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| 5/24 |
| 2005/1/3-4 [Politics/Domestic/SocialSecurity] UID:35521 Activity:high |
1/3 so is SSI broken or not? i can't figure it out.
\_ If you ask anyone in the media, yes. If you ask anyone who
actually knows economics and pays attention to the subject, no.
\_ i'm not sure. i have read that the bush/norquist and co.
want to break soc. security to allow the government to
not have to pay back all the money it borrowed from
the ssi trust. not sure, maybe someone smarter than me
can write a report for the class.
http://www.talkingpointsmemo.com/archives/004327.php - danh
\_ you're an idiot. -tom
\_ More to the point, BushCo want to let people invest their SSI
payments in the market; has he never heard of the stock market
crashes of 1929, 1987, and the DotCom Bust of 2000?
\_ Do better research, even including the crashes, over the
long term a well diversified portfolio out performed
"safe" investments.
\_ Genuinely curious: how diversified do you have to be? If
you put 1% each in 100 Dow Jones listed companies, you'd
still be down 10% from the pre-DotBomb days.
\_ DJIA @ 1/2/81 = 963.99
DJIA @ 1/2/91 = 2633.66
DJIA @ 1/2/01 = 10790.92
DJIA @ 1/3/05 = 10729.43
Please refer to subsequent post about the lack of
historical perspective and the over-emphasis on current
and short-term trends.
\_ I really do appreciate the amazing jump made between
91 and 01, but now what?
\_ The data is trivially available. I assumed it
was sufficient to give the long term trend, and
that you would be able to fill in points in
between. Mea culpa. BTW, the question is not
whether the Dow performs well over the long-term
(it does). The question you should be bright
enough to ask (with that fancy cal education and
all) is really how long would it take you to
recover if you had the misfortune to buy at a
peak. DJIA @ 9/3/29 = 380.33, and @ 12/1/55 =
386.77. DJIA @ 10/1/87 = 2596.28, and @ 8/1/89
= 2660.66. DJIA @ 9/1/00 = 11219.54, and it's
10729.43 today, down 4.3% from 9/1/00.
\_ SSI is broken simply because people are living longer and
having fewer children.
\_ today's nytimes editorial says "if you extrapolate to
INFINITY, the amount of money you owe is greater than
getting payed(paid, learn to spell, damn you)
in, if you extrapolate to something
more reasonable, it's not broken." who do you
believe? - danh
\_ Agreed: the argument that we're going to run out of money
in SSI any time soon is based on an ad infinitum fallacy.
\_ From the same NYT editorial, " sticking to the traditional
75-year time horizon [...] Social Security's shortfall is
estimated by the Congressional Budget Office at $2 trillion
and by the Social Security trustees at $3.7 trillion, a
manageable sliver of the economy in each case. If the
shortfall is on the low side, Social Security will be in the
black until 2052, when it will be able to pay out 80 percent
of the promised benefits. If it is on the high side, the
system will pay full benefits until 2042, when it will cover
70 percent." Whether this is considered broken depends on
your politics, but certainly this is less broken than if you
projected out to infinity. GDP today (in today's dollar) is
~ $12T. Assuming a growth of 3%, GDP in 2042 will be $37T
in today dollars. Would a SSI deficit of 10% of GDP in 2042
(assuming worst case deficit of $3.7T is in 2004 dollars) be
considered broken? Remember, the current budget deficit is
"only" 2.7% of the GDP.
\_ At the end of 1993, According to Al Martin, "The
total national debt of the United States on a fully
realized basis, inclusive of federal, state, county
and local debt stood at a record $20.613 trillion
(83.73% of said debt having been created from 1981-92
and from 2001 to present.) The total public and private
indebtedness of the United States ended the year 2003 at
$39.384 trillion. The total public and private assets of
the United States ended the year 2003 at $26.134 trillion.
Thus, the United States by the end of 2003 has a negative
net worth of approximately $13 trillion. The total debt
service of the United States ended the year 2003 at 309.4%
of GDP (Gross Domestic Product). These are numbers never
before seen.
\_ What? "end of 1993", "created from 2001 to present"?
\_ There might be some surpluses in there, so that
means no new debt created? The point is that
betting on the long-term viability of the US might
be unwise. When you add in other liabilities like
SSI and Medicare, the numbers go beyond $80
Trillion, but then of course we don't *have* to pay
those.
\_ The national debt by itself is "merely" $7.5T, which is
62.4% of the GDP. We had national debts of 64.1% to
63.5% of GDP from 1992 to 1998. Unfortunately, the
OMB estimates the debt will go up to 72% of GDP in 2009. |
| 5/24 |
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| www.talkingpointsmemo.com/archives/004327.php next (January 02, 2005 -- 02:18 PM EDT) As pretty much all the sensible articles on Social Security have made cle ar, to the extent that we have a problem, it is not a Social Security pr oblem, but an accumulated national debt problem. And this isn't just a l ooking at one side or the other Advertisement of the coin issue, but a category difference. The United States has a bit over $7 trillion in accumulated national debt . You can say that's been built up over the history of the country. But overwhelmingly it was borrowed over what happens to be the span of my li fetime -- the last thirty-five years -- and especially over the last twe nty-five years. After 1980 we started borrowing money big-time to finance our deficits -- in large part because of tax cuts on high-income earners. However you w ant to slice it, we started spending substantially more than we were tak ing in in tax revenue. This is from memory, so I may have the numbers a bit off. But I believe a bout $4 trillion of that debt was borrowed on the open market -- individ ual Americans have them in their investment portfolios, or pension funds hold them, or the Chinese, Japanese and the Saudis and others have them in bonds. But about $3 trillion of those dollars we needed to fund the 1980s and 19 90s deficits we managed to borrow closer to home. We borrowed it from th e Social Security (and a few other government) trust fund. Almost the entirety of President Bush's Social Security phase-out plan co mes down to a simple proposition: finding out how not to pay it back. Now, admittedly, this is an approach that the president is rather familia r with from his own business career at various failed energy companies. But it is, in so many words, a straight up con -- one of vast scale, and one which virtually no one in the media ever frames in just these terms . Before discussing that aspect of the question, consider a hypothetical. L et's say there'd not been a Social Security -- President Bush's dreamwor ld. The difference would be that we'd have had to borrow from private borrowers in the US and abroad. The J oneses and the Smiths with their 401ks probably wouldn't like that. And the Japanese and Saudis probably wouldn't like it much either. Of course , defaulting on our entire national debt would also certainly trigger a seismic international financial crisis. So you can probably figure that no one would be a huge fan of it. So why does the president figure he can get away without making good on t he debt to the folks who pay Social Security taxes, who are overwhelming ly low and middle-income wage earners (since no one pays Social Security tax on investment income or wage and salary income over about $85,000 a year)? If anything, the fact that a sizeable portion of our huge national debt i s owed (in the aggregate) to ourselves would seem to be a good thing sin ce it gives us in extremis at least some flexibility on repayment. But t o the president this is a reason to abolish Social Security so the money doesn't have to be paid back at all. As I said at the beginning of this post, the challenges we face over the next several decades aren't really Social Security problems but national indebtedness problems, though the issues are clearly related. One obvious and immediate way to relieve long-term pressures on Social Se curity financing is to reduce the national debt ... by ending our habit of running huge annual deficits or even better by paying down some of ou r accumulated debt (there are complicated macro-economic questions relat ed to this second point; He's presided over the biggest fiscal t urnaround in American history, taking the country from modest annual sur pluses to the biggest deficits -- at least in non-adjusted dollar terms -- in American history. And that's only one reason why you can make a de cent argument that President Bush has done more than any other president and perhaps any other single American ever to endanger Social Security' s future. The guy who's the biggest threat to Social Security says he wants to 'sav e' it by abolishing the program and replacing it with private accounts. |