I think you're reading us wrong. We know we have to take the medicine, but let's be clear on this:

It's us who'll be taking the medicine. The layabouts and professional students who make up the Democrat base aren't taking it in the stinky starfish here, we are. And we're entitled to bitch about it.

My particular beef is with the Congress, who should have been out selling reform instead of running from it. Had they peddled reform, this means-testing would have been a bargaining chip, not the beginning point for negotiations.

But the Dems had no pressure to propose anything themselves because of the cowardly GOP congress, so Bush has to throw means-testing on the table just to get the freaking punditocracy to pressure the Democrats on this!

Do you actually think this is as bad as the pain's going to get? Do you believe the Democrats won't insist upon screwing us even harder now?

Mark my words, this is just the beginning.

Basically, what I'm asking is that if he's going to turn SocSec into another entitlement program, that he get rid of at least one comparably-sized entitlement program in return.

Already I've had to eat the huge government programs of the Prescription Drug plan and No Child Left Behind. How many more of these damned things am I going to have to finance?

If he's really going to cut government spending - not just nibble around the edges, but get into some real spending evisceration - then I can be more forgiving. I've seen that budget that just passed though, and trust me, it's nibbling. Lots and lots of nibbling.

I don't really care who "wins" as long as the right thing gets done (part of the right thing is a cut in the "promised" benefits.) I don't care if the Dems use it to bitch and claw their way back into power, as long as they can't undo this right thing.

It is like when Clinton got to claim the credit on welfare reform. I didn't care that he got the credit - I was happy that it was passed, and it seems that it was a change that's been pretty permanent.

If Social Security gets reformed properly, I don't care how much whining from the AARP I have to hear. Because just wait when Medicare is on the chopping block, as it will have to be.

Well, it's a start. And yes, the Dems offer no alternative.

But Bush still does not address the Real unfunded liability.....Medicare....which is what Really threatens to explode payroll taxes. He does not mention the exemption of wealthy people from Social Security taxes on most of their income - the magic 90K line. (Most Americans not wealthy pay the full 15.8% - compared to the ~ 4% rate paid by a Texas oilman raking in 5 million a year) Nor has he addressed how borrowing two trillion from China, Japan to address the shortfall in revenues to fund the "ownership accounts" will affect the value of those "ownership accounts" when the Gen X and Y "owners" have to pay off the China loans 20-40 years from now, with interest...Or the 1 trillion in loans those Gen X and Y dupes will be paying off later for money Bush has already borrowed to fund his tax cuts and corporate giveaways to his Baby Boomer peers. Money the US owes to foreigners had accumulated to 1 trillion from 1970 to 2000. Bush doubled that in 4 years.

The Democrats have no ideas, no "business proposals" as Dubya would like to say....but I would hardly call Bush's fiscal stewardship in the last 5 years, inspiring, or breeding the slightest amount of trust that he wishes to protect the financial interests of any Americans but those in the Real "ownership class".

I think spongeworthy is right here. I don't think people are complaining so much about Bush's plan as they are complaining that 1) Bush's plan is not likely the one we will ultimately see, and 2) it's the same old people taking the hit.

Also, conservatives are for cuts in government spending so that they can reduce their tax burden (among other reasons, despite what liberals might believe), not so that they can continue to pay the same in taxes and have less to show for it.

Bush's plan essentially says: "I'm going to cut benefits. This will only affect middle class people because I won't cut benefits for the poor and the rich don't need Social Security anyway. However, you still get to pay the same amount it taxes, but I guess that's better than having to pay more. And in return, I'll allow you to be sure that you can keep at least part of what you pay in."

That might be politically and fiscally necessary, but it doesn't seem like something to get overly excited about, especially if you're in that middle class group.

And cutting benefits to Social Security is a little bit different than say, ending the National Endowment for the Arts or closing down the Department of Education.

George W. Bush is not a conservative, or at least not a small-government-fiscal-responsibility conservative. I like W. and I voted for him, but in many ways he's just as much a Big Government pol as Clinton ever was. However, even he can see that Social Security and Medicare are the two biggest structural drags on the American economy, and kudos to him for tackling at least one of them.

I am one of those millions of Gen-X'ers who will be taking it right in the keester regardless of what changes are made to Social Security; I've been paying into the "fund" for twenty years already but have little hope of seeing one thin dime back out of it. Payroll taxes are going to go up; there is no other way to cover the huge costs associated with the Boomers leaving the job market. So not only have I had twenty years of my hard-earned money misappropriated from me, I can expect to have even more money misappropriated from me from now on!

Private accounts are like putting a small rosebush on a huge mountain of bullshit. It's still a pile of shit, but at least you have a small thankyou gift for getting to the top.

Nor has he addressed how borrowing two trillion from China, Japan to address the shortfall in revenues to fund the "ownership accounts" will affect the value of those "ownership accounts" when the Gen X and Y "owners" have to pay off the China loans 20-40 years from now, with interest...

Let's get something straight--we owe that money anyway. Bonding it out now to the Japs or the Bulgarian Navy or whoever doesn't matter in the slightest to any but the most obstinant crypto-cons. May as well let somebody else finance it at low rates now than wait until the problem compounds at high rates.

And if Bush's proposal allows for a T-bond option, as it no doubt will, we can finance a portion of this ourselves going forward. That part of the plan makes perfect sense.

It's going to take some real Democratic demagoguary to get me to actively support this--a missed opportunity to make Americans understand that bleeding working folks to pay for layabouts has a cost. But we can count on that demagoguary like the sunrise, as the Evil Bushrovian Machine knows.

Wait-- we get SS benefits?

Do those include free AT-AT rides?

Cheers,
Dave at Garfield Ridge

Basically, what I'm asking is that if he's going to turn SocSec into another entitlement program, that he get rid of at least one comparably-sized entitlement program in return.

It already is an entitlement program.

FDR lied. We should face facts. SS is not "insurance." It is not an invesment plan. It is not, never was and never will be anything other than welfare.

Welfare is when money is taken from A by force, and paid to B for B's consumption.

In contrast, an investment (including insurance) is when you pay money to someone, who then takes that money and uses it in a profitable business enterprise, and shares those profits with you. That is the opposite of consumption.

The only thing that your SS "contributions" are invested in is the right to turn around 30 years later and tax the younger generation of workers. That's not what I'd call a "profitable enterprise."

People always talk about how "sound" the existing SS system is. It's only "sound" because it relies on the govt' power to tax productive people.

The thing is, as hostile I am to the gov't, I'm not against welfare for the truly needy, especially the disabled. I just wish they'd be more honest about what the SS system really is and what functions it's supposed to serve.

Spongeworthy writes:

Let's get something straight--we owe that money anyway. Bonding it out now to the Japs or the Bulgarian Navy or whoever doesn't matter in the slightest to any but the most obstinant crypto-cons.

It actually matters quite a bit. If you are repaying the California Teachers Pension Fund, chances are that loan money plus interest is spent or invested in America. If it is repayed to the family of a wealthy People's Liberation Army General who buys T-Bills, chances are that income is spent in China or in putting us deeper in hock to China.

Now at one point, America was even more in debt to foreigners than today, but that was back when we were getting huge sums of European money to build our infrastructure - ports, railroads, subways, electric grid during America's great growth phase (1830-1930) which was also our great protectionist phase as we built ourselves into a prosperous nation that dominated over 30 new industries. With the loans solidly invested in economic growth and export industries, we could afford to pay back the Euros.

This latest foray into massive deficits and deep finiancial obligations to foreign countries is not for capital improvements, R&D, educational enhancements, or infrastructure improvements that bolster productivity.

Bush has borrowed money for tax cuts for the wealthy, big buckets of corporate pork, security pork, funding a 300 billion War with Iraq, and to help buy oodles of cheap Chinese, Asian, and Euro stuff...

He has cut R&D 30% from Clinton's time, foisted education costs further on the states, and done little to stimulate needed infrastructure improvements and corporate capital spending.

And 2 trillion more in IOUs to Asian and Euro bankers - not for investments, but to finance welfare in the form transition costs associated with making up lost payroll taxes so individual "ownership accounts" can proceed? Unthinkable, given the 2 trillion we already owe to our Chinese, Japanese and some Euro bankers.

Bush is setting up Gen X and Y to repay the 2 trillion owed for the good gravy deals he slathered his Generation with. What good is an investment account if it is payed in good part for by interest accumulating, borrowed money?

I'm for cutting, but I'd just across-the-board raise the retirement age.

People are staying healthier longer and living longer. SS is supposed to be insurance for an old age in which you aren't able to work. As such, if you die before you collect everything you put in, well, most insurance you pay in and hope you never have to collect it. What you don't want is to be 85 and eating dog food.

So I guess I disagree with what I'm hearing about Bush's proposal. Rather than base it on income, I'd base it on ability to work. If you're still healthy, you keep working. Or if you want the luxury of early retirement, save for it yourself.

Lets not also forget that a lot of liberals (teachers, social workers etc) actually have replacements for SS. They don't pay in, they pay into a private account instead, and they (probably) won't take out, they will instead retire on their larger private accounts.

Their principles of paying into SS for the 'greater good' only apply to how they want to spend your money, not their own, they prefer to keep their own in a nice fruitful private account. Meanwhile your SS dollars are picked on by a bunch of layabouts that didn't pay into it.

So do we really want them making decisions about some ponzi scheme that many don't pay into, and don't participate?

What Jimmie and Mony said.

Jimmy and rightwingsparkle, like me, are in a camp I call the "social security realists". We are all probably folks in our 30's or 40's who have learned a bitter lesson over the years: getting rid of social security entirely is simply not going to happen. It's not called "the third rail of politics" for no reason. The reason is that social security is a program near and dear to the hearts of old people. Old people vote in large numbers, and by and large they vote democrat. These folks are understandably very focused on near-term effects, and are very susceptible to the "Bush is cutting your benefits!" demagoguery.

The Geritol bloc, combined with the coming tidal wave of retiring Boomers, will probably sink any major social security reform. I wish it were not so, but the democrats will fight any reform movement tooth and nail because (as I have written elsewhere) it is one of the last real Big Government holdouts. If W. manages to shoehorn even a small and monetarily insignificant move to private accounts through Congress, I'll be grateful and amazed in equal measure.

For many of us younger folk, we have learned that social security is simply a bad joke -- our "safety net" will be long gone by the time we're old enough to collect it. I object to being lied to by politicians and leftists alike who insist on propagating this lie. I'm not an idiot, and I know a Ponzi scheme when I see one.

George W. Bush gets props for being brave enough to at least engage the fight, but we need to be realistic about what he can accomplish in the face of such determined opposition.

First, Social Security is not going to go away. Even without any changes, it will have enough cash flow after 2041 to pay 70% of currently promised benefits. So everyone complaining that they will not see "one thin dime" back of their payroll taxes is exaggerating by at least that amount, even in the worst case scenario.

Second, you need to remember that that's not the only way one benefits from this program. When the Social Security checks go out, one of two things happens to the money. It is either spent by a needy senior, and thus saves their family from having to spend money to support them, or it is saved by someone who is better off, in which case it just becomes part of their estate and is passed onto the next generation in the form of either gifts (if they plan ahead) or inheritance. Either way, the next generation receives these benefits in addition to the direct payments they will receive.

Finally, let's all remember that the "Baby Boom" is a generational anomaly. As the boomers eventually die off, the stress on the system created by their demographic bulge will dissipate somewhat, and we'll be back to a more normal payee-to-retiree ratio. Isn't that a comforting thought?

HT:

You need to lay off the crack, man. It'll ruin you.

Even without any changes, it will have enough cash flow after 2041 to pay 70% of currently promised benefits

I'm glad you can swallow that horseshit without choking, because I can't. That 70% number assumes a lot of things: the the economy will continue to grow, that people's life expectancies won't change significantly, and that the working population and relative wages will either stay the same or grow. I happen to think that all of these assumptions are complete bullshit.

The economy will keep growing, but remember that social security itself is a liability to the government, not an asset, so it is a drag on overall productivity. Demographics is also against us: people are likely to live as much as 20 years longer than they did even a decade ago. People are likely to routinely reach the 100-year mark, which means that people may draw on social security for 20 years longer than the actuaries expect.

I don't fear a US economic meltdown as much as a Chinese one, and it is for that reason I fear a devaluation in US currency. China has not yet gone through the pain of industrialization that the US went through in the early 1900's: unionization, the problems of urbanization, all the rest. And since China holds a lot of US debt, a crash in China's economy (all but inevitable IMO) will cause a lot of pain here as well.

I'll repeat it for the slow of wit: if you are 40 or younger, your so-called "benefit" is nothing but thin air. If you buy into the social security "safety net" bullshit, you do so at your own peril.

C-ford, your vision of international money flows is tied up in your ideology. You seem to think the Chinese are getting some kind of windfall from us in the form of 4.5% interest or something.

I agree that funding current expenses with debt is bad in principle, but it doesn't make a lick of difference who get's the crappy 4.5% interest. What this tells you is that the Chinese can't get a better return that 4.5% in China so they buy our debt.

Now what they do with the money, who cares? If Americans wanted a crappy 4.49% return, then they'd own the debt. Trust me, I do this for a living--there's plenty of money out there to finance our own debt. We choose higher returns.

Once the interest is paid to China, they can buy more bonds, buy Dell computers, buy petroleum or fritter it away on hookers and beer (my choice). But in a global market, the money flows will tend to circulate fairly evenly over time.

Trade deficits are another matter, and hopefully a short-term problem. But if a guy wants to loan me money to invest in the American economy at 4.5%, I think it's a good deal for everybody.

Also, it assumes that Congress won't find more new and interesting "crises" to spend tax dollars on before we all retire. For my own sake, I'm not counting on Social Security at all. If I get some...great, but I'm not counting on it.

When the Social Security checks go out, one of two things happens to the money. It is either spent by a needy senior, and thus saves their family from having to spend money to support them, or it is saved by someone who is better off, in which case it just becomes part of their estate and is passed onto the next generation in the form of either gifts (if they plan ahead) or inheritance. Either way, the next generation receives these benefits in addition to the direct payments they will receive.

This is wrong, HT. There are (at least) two glaring holes in your comment.

First, as to the family that supports the aging senior. The money that the SS recipient gets (thereby supposedly saving her adult children the expense of support) happens to come directly from someone else's paycheck. Maybe even her childrens' paycheck. So, whatever gain you think that the economy is getting by alleviating the expense that the SS recipient's family would have incurred is directly offset by the cash that the taxpayer does not have anymore. The younger generation's "gain" (in not having to support grandma) is negated by the immediate loss of paying the tax. (That doesn't even count the substantial transactional costs of transferring the money.)

Second, on a larger scale, there is a big difference between consumption and investment. If I saved and invested the money that the gov't taxes away from me, the economy as a whole would grow. When that money is not saved and invested, but is instead used for immediate consumption, the net effect is a loss for the overall economy.

This is true because investment creates value, whereas consumption reduces it. This is called "time preferences." It refers to the extent to which a person (or a society) is willing to obtain future benefits (investment) by foregoing present benefits (consumption).

For example, getting an education is a classic method of having longer-range time preferences. You give up a present good (leisure, immediate income) in exchange for a long-term future benefit (increased income potential).

Time preferences are really very simple. All it means is that wealth is generated by preferring long-term benefits over short-term benefits. Wealth is a matter of foresight.

What SS does (as with all such gov't expenditures) is take long-term dollars (money that would have been saved and invested) and turns it into immediate consumption dollars (money that is immediately consumed).

A genuine, profitable investment makes society richer. It is used to support a profitable enterprise. It increases the total value in the economy. SS does the precise opposite. These are immutable laws of economics.

SS simply cannot be defended on the grounds that it makes the economy work better in any way. It is inherently counter-productive. It will always constitute an overall drag on the economy.

In other words, when you convert savings/investment money into immediate consumption money, you have to account for all the profitable business activity that does not come into existence as a result.

The only grounds on which you can defend SS is as an anti-poverty program, i.e., for the indigent (and disabled due to age). That's what it should be, because that's all it is good for.

No, Finn, you are wrong. I understand that you may have read an economics textbook somewhere once, but your arguments do not hold up in the real world, probably because you didn't do the same for accounting.

First, because you are double-counting your FICA taxes as a net debit in this discussion. They are already counted once in calculating the ROI which people love to use as an argument for eliminating the system in favor of privatization. I am simply pointing out that most Americans benefit from the plan in two ways, one of which (the inheritance effect) has not yet been considered in calculating the true ROI to plan participants.

Second, your argument about investment vs. savings similarly doesn't hold water, both as a practical matter and as a matter of accounting as well. American corporations are already sitting on trillions of dollars in retained earnings that they are choosing not to invest in anything at all. Adding capital directly to that pool via savings doesn't increase its utilization, especially since meta-risk factors currently dominate the more modest ROI calculations that corporations usually use to make capital allocation decisions.

Also, it may not have occurred to you, but dollars spent on, well, spending always wind up on somebody's balance sheet somewhere (they don't just evaporate). If they aren't retained by corporations for capital use, then they are (thretically) distributed via dividends or share price appreciation and thus wind up back in the hands of...investors. Your argument about time preferences and the old education example are only transferrable from the individual to the corporate level in a world of infinite opportunity and zero risk, which is not the world in which we live.

finn said: Welfare is when money is taken from A by force, and paid to B for B's consumption.

In contrast, an investment (including insurance) is when you pay money to someone, who then takes that money and uses it in a profitable business enterprise, and shares those profits with you. That is the opposite of consumption.

The only thing that your SS "contributions" are invested in is the right to turn around 30 years later and tax the younger generation of workers. That's not what I'd call a "profitable enterprise."

People always talk about how "sound" the existing SS system is. It's only "sound" because it relies on the govt' power to tax productive people.

The thing is, as hostile I am to the gov't, I'm not against welfare for the truly needy, especially the disabled. I just wish they'd be more honest about what the SS system really is and what functions it's supposed to serve.

I agree! and I'll take my 4% rosebush on the pile of cow sh*t. it beats just the pile

when did we become the land of the dependent and the home of the unaccountable? Or are we all just putting in our time until that magic age when we too can collect a welfare check? spit

Spongeworthy -

It's never good to let another country get you by the testicles. Especially countries tempted to squeeze. That is a whole lot different than going in hock to an uncoordinated amalgam of American lenders that will not be tempted to dump 200 billion to wreck the dollar if you cross them.

If I was Chinese, I would be looking forward to the day that the Quai-lo are given their comuppance and made to kow tow to avenge some of China's past great national humiliations where it lost face. And no Quai-lo nation deserves it more than the US. Save perhaps the Japanese, who in Chinese eyes are not Quai-lo but degenerates whose only redeeming culture was ripped off from the Chinese.

We used our clout back when we were actually a creditor nation to ensure those deviating from our will or who ticked us off were brought in line or their currency would devalue to junk....Britain and France had to back down in 1956 and become 2nd tier nations - when we said we would dump their IOUs on the open market and destroy the Franc and Pound unless they exited Suez. And our standing as the leading creditor nation until the 80s allowed us to dominate the World Bank and IMF.

As for investing in the economy - the trillion Bush has borrowed from foreigners was mostly pissed away, not used for investment in American economic growth, and the 2 -3 trillion he wants to borrow to prop up a welfare program certainly won't be.

So cedarford, in your world the executive branch of government authorizes and appropriates spending? Let me give you some advice; if you limit your comments to 50 words instead of 500 you'll only be wrong a little bit at a time.

BrewFan's crack gets a 7.5 on the Cedarford Insult Tracking meter. Not a bad shot at all.

As for the topic, uh, I love the Prez, I hate old people, Social Security is immoral, Congress is dumb, and the deficit doesn't matter, can we stop talking about economics now? It makes me feel ditzier than usual.

Well, duh, Spewfan! Yes, the Republican Congress DID approve Bush's ways of pissing away 1 trillion in loaned money from foreign nations in the last 4 years.

What's your point? That not only Bush and his radical Right ideologues are at fault?

I gladly concede your (evident) point.

I understand that you may have read an economics textbook somewhere once

Don't get fucking personal. If you can't win the argument, just say so.

you are double-counting your FICA taxes as a net debit in this discussion.

I'm not double-counting anything. I am refuting your argument which ignored the fact that "when the Social Security checks go out," they do actually come from somewhere. The US gov't obtains those funds from taxes.

You were acting as though that money is just magically concocted out of thin air by the will of a benevolent government. In reality, you have to include the debit on the taxation side before you get around to these wonderful credits that the family that supports the aging senior supposedly gets.

All you have demonstrated with your analysis of net debits and credits is that the money that is taken by FICA taxes is not put in an incinerator. Yes, it does re-enter the economy, in the form of benefits checks, which are spent. Congratulations for stating the obvious.

The real question is whether the process of transferring these funds from payors to recipients, in the final analysis, ends up with a net debit or a net credit to the economy. It's obvious that it is a net debit.

[FICA taxes] are already counted once in calculating the ROI

Hold it right there. First of all, I object to the use of terms like ROI (return on investment) when talking about a comprehensive tax-and-spend system like SS. The reason is that there is no genuine "investment" going on in SS.

From the perspective of an individual investor, there isn't much difference between investing in a corporate bond and a government bond. They have their respective prices, rates, terms, and ratings. So, on the surface, from the investor's perspective, they look similar.

But from the perspective of the issuer of the bond, they are radically different, and you have not addressed that difference at all.

A corporate bond is a debt that the corporation uses to expand its business. It can only do so if the business is already profitable. A business is profitable if it provides a valuable good or service to its customers. Lending a profitable business money to expand its operations improves the economy and standard of living for everyone, from its customers to its employess. Everyone wins. That's why buying a corporate bond is a real investment.

In contrast, when a government borrows money by issuing a bond, it gets the money to repay it by taxation. Say what you will about the necessity of taxation, but it is not economically productive. If they were, people would pay taxes voluntarily (and we would call it "buying things" instead of "taxation"). Instead, taxes are taken at the point of a gun. Moreover, the funds that are taken are not "invested" in anything. They are consumed. Consumption is the opposite of investment.

your argument about investment vs. savings similarly doesn't hold water, both as a practical matter and as a matter of accounting as well. American corporations are already sitting on trillions of dollars in retained earnings that they are choosing not to invest in anything at all.

Read more closely. I was talking about the difference between investment vs. consumption, not investment vs. saving. Unless you stuff cash in your mattress, saving is the same thing as investment.

Adding capital directly to that pool via savings doesn't increase its utilization, especially since meta-risk factors currently dominate the more modest ROI calculations that corporations usually use to make capital allocation decisions.

Adding capital reduces the interest rate. Doing so increases the rate at which capital is used to expand the economy.

Your argument about time preferences and the old education example are only transferrable from the individual to the corporate level in a world of infinite opportunity and zero risk, which is not the world in which we live.

Strawman alert. My argument does not depend on "infinite opportunity and zero risk." That's ridiculous. It stands on the principle that greater savings increases capital, which improves the economy by encouraging innovation and expansion by lowering interest rates. It would mean more investment in R&D, new technologies, large-scale systems (like cell phones, the Internet, etc.)

Typically, its at times when the capital is so plentiful that the economy "heats up" to such a degree that the Fed feels the need to step in and ARTIFICIALLY raise interest rates via the central bank. This is also an insane practice, but is a topic for another day.

You are the one assuming that the choice between consumption and investment should be dictated by government policy. I submit that it should be made by the opportunities presented by a free market.

I suspect you are operating on the basis of some flavor of Keynesian (bullshit) theories about the bogeyman of "hoarding" and how the government should "stimulate consumption." As though we need the government to stir the pot of the economy to get people to spend.

It is so deeply flawed it is hard to know where to begin. For starters, Keynesians always favor consumption over capital investment. And they favor debt over capital. And they favors inflation over sound money.

The inflation is perhaps the worst part. It is so corrosive that it is the very reason that the dollar has lost 95% of its value since 1913. It is the reason why grandma has no real savings at the end of her life, and why her children end up supporting her in the first place.

If we put a stop to the constant inflation, fewer grandmothers would need support, fewer benefits would have to be paid to seniors, and their children could keep more of their earnings rather than have them depleted via taxes.