A Forum for Grinches and Ho-Ho-Hoes

[sgtclub]

Originally posted by Mmmm, Burger (C.J.)
X times the number of people participating times teh amount at issue. That's basically what bush is proposing, but the problem is that all current benefits are being funded by current taxes, with some taxes going into the trust fund. If you put those extra funds into "private" accounts you're depleting the trust fund even faster. The cost of reducing liabilities in the future is decrease revenue presently.

Bush is not proposing that SS gets to share in my upside. My plan potentially would produce a net game to the system, so I think the real cost would need to be discounted for that.

[Greedy,Greedy,Greedy]

Originally posted by sgtclub
I'm not sure if anyone has proposed this, but it seems like the math should work - even though math is hard.

X% of your SS tax goes into a private account, 100%-X% goes into the current system. When you hit the retirement age, you're benefits from the current system are reduced by the amount that your X% would have earned in the system (or even a greater percentage), but did not because it's in the private account. Assuming the private account appeciates at a higher rate than it would have under the current system, you get the benefit of the difference or the benefit of a part of the difference.

Not sure what the transition costs would be.

Transition costs should be obvious. Right now, funds paid in go to two places: to pay current benefits and to build up a reserve. If your X is less than the amount that goes into the reserve, you have less in the way of transition costs. If it is greater than the amount that goes into the reserve, then you have to cut benefits to current recipients to fund your private account.

OK, what if the stocks you invest in dramatically underperform, resulting in nothing in your private account - is the answer that you should be left to starve?

Now assume a great depression style crisis happens about once a century. Stocks collapse. Is everyone who retires in the next 10-15 years just SOL?

I'm glad Dad has a military pension.

[sgtclub]

Originally posted by Sidd Finch
But they aren't commies? What's the distinction?

Dude, it's rhetoric.

[sgtclub]

Originally posted by Tyrone Slothrop
Let's just set aside the various issues relating to the performance of private accounts vs. the current system, and the desirability or lack thereof of the insurance function that we now have, and focus on transition costs. Money that comes in now is not invested. It's used to pay for current retirees. So doing what you propose will entail borrowing a big chunk of money. If this improves the system's finances as of 2052, this happens only at the cost of hurting our finances now. If you think the shortfall that we face in 50 years is a "crisis," it makes absolutely no sense to talk about borrow money to shift to private accounts. The conversation should be, instead, about tweaking the system in the ways discussed in other posts.

Your proposal is like my wife saying to me, we should buy a Mercedes, but I'm not sure about the costs. Well, sure. If money were no object, why not?

I understand all of this, but the main objection to personal accounts seems to be that we borrow lots of money for no net gain to the system. However, if the system were to share in the gain, the calculus is a bit different.

[Sidd Finch]

Originally posted by sgtclub
That's not what I want at all. What I want is a greater return on my money than I'm currently getting.

My apologies. It's the guy you are supporting who wants the government to borrow 2 or 3 or 4 trillion.

Question: You said Bush thinks it is morally necessary to provide a safety net (not exactly your words, but close). If private investments turn out to have risk -- obviously they do, but you wouldn't know it from listening to Bush -- then what happens to the people on the downside of that risk? Are they just fucked, and will the Republican Party that you say will still be in power 25 years from now have the political will to say that they are fucked?

[Tyrone Slothrop]

Originally posted by sgtclub
Dude, it's rhetoric.

I think Sidd meant: Aren't they commies too, rhetorically speaking?

[Mmmm, Burger (C.J.)]

Originally posted by sgtclub
However, if the system were to share in the gain, the calculus is a bit different.

In other words, the government should invest in the stock market?

Commie.

[sgtclub]

Originally posted by Greedy,Greedy,Greedy
OK, what if the stocks you invest in dramatically underperform, resulting in nothing in your private account - is the answer that you should be left to starve?

Now assume a great depression style crisis happens about once a century. Stocks collapse. Is everyone who retires in the next 10-15 years just SOL?

I'm glad Dad has a military pension.

Even under the Bush plan, as I understand it, the permitted investments narrow as you get closer to retirement, so that you are only permitted to invest in "safe" investments.

You're dad's pension, in all likely hood, is invested in the market.

[Tyrone Slothrop]

Originally posted by sgtclub
I understand all of this, but the main objection to personal accounts seems to be that we borrow lots of money for no net gain to the system. However, if the system were to share in the gain, the calculus is a bit different.

No, I object to borrowing a ton of government money. Make the modest fixes to Social Security to ensure it continues to do what it does. We have private accounts now. People who want more money -- including most of us -- can go to Schwab or Fidelity and open a private account. You don't have take money away from Social Security to allow this happen.

[sgtclub]

Originally posted by Sidd Finch
Question: You said Bush thinks it is morally necessary to provide a safety net (not exactly your words, but close). If private investments turn out to have risk -- obviously they do, but you wouldn't know it from listening to Bush -- then what happens to the people on the downside of that risk? Are they just fucked, and will the Republican Party that you say will still be in power 25 years from now have the political will to say that they are fucked?

I don't think this is a real risk, given that a very small portion of our total retirement pool will be permitted to be in private accounts.

[sgtclub]

Originally posted by Mmmm, Burger (C.J.)
In other words, the government should invest in the stock market?

Commie.

No, I should invest in the market.

The government already does invest in the market via management of pension accounts.

[Sidd Finch]

Originally posted by Tyrone Slothrop
Money that comes in now is not invested. It's used to pay for current retirees.

It's also used to fund government operations, magically reducing the deficit because it's not counted as part of it. (Does anyone remember who recently said that the 2-4 trillion Bush wants to borrow shouldn't be considered "debt" or "deficit", because it was really a "savings"?) This may explain why Bush wants to postpone PRAs until after his term ends -- he's not prepared to accept the immediate bloating of the deficit that will come, before a single penny of the 2-4 trillion transition costs is spent.

Your proposal is like my wife saying to me, we should buy a Mercedes, but I'm not sure about the costs. Well, sure. If money were no object, why not?

This explains the gleam in her eye when she saw my Kraut car.

[sgtclub]

Originally posted by Tyrone Slothrop
No, I object to borrowing a ton of government money. Make the modest fixes to Social Security to ensure it continues to do what it does. We have private accounts now. People who want more money -- including most of us -- can go to Schwab or Fidelity and open a private account. You don't have take money away from Social Security to allow this happen.

That is a reasonable objection. Would you also support increasing the 401(k) and IRA limits?

[Greedy,Greedy,Greedy]

Originally posted by sgtclub
I don't think this is a real risk, given that a very small portion of our total retirement pool will be permitted to be in private accounts.

Ah, the conservative wish-think. Let's just pretend the risks aren't real.

But, clubby, risk and reward correlate, don't they? If they didn't, wouldn't we all move to nothing but the high reward investments?

(I'll note that the above correlation isn't exact and may point to one potential "fix", but a "fix" that, as Burger noted, isn't permitted because it would be communistic -- generally, a well diversified portfolio with part equity and part debt has both a higher return and a lower risk than an all debt portfolio, which is basically what SS is invested in; we could lower risk and increase return by letting the current trust fund invest in a portfolio of 20-30% stock).

[Tyrone Slothrop]

Originally posted by sgtclub
That is a reasonable objection. Would you also support increasing the 401(k) and IRA limits?

Maybe. How do you propose to make up the lost revenues?