[Changleen]

Good morning. I'm Terry McAuliffe, chairman of the Democratic National Committee.

And therefore I have an agenda, but,

This week, President George W. Bush delivered his State of the Union address, and though he claimed our nation is strong, he did not and could not say that America is stronger today than it was four years ago.

Four years ago, when President Clinton left office, our nation was experiencing the longest economic expansion in our history. We had moved from record deficits to record surpluses. Unemployment was at a historic low and America was respected in the world.

But after four short years of Republican control, our economic growth has slowed. We've returned to the days of deficits and debt, and America is no longer seen as a beacon of freedom and progress.

And now these same Washington Republicans want to privatize Social Security. While Social Security faces challenges, Bush's privatization plan would make things worse.

Here's how: First, in order to pay for the creation of private accounts, Bush wants to borrow $2 trillion from foreign nations.

Fact. Is borrowing 2 trillion when you're already so far in the hole a good idea? I'd say no, but feel free to disagree..

Secondly, Bush wants to cut benefits. How? He wants to change the way Social Security benefits are calculated, and by doing that, future retirees will see a nearly 50 percent cut in benefits compared to the current system. And that's whether you set up a private account or not.

Debatable, but it does seem that the government will enjoy most of the extra benefits linking SS to the stock market will bring, not the public. i.e. You might make more money under this scheme if the stock market continues to perform, but you won't see all of that benefit, especially if you die 'early'. Fair enough since the government is administering it for you? Maybe, but putting in extra money to ensure a better pension (which would work under a private scheme, has no guarantee of working under Bush's scheme.

And here's the worst part. Even after all those cuts and massive borrowing, private accounts would actually do nothing to help save Social Security. Don't take my word for it. Bush's own White House admitted that this week. In fact, private accounts would actually speed the insolvency of the program.

Slight sleight of hand in that he's talking about the current system, which would run parallel for the next 50-60 years, but it is true that this (the current) system would be able to offer only lower and lower payments over the course of it's reduced life. This means that those who choose not to take up Bush's offer (probably the poor for the most part) would get a much worse deal if they did not have a properly private supplement to their SS. i.e. the poor would most likely get poorer.

Benefit cuts, massive debt and more insecurity are not the type of drastic changes we need to make to our nation's retirement security.

Americans deserve better. After all, Social Security is not a handout. It's an earned benefit, one that every American pays into over his or her lifetime and one that every American deserves to get back guaranteed.

For our part, Democrats are for giving Americans more options and choices when it comes to retirement security and savings. And we agree there must be discussion about Social Security and the challenges that lie before us.

But according to the Congressional Budget Office, Social Security is solvent until 2052. And even after 2052, it still will not be bankrupt as the president has said. There's no dispute that Social Security faces problems down the road, and we must address that. But we have the time to do it right.

And that begins with telling the American people the whole truth. Bush's plan, as I've said, will force America to borrow $2 trillion from foreign nations, further increasing our national debt. It will also result in a guaranteed cut, and that's the truth.

Democrats want any plan to solve the Social Security challenge to be rooted in fiscal discipline with budgets that pay as we go. Democrats will insist that any change in the system not result in benefit loss. And those two principles for the safety and security of America's seniors we will not yield.

Democrats will reach out. We will work across the aisle. But we will also hold feet to the fire and make the Washington Republicans accountable for their selfish agenda.

This is Terry McAuliffe, chairman of the Democratic National Committee.

And thank you for listening.

 

[Changleen]

Heh - I just read something very interesting: Bush's projections for currect SS plan to run out in 2042 are based on very conservative economic growth figures. However, his plan to halve your budget defecit are based on more optimistic figures. If you apply the budget figures to the SS model, the system never goes bankrupt, and further, actually ends up $3 trillion in credit by 2042. So which is it Bush?

 

[Changleen]

Also, why not fix the problem the way most other western countries have proposed? Simply increase everyone's contribution by a tiny amount...

 

[Westy]

Also, why not fix the problem the way most other western countries have proposed? Simply increase everyone's contribution by a tiny amount...

Then we'd be making a negative return on our investments. That is just horrible.

 

[fluff]

Give everyone a free house. That'd solve the problem.

 

[Changleen]

Then we'd be making a negative return on our investments. That is just horrible.

How's that?

 

[Archslater]

Mark Cuban (who voted for Bush) had an interesting take on the subject. He seemst to be against it for some very sound economical reasons.

http://www.blogmaverick.com/entry/1234000127024034/


1. To “work,” privatization must generate more money for retirees than current arrangements. This bonus is supposed to be extra money in retirees’ pockets and/or it is supposed to make up for a reduction in promised benefits, thus helping to close the looming revenue gap.

2. Where does this bonus come from? There are only two possibilities: from greater economic growth, or from other people.

3. Greater economic growth requires either more capital to invest, or smarter investment of the same amount of capital. Privatization will not lead to either of these.

a) If nothing else in the federal budget changes, every dollar deflected from the federal treasury into private social security accounts must be replaced by a dollar that the government raises in private markets. So the total pool of capital available for private investment remains the same.

b) The only change in decision-making about capital investment is that the decisions about some fraction of the capital stock will be made by people with little or no financial experience. Maybe this will not be the disaster that some critics predict. But there is no reason to think that it will actually increase the overall return on capital.

4. If the economy doesn’t produce more than it otherwise would, the Social Security privatization bonus must come from other investors, in the form of a lower return.

a) This is in fact the implicit assumption behind the notion of putting Social Security money into stocks, instead of government bonds, because stocks have a better long-term return. The bonus will come from those saps who sell the stocks and buy the bonds.

b) In other words, privatization means betting the nation’s most important social program on a theory that cannot be true unless many people are convinced that it’s false.

c) Even if the theory is true, initially, privatization will make it false. The money newly available for private investment will bid up the price of (and thus lower the return on) stocks, while the government will need to raise the interest on bonds in order to attract replacement money.

d) In short, there is no way other investors can be tricked or induced into financing a higher return on Social Security.

5. If the privatization bonus cannot come from the existing economy, and cannot come from growth, it cannot exist. And therefore, privatization cannot work.

 

[Archslater]

Furthermore, I'm no expert on economics, but everyone is looking at the model of the private account, comparing it to 401k's and other existing personal retirement accounts. Can these private accounts still function in the same way if trillions of dollars are suddenly diverted from Soc. Sec. to Wall Street. Seems like the sudden huge influx of cash would cause some crazy things to happen.

 

[Damn True]

The average return on investment for the NYSE is 12%. Social Security can't beat that.

IMO the best way to get SS fixed is to put every member of congress past present and future on SS.
You did know that they aren't in the SS plan right?

 

[Damn True]

If you invest it privately (i.e. yourself) you can access the original investment whenever you want (and pass it to your kids). Dubya's way stops you doing that. If people are savvy enough to invest for thier future themselves, where is the benefit of this scheme?

Wrong.
GW's plan ensures that my estate, including my personal retirement can be trusted to my family. In the case of SS if I die the money just dissapears into federal coffers.

 

[Silver]

The average return on investment for the NYSE is 12%. Social Security can't beat that.

IMO the best way to get SS fixed is to put every member of congress past present and future on SS.
You did know that they aren't in the SS plan right?

The average road bike weighs less than 20 pounds. My Bullit can't beat that.

Oh, wait...you say they are meant to do different things? I feel silly...

 

[fluff]

Wrong.
GW's plan ensures that my estate, including my personal retirement can be trusted to my family. In the case of SS if I die the money just dissapears into federal coffers.

With this proviso:

_________________________________________________________________
And even at retirement, the government would control what becomes of the money. First, the government would automatically take back a portion of the money at retirment and convert it to a guaranteed stream of payments for life -- an annuity. The amount taken back -- called the "clawback," descriptively enough -- would depend on the amount of money the retiree requires to remain above the official poverty guideline. That's currently $12,490 for a couple or $9,310 for a single person. Only after the combination of traditional Social Security benefits and the mandatory annuity payments from the private account equal the poverty level would any remaining portion in the account be "yours."

"Senior Administration Official:" They would be permitted to leave those (leftover) funds in the account to continue to appreciate; they could withdraw those amounts as lump sums to deal with a pressing financial need -- and, obviously, any additional accumulations in the accounts could be left as an inheritance. But the main restriction, again, to repeat, is that people would not be permitted to withdraw money from the accounts to such a degree that by doing so they would spend themselves below the poverty line.
________________________________________________________________
Deja vu...

 

[Damn True]

The average road bike weighs less than 20 pounds. My Bullit can't beat that.

Oh, wait...you say they are meant to do different things? I feel silly...

You mean I can't use the money I currently have invested in individual stocks, Mutual Funds and 401k to retire on?
Damn, I'll have to depend on the govt to support me. Wow, I sound like a democrat.

 

[Silver]

You mean I can't use the money I currently have invested in individual stocks, Mutual Funds and 401k to retire on?
Damn, I'll have to depend on the govt to support me. Wow, I sound like a democrat.

SS is meant to be a supplemental program. You want private accounts, fine. Just don't bitch when 20 years down the road the market takes another dump and SS version 2 gets started up alongside the current version. It'll be fun when the current tax deferments start coming due as well...

 

[Damn True]

When the market is sour you go bonds, when the market is good you go with the market. Having the freedom to do what you wish is the point here.

eeeesh, now I sound like a libertarian

 

[Silver]

When the market is sour you go bonds, when the market is good you go with the market. Having the freedom to do what you wish is the point here.

eeeesh, now I sound like a libertarian

If you're Warren Buffet, maybe. You won't be buying bonds with your private account funds.

Bond funds, maybe. But most people don't know enough about how those work either.

 

[Damn True]

Well then we'd better just stick with what wont work then right?

God forbid we educate people.

If you have your money in a diversified group of funds you can play it right. Like I said, bonds when the market is low (yes, I meant bond funds) and a few other funds of varrying levels of risk for when things are running well. Pretty simple actually.

 

[Silver]

Pretty simple actually...famous last words.

If you get the timing right. If you get it wrong, well, you get it wrong. Trying to time the market can be a dangerous game.

And since we're on a libertarian bent, why the hell should I pay tax money to educate people about interest rate risk, just so they can lose their shirts and then we can bail them out again?

 

[Damn True]

Hmm, good point.
Since the funds and brokerages stand to gain huge through fees from all these new investors perhaps they should pay to educate investors.

Bottom line, you are far more likely to do far better on your own than by leaving it to the govt. Now that sounds really libertarian.