money owed to them, only that it gets paid. Last time I checked interest payments were real, though I know the .04 cents I gained last month on one particular account doesn’t seem real when compared to what I was making a few years ago. Interest payments are money owed to the business and once it is in the account, there is no reason not to account for it as real.

Again, any funds paid out that are not collected are piling debt on future taxpayers. How real is it if your bank borrows your money and tells you it will pay you interest, but it never does? Robbing Peter to pay Paul is not a viable system.

Why and how are the special bonds issued by the US Treasury worthless?

They cannot be redeemed. The government has no money.

I think it would be criminal for the Social Security Trust Fund to not invest the 3 trillion dollars they have sitting around. But where can they invest that much money without exposing the money to risk? Perhaps a Treasury Bond that is used the world over as the benchmark for riskless investing. And yes, I understand that there is no such thing as a riskless investment, but treasuries have long been used as the mythical riskless investment example. So the government borrows the money from the trust fund and issues it a bond that can be redeemed at a later date. If Congress didn’t want to borrow the money, then the money would simply sit there and do nothing in an account, but I would rather congress borrow from the fund and pay its own citizens interest versus foreign nations. If the trust fund bonds are not real, then are my EE bonds?

How about Muni's? Why not invest the funds in state and local governments that have balanced budgets laws? How about blue chip corporate bonds? Why does it have to be on future taxpayers?

You say that the key aspect is that 0 is the bottom, but is that true? I have access to over $100,000 in credit right now. I’m not saying I’m going to run out and use it, but it’s there if I were to get into a dire circumstance. I would argue that 0 is not the bottom dollar for businesses either. If that were true, then there would be no need for corporate bonds or any other lending vehicle(s) that allow business to continue to prosper.

Alot of private debt is collateralized and you likely have a good debt to income ratio. The federal government is 16 trillion in debt, its takes in only 2.4 trillion with expenses of 3.8. What sane private sector bank would loan them money? Please, use some common sense in reguards to equating government debt to private debt.

How do you get to the idea that there would be no external victims to a “0 as the bottom dollar” rationale? I understand the notion of not passing on debt, whether it is to a relative or company, but sometimes that’s the only way people survive. Perhaps it’s because while most decisions in life are going to involve financial consequences not all are financial decisions. My wife and I could have eloped for a couple of hundred dollars versus having the $14,000 wedding. I could opt to not fight cancer because I can’t afford it or I could say we’re going to fight with everything I’ve got and damn the cost. (Just a side note, this is only an example) So I fight and lose, and so do my creditors. Thinking about, I guess your right, if I had stayed at zero there would have not been any external victims. But this underscores the notion that while most, if not all, decisions will have a financial consequence(s) not all consequences are financial.

Most state and local governments have balanced budget laws. My city had to layoff cops and firemen. These and the provate sector have to operate on a sane playing field, yet the federal government does not. This lack of prudence comes with concequences to future freedoms and prosperity.

I do not have the right to selfishly maintain my status quo at the expense of future taxpayers. Our current pay/go system is not fair(from generation to generation) or sustainable. A privatized system would eliminate the unfair financial practices happening in the current system.
The government is practicing Enron accounting. There is no justification for this.

Why use the phrase “Americans are too stupid to take care of themselves”?

Word it how you like, but for the government to force us into its ponzi-scheme is saying the same.

I like to think that Americans are simply not educated enough on pensions and retirements. How about we bring back home economics classes and focus on these types of topics. This seems especially important as most companies have moved away from defined benefit plans and onto defined contribution plans which place more emphasis on the individual to plan for their future. A good example is my company that recently changed its policy on 401k contributions because their employees didn’t realize they were losing money. Now the company automatically contributes part of the employee’s salary into the 401k so instead of having to actively start participating in the pension program, employees have to actively quit participating.

I am not against the government mandating retirement plans. I am against it managing the funds as a large Bernie Madoff with a gun to my head.

I do believe you have some good points about private versus government systems. In general I think both sides have good and bad points to be had. Whether it is a system that focuses on procedure rather than results or a bureaucracy that is so large it cannot support itself. However, I believe that those of us working today have double duty. We owe it to our parents and grandparents to provide them with the services and care that they were promised while at the same time we have to look out for ourselves and make sure that we will have what we need to retire without having to rely on social security.

I fully agree. My attention to this is to change the system from a very bad one to a much better one. The current system is failing miserably. There are losses that have to be reconciled while phasing to a workable system.

What I do not accept as a solution is to double down on the current system. Think about it, 12.4%(and this will have to go up for future payers) of ones income put into a system for near 50 years and all they get is a poverty level existence if they survive to see it. Increasing the taxes and lowering the benefits just to maintain the current system is ludacris.

Please answer the question honestly, would you invest your hard earned money in this system if it were voluntary?

[maat55]

[QUOTE]

If it's mandated, doesn't that mean you still have a gun to your head and have to participate?

And who (if not the government) would issue that mandate?

So if the government would have to mandate it anyways, and would highly regulate such an industry (as it's mandated for everyone) why not just have the government run it?

Is this answer not already clear. It is one thing to force me into a properly managed private system as apposed to a failing ponzi-scheme that costs each following generation more than the last. As a Constitutionalist, I am compromising.

I think you have the mistaken belief that all Americans are middle class and can afford to cut back when needed.

What of those who are permanently disabled, and therefore have no income? Who puts in their 12.4%? No one. What happens to them in society?

Families, friends, churches, charities and state governments.

Just like they would in a mandated private scheme. If it's mandated, you have no choice. Your hands are tied.

A private system have personal accounts that would be limited to qualified investment groups. If we cannot trust our private system, why not just become a Communist country.

Put your money where your idealism is. Would you invest in the government system or the private sector?

Instead of defending fairy tale land, explaint to me how the current system will survive without unfairly punishing future Americans. Do you admit that more government solutions lead to more government control and less freedom?

As pointed out in other threads, not every cent of the Social Security tax goes to a retirement savings program. There are other programs funded by the Social Security funds.

Name them please. They are supposed to fund AOSI(SS), DI(disablility), MI(medicare) and SMI(supplimental medical insurance). All of these can be privatized and function without debt.

[jpg7n16]

Is this answer not already clear.

Apparently not to you. Forced by the gov to a private profit driven company is no different than forced by the gov to the gov run program.

It is one thing to force me into a properly managed private system as apposed to a failing ponzi-scheme that costs each following generation more than the last.

So if the gov were running it with a surplus, you would be okay with that?

A private system have personal accounts that would be limited to qualified investment groups. If we cannot trust our private system, why not just become a Communist country.

Why does it have to be all one or the other?

In your mind is there no scenario with one part government run social programs, and one part privately run investment options? (aka the current system)

Put your money where your idealism is. Would you invest in the government system or the private sector?

I see nothing wrong with living in a country that takes care of the poor, disabled, and elderly.

Instead of defending fairy tale land, explaint to me how the current system will survive without unfairly punishing future Americans. Do you admit that more government solutions lead to more government control and less freedom?

Raise revenues, and cut costs. Same way any financial system will survive.

No I do not admit that, because I don't believe it. I'm not a super conspiracy buff like you. "The government is trying to take care of the poor and needy in this country because they want to steal your freedom!!! REVOLT!!!!!"

Name them please. They are supposed to fund AOSI(SS), DI(disablility), MI(medicare) and SMI(supplimental medical insurance). All of these can be privatized and function without debt.

Let me google that for you

If private solutions are the only answer, why do people not save for retirement on their own? Why do so many people not buy long term disability coverage? (private companies offer it right now) Why do so many people live without health care? (private companies offer it right now)

Each function that SS provides for ALREADY IS an industry run by private profit-driven companies, and many people don't take advantage of it.

[cooliemae]

[QUOTE=maat55;333391]

Where is it coming from?

The 103.2 billion is borrowed money for who to pay? SS funds are giving the government an improper slush fund to abuse and pile debt on future taxpayers for todays status quo.

Again, any funds paid out that are not collected are piling debt on future taxpayers. How real is it if your bank borrows your money and tells you it will pay you interest, but it never does? Robbing Peter to pay Paul is not a viable system.

The money is coming from the treasury and perhaps it is adding to the debt, but I think we have more of a economic problem than a borrowing problem. If the economy hadn't tanked (in no small part to private industry) then the annual deficit may not even exist and the trillion dollars in stimulus that has been pushed wouldn't have been needed. So the size of the debt wouldn't have grown and it probably would have shrunk as a % of GDP. So we need to grow our way out of debt not cut our way out. That means we need to spend some money to make some money. That's the private sector to a tee. Take a out loan start a business up, grow business, pay off loan. But we're off topic. So you want to talk about SS as a product and I'm saying that in the end the earning of interest on the trust fund is in the best interest of the trust fund and the borrowing of money by the federal government is a mute point in this thread.

They cannot be redeemed. The government has no money.

You will pardon me if I don't take your word at this. WOuld you please provide some more detailed explanation of why the cannot be redeemed with perhaps a credible source!

How about Muni's? Why not invest the funds in state and local governments that have balanced budgets laws? How about blue chip corporate bonds? Why does it have to be on future taxpayers?

Muni's are risky and just because you have a balanced budget doesn't mean you won't go bankrupt. For example, the housing bubble left a good deal of communities struggling with lower property values which translated in to lower tax revenue. If you have to balance then you have to cut services to pay debt which means people will probably continue to leave because of poor services, and the cycle continues. As far as corporate bonds....you're right no company has ever gone bankrupt. (Sarcasm definitely intended!)

Alot of private debt is collateralized and you likely have a good debt to income ratio. The federal government is 16 trillion in debt, its takes in only 2.4 trillion with expenses of 3.8. What sane private sector bank would loan them money? Please, use some common sense in reguards to equating government debt to private debt.

Not to get back on the federal debt bandwagon, but.... First, the 100k I used as an example is uncollateralized debt, but I do have a good debt to income ratio (somewhere around 10% - student loans what are you gonna do). So the US was worth about 50 trillion dollars (at least at the end of 2009 - I assume it's gained some back from since then) So the 15 trillion in debt around a third of the net worth of the US. If we apply the common sense method to deciding whether or not to loan a bank (or federal govt) money, I think I would see some insanity the massive leveraging that banks did in last decade. Is a leverage of 30 to 1 or higher sane? I use this only to point out that private systems can be just as bad or worse than government sponsored programs.

Most state and local governments have balanced budget laws. My city had to layoff cops and firemen. These and the provate sector have to operate on a sane playing field, yet the federal government does not. This lack of prudence comes with concequences to future freedoms and prosperity.

First, I would rather pay a little more in taxes or some interest on a loan in order to make sure that my cops and firemen are employed. And you are correct that the federal government unlike other entities gets to operate by a different set of rules. However, the federal government is unlike any other organization in the country simply due to the scale of its responsibilities. I don't see cities chipping in to pay for the Defense Budget. I agree with you that a lack of prudence on the federal government's part has lead to some negative consequences. For instance, we fought two wars (and please don't get started with that topic) that were not paid for. It would have been prudent for President Bush to come out and say hey we were attacked we need to go abroad and take care of this threat and in order to do so we are going to need everyone to give a little more for the war effort. When war is paid for, taxes go down. Medicare Part D - unfunded and tax cuts in the middle of war - don't know what was going on there.

I do not have the right to selfishly maintain my status quo at the expense of future taxpayers. Our current pay/go system is not fair(from generation to generation) or sustainable. A privatized system would eliminate the unfair financial practices happening in the current system.
The government is practicing Enron accounting. There is no justification for this.

I don't want to go off on a rant about taking care of people or what not, but taking care of oneself is not always a selfish thing to do. As for the current pay/go system, I agree that changes need to be made, but overall the pay/go system works. The biggest problem the system faces is the smaller workforce of today paying for a larger retirement group. The second problem with the pay/go system was the fact that the original recipients of social security hadn't been in the system long enough to put a good amount of money in. In other words, the elderly were included in the program from the get-go instead of excluding them because they hadn't paid into the program all that much - if any.

Word it how you like, but for the government to force us into its ponzi-scheme is saying the same.

I am not against the government mandating retirement plans. I am against it managing the funds as a large Bernie Madoff with a gun to my head.

Please explain to me why SS is a ponzi scheme, and I really mean it. I don't understand where you are coming from and can't really articulate a counter argument to your unqualified statement.

From my perspective, you are saying that a company that borrows from its own clients to pay its own clients is a ponzi scheme. If this is true than every bank is a ponzi scheme is it not?

I fully agree. My attention to this is to change the system from a very bad one to a much better one. The current system is failing miserably. There are losses that have to be reconciled while phasing to a workable system.

What I do not accept as a solution is to double down on the current system. Think about it, 12.4%(and this will have to go up for future payers) of ones income put into a system for near 50 years and all they get is a poverty level existence if they survive to see it. Increasing the taxes and lowering the benefits just to maintain the current system is ludacris.

Please answer the question honestly, would you invest your hard earned money in this system if it were voluntary?

My MIL lives only on SS and Medicare. She's in her 70's, disabled and will probably be moving in with my family within the next year. She receives less than $1,000 a month from SS and gets by in large part because she owns her house. She has gotten medical care through Medicare, which has helped with her quality of life and let me thank everyone out there for paying your taxes (though some think you have a gun to your head).

As I have said I believe we are going to have to do both. I will continue to support Social Security and the other trusts because, while you might think others will, in my opinion the citizenry as a whole are the only ones with the ability to pay for the services our fellow citizens need. If everyone's not mandated to give money to help the poor, elderly, and sick, how many people actually would? In this regard I am very cynical about the giving nature of the American taxpayer.

I save and invest aggressively in hopes that I won't have to rely on these services when I retire and I'll count them as a bonus, thus providing me with a comfortable living into old age.

So I agree that reforms need to be made and that SS cannot continue as is, but I disagree with your claim that SS is being criminally run and that a private option is the only way to go.

[dczech09]

As a Libertarian, I do not believe the government should have anything to do with our personal lives. They should not force us into a private system or a public system of any kind.

People should be free to keep their money and do with it as they see fit. If this means that many people do not save for retirement, then so be it. Retirement is not a necessity or entitlement.

I will continue to teach my generation about investing for the future, but at the end of the day it should be up to the individual to decide if they will actually invest. The government should not be in the business of forcing action or forcing a program down the peoples' throats.

There is no doubt that the current Social Security program is broken. It is run by politicians afterall . If the government did not take your 4.2% employee contribution for SS and instead allowed you to invest on your own, you could save up that same 4.2% each year in a 401k or similar plan, aim for an 8% annual return, and have a large lump of money at age 65.

As for some people not having enough money to invest on their own. The reason why they don't have enough is because the government keeps taxing to the point of break. Not just them, but their employer as well.

Even if the system was somehow viable, which it isn't, I would still oppose the system as it is against my values of liberty and individual freedom from government. This is what our nation was built on!

[chrisburke21]

I have two points I would like to make:

1. To break even...money paid in vs. money out is only approx two years. (even lower if you are a lower income individual. Two years is for the top tier of earners)
2. How much money would it cost to buy an annuity that will pay you approx 1k -2500 per month with inflation protection. Quite a bit.

Seems like a great deal to me.

[maat55]

[QUOTE]

So, let me get this straight: we should prevent the elected people from taking our money and spending it unwisely, but then pump 12.4% of the nation's income into the hands of private investors who will miraculously and piously invest it for the benefit of all?

So, you do not have a 401k or IRA? Why bother with just your 12.4%, ask SS if you can invest your additional savings as well.

And you don't see this as a way of INSURING we get more Bernie Madoff schemes?

I'll trust Fidelity, Vanguard or T. R. Price over the government.

Can you set your "way back machine" to 2007, and pay attention to the bankers giving out known-bad loans, then bundling them into big packages and telling everyone they are "good investments?" Just who made money off of those?

Let me guess, GSE's(Fannie, Freddie) and the federal reserve had nothing to do with it. The government defined the playing field, the banks just played the game.

The big investment houses you'd create with your plan would become... "too big to fail."

This may have merit, but again, I trust them before the government. Would there be good times and bad times, sure, but I still have retirement funds without burdening future generations. Besides, it is not the entities that hold the value, it is the investments themselves.If the wheels stop turning, the government could do nothing about it.

I would have said, instead, "Too big to be saved. Let the others in the market buy their good assets, and let the investors who bought their stock lose the value just like the system is supposed to work."

I agree.

Bush and Obama BOTH sold out the middle class with their "keep my rich friends rich" schemes. Both of them accomplished their goals: their rich friends (both groups) got their bad investments back. The rest of us paid for it.

And this is the government you trust with your 12.4%?

[maat55]

[QUOTE]

I'm saying that in the end the earning of interest on the trust fund is in the best interest of the trust fund and the borrowing of money by the federal government is a mute point in this thread.

I disagree. Where it get the money and how it gets the money is very relevant. Again, I ask you, would you invest in SS volunarily?

You will pardon me if I don't take your word at this. WOuld you please provide some more detailed explanation of why the cannot be redeemed with perhaps a credible source!

Why the Social Security trust fund is useless - Aug. 10, 2010

Muni's are risky and just because you have a balanced budget doesn't mean you won't go bankrupt. For example, the housing bubble left a good deal of communities struggling with lower property values which translated in to lower tax revenue. If you have to balance then you have to cut services to pay debt which means people will probably continue to leave because of poor services, and the cycle continues. As far as corporate bonds....you're right no company has ever gone bankrupt. (Sarcasm definitely intended!)

The housing bubble was caused by government policies. Yet, most municipalities are paying their bills. As with any investment, you are going to have winners and losers, but you usually come out ahead. Judging the market today is apples and oranges. The blame for this recession is on the government, the blame for SS going broke is on the government, why on earth would we keep letting them run the show?

So the US was worth about 50 trillion dollars (at least at the end of 2009 - I assume it's gained some back from since then)

No, the government is worth 0. Exactly what assets is it going to use to pay its bills?

Is a leverage of 30 to 1 or higher sane? I use this only to point out that private systems can be just as bad or worse than government sponsored programs.

This is crony capitalism, which is another unintended consequence of big government.

First, I would rather pay a little more in taxes or some interest on a loan in order to make sure that my cops and firemen are employed.

Raising taxes in a recession only causes more problems. Our city came through the recession just fine and has hired back most of its P&F.

And you are correct that the federal government unlike other entities gets to operate by a different set of rules. However, the federal government is unlike any other organization in the country simply due to the scale of its responsibilities.

Many of these responsibilities are not based on Constitutional principles. My income, healthcare, retirement, food, and shelter are not the business of a Constitutional federal government.

I

don't see cities chipping in to pay for the Defense Budget.

It is not necessary for them to do so. Collecting taxes for constitutional government would be fairly painless.

I agree with you that a lack of prudence on the federal government's part has lead to some negative consequences. For instance, we fought two wars (and please don't get started with that topic) that were not paid for.

I disagree on the level at which we fought those wars, but together, they did not cost much over a trillion dollars. I disagree with Medicare-D. I also disagree with Obamacare, SS/medicare, welfare and unemployment.

It would have been prudent for President Bush to come out and say hey we were attacked we need to go abroad and take care of this threat and in order to do so we are going to need everyone to give a little more for the war effort. When war is paid for, taxes go down. Medicare Part D - unfunded and tax cuts in the middle of war - don't know what was going on there.

I think the tax cuts where prudent, but spending cuts should have happened as well. IMO, we spend far more on national defense than necessary.

I don't want to go off on a rant about taking care of people or what not, but taking care of oneself is not always a selfish thing to do.

Self-preservation should always be promoted. This makes it easier to find the truly needy. Federal programs only promote more dependency.

As for the current pay/go system, I agree that changes need to be made, but overall the pay/go system works.

I disagree. It has promoted dependency and poverty level existence for many senoirs. An unintended consequces is the disparity of wealth. Most Americans cannot afford to accumulate wealth to pass on.

The biggest problem the system faces is the smaller workforce of today paying for a larger retirement group. The second problem with the pay/go system was the fact that the original recipients of social security hadn't been in the system long enough to put a good amount of money in. In other words, the elderly were included in the program from the get-go instead of excluding them because they hadn't paid into the program all that much - if any.

Is this not the elements of a ponzi-scheme?

Please explain to me why SS is a ponzi scheme, and I really mean it. I don't understand where you are coming from and can't really articulate a counter argument to your unqualified statement.

You defined it well above. Madoffs system lasted only because there was more money coming in than going out, once that changed, it collapsed. SS has had this happen more than once, yet the solution always is to raise tax rates and extend the benefits date.

From my perspective, you are saying that a company that borrows from its own clients to pay its own clients is a ponzi scheme.

I'm saying that borrowing to maintain the current status quo at the expense of a larger burden on future taxpayers is immoral. Forcing a ponzi-scheme past its death is not different.

If this is true than every bank is a ponzi scheme is it not?

Banks are a whole different animal. They make money on air.

My MIL lives only on SS and Medicare. She's in her 70's, disabled and will probably be moving in with my family within the next year. She receives less than $1,000 a month from SS and gets by in large part because she owns her house. She has gotten medical care through Medicare, which has helped with her quality of life and let me thank everyone out there for paying your taxes (though some think you have a gun to your head).

Your MIL deserves her benefits and would not loose them in a phaseout. SS/medicare where not designed to be welfare programs and should not be. How long someone lives and their quality of life is not the business of others. These examples are for voluntary charity and families to take care of, not bloated federal beauracracies.

As I have said I believe we are going to have to do both. I will continue to support Social Security and the other trusts because, while you might think others will, in my opinion the citizenry as a whole are the only ones with the ability to pay for the services our fellow citizens need.

Voluntarily.

If everyone's not mandated to give money to help the poor, elderly, and sick, how many people actually would? In this regard I am very cynical about the giving nature of the American taxpayer.

Yours is a socialist mindset that leads to Totalitarianism. This country changed the world with freedom, not socialism.

I save and invest aggressively in hopes that I won't have to rely on these services when I retire and I'll count them as a bonus, thus providing me with a comfortable living into old age.

As you should. But if you do not, it is not my problem. Freedom is more important than your personal well being. This is why we send 18 year olds to die for it.

So I agree that reforms need to be made and that SS cannot continue as is, but I disagree with your claim that SS is being criminally run and that a private option is the only way to go.

The federal governmetn will never run it properly because the federal government does not have the right mindset to run a business.