The Democratic Congressional Campaign Committee is running ads in Indiana’s 8th and 9th Congressional District chastizing Reps. Sodrel and Hostettler for supporting the social security privatization plan that kicked off President Bush’s doomed second term.
The plan would have diverted funds paid in by younger citizens, currently being used to pay for benefits to current recipients, to private accounts. No plan was in place to fill resulting hole in social security funding, so we would have had to borrowed even more money.
The ad says:
“President Bush wants to borrow $2 trillion dollars – driving up our debt even further to privatize Social Security,” the announcer says. No one knows exactly how much the transition would have cost, but Vice President Cheney said it would be trillions.
The article went on to say:
Sarah Feinberg, a spokeswoman for the Democratic Congressional Campaign Committee that paid for the ad, said even though privatization is not up for a vote this year, “when given the political opportunity, we believe the president and the Republican majority will try to pass privatization again.”
Rep. Hostettler responded with a statement that said, “With no agenda from their leadership and a candidate with no original ideas of his own, the liberals are resorting to scaring senior citizens once again.”
I think the Ellsworth campaign captures an important point with their response:
Jay Howser, spokesman for Democrat Brad Ellsworth, Hostettler’s opponent in the November election, said both campaigns have ideas on Social Security. Ellsworth wants to protect a program that has been working for 60 years, and Hostettler wants to change it by moving money into private accounts.
“It’s a clear difference between the two,” he said.
Doing something for the sake of doing something is a bad habit among politicians. Social security has been one of the government’s more successful programs, and I think leaving well enough alone is a good strategy. Certainly, to the extent it does have problems, they are minor compared to the other problems with the federal government. First and foremost, the federal government needs to stop raiding social security to pay for general fund expenditures and it needs to pay back the money it has borrowed from Social Security.
At the risk of sounding picky, I wonder why there have been no ads aired (to my knowledge) in IN-2? Rep. Chris Chocola openly admitted, in 2000, that he would like to see Social Security privatized. Not only that, President Bush came to South Bend and sat on the dais with Chris Chocola during a Social Security “town hall meeting”. Really nothing more than an infomercial for his privatization plan. Bus loads of wingnuts were brought in to pack the house and although I know of a few Democrats who attended, they were allowed in because they worked at Notre Dame (where the meeting was held); if they had dared to object, I am sure they would have been shouted down and likely led out.
It is time that IN-2, and Joe Donnelly, are given the help we need to unseat Chris Chocola. Too often we are overlooked by the DCCC and Washington. Indiana has a golden opportunity to unseat three Republican incumbent congressmen this year; kudos to Baron and Brad, but Joe has a very good chance as well. We are all on the same team, but, hey Washington, let Joe get off the bench and get some “PT” playing time too.
I wondered that a little bit as well. I suspect it comes down to weighing odds of success and most bang for your buck. Without knowing whether the common wisdom is correct, I think Hostettler and Sodrel are seen as more vulnerable than Chocola. Furthermore, I suspect you can buy media time that overlaps the 8th and 9th Districts whereas the 2nd District is a bit further removed. So you can hit two vulnerable districts with the same media buy.
All the same, I think Chocola was a little further out in favor of privatization and the social security attacks are probably more effective against him. I hope the DCCC can find a way to help out Donnelly.
Personal accounts are in the news these days. Many say they are the solution while others say they will worsen Social Security’s problem. What is the truth and how do you determine for yourselves?
Social Security earned 5.7% on its trust fund in 2004. It is not that Social Security’s trust fund earns a low rate of return, but rather Social Security will pay a low rate of return to future beneficiaries due to the high tax rate paid for their benefit. http://www.ssa.gov/OACT/ProgData/effectiveRates.html
At http://www.nationalcenter.org/gspan.htm you can see Alan Greenspan remarks of December 6, 1996 on investing a portion of social security funds into equities.
“If social security trust funds are shifted in part, or in whole, from U.S. Treasury securities to Personal debt and equity instruments, holders of those securities in the Personal sector must be induced to exchange them, net, for U.S. Treasuries. If, for example, social security funds were invested wholly in equities, presumably they would have to be purchased from the major holders of such equities. Personal pension and insurance funds, among other holders of equities, presumably would have to swap equities for Treasuries. But, if the social security trust funds achieved a higher rate of return investing in equities than in lower yielding U.S. Treasuries, Personal sector incomes generated by their asset portfolios, including retirement funds, would fall by the same amount, potentially jeopardizing their financial condition. This zero-sum result occurs because of the assumption that no new productive saving and investment has been induced by this portfolio reallocation process.
Thus, the dilemma for the social security trust funds is that a shift to equity investments without an increase in domestic savings may not appreciably increase the rate of return of social security trust fund assets, and to whatever extent that it does, would likely be mirrored by a comparable decline in the incomes of Personal pension and retirement funds.â€
Proposals call for changing the benefit formula from wage indexing to inflation indexing. You can read about this at http://www.ssa.gov/OACT/COLA/Benefits.html This reduces the initial benefit by about 25%. Had this change taken place in 1983, benefits would be 19% less for those retiring this year. Increasing the number of working years used in the calculation from 35 to 40 would reduce the average indexed wage, resulting in another 5% benefit cut.
In addition, for every dollar diverted to a personal account, the worker will be charged a finance rate equal to the long-term bond rate plus 1%. In effect Social Security would make 1% on the balance of your account yearly. This “loan†would be repaid when you retired by reducing your already reduced benefit by its equivalent annuity value. This is referred to as the “OFFSET†condition. Diverting about 4% would reduce your Social Security benefit to zero. You can read about this at http://www.csss.gov/reports/Final_report.pdf, page 99
In addition any money borrowed to pay transition costs will have to be financed, which would raise your federal income taxes. You will earn a higher rate of return on your diverted dollars, but will now have a sizable loss on your non diverted dollars for a combined return close to zero percent.
On average, proposed Personal accounts when combined with the Social Security benefit will provide no more than the current payable benefit. Personal Accounts do not increase overall savings, but simply is an accounting gimmick. Real savings can only begin with real benefit cuts now.
In simple terms you cannot get something from nothing. If you are not happy with the current Social Security program, then you should be equally upset with Personal accounts.
To pay just those who are current beneficiaries requires about $5 Trillion in addition to the $1.65 Trillion in the SS-OASI trust fund.
To put it bluntly, anyone born after 1985 at best will be paid 29 cents for each dollar of taxes paid plus inerest. If taxes are raised, they will see a higher benefit; if you raise the retirement age, you may collect higher benefits, but for a shorter period of time; if they cut benefits you will be paying hight taxes for less beneifts. In the end, you will still only get 29 cents in paid benefits for each dollar paid in taxes plus interest.
My plan is The Larsen Plan
I have posted on eBay for sale (except where and to the extent it would be unlawful) the right to receive my future social security benefits at a net present value. Spread the word! You can search under “social security†on eBay to find the link.
Perhaps people’s future benefits could be salable, pooled and then traded as asset-backed securities. No fix of any type seems on the horizon, however, so before the Ponzi scheme implodes, maybe an institution would be willing to buy on an individual basis (even if only for pubicity, either for itself or for the 800 lb gorilla nobody is discussing).
The 800 lb gorilla you speak of is getting larger by the second. The fact is Social Security is promising over $2 Billion a day in more benefits than it can pay. The unfunded liability is over $14.5 Trillion, up over $3 Trillion since I began my bid for Indiana’s 3rd district.
There are 117 million potential voters in the US under age 46. There are only 36.5 Million SS-OASI beneficiaries and when combined with the boomers number far fewer than all those under 46. So why not speak up?
The day before the primary SSA Trustees announced they could not pay full scheduled benefits past 2040, a year earlier than last. Medicare is now projected to be unable to pay scheduled costs after 2018, two years sooner.
Am I the only one who sees this as a problem, no? 29% of the voters in the 3rd district see this as a problem. The problem will only get worse over the next two years. My support will only grow.
If you want the 800 lb gorilla off your back, support and vote for William Larsen in 2008.