TCS Daily


A Mass Delusion

By Jagadeesh Gokhale - April 21, 2006 12:00 AM

Most have declared the Social Security reform debate dead. But the program still faces financial insolvency, so no action now simply means that the debate is being shifted into the future. Supporters of personal accounts are unlikely to give up their quest so account opponents are maintaining a drumbeat of criticism.

Unfortunately, much of the criticism of personal accounts is based on an incorrect premise -- that the accounts' objective is to put more money into retirees' pockets. Critics argue personal accounts would deliver this goal only by taking money away from others.

However, the system has another dimension that is a crucial reason personal accounts should be retained as a reform option: Current payroll taxes create entitlements to future benefits. This link leads to a misperception of the risk inherent in retirement financing and harms growth-promoting economic behaviors. The misperception and its harmful effects will continue to grow as long as the program remains in its current form.

Nobody really knows the exact size of future obligations created by today's payroll taxes: Future benefits will be paid under future program rules, and the program's financial insolvency makes those rules uncertain.

Opponents of personal accounts ignore that uncertainty and continue to proclaim that Social Security constitutes "guaranteed" retirement support. This perception is only reinforced by the Social Security Administration's regular notifications to participants of future benefits that would be paid under current laws.

Life holds no certainties. But to provide a relatively strong benefit "guarantee," Congress would have to pass a law requiring a super majority vote to alter the current benefit formula. In that case, recurring financial shortfalls would have to be closed by hiking payroll taxes or otherwise injecting more resources into Social Security. Were that the case, a ballooning cohort of retirees would require repeated payroll tax hikes that would eventually become unbearable.

In reality, there is no strong Social Security guarantee and future electorates are unlikely to acquiesce to exclusively revenue-side adjustments. Potential future benefit adjustments should not be ignored, but talk of "guaranteed" benefits misleads people into believing their retirements are more secure than is really the case -- a misperception that negatively affects how much they personally save for the future.

Another way that the current Social Security system erodes national saving is by transferring resources from savers to spenders. Studies show that spending rates of American retirees out of their total resources are larger than those of American workers, and retirees' spending rates have increased over time. That means transferring dollars from workers to retirees via Social Security and other entitlements promotes spending growth and retards national saving.

The savings-reducing impact of entitlements would not matter if Americans were saving excessively -- like the Chinese do today. However, Americans' saving rates -- never very high historically -- have fallen significantly since the late 1970s, causing the United States to rank close to the lowest savers among developed economies.

Social Security also creates labor-markets inefficiencies: Financing benefits out of payroll taxes rather than out of prior savings adds to work-disincentives arising from income taxes. Studies show that spousal labor-force participation is especially reduced by Social Security payroll taxes and dependents' benefits that accrue despite a lifetime spent out of the labor force. And recent studies have shown that Social Security's clawback of benefits for working beneficiaries younger than 65 (otherwise known as the "earnings test") induces people to retire early even when in good health and with undiminished ability to work.

According to a study by Nobel laureate Edward Prescott, high social insurance taxes cause lower labor-force participation among Europeans compared to Americans. Thus, a policy of "fixing" Social Security through tax increases would only discourage work and compound the growth-retarding impact of low saving and capital formation.

Perhaps most worryingly, economists and social scientists have begun to suggest that the long-term fertility decline in developed economies may also be the effect of generous pension and health insurance programs. A recent study shows that a significant portion of fertility declines among developed economies during the 20th century can "be explained" by the generosity of retiree pension and health benefits. In addition, changes in social structures and behavior -- women's economic independence, higher divorce rates, and increasingly separated living arrangements of retirees and their adult children -- which are partially wrought by greater economic independence during retirement -- may sustain the decline in fertility rates.

Because the existing structure of entitlements weakens important growth-promoting economic behaviors -- saving, labor-force participation, family cohesion, and potentially even procreation -- finding a way to provide retirement security that reverses or minimizes them in the future is obviously important. Simply assuming that future benefits would be paid through higher taxes and ignoring the risky nature of Social Security's "intergenerational compact" appears to be a sure recipe for disaster.

Personal accounts cannot solve Social Security's cash flow shortfalls, but they could help to eliminate the mass delusion about retirement security that the current program creates.

The writer is a senior fellow at the Cato Institute.

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60 Comments

An elaborately constructed theft
I can'r believe you people still think you can pull this off. Wasn't this scheme unmasked for the public year before last-- back when the president still had some shred of credibility remaining?

Here's how it works. First you pick the Lock Box, where everyone's retirement funds used to sit. They were supposed to be retired there until around 2019, when payments would begin to exceed revenues and they would be needed. But of course they were more useful elsewhere, so Congress could give the appearance of making ends meet while they slashed taxes and increased spending.

Why'd they do that? The old rule always holds: qui bene. See who benefits.

So let's see where the money

Who do you think makes all that money we spend on our elective war? Well, duh, it's the same company our vice president, chief architect of the war, runs from inside the administration. Plus a bunch of other companies just like it and equally well connected.

Here's how it works. One thing you need when you're building a chain of permanent bases in Iraq is concrete. A lot of it-- millions of yards. And it so happens that Iraq makes-- or used to make-- a lot of concrete. It costs next to nothing.

So do we use it? Sorry, I think you just don't understand the New Ecomony. We shut those factories down and throw the workers out. That was socialism. Instead we import, at tremendous expense and from the other side of the world, the most overpriced concrete we can obtain.

So do I have to explain how a cost plus contract works? I can see you shaking your heads.

Okay, how about an open ended contract? That means that even as they talk about winding down the occupation force on the one hand, they continue building new, larger bases there with the other. And we're not supposed to notice the disconnect between what they say and what they do.

It's a war without end, and it requires all our money.

That, dear kiddies, is why Social Security is in so much trouble. It's been hollowed out from within, by rats.

There never was a Lock Box
THe SS system NEVER had a lockbox, it was allways a pay as you go system.

The SS "saving" was always on paper and never had any money in it. This has been shown many times all you have to do is look at the income as compared to the payouts every year. Yes lots of people put into the system over the years, but think about all the people that got lots of money from the system right when it started that have never put a dime into it. THis lockbox as allways been in fantasyland and has never been real.

This is an easy fact to check
You appear to be unaware that the problem with payouts and baby boomers was anticipated back around 1983-85, and a fix was implemented.

It involved a sharp increase in the payroll tax rate, so that instead of merely staying even with payouts, they began to put away large amounts of reserve funding. If you're interested you can go to the SSA web site and see the size of the surpluses that have been created since implementation. So the answer is YES, the Trust Fund (aka the lock box) had plenty of money in it. It still has many billions in promissory notes.

The problem was that as soon as the new system was created a dialog in Congress broke out, between those who wanted to use the money only to retire debt (in retrospect a wise idea) and those who wanted to spend it. Naturally greed won out. Almost every member of Congress wants to find ways to lower taxes while increasing spending, and this was the Royal Scam.

But done is done. Now when 2019 approaches we will have to start paying back in the money that was taken out. At first it will be a trickle, but in time it will get more painful. And those workers up ahead in the 2030's will curse the evil days of the nineties and oughts, when crooked politicans stole all the money to wage idiot wars halfway around the world.

Do not privatise it minimize it
Lets not privatize social security lets minimize it. First increase the retirement age and index it for expected life span. Then pay out the minimum to all recipients. If the poorest people can live in the minimum payments then richer people can to. This should allow the reduction of the tax and encourage people to make their own arrangements for old age.

The democratic argument against privitization
To paraphrase Charles Wrangle D-NY. If we allow the people to invest 4% of their SS then they will see the better retunrs and want to put more into private accounts. It wouldn't be long before we wouldn't need SS at all.

He made this argument against priviization while debating Shaun Hannity on the subject. Hannity missed it. But Wrangle is correct, if people were allowed to use private accounts there would soon no longer be a need for the SS program and thus no more money for Wrangle and others in Congress to mis-appropriate.

No 'lock box' can exist without the feds buying foreign assets because the federal government is the
No 'lock box' can exist without the feds buying foreign assets because the federal government is the source of all dollars. Roy the Federal government cannot save money like you and I can.



Mostly agree
SS is a successful universal welfare system. Prior to SS the vast majority of old people lived in poverty. Of course, there were many fewer old people because the median life span was 60 and half the population lived in poverty. The system was sold to the Republicans by claiming it was a retirement system. In fact, it was a universal welfare system and a capped, flat income tax. There never was an actuarial or accounting connect between the tax and the benefits.

SS was designed to be one leg of a three part system - SS, personal savings, and company pension. Thus SS never was designed to provide 100% of anyone's income. The payout could be one third of the median poverty level which in theory is the minimum required amount needed for basic food, shelter, and clothing.

If SS was admitted to be a welfare system then logically the tax should be applied to all income with no dollar cut off.

Companies - except for govt jobs - no longer provide a pension for new employees. This eliminates one leg of the tripod and doubles the worker's responsibility.

And the third leg? Statistically, the typical worker doesn't have the smarts to manage cash money and to save for his retirement.

If SS is dumped then in 50 years or less we will revert to per WW1 conditions with the majority of old people living on county work farms or sleeping under bridges.

creating mass delusion
I think I agree with this article, but whats the point? I had to read every paragraph 2 times to piece together the points. Its like the goal is to find more and more creative ways to make the argument. It didn't sink in to the masses when it was less complex, so maybe it will sink in if we make it more complex?

The problems with SS are simple, just tough to deal with.

Roy hit it on the head above. The problem is politicians taking the surplus revenue from SS taxes and spending it, instead of actually investing it. Promissory notes are useless, the government will have to come up with the money eventually anyway.

Now we'd be in serious trouble if all that revenue was suddenly taken away to actually let people invest it themselves. Thats why Bush's idea was to only let us keep 4% of it. Even that 4% would make the government squirm, but its not privatization without us getting to control something. 4% is hogwash, its my money, my retirement, I want 100% to invest. But we already have hundreds of billions in debt a year, imagine if we took that SS tax revenue away from our giant hog of government. Add the tens or hundreds of billions it would cost to implement Bush's ideas and now wonder it so miserably failed. Thank God it failed.

Nice one by corporal99 too. Charles Wrangle argues against privatization by arguing for total privatization. I agree with that idea too, but I don't think its realistic in our society. I would love to keep the money myself and invest it how I want. But there are a lot of Americans who are not responsible enough for that. So if we let those people control the money, they blow it and retire with nothing, then what? Its not a simple answer, but there is a happy median out there somewhere. Bush didn't have it, no one has so far. It would be painful to everyone, so it would be a tough answer to come to.

I don't agree with the idea of just raising the retirement age and cutting benefits. Go ahead and cut benefits, I don't care about that. What pisses me off is the idea of paying all this money into it and getting none of the benefit. Those odds increase by raising the retirement age.

Man this is a complex issue, so many possibilities. We're really going to need strong leadership and bi-partisanship to get it done. I dare say we're screwed, there is little reason to have faith in our corrupt and cowardly politicians. They'll just do another fix like the last one that kicks the can further into the future.

Right and wrong Floccina and Roy
Floccina is correct, the system was originally set up as a pay as you go system. Roy is right, during the Reagan years increases were put in to create a surplus. But, the only time a "lock-box" was really brought up was in the mid-90s.

Floccina is incorrect in saying the government cannot "lock-box", they do it all the time. it is called "ear-marked" funds. That means the money can only be spent on the designated program. This is what was suppose to happen with the surpluses of the 80s and 90s. It was to be ear-marked and set aside for the increased need.

the lock box was picked 40 years ago.

your memory is faulty
The fix voted in during the Carter administration was never intended to fix the problem for all time. And it was never advertised as such. It was designed to keep the system solvent until a permanent solution could be found.

SS or productivity
The reason why so many people live better in retirement has nothing to do with Social Security. (This can be proven by just looking at the size of most SS checks.)

The reason why retirees do better today is because they earn so much more while working, and work longer, then they could 70 years ago.

It is the improved productivity, brought to you by capitalism, plus improved health care, once again brought to you by capitalism, that has improved everyone's life.

Let the Democrats fix it
I'm honestly tired of the Social Security debate. The Democrats say it isn't a problem. Fine. If they are correct, good for them. If they are wrong, let them take the blame. As I see it, the worst case scenario is that benefits will have to be reduced. I for one am totally in favor of a smaller social security system anyway. Further, those who really believe that the system is just fine will be the ones who get burned - they deserve to get burned. Those of us who think the system is not just fine are already preparing. I really don't see a downside to just letting the Democrats have this issue.

No Subject
The number of old people below poverty level would double if not for SS. What percentage do you think would be better off if there had been no SS?

Roy's elaborate fantasies
Obviously Roy never got the word. When the Republicians recently offered a bill that would stop the use of Social Security funds for anything other than Social security guess who voted against it in mass.


It takes a really stupid idiot to parrot these WWP lines and believe them.

But there's always Roy.

Sheep to slaughter
Social security was an income redistribution scheme. If private industry tried it as a pension fund the officers would be thrown into jail for fraud. But the government using a Ponzi scheme well it was just a matter of time before the little fraud blew up.

The government has no business stealing funds and placing it from one pocket and putting it into another. People who are depending on this are in for a surprise. Then we can hear Roy and the other Leftists braying about Rove when the Dems refuse to allow privatization of even a lock box.

I pity the fools who are depending on this.

invest or privatize?
Investing the social security trust fund is not the same as privatization. Many states have large pension trust funds that are in the hands of fund managers. Clinton wanted to invest the social security trust fund, but was blocked by Republicans who said the Federal government should not be in the business of stock picking because there is too much temptation to corruption (having the Ohio coin dealer in mind?). Not liking Republicans even then, I thought they were just being obstructionist.

Private accounts are a higher overhead, higher risk approach to the same thing, as the people of CHile are finding out.

who?
What bill is that? I haven't heard about it. Please share, I'd like to research it so I know who voted how on it. There must be more to the story.

I would hate that anyone would vote against it, except, we have to be realistic too. Our goverment would go bankrupt if it passed. Unless we could cut defense spending, which is next to impossible in the current climate.

Besides, don't Republicans control the Senate and House? Couldn't every single Democrat vote against it and it could still pass?

At present
Most people on SS are way better off, because they are getting hundreds of times more back, then they ever put in. There is no way private investment could have made those kinds of returns.

But you claim that the reason old age poverty has disappeared is solely due to SS can't be supported.

If SS was admitted to be a welfare system then logically the tax should be applied to all income wit
First I agree with you on this: ‘If SS was admitted to be a welfare system then logically the tax should be applied to all income with no dollar cut off.’

But I think that you get other things wrong:

You wrote: ‘Prior to SS the vast majority of old people lived in poverty. Of course, there were many fewer old people because the median life span was 60 and half the population lived in poverty. The system was sold to the Republicans by claiming it was a retirement system. In fact, it was a universal welfare system and a capped, flat income tax. There never was an actuarial or accounting connect between the tax and the benefits. ‘

The elderly population was not disproportionately poor in fact due to the starting age to receive SS being higher than the average life expectance at the time that it was instituted the people who received the benefit where disproportionately better off (even today the rich outlive the poor significantly). Poverty is disproportionately a youth problem now and then disproportionately children in single parent homes. One of the reasons to start SS was to get the elderly to stop working, FDR thought that would help the unemployment situation (he was wrong on this). That is why FDR said it was to be temporary.

You wrote: ‘SS was designed to be one leg of a three part system - SS, personal savings, and company pension. Thus SS never was designed to provide 100% of anyone's income. The payout could be one third of the median poverty level which in theory is the minimum required amount needed for basic food, shelter, and clothing. ‘

They called it social security insurance because some supporters meant it to be insurance against living too long.

You wrote: ‘Statistically, the typical worker doesn't have the smarts to manage cash money and to save for his retirement.’

Savings is not how people typically lived in retirement, their children helped to support them. It, has in part due to SS, now become a dishonorable thing to rely on your children to care for you in old age. This is not good.

Also individuals may be stupid but society builds up norms that are smart. The norm would revert to everybody saving 10% of their income most of their working life and then a much greater percentage closer to retirement and to working longer as it was before SS.

You wrote: ‘If SS is dumped then in 50 years or less we will revert to per WW1 conditions with the majority of old people living on county work farms or sleeping under bridges.’

75 of years of economic growth will make this very unlikely.

Bill killed in committee last week
Essentially the bill would have stopped the use of social security funding for any purpose other than social security and as I understand it would have stopped the use of IOUs to circumvent this process. Try a google search for April Congressional bills. As the news reported it every Democrat representative voted against it.


Big surprise.

Lefty GooGoo's math
Please explain how the cost of the 100,000 plus employees of socil security are cheaper than the costs of a private firm handling investment. Please point to me the expenses of one investment firm that exceeds that of the Scoial Security Department's administrative costs?

By the way do you know what the return on social security is? Answer-why do you think Congress exempted themselves from the porgram until recently.


Thanks for demonstrating the WWP line again.


By the way Chile went to a private program after their government administered program (like our Social Security) went completely bankrupt after being looted by the politicians. What is the name for someone who advocates the same action after seeing the results and expecting something else?

The New Math
Guess what? You are able right now to put four percent of your SS payroll taxes into whatever financial investment you care to buy into. That way, you will have that nest egg in addition to your Social Security payments. You just can't decide to stop contributing in to SS at the same time.

Let's see. If your payroll tax deduction into SS is twelve percent, four percent of that would be, um... 0.0048 of your income, or a bit under one half a percent. That wouldn't be so bad. Instead of paying out 12% you'd be paying out 12.48%.

reading comprehension
I'm trying to reply in kind (i.e. unkindly).

I said the overhead for private accounts would be high, not the overhead for institutional investing, which is the Clinton plan the Republicans opposed. The Bush "plan" called for administrative fees for individual accounts that were very high.

By the way, the Federal Government for all its faults, is better at administering services (less overhead) than the private sector, at least in health care.

As solid as the US Treasury
The problem with this line of reasoning is that there are two separate accounts. It was set up that way as a matter of law. Once we pay our income taxes it goes into the federal treasury, and becomes Uncle Sam's money. Payments into the SS Trust Fund do not. They remain our money. That is key.

Try to think of it this way. A law office handles its own moneys, in its business account. It also handles fiduciary moneys, in various escrow accounts it holds for its clients. It has a fiduciary duty not to commingle funds from those two separate accounts.

Of course lawyers do sometimes do that. And thereby make themselves liable for prosecution and disbarment. But the Feds are different. They don't exactly hold themselves above the law... but they are so difficult to get to that no one has ever been able to prosecute them for mishandling our money as though it were their own. So they borrowed the money and then spent it. And now they've got nothing. Eight trillion less than nothing, to be precise.

The Trust Fund works best when it remains a straight savings account, not being lent out and thus earning no interest. In this formulation it is merely retired money, held in a mattress until the day it is needed. Yes, when Congress borrows all the money they put in notes that say they intend to pay it back, with interest, wink wink. But that premise is entirely dependent on their good feelings. They are in no way tied to performance , in the way they are tied to the repayment let's say of a T-bill.

If they stiff the depositors in the SS Trust Fund, no one will be surprised. But if they stiff the T-bill investors the dollar will fall quicker than the Italian lire in 1945. So if push comes to shove, guess who gets paid and who doesn't?

Sloppy work
Not so. The lock box was picked around 1992. Forty years ago would have been in 1966. The lock box was just fine.

Huh?
>Were that the case, a ballooning cohort of retirees would require repeated payroll tax hikes that would eventually become unbearable.


I don't see how increasing payroll taxes of retirees can solve this problem. Any surplus in SS is spent, so no asset is produced that can handle the ballooning cohort when they retire. There is no relationship between the cash flow generated by current workers and the retirement benefits demanded by the retirees.


To say that the program is insolvent doesn't make sense either. It's basically a cash flow issue. Can those who pay afford to pay for those who retire on the payors' cash flow into the system? If not, then there are two options. Increase taxes for the current workforce or reduce benefits of the retirees (or both).

ABD

No Subject
Hope you are correct. I see the middle class shrinking big time when the real estate bubble pops. It will start when the fed boosts the interest rate another percent or so.

There are no permanent fixes
Not in this life. But the increase in payroll taxes was thought of as a one time adjustment that would patch the baby boomer bulge up in 2012, when benefits were calculated to surpass revenues. Note that they thought 2012, when last year they were thinking 2018. This is one of those projected dates that recedes the closer you get to it.

It was a good patch.

A reform bill?
Okay, you've got my attention. When did the Republicans offer a bill that would stop congressional borrowing from the Trust Fund? Could you provide a citation? I think I'd have heard of something like that.

Thanks in advance for providing solid evidence.

Only one option
Anthony,

There's really only one option - reduce benefits. The current workforce will refuse to pay higher taxes because it will be understood to be throwing good money after bad.

DeMint-Crapo, that's who
TJ is referring to the DeMint-Crapo Amendment, which sounds to me like a fine idea. Here are some background reports:

http://news.enquirer.com/apps/pbcs.dll/article?AID=/20060326/EDIT02/603260306/1090

http://demint.senate.gov/index.cfm?FuseAction=Issues.Detail&Issue_id=64

http://demint.senate.gov/index.cfm?Fuseaction=PressReleases.Detail&PressRelease_id=252

The bill was supported by a Republican I like (Graham, SC) and a couple I don't (Lott, MS and Brownback (KS). The deal killer was that it doesn't just protect the Trust Fund against borrowing, it privatises Social Security. The first provision was just a deal sweetener that didn't work.

The devil is in the details
Now that I've had the chance to review DeMint-Crapo, I notice one little thing.

How do they propose to pull that one point something trillion back out of the budget and put it into individual retirement accounts for every contributor under the age of 55? This is one small detail the authors of the amendment apparently have not yet worked out.

Not to mention a lesser problem. How do they propose that the federal government function on a low tax basis without continued reliance on borrowing from the Trust Fund? The annual budget shortfall would grow to about a trillion a year, which is unsustainable debt.

This one needs to go back to the drawing board.

The devil is in Roy
One only need ask any family how they make ends meet when they suffer a finbancial shortfall.


Something that Commissar Roy would never, never do. Because in his mind you don't earn money, the state allows you to keep a portion of what you earn at its discretion.

I think the only solution to SS and worse Medicare issues is violence.
Face it, there is no way that the bone heads in this government can pay for the government they appropriated and then pay for not one but two wars on top of it. So it is all a farce.

This farce has two possible solutions, that payers pay more or payees get less. So you figure out how to get increasingly unhappy payers to keep paying more at higher percentages. It simply can not happen. Eventually those payers will use coersion (commonly called democracy) and when that fails choose the worst thing which is stop working completely or the next to worst thing which is to refuse to pay forcing our benefactors in Washington to use violence.

Thumbs up to the author for mentioning two things:
1. Social Security is not guaranteed. It is only a guess for the furture based upon current law. Politicians can change laws rather quickly.

Makes you want a Roth IRA doesn't it?;-)

2. These "benefits", more accurately wealth transfers from younger to older folks do affect the growth in population. So be careful about deporting immigrants, they may be the only young folks left.

Rhetoric ineffective in this instance
I was looking for a more serious answer, TJ. The bill is unworkable as written. Further, I can see no way the concept could even be retained if someone wanted to make it work. That makes it less than a viable plan, but just a political feint.

Unless you can show us which pocket the government could take a trillion actual, negotiable dollars from.

Another Roy lie
Exactly where do you get a trillion dollar figure from ace?

This is why our government doesn't work because we have morons who will lie rather than seek solutions.

By the way just eliminating the SSI program will provide hal;f of that annually. Throw in Section 8 housing and earned incoime tax credits and you have it.

GOGO spins
Poor Lefty Good Lie can't answer the question that is clear. And are supposed to believe the bold assertion that the Federal government is bettering at administering services than the private sector?


Yeah guess Cuba, UK, USSR, France, Germany, China, North Korea, North Vietnam, the Great Society, the Veterans Administration, the IRS, you name it prove your point.

That's why when people voted on Clintion's healthcare program in the 1996 election for the first time in 60 years the Dems lost control of both houses. Yeah Goody you're right.


YOU ALSO MAKE ME LAUGH

HAHAHAHAHAHHAHAHAHHA




Effect of SS on Population
Billott1,

I never thought of that, but it is a very good point. Taking 15% out of a young couples wages could very well mean the difference between deciding to have another child or not. At the margins, it most certainly does have an impact. And at the other end, more people choosing to retire early reduces economic growth, putting even more pressure on young families. Very interesting.

The uninformed mind is its own best defense
Excuse me, did I say a trillion dollars? The precise answer is $1.7 trillion.

"To date, the Social Security trust funds have accumulated about $1.7 trillion worth of U.S. Treasury bonds. This means that the Treasury has had to borrow less from other lenders to finance our budget deficits. Consequently, the Treasury has not had to raise the rate of interest on its bonds to attract private investors, and it has had to rely less on foreign lenders such as the Central Banks of China and Japan."

http://www.socsec.org/publications.asp?pubid=540

But what does the Social Security Administration know? They even seem to think that "Private investors have put their saving into assets such as stocks, corporate bonds, and housing instead of Treasury bonds, which has led to construction of new buildings and purchases of new equipment in the United States, contributing to economic growth."

So you're right. I guess we'll always have a problem with morons who just shoot their mouth off first, without bothering to look up any data.

A safer investment
Makes you want to put your money someplace safe, like in a Savings and Loan.

You could invest in real-estate or in children or in learning a marketable skill that can be done l

Roy
If it was as you describe then the feds could just stop the SS tax and pay the money out of deficit spending and at the same time they could make an account will the money the needed for future payments. Beacuse your argument completely ignors effects on the supply of money.

Refinancing ad infinitum
They can roll the Social Security debt over until pay-back time, a dozen years up the road. But then they will need actual money to feed back into the Trust Fund, so they can write checks on it.

It's much like the interest on the Debt. They can keep rolling the principal over, but in time our interest payments alone will equal the amount of revenue the Treasury takes in. Already in fiscal 2005, we had to pay out $352 billion. And that was with ultra-low interest rates. Wait til the rates go back up and see what happens with our interest payments.

For that matter they could just get out of the tax collection business, and just close down the IRS. We could live on air-- that is, until the investors got queasy and wanted to pull their money out of T-bills. Then bingo, no more United States.

Then your mind is well defended
The problem is trolls who accept the propoganda of the government without even analyizing what it means. The government takes money uses it and replaces it with IOUs and then claims this is stable form of investment.

Or put in words even a dullard like you can understand your wife withdraws your entire savings account of 1,000 and replaces it with an IOU based on her earnings (she is a stay at home mom). Only a moron too stupid to realize that interest rates have nothing to do with debt could accept such a explanation when any reasonable individual could see that when the USA ran its greatest debt during WWII interest rates were nowhere near as high as under Jimmy Carter. Or as Reagan increased the debt load interest rates again declined.

What a dullard. Your right the problem here is moron's who shoot their mouths off without the least understanding of anything.

Did you learn economics at the Purple Duckie's Romper Room?

Let me get personal for a moment
What makes you such a nasty person? Every other word is "troll" and "dullard". Are you that unhappy with your life? We're just having a conversation about economic policy here.

You say things like "The government takes money uses it and replaces it with IOUs and then claims this is stable form of investment." Well, as a matter of fact if you poll a hundred people, including financial analysts, they'll all tell you very likely that they think treasury bills are the safest form of investment. You don't have to believe that... in the case of Trust Fund borrowing I don't even believe that... but most people accept it. It's a legitimate assumption. Is that a reason to run off with the potty mouth?

You could use a little practise in the way of social skills. Sit down and reflect to yourself whether the people in your life enjoy your company or whether they commonly avoid you. I think they'll become more friendly the moment you stop calling them dullards and morons.

Troll you are and dullard you aspire to be
Talk about a potty mouth! Anyone who thinks treasury bonds are a good investment only demonstrates their ignorance. But having repeated that lie we are only left with the hard fact that you are an idiot without any idea of what he is talking about. You have no idea of risk or risk measurement. You have no concept of inflation and what that does to investment.


Go back to DU dullard and spread more lies and ignorance there. You do need help, mental as well as spiritual.

trolls and dullards oh my
What a terrible conversation that was. TJ you offered one idea of substance, that treasury bonds are a bad investment. Maybe so, but you also made an analogy of our government as a stay at home mom. Huh? Thats so stupid its funny. The fact is, there is not another entity that exists that is more stable of a creditor as our government. Our fed is the backup system to our banks, it better be darn stable. The morons running our government and stealing our money is another subject.

Roy wins that little streak of an argument.

TJ, don't you know when you call other people names its a reflection of how you feel about yourself? Don't be depressed because you're ignorant, and then act tough and intimidating to others. Open your mind and accept responsibility for yourself. Just talking louder or more forcefully doesn't make you more right. Unless you're just trying to be more right-wing, in which case you're doing a good job.

You could invest in real-estate or in children or in learning a marketable skill that can be done l
You could invest in real-estate or in children or in learning a marketable skill that can be done late in life.


lefties
LG has in the past informed us of how much better off the people of Cuba are, compared to the US.

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