Privatizing Social Security unworkable politically, economically
In this morning’s post, I talked about today’s political environment as “a primal scream of denial, an insistence that easy answers be found — right now!” A recent Wall Street Journal/NBC News poll adds some weight to that description.
Voters were read a series of positions or actions and were asked whether they would make them more or less enthusiastic about supporting a candidate for Congress. In response, 50 percent said that they would have reservations about, or would be very uncomfortable about, a candidate who supported the economic policies of Barack Obama.
On the other hand, 62 percent said they would feel that way about someone who supported the economic policies of George W. Bush.
The poll also found that 49 percent of voters would feel very uncomfortable about a candidate who proposed to phase out Social Security and instead allow workers to invest in the stock market. Only 21 percent said they would be enthusiastic or comfortable with a candidate taking that approach.
That’s an interesting number, given that more and more Republicans are once again beginning to raise that possibility. But I want to set aside the polling numbers for a moment and consider a very practical problem with that idea.
Proponents of that approach almost always say that they will guarantee the Social Security of all current recipients as well as those over 50 or 55, while allowing younger workers to opt out the system in favor of private accounts. Politically and morally, that kind of guarantee would be essential, and everyone understands that.
So here’s the problem. The Social Security benefits for those older folks would have to be financed by continuing taxes on those still young enough to be working. For better or worse, that’s how the insurance system works: Today’s workers help finance today’s retirees.
So where is the money that those younger workers would set aside to invest in their own retirement? That would have to come on TOP of what they’re paying to support Social Security. They will be paying to support today’s retirees AND paying to finance their own private accounts, in effect paying for two retirement systems at the same time.
If you add in the fact that today’s and tomorrow’s taxpayers are obliged to repay $2.5 trillion to the Social Security Trust Fund — money that was borrowed over the last 25 years largely to help offset tax cuts for the more affluent — you’ve got a third retirement-related burden to handle.
I haven’t heard any proponent of private accounts explain how the accounting of all this could possibly work. Even President Bush, in his aborted attempt at privatization, never really explained how that transition could be financed without adding trillions more to the national debt. In other words, those 49 percent are right to be deeply uncomfortable.
Tell us what you think about the site
Customer Care »
Vacation stops, manage subscriptions and more
AJC Services
Sections
Other Editions
Guides
Visitor Agreement | Privacy Statement
© 2012 The Atlanta Journal-Constitution
248 comments Add your comment
stands for decibels
September 8th, 2010
12:04 pm
So where is the money that those younger workers would set aside to invest in their own retirement?
Tax cuts. Ain’t you learned nothin’, boy?
USinUK
September 8th, 2010
12:05 pm
dammit, Jay, I misread it and thought you were talking about PIRATIZING social security! after all, national talk like a pirate day 2010 is next Sunday!!
http://www.talklikeapirate.com/piratehome.html
aaaaarrrrrrrgggggghhhhhhh
N-GA
September 8th, 2010
12:16 pm
Ever since the school system started teaching the “new math”, Americans have been unable to understand how politicians calculated the costs of things like Social Security, war, Medicare, unlimited importing of goods and offshoring of jobs, etc.
Low interest rates for too long = excessively easy credit = out-of-control spending = economic disaster
JohnnyReb
September 8th, 2010
12:16 pm
“If you add in the fact that today’s and tomorrow’s taxpayers are obliged to repay $2.5 trillion to the Social Security Trust Fund — money that was borrowed over the last 25 years largely to help offset tax cuts for the more affluent–”
Those nasty old rich, job providing people. Let’s punish them some more. Never mind the top 1% of wage earners already pay 39% of federal taxes! They and the 50% of wage earners who pay 97% of federal taxes can just pay more so that I can keep getting my food stamps. After all, if I don’t use my welfare check to pay my cell phone bill I won’t be able to talk to anyone. And, I absolutely have to make the payments on the widescreen.
Keep Up the Good Fight!
September 8th, 2010
12:16 pm
There’s a talk like Rupert Murdoch day?
USinUK
September 8th, 2010
12:17 pm
“There’s a talk like Rupert Murdoch day?”
me, I’d like a Talk Like Carol Channing Day …
Keep Up the Good Fight!
September 8th, 2010
12:19 pm
Jay…your mistake is trying to talk about reality and nuances…. Crazy cons don’t want to discuss either, they just want to get elected. Cause “con just wanna, just wanna have fun.”
Mick
September 8th, 2010
12:19 pm
Fix it, up the cap from 106k to 300k, and then move on.
Bruno
September 8th, 2010
12:22 pm
Jay–In case this article was in response to your “debate” with Harry Callahan yesterday, don’t sweat it. You won hands down.
What Harry and others overlook in their calls to privatize SSI in the hopes of a better return on the money is the simple relationship between risk and reward. In the case of SSI, virtually no risk is acceptable. As such, we have to accept that fact in advance that the return on investment (ROI) will always remain low.
The way forward
September 8th, 2010
12:23 pm
So where is the money that those younger workers would set aside to invest in their own retirement? That would have to come on TOP of what they’re paying to support Social Security.
1. Preserves the existing Social Security program for those 55 or older.
2. Offers workers under 55 the option of investing over one third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to Federal employees. Includes a property right so they can pass on these assets to their heirs, and a guarantee that individuals will not lose a dollar they contribute to their accounts, even after inflation.
3. Makes the program permanently solvent – according to the Congressional Budget Office [CBO] – by combining a more realistic measure of growth in Social Security’s initial benefits, with an eventual modernization of the retirement age.–Congressman Paul Ryan
JohnnyReb
September 8th, 2010
12:23 pm
How is it that Progressives think it’s OK to rob the treasury for entitlements “they approve of,” yet the thought of adding to the deficit to fix SS is unthinkable? Oh no, we have to keep controlling those poor people, they are not smart enough to function on their own, and lord help us, if they actually succeed they could vote Republican!
Fly-On-The-Wall
September 8th, 2010
12:24 pm
I sure wish someone would show both sides of the discussion that JohnnyReb is putting across. He claims that the top 1% pay 39% in taxes but other claim they hardly pay anything.
So which is it? Can someone put the two sets of data side by side so all of us can see who is telling the truth. My guess is they’re both wrong and it is somewhere in between but I’d love to see that.
I’m still of the mind that if these so-called rich have all this money then where were they during the Bush years when the economy was shedding jobs at 500k – 750k a month? They could have had their pick of good experienced people to help them run that new business they’ve got all this money for.
But please, please, please someone put this to rest and show the sets of data that both sides claim as fact in this question of who is really paying their fair share.
jewcowboy
September 8th, 2010
12:26 pm
“They will be paying to support today’s retirees AND paying to finance their own private accounts, in effect paying for two retirement systems at the same time.”
Imagine that…boomers being subsidized for their greed by their children and their children’s children. How’s that revolution working for y’all? Well, it sucks for the x’ers and y’ers. Though I did run across a new and very apt name for gen-xers…Baby Busters.
larry
September 8th, 2010
12:26 pm
Yep, those job-providing rich people. Where are they providing jobs at ? Just wondering.
Bruno
September 8th, 2010
12:27 pm
Fix it, up the cap from 106k to 300k, and then move on.
Mick, that is a simple solution along with raising the minimum age for eligibility. When SSI was started, people didn’t live nearly as long as they do today. The only wild card in the mix is that fact that minorities, as a group, don’t live as long as whites. Those concerned with social justice find this a bitter pill to swallow.
jewcowboy
September 8th, 2010
12:27 pm
USinUK,
“me, I’d like a Talk Like Carol Channing Day …”
Do we get to wear a blonde wig?
Fly-On-The-Wall
September 8th, 2010
12:28 pm
I see the ad by Deal on this page now. ‘Roybama’, is that all he has? Can’t he tell us what he plans to do instead of trying to tie Roy to Obama. This is Georgia, not Washington DC last time I checked.
Bubba Bob
September 8th, 2010
12:32 pm
I think we should spend ourselves into debt so heavily we can’t recover, let the economy crash, suffer for years and then see if people want to be more fiscally responsible.
Bruno
September 8th, 2010
12:32 pm
I sure wish someone would show both sides of the discussion that JohnnyReb is putting across. He claims that the top 1% pay 39% in taxes but other claim they hardly pay anything.
Fly–In terms of income taxes, the rich certainly do pay the lion’s share of all taxes collected according to the IRS:
http://www.taxfoundation.org/news/show/250.html
From the article:
“In 2007, the top 1 percent of tax returns paid 40.4 percent of all federal individual income taxes and earned 22.8 percent of adjusted gross income. Both of those figures—share of income and share of taxes paid—are significantly higher than they were in 2004 when the top 1 percent earned 19 percent of adjusted gross income (AGI) and paid 36.9 percent of federal individual income taxes.”
and
“For the first time this year, we are also presenting data on the top 0.1% of tax returns (the top 10 percent of the top 1 percent). This 10 percent of the returns in the top 1 percent amounts to only 141,000 tax returns but accounts for nearly 12 percent of the adjusted gross income earned and approximately 20 percent of the nation’s federal individual income taxes.”
JohnnyReb
September 8th, 2010
12:34 pm
Fly On The Wall – here’s a link to who pays taxes.
http://www.taxfoundation.org/news/show/250.html
JohnnyReb
September 8th, 2010
12:35 pm
Bruno, you beat me to it. We posted the same link.
Bruno
September 8th, 2010
12:35 pm
Yep, those job-providing rich people. Where are they providing jobs at ? Just wondering.
larry–Hold tight, things will pick up in January when the anti-business Democrats are thrown out on their collective rears.
RW-(the original)
September 8th, 2010
12:35 pm
If you add in the fact that today’s and tomorrow’s taxpayers are obliged to repay $2.5 trillion to the Social Security Trust Fund — money that was borrowed over the last 25 years largely to help offset tax cuts for the more affluent — you’ve got a third retirement-related burden to handle.
Does anybody really believe that if income taxes were higher in the upper income brackets that this shortfall would be funded? First off I don’t believe you would have as much extra money flowing to Washington as you think, but even if you did there’s not a snowball’s chance that the politicians wouldn’t find someplace else to spend it.
TaxPayer
September 8th, 2010
12:36 pm
Well, if we had left healthcare alone, then the hard work of folks like Massey, the Koch brothers, et al, would have taken care of the dilemma of paying for all these old retirees all on its own. So, let’s start rolling back the regulations and stoking those coal-fired furnaces and such like we did in the good old days before government intervention. Then, retirees will die at a more reasonable age, actuarially speaking, and we will have that social security problem under control in no time at all. But just to play it safe, have an egg or two for breakfast every day.
Keep Up the Good Fight!
September 8th, 2010
12:37 pm
First, as pointed out…the $2.5 trillion owed is because Congress decided to dip into the funds paid for SS to fund other programs. That money rightfully belongs to SS and the IOU’s must be repaid. That means that money will have to be collected to pay it back.
As for the other proposals, the problem still seems that the hard decisions are being avoided and a shell game continues.
Bruno
September 8th, 2010
12:37 pm
Bruno, you beat me to it. We posted the same link.
LOL. Milliseconds count in today’s world, Johnny. Plus, I included some text and quotes as well.
(putting six-shooter back in holster)
Vinny
September 8th, 2010
12:40 pm
Seeing as how my yearly SS statements state that I will only be receiving 0.75 cents on the dollar to what I PAID into this government run ponzi scheme, I’d rather take my chances with privitization.
The government can’t do anything right or without some measure of corruption.
Fly-On-The-Wall
September 8th, 2010
12:40 pm
Bruno,
Thanks, that helps. Now a question. Are they just earning a ton more than us or do they have investments somewhere else that offset their taxes? Because the usual argument I hear is that the ‘rich’ have so many more ways to hide income.
Are these figures you listed before any type of ‘deductions’ or ‘reductions’ that could be claimed? In other words are the figures listed just showing the income and taxes owed but does not then include any deductions against their tax bill? That would be an easy thing misrepresent, I show their income and tax bill but not show the deductions to reduce that tax bill. I could then claim that someone is paying too much or too little without really showing the whole picture. Do you know which this is?
Bruno
September 8th, 2010
12:41 pm
As for the other proposals, the problem still seems that the hard decisions are being avoided and a shell game continues.
You’ll need to take that up with the AARP, Good Fight. Neither party is going to risk alienating that voting bloc.
Jay
September 8th, 2010
12:41 pm
Way Forward, here’s the Tax Policy Center on Ryan’s “Roadmap.”
“The Ryan plan proposes large cuts in Social Security benefits — roughly 16 percent for the average new retiree in 2050 and 28 percent in 2080 from price indexing alone — and initially diverts most of these savings to help fund private accounts rather than to restore Social Security solvency. Because the plan would divert large sums from Social Security to private accounts, it would leave the program facing insolvency in about 30 years, just as under current law. The plan would avoid insolvency by transferring $1.2 trillion from the rest of the budget to Social Security between 2037 and 2056, and those transfers would not be fully repaid until 2083.
The plan also seeks to entice higher-income seniors to divert a substantial share of their payroll tax contributions to private accounts. It would exempt from taxation all income drawn from these accounts in retirement, while retaining the feature of current law that counts as taxable income most of the Social Security benefits these affluent seniors could receive. In addition, the Ryan plan would require the federal government to guarantee the performance of the private accounts; if the stock market fell and value of the accounts declined sufficiently, the Treasury would have to make up the losses.”
In other words, it rearranges the deck chairs. Furthermore, guaranteeing the performance of private accounts is yet another way of privatizing any gain from those accounts, while keeping the risk of poor performance in the public sector.
TaxPayer
September 8th, 2010
12:42 pm
The next thing you know, the Republicans are gonna start whining about those unemployed folks not paying a poor tax or something and dumping their burden on the billionaires. Don’t they care about the billionaires! I mean, how can we expect billionaires to pay millions in taxes. It’s just crazy talk. It’s like if a billionaire made a 100 million and was asked to pay a million of that in taxes , then that would like rob this poor billionaire of almost a whole one percent of earnings that could have been trickled down on society in the form of real help. Like man. Doesn’t anyone care about the poor people that have to pay taxes any more, man.
A blast from the past
September 8th, 2010
12:44 pm
Guess Who Really Pays the Taxes?
stands for decibels
September 8th, 2010
12:46 pm
my yearly SS statements state that I will only be receiving 0.75 cents on the dollar to what I PAID into this government run ponzi scheme,
You know how long you’re going to live? Really? Can you tell me how long I’m going to live? Because that’d be a neat-o thing to know.
Redneck Convert (R--and proud of it)
September 8th, 2010
12:46 pm
Well, the problem is, Bookman writes like we got to keep Social Security. I say cut those old geezers loose and let them go to work as greeters at WalMart. They can’t do no worse than the ones they got there now. If you ask one where the white socks for your monthly bath are, they’re as likely as not to send you to the grocery section.
I’m a Conservative and that means it’s all about me, me, me. I don’t mind putting money in a account for my own retirement, but dang, I don’t want to pay for somebody else’s. That’s Socialism.
It’s a cruel world out there and I’d rather be the wolf than the sheep.
TaxPayer
September 8th, 2010
12:47 pm
Seeing as how my yearly SS statements state that I will only be receiving 0.75 cents on the dollar to what I PAID into this government run ponzi scheme, I’d rather take my chances with privitization.
Wow! I didn’t see that anywhere on my statement from Social Security. I imagine you must really be distraught over being singled out like that.
Fly-On-The-Wall
September 8th, 2010
12:48 pm
Bruno and JohnnyReb,
Since you both came up with that link so fast can someone else please provide some data. It’s not that I don’t trust you but I’d like to see someone else’s data. I know the Tax Foundation claims to be non-partisan BUT. I have my doubts but nonetheless this is one piece of data so I’d like to see someone from the side that claims the rich do not pay enough submit similar information. Thanks in advance.
Keep Up the Good Fight!
September 8th, 2010
12:48 pm
I always love the overstatement that government can’t do ANYTHING right. Of course we know corporations get everything right. Yep, there are problems with government, waste, corruption, and just plain stupid moves at times. But there is not one government and not one agency and not all is wasted or lost to corruption.
And just ask those working for large corporations whether there is any corporate waste or lack of efficiency. Most everyone I talk to that works for large corporations have complaints about the way they are run. And we have plenty of evidence of waste, inefficiency, corruption and greed in corporations.
Bruno
September 8th, 2010
12:48 pm
Are these figures you listed before any type of ‘deductions’ or ‘reductions’ that could be claimed? In other words are the figures listed just showing the income and taxes owed but does not then include any deductions against their tax bill?
Fly–The amounts listed are actual taxes paid, after whatever deductions can be made are figured in. In summary, the top 1% earned about 23% of income, and paid a little more than 40% of the income taxes collected. Whether this is fair or not depends upon your individual viewpoint, I guess. Personally, as long as I am living comfortably, I really don’t care if others are living better. Wealth envy isn’t part of my outlook on life.
jewcowboy
September 8th, 2010
12:52 pm
Bruno,
“The only wild card in the mix is that fact that minorities, as a group, don’t live as long as whites. Those concerned with social justice find this a bitter pill to swallow.”
Want to talk about a bitter pill? Try being a gay man or woman who is unable to obtain survivor benefits when your partner dies b/c of our discriminating system.
Mick
September 8th, 2010
12:53 pm
Bruno
I say no to raising the eligibility age. If you are a skilled blue collar worker toiling in the trenches, those additional years would be pretty tough as opposed to some office paper pusher.
Bruno
September 8th, 2010
12:54 pm
It’s not that I don’t trust you but I’d like to see someone else’s data.
Fly–The data provided on the link comes straight from the IRS. I don’t know what better authority exists on what income was earned and what taxes were paid.
I have my doubts but nonetheless this is one piece of data so I’d like to see someone from the side that claims the rich do not pay enough submit similar information.
On the “other side”, Fly, all you are going to find are anecdotal stories of particular individuals who didn’t pay a lot of taxes, e.g. Jay’s journalistic “scoop” that Nathan Deal didn’t pay a lot of taxes the past few years. IMO, the “Big Picture” is more important, not stories about a few individuals.
Fly-On-The-Wall
September 8th, 2010
12:56 pm
Bruno,
I agree with your statement – “Personally, as long as I am living comfortably, I really don’t care if others are living better. Wealth envy isn’t part of my outlook on life.”
The thing I get concerned about is the rich feeling ‘entitled’ to being rich and therefore they should stay rich (I think of Paris Hilton for some reason when I type this). I don’t want anything special for the rich anymore than anyone else. If they got there by hard work then more power to them (so to speak), they earned it. But don’t cut them deals just because they have money. Same for big corporations. They can do a lot of things but don’t give them tax breaks or special tax breaks just because they are a big corporation. If we truly believe in the capitalistic system and the free market then we wouldn’t give them a dime in tax breaks or sweetheart deals. My 02 cents anyway. Thanks.
TaxPayer
September 8th, 2010
12:57 pm
I tend to prefer this site’s analysis of such things as incomes and taxation and such.
Bubba Bob
September 8th, 2010
12:58 pm
We’ve got all the money we need. We’re currently on the hook for only $61.9 trillion. Should be easy to keep paying out money to all these programs, defense, etc.
Bubba Bob
September 8th, 2010
12:59 pm
The US Debt Clock shows us as being $110 Trillion in the hole. Check out those UnFunded Liabilities.
http://www.usdebtclock.org/
Paul
September 8th, 2010
1:02 pm
Silly Jay
You pass it, then you figure out how to do it! Seriously, the whole objective is to appear to give voters a choice and the illusion you’re the candidate who will “do something.” (I was late to your last post, but that idea’s fleshed out a bit right before the thread ended).
the way forward/Jay
way – so it takes a third of the contributions out of the SS system, not all contributions (which a complete changeover would do) so it still leaves a shortfall to be made up somehow, correct?
Jay – that ‘price indexing’ leading to lower benefits – does anyone who’s read the entire analysis know if that has to do with what was discussed yesterday – moving from a CPI based on some worker wages to a CPI that’s more broad-based, representative of most of the population, including retirees?
So far, it appears to me, it really is just rearranging the deck chairs with descriptors that appear to give people control over their future. I dunno if it’ll work, though. Those seniors comprise an effective lobby. And they vote.
Bruno
September 8th, 2010
1:02 pm
Want to talk about a bitter pill? Try being a gay man or woman who is unable to obtain survivor benefits when your partner dies b/c of our discriminating system.
jewcowboy–I’m 100% with you on that account, not in small part due to the fact that one of my sisters is gay. Personally, I am completely in favor of legal “domestic partnerships” to circumvent this unfairness along with the other lost benefits that married folks automatically enjoy.
From my perspective, it seems to come down to a disagreement over terminology. In one corner, you have folks like josef who won’t accept any difference in legal language (marriage for straights, domestic partnerships for gays), even if the benefits are exactly the same. On the other hand, many polls I have seen show that a majority of Americans are comfortable with extending similar benefits to gay unions, but aren’t comfortable with equating such unions with heterosexual marriages in a linguistic sense. I count myself in the second group.
Jefferson
September 8th, 2010
1:08 pm
Let’s just add a middle man — not. Raise the cap, move on. There was plenty of wealth in the 50’s,60’s,70’s, the proof of how things are now was that Reagan was out in left field with a catcher’s mitt on, wondering why the 3rd base coach wants him to bunt.
jewcowboy
September 8th, 2010
1:08 pm
Why does this thing eat my posts?
Bruno
September 8th, 2010
1:11 pm
I say no to raising the eligibility age. If you are a skilled blue collar worker toiling in the trenches, those additional years would be pretty tough as opposed to some office paper pusher.
I understand your point, Mick, but it wouldn’t make any sense to me to create different layers of benefits based on whatever job you do. The bottom line is that the minimum age HAS to go up to prevent insolvency. If this creates an unfairness for blue collar workers vs. white collar, or for minorities vs. whites, that is simply the price you have to pay for applying the law equally to everyone, IMO. Otherwise, you would have to toss out key concepts in our legal system such as the Due Process Clause and the Equal Protection Clause.
Remember Mick, it’s all about equal opportunity, not equal outcomes.