State of the Union 2005

Social Security Reform

Published on February 3, 2005 By KarmaGirl In Politics

Last night the President gave the State of the Union address. I usually don't watch them, and I honestly didn't watch all of this one. My main reason for watching it was to find out what he was going to say about Social Security.

I have had a sinking feeling about Social Security for quite some time. This feeling was based on the fact that our population grows vastly each year, cost of living increases, and people live longer. All of those factors have given me the impression that Social Security, even if run completely efficiently, would be bankrupt by the time I retire, and all the money that I contributed by then I could kiss goodbye.

Obviously, from listening to the State of the Union, my feeling are founded. According to the speech, Social Security will be paying our more than it takes in by 2018, and will be bankrupt by 2042. Well, if I retire when I am 65, that means that I will retire in 2038, which is 4 years before the system is completely bankrupt (I believe in the speech he quoted that it would be hundreds of Billions in deficit by then).

His plan involves the following (which can be found at: http://www.whitehouse.gov/stateoftheunion/2005/#2):

Saving Social Security for America 's Future Generations

Fixing the Current Social Security System: The President wants to strengthen Social Security for the 21 st century. His fiscally responsible plan calls for reforms that would keep Social Security's promises for today's seniors and those near retirement ; solve the financial problems of Social Security once and for all; and give younger workers a chance to save in personal accounts for their own retirement.
By 2018, Social Security will owe more in annual benefits than the revenues it takes in, and when today's young workers begin to retire in 2042, the system will be exhausted and bankrupt. As currently structured, Social Security cannot afford to pay promised benefits to young workers. President Bush has laid out basic principles to guide reform:
- We must make Social Security permanently sound;
- We must guarantee no change for those 55 years or older (born before 1950);
- We must not jeopardize our economic strength by raising payroll taxes;
- We must ensure that lower-income Americans get the help they need to have dignity and peace of mind in their retirement;
- We must make sure any changes in the system are gradual, so that younger workers have years to prepare and plan for their future; and
- We must make Social Security a better deal for younger workers through voluntary personal retirement accounts.
The President laid out his vision for voluntary personal retirement accounts. Under his plan, personal retirement accounts would start gradually. Yearly contribution limits would be raised over time, eventually permitting all workers to set aside 4 percentage points of their payroll taxes in their accounts.
- There will be careful guidelines for personal accounts to provide greater security in retirement, including a conservative mix of bonds and stock funds similar to those offered under the Federal employee retirement plan; protection from hidden fees; protection from sudden market swings on the eve of retirement; and a requirement of pay-outs over time to prevent a person from emptying his or her account all at once.

It's honestly a lot to think about. I would love to be able to invest my own money instead of it going to the government. I know that I wouldn't have access to all the money I pay to SS, but even if I had a fraction, at least that would be a fraction that I know will be there for my retirement. As is, I worry that I am not saving enough to cover retirement, knowing that my fears about SS are founded isn't helping any.

I really hope that we are successful at reform. I hate to think that my husband I could pay in for a combined work life of almost 90 years when we retire and end up not seeing a dime of our money. (The real dollar value of that money, BTW, without interest is over a half million dollars that we will contribute even if our contributions don't go up per year past this year.....which I am sure they will).

Comments (Page 1)

ParaTed2k

on Feb 03, 2005

Thank you for this article, too many people hear sound bites and bumber sticker statements, then choose sides as if we knew the details of either side with any real depth.

So far, from what I've heard and read, the two sides of the Social Security reform issue (once again) comes down to who should have the say in how our money is used.

The people who fall on the side of the president's plan would rather see people have control of at least some of the money that comes out of our paychecks every week.

From listening to those opposed to president Bush's plan, the arguments seem to boil down to two categories.

1) The government is more qualified to control the Social Security revenues, and should protect the people from risky investment choices.

2) "If it ain't broke, don't fix it".

Well, during his adminstration, Prs. Clinton said that the Social Security system was headed for crisis. So, unless congressional democrats (and others who oppose Prs. Bush's plan) can show how the problems identified in the 90s have been addressed, I'd say SS isn't anymore healthy now than it was back then.

You'd think that the democrats would consider it a pretty good victory that republicans are even considering Social Security worth saving in the first place. ;~D

Locamama

on Feb 03, 2005

I think GW made a strong argument about why social security reform is needed. I do believe what we need to take from this is that we need to make sure we have our own retirement savings in place and not to rely on social security. This is something that I really need to start working towards. The problem is that we need the safety net of social security because there will always be people who are not saving for retirement.

Sturgee

on Feb 03, 2005

I agree that Social Security should be reformed in some manner, to ensure it's solvency and ability to provide benefits indefinitely. However, in fairness, an editor at US News, Mort Zuckerman, wrote a very good article Link articulating some facts about the issue. His argument is falls into the "If it ain't broke...." category, but at least he backs up his argument with a little logic and numbers. I still think that there should be some reform personally, but the article at least gave me something to think about....

Dr Guy

on Feb 03, 2005

Thanks for the link. It was an interesting read, but it still failed to make its point, it only posited that perhaps the time line is wrong. The simple fact of the matter is that a Ponzi scheme has to colapse in time, as there is no way for it to continue drawing in new money.

We see the fiscal wastes that this type of mentality has wrought on most of Western Europe, and ignore the models of privitazation plans that have worked and worked well in our own hemisphere. That the democrats declared it DO before A is just their bitterness at being out of power, for it was Clinton and Before him Carter who sounded the alarm that the system was failing. yet instead of making the hard choices that must be made, each left it up to a republican sucessor to fix the problem.

That is as spineless as it gets with politicians. It is easy to make easy decisions, but great leaders make the tough calls, and that is what makes them great.

Draginol

on Feb 03, 2005

The Democrats view is to take the easy path: Eliminate the limit on how much you are taxed on social secuirty. Right now, if you make over $90,000 per year, you are capped on how much you contribute to it since there's no way you'd ever get anywhere near that much back. By doing that, the system remains solvent longer.

The Republican point of view is that Social Security is fundamentally flawed because it is a pay-as-you-go system. Therefore, when in 2020 or so there's only 2 workers per 1 retiree, the system will start collapsing. By 2042, the system goes bankrupt (for Democrats who disagree, look up the definition of bankruptcy, even Democrats in congress admit that payers will only be getting 70 cents on the dollar back -- that's called bankruptcy).

I'd love to be able to wave a magic wand and force congress back in 1960 to have switched to private accounts. Then we wouldn't be going through the pain we are now going ot have to go to. Bush's plan will require much larger deficits (from somewhere) to pay for system - like I said - it's a pay as you go system. So if some of the moeny you currently pay in goes into a private account, that missing money will have to be made up somewhere. So the Democrats are right on that point - it will increase the deficit. But if we wait, it'll be much much worse.

Gideon MacLeish

on Feb 03, 2005

I thought it interesting that 2042 is the year it will be totally bankrupt...if the retirement age is raised to 72, as has been proposed to some, that'll be the year I'd otherwise be scheduled to collect.

InfoGeek

on Feb 03, 2005

Has there been any discussion on how much it will cost to create these accounts? Who will maintain the accounts and what their cut is?
Is it taken off the end result? Each payment?

You know the will and financial lawyers are going to have a field day with this.

IG

Dr Guy

on Feb 03, 2005

You know the will and financial lawyers are going to have a field day with this.

In any eco system, there is always leeches and parasites. A sad fact of life that will not go away whatever happens.

ParaTed2k

on Feb 03, 2005

Has there been any discussion on how much it will cost to create these accounts? Who will maintain the accounts and what their cut is?Is it taken off the end result? Each payment?

Good questions, and there may be some answers, but since this idea is just in the "idea" stage, the details will have to be hashed out as the concept develops.

The counter to the first question of course would be, has there been any discussion on how much it will cost the average worker if we stick with the current plan? Expecting to tax 2 workers enough to give 1 retiree all the benefits promised (and that doesn't even take the non retired disability recipients into consideration), is far more "risky" to the system than allowing the people to invest a portion of what is their own money in the first place.

dlepel

on Feb 03, 2005

People need to check facts before they believe what they are told. The Social Security system will not go broke in 2042.

Link

At a time when corporate taxation is down by billions because of moves to offshore havens, and in a time of war (Bush will be asking for yet another 80 billion for Iraq after being unable to account for about 90 billion from before), this is no time touch Social Security. This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

drmiler

on Feb 03, 2005

Reply #10 By: dlepel - 2/3/2005 4:45:13 PM
People need to check facts before they believe what they are told. The Social Security system will not go broke in 2042.

Link

At a time when corporate taxation is down by billions because of moves to offshore havens, and in a time of war (Bush will be asking for yet another 80 billion for Iraq after being unable to account for about 90 billion from before), this is no time touch Social Security. This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

Oh REALLY? Maybe you should go listen to the Democrats. Cause they are singing a vastly different tune. EVERYONE agrees that it's in trouble. The difference in opinion comes from how to fix it.
And just an FYI....*your* own article says your wrong.

After that point, Social Security would be unable to pay full benefits. But by law, it would continue to issue benefit checks to the extent that incoming revenue from payroll taxes allows. With reserves gone, Social Security would be on a cash accounting basis, able to pay out only what it collects in a given year

Unable to pay *full* benefits is bankruptcy in ANY economics class.

ParaTed2k

on Feb 03, 2005

This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

A fabrication that Prs. Carter first identified, and Prs. Clinton called "a crisis".

Dr Guy

on Feb 03, 2005

People need to check facts before they believe what they are told. The Social Security system will not go broke in 2042.

No, it will. And your link only confirms it. By that time, there will be no reserves left so they will be paying from the money recieved. So as long as there are still taxpayers, there will be money coming in. But as your link confirms, it will not be enough to pay the obligations incurred. That sir is called bankruptcy. I should know. My wife works in that field.

So you go tell your parents or grandparents that they are going to get a cut of 75% of their benefits next year, and see if they agree with you. My Mother is as conservative as I, but she screams if they even think of touching her monthly check.

Dr Guy

on Feb 03, 2005

This is a fabricated problem that simply allows for more control of the government and Corporate America over your money.

No, SS is fabricated. Because it is doing more than it was originally intended to do.

But let me set you straight. Corporations, or rich fat cats are not being given money by the government. Neither this one or any one. They are at times, allowed to keep more of what they earn. Money earned is not by default the governments. ONly through taxation does the government get money and that is confiscatory.

Want an example closer to home? I dont have a coat. You have 2. So I get to take one of yours. And you have no say so in it. Why? Because you have 2 and I have none, so one of yours BELONGS to me.

That is taxes.

Moderateman

on Feb 03, 2005

I wonder what would happen if suddenly everyone decided NOT to pay any taxes to the federal gov.?

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