Privitizing SS and Medicare

[james.hendrickson]

Definitely. Nobody in either party is going to let SS implode. That would be disastrous.

I like Milton Friedmann's position on it. Issue everyone who is due social security a bond, then shut down the program.

From the Independent:

http://blog.independent.org/2015/10/20/milton-friedmans-solution-for-social-security-would-work-for-government-pensions-too/

Milton Friedman, the 1976 Nobel Laureate in economics, was interviewed on the television program Uncommon Knowledge in 1999, and he offered a solution to Social Security’s financial problems: shut it down.

But Friedman didn’t advocate that the federal government walk away from its promises.

Social Security participants are owed a stream of payments during their retirement years based on a set of factors, including lifetime earnings, number of years worked, and age at retirement. This stream of Social Security payments has an expected present value.

Friedman advocated that each Social Security recipient, or future recipient, receive a bond equal to the current expected value of the benefit stream they have been promised under current law. The bond would be due at age 65 for future recipients and due today for current recipients.

Issue the bonds; then shut down Social Security.

This approach ensures that everyone gets what he or she has been promised. It brings the true cost of the unfunded liability above board. It funds the unfunded liability and requires the federal government to establish a specific financing plan to pay off the bonded debt. And it closes Social Security, a program whose tax and benefit design is morally indefensible.

[cooliemae]

I appreciate the depth of your thoughts and correct me if I'm wrong, but this plan wouldn't solve the problem of current retirees without and infusion of cash from somewhere.

Since the current workers are paying for current retirees, opening up individual TSP-SS accounts would magnify the problem of the SS fund being underfunded. If we could find a bridge to get us from current system to your proposed one it sounds like a nice option, but I don't know if a bridge could be built.

[cooliemae]

And it closes Social Security, a program whose tax and benefit design is morally indefensible.

Help me out with the the morally indefensible part.

Personally, being a government worker the idea of shutting down SS causes me some heartache. The Federal Employee Retirement System is built upon a tripod of support; 1) Thrift Savings Plan, 2) Federal Retirement Payment, & 3) Social Security. So taking a leg out of the plan is a big deal.

Second, I think a plan like this would have quite a number of unintended consequences, such as sudden income from bonds causing seniors to have assets that kick them off medicare premium assistance/medicaid.

[Petunia 100]

I like Milton Friedmann's position on it. Issue everyone who is due social security a bond, then shut down the program.

From the Independent:

http://blog.independent.org/2015/10/20/milton-friedmans-solution-for-social-security-would-work-for-government-pensions-too/

Milton Friedman, the 1976 Nobel Laureate in economics, was interviewed on the television program Uncommon Knowledge in 1999, and he offered a solution to Social Security’s financial problems: shut it down.

But Friedman didn’t advocate that the federal government walk away from its promises.

Social Security participants are owed a stream of payments during their retirement years based on a set of factors, including lifetime earnings, number of years worked, and age at retirement. This stream of Social Security payments has an expected present value.

Friedman advocated that each Social Security recipient, or future recipient, receive a bond equal to the current expected value of the benefit stream they have been promised under current law. The bond would be due at age 65 for future recipients and due today for current recipients.

Issue the bonds; then shut down Social Security.

This approach ensures that everyone gets what he or she has been promised. It brings the true cost of the unfunded liability above board. It funds the unfunded liability and requires the federal government to establish a specific financing plan to pay off the bonded debt. And it closes Social Security, a program whose tax and benefit design is morally indefensible.

Morally indefensible? In what way?

[Petunia 100]

A step further than privatization --> make it optional. This way you can invest that money or you may not want medicare if you have retirement health benefits or prefer to buy your own. Max flexibility, min. government.

Some may think there's the national debt issue and health exchange issue; but the national debt shouldn't be financed thru SS anyway (take that away and gov. may actually become more careful with spending); and roll the medicare (whatever's remaining) into gov employee heath plan.

And so for the vast majority who opt not to participate, then what? Are we prepared to allow seniors to starve in the streets?

[TexasHusker]

I'd like it for me, but honestly for the greater good of all society, it needs to stay as is!

All this money stuff is just too complicated for most people. We get it but we are a minority when it comes to this stuff. Most people can't even count change back for goodness sakes.

Sadly you are correct. Our once-proud republic has become a melting pot of pansies who would much prefer that someone look after them (i.e. the gubmit) than having to look after themselves.

What a pathetic, but nevertheless true, commentary on our country.

[LivingAlmostLarge]

What happens when people don't want to participate? They have the option now of a 401k and don't. Only way to guarantee they can retire is to force it. People may not like the idea of mandatory retirement, but I don't see many people saying "sure let's take away SS and pay us back out." Do that idea of paying people out and I bet the majority of americans will be pissed. SS might not be much but I am surprised by how may depend on it solely.

And Pflyer how do we pay out if we make everything private going forward? What about the retirees now? What happens if you are disable or have chosen to stay at home with kids and then don't work? Do you get nothing?

[cornfieldj]

Milton Friedman also said that compulsory retirement programs infringe on personal freedom.

I like Milton Friedmann's position on it. Issue everyone who is due social security a bond, then shut down the program.

From the Independent:

http://blog.independent.org/2015/10/20/milton-friedmans-solution-for-social-security-would-work-for-government-pensions-too/

Milton Friedman, the 1976 Nobel Laureate in economics, was interviewed on the television program Uncommon Knowledge in 1999, and he offered a solution to Social Security’s financial problems: shut it down.

But Friedman didn’t advocate that the federal government walk away from its promises.

Social Security participants are owed a stream of payments during their retirement years based on a set of factors, including lifetime earnings, number of years worked, and age at retirement. This stream of Social Security payments has an expected present value.

Friedman advocated that each Social Security recipient, or future recipient, receive a bond equal to the current expected value of the benefit stream they have been promised under current law. The bond would be due at age 65 for future recipients and due today for current recipients.

Issue the bonds; then shut down Social Security.

This approach ensures that everyone gets what he or she has been promised. It brings the true cost of the unfunded liability above board. It funds the unfunded liability and requires the federal government to establish a specific financing plan to pay off the bonded debt. And it closes Social Security, a program whose tax and benefit design is morally indefensible.

[Spiffster]

I'd like it for me, but honestly for the greater good of all society, it needs to stay as is!

All this money stuff is just too complicated for most people. We get it but we are a minority when it comes to this stuff. Most people can't even count change back for goodness sakes.

Yeah, its unfortunate that we must cater to these types of people, but they represent the voting majority.
Adding to your point, it amazes me that some people have to use a calculator or (even worse) consult a smartphone app to calculate a tip.

[LivingAlmostLarge]

These types of people are not just liberals. Just as many conservatives aren't financially self-sufficient. Actually if you go to federal tax dollars blue states actually pay more in taxes to fund and help red states. So "those" people are pretty much everyone no matter what their political leanings.

I'm not sure what percentage of the US is actually financially aware. I'd say about 10%.

[cornfieldj]

I'm not sure what percentage of the US is actually financially aware. I'd say about 10%.

Really wish some financial services survey would take a look at this. I do know that on the quick financial literacy quizzes that go around, few people can get all the right answers to questions like "Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?"

[StormRichards]

The references to Milton Friedman are a trigger for me bringing back really bad memories of my Macroeconomics class and the miserable Professor who taught it. I need some damn Play-Doh STAT!

[Mjenn]

In the country I live in, a portion of our equivalent of SS is privatized. Or rather, we get a letter home every year saying that we have x amount of funds saved in our SS account that we can select how it is invested.

To be honest, I find it quite stressful. While I may end up with a bit more money, most of the times we have ended up in the standard account because it historically does have the highest returns. To be advised on how to invest, we have had to find a pay an advisor and vet the advisor to make sure that they have our best interest at heart and have the proper training. It takes a large chunk of time every year and I am really not sure we are doing the best thing at all.

Most people don't even bother because it is so complex and most of the people who try to advise you are really just looking for a payout.

But I guess that is freedom of choice? FYI I live in a country that is often considered quite 'socialist' aka part of scandinavia.