Centerfield

The Dow has been mostly rising for over a century now. Stocks really are a very safe investment OVER THE LONG TERM.

The key is that you have to be in for decades, or you're taking risks.

I once looked at a chart of the DJIA over its lifetime, and was startled at how short even the Great Depression downtick was. (? less than a decade? )

I don't think it was less than a decade. I think the recovery point was after WWII. But yes, if you have a 30 year time horizon, in 1928 it would still have been best to invest in the stock market.

But that's on the average. The reason that stocks return more is that there is a risk premium. That means that while the average investor prospers, a significant minority lose out.

Interestingly, I heard some testimony from the head of TIAA-CREF to the Social Security committee a few years back (note: after bubble bursting).

He said that investors in the market through TIAA-CREF (e.g., academic mutual funds) had nearly all done pretty well, and he wasn't sure if any atall had lost money; at most tens.

Since, realistically, SSI-based investments are likely to be the same kind of rule- and advice-laden plans as TIAA-CREF has, IMHO that's likely to be a good indicator of SSI investment performance.

TIAA-CREF administers retirement funds for many universities, using the academic-side mutual fund rules. It doesn't just have professors, but also many janitor and other support professions, participating.

Josh Marshall is an unrepentant liberal. Let him rip Harold Ford, I'm sure his readership loves it. Non knee jerkers know better.

Rep. Harold Ford is also a favorite on our website. The moderate Democrat is surely exploring Social Security privatization to serve his constituents, not be house Negro to the Democratic Party. What Josh Marshall ignores is that 2/3 of blacks rely upon Social Security for 2/3 of our retirement income. One in three black men doesn't even LIVE long enough to collect Social Security. That makes the stock market's historical 8% return on investment far more important to our communities, versus Social Security's paltry 1.5% return. It would also help us close the racial wealth gap, and enable folks to transfer funds to our heirs - who can buy a home, start a business, or go to college.

Even my incoming Senator (Barack Obama), a liberal Democrat, is looking at the issue. Yet we're supposed to dutifully fall in line with the Democratic Party, even though it would undermine our economic progress? Marshall is on crack.

I'm focused on the borrowing aspect. Borrowing money to play the stock market is a risky maneuver. It may work out, but may not. I see Bush as a gambler--I think he has the Texas wildcatter trait--and thus he's more focused on the possible upside than on the potential downside (his invasion of Iraq was a huge gamble that almost cost him the Presidency). I don't think this course of action is prudent.

they ripped tim roemer as well

Marshall doesn't get it. This is no surprise. He's a true believer. And party of the litany is that privatization is bad. Period. It's bad, and when the topic comes up, it is sufficient to simply list all evidence that supports its baddness, and ignore the rest.

Rick, I think the "borrowing to invest" argument is a little bit of a red herring. The primary reason why we need to do something to social security is because the ratio of payers to payees is trending towards increasing imbalance. If there was no impending (at some point) imbalance, we wouldn't really NEED to fix anything, so we wouldn't have to borrow or raise taxes or cut benefits or do anything else in the first place.

So while you are right that it's something of a risk to borrow to finance investment, you have to balance this out with the risks and downsides of other approaches. Raising taxes could also be risky to the economy. Cutting benefits or raising the retirement age would be unpopular and so hard to pass, and painful and unpleasant to many if it did pass.

Any time you consider borrowing money to make an investment, it's a risk. The way I look at it broadly is simply that we'll be borrowing to finance a transition to a reformed system that gives us a greater return on the money collected and bridges the gap by relying on economic growth instead of the more painful and undesireable alternatives.

And I look particularly at the idea of borrowing to do this as simply essential, because I think that America must do its best to keep its already-made promises to the people who have been relying on these promises ($1100 a month til death) being kept.

That's the problem in a nutshell. Bridge the coming gap while keeping our promises. Do it in the least painful way. And make sure the reformed program preserves the insurance/risk-pooling component that is most important to the majority of Americans who would be deeply be burdened by trying to grow a wad of investment cash to finance retirement should they live to be 80, 90, 100.

The trends point so strongly in one direction...Americans are living longer and longer at greater and greater medical cost. Leaving economic growth out as a possible re-balancer of the equation leaves only raising taxes, cutting benefits, raising the retirement age, and curtailing eligibility. None of those are popular, and all would be painful.

The Dow began the 1920's around 78, then rose steadily to fluctuate between 120 and 160 for a few years. In 1927 the "bubble" began, and the Dow rose like a rocket over the next two years, topping out at 386 in September before "crashing" in October from 358 to 212. It recovered to a high of 297 in the spring of 1930 before beginning a slow slide until September 1931, when it crashed hard as a result of the Smoot-Hawley Tariff Act and the mistaken tight-money policy of the Hoover Fed. It continued to decline until reaching a low of 43 in June 1932. It steadily recovered into the 180's by 1938, then started to decline and fluctuate again on effects of the twin wars in Europe and Asia.

Someone who was fully invested in the Dow in 1926 or 1927 and held onto their stocks was very solidly back in the money a decade later, even doubled up--you could have bought the Dow in the high 90's once during one short dip in 1926. Anyone who bought at the top of the bubble (October 1929) had to hold on until 1954 to break even. It's all in the timing.

It's pretty safe to say that, if you discount the "bubble" of the late '20s as the speculative abberation it was, that the Dow recovered from the Depression back to the long-term trend line in the mid '30s, before getting slapped back down by World War II.

The Dow finished the war in April 1945 at 165.

Rick hit the most important point -- stocks have higher returns than treasury bonds because stocks have higher risk. There's no free lunch. OTOH, most bull and bear markets have lasted about 15-20 years. A privatized SS system would presumably force people to invest over their entire working lifetime, so bear markets shouldn't wipe anybody out.

(As for the Great Depression -- 1930 and 1949, the S&P 500 average annual return was 3.2% (dividends reinvest, adjusted for inflation).

For the record, I'd rather turn Social Security into a federal welfare program for old people -- giving monthly checks to every retiree, regardless of wealth, seems silly. We could cut the expense dramatically and cut payroll taxes, too. But if we're going to keep SS, minor cutbacks to benefits will keep the Trust Fund in good shape for 70 years, while these private account schemes look like a real mess in the making.

I think that there's a perfectly good argument that we should never have entered into the Social Security program way back when. But that decision was made before most of us were born and it's a tiger we're not going to dismount.

Given that political reality why is FICA max $90,000? Why not $150,000? Or higher? Since most income growth has been in the upper quintiles over the last twenty years or so it makes sense to tax more of that income.

That, in my view, is the real solution to solving the Social Security crisis (if there is a crisis). Subject more income to the tax by doing two things:

1. Raise FICA max.
2. Remove the remaining exemptions from FICA.

Yes, the logic of borrowing to invest is like a perpetually motion machine. The numbers might look good at first, but there are frictions which prevent it from working. If it really was a money-winner, we wouldn't need to have taxes at all. The government could borrow, invest, make money, and we could abolish the IRS. Likewise, none of us would have to work, because we could borrow, invest, and pocket the difference.

If the rate of return on bonds is say, 6%, and the rate of return on stocks averages, say 11%, borrowing at 6% to earn 11% sounds like a free lunch. But if that 11% was as risk-free as the 6%, everyone would be borrowing, and the interest rate would be build up until it converged to the rate of return on stocks. The risk is REAL.

If I remember my economics classes correctly, the risk can't be diversified away either. The risk premium for stocks is already assuming a diversified portfolio. I was taught the Capital Asset Pricing Model, which says that the risk premium is based on the variability of returns as driven by the business cycle of the economy as a whole. You don't get a risk premium for the individual risk of a single stock.

So if the risk premium is real, and it's based on the variability of the economy as a whole, I don't see how the government as an investor performs any better than any individual investor who owns a diversified mutual fund. Adding in transaction and administrative costs, plus the risk that the federal government may screw this up entirely (remember, Republicans, it's likely that there will be at least one Democratic president elected before you retire) I'd say this is likely to be a drag on your retirement income.

AS a moderate to conservative democrat, I totally disagree with the Presidents proposal. I think the better way to handle Social Security is for the Federal goverment to put back into the fund the money they took out of the excess of social security receipts. Then instead of investing that money as the President foolishly is considering. The money should be loan at let's 4% interest to the states to rebuild America's aging infrastructure. This not only generate's money for the fund but also creates jobs. The President should also create an Universal retirement fund along the lines of the Federal Employes Thrift Savings Plan" this would also workers to invest tax-defered dollars for a retirement plan they could move employer to employer.

Not as big a drag as the additional taxes needed to pay for those fictional "Trust Funds," Rick. Anyone taking those "Trust Funds" seriously needs to be spanked with a 401(k) full of IOU's from themselves, to themselves, and with a 70% payroll tax increase for SS alone. And will be. They require real additional taxation to pay, and stuffing more money in them just means letting the feds throw away more money in the meantime. Your kids will be paying those tax increases, and if you have income other than SS, you will be too. For a real solution, you have to start by ignoring the "Trust Funds." They're not a real asset. They're a promise to raise taxes to cover the payment of future benefits. Anyone touting them as real assets doesn't know the meaning of the phrase, and when you hear the term "actuarial balance" you should keep a hand on your wallet.

The CAPM model has some serious limitations, both as a theoretical and an applied model. Applied risk diversification includes smoothing of returns by contrarian investment, for one thing, which isn't subsumed in the CAPM model. The CAPM model is for risk reduction in single-class portfolios only, not multi-class. A balanced portfolio contains long-term bonds and other investments as well, which tend to move opposite of the stock market. You don't get the full returns on the peaks, but you also don't get the full hits in the valleys. And since investments are made incremetally and constantly, the buying is essentially done at the trend line average. Diversification can't remove catastrophic economic risk, but nothing can. (If the economy tanks, SS isn't going to be collecting as much in payroll taxes--d'oh!)

But applied diversification can and does reduce market value fluctuations enormously and prevent wipe-out. Except in case of catastrophic economic meltdown, which can't be covered by the government or anyone else, only by individual stockpiling of hard commodities. (Built that secret riot shelter and stocked it with freeze-dried food, guns, and trade goods yet?)

Better models (applied ones) for long-term systems are TIAA/CREF and the federal Thrift Savings Plan. Long-term history of both suggests that it can be done, and done well, by using such a model for the private investment portion while making up any payout shortfalls to the minimum benefit level through the SS system. Even with a few nasty market dips, it'd still be much cheaper than doing nothing. All you have to do to make it worthwhile is have a return ratio of over 0% after expenses, as any positive "return rate" on the current "investments" is illusory--it's all from taxes, and we gotta pay those taxes. Not just the interest--we also have to pay back that principal, which the government has already kindly spent on our behalf.

Doing nothing about SS alone would require increases in dedicated overall federal taxation in a bit over a decade, rising to the equivalent of 7% of GDP by 2035 from the current SS rate of 4%.3 of GDP.

My preferred solution would involve starting privatization accounts with the current excess SS revenue, instead of letting the government piss it away on more spending and replacing it with more future taxes on my kids. Not that this is likely to happen, as the government is already planning on using that revenue to pay shortfalls in Medicare, which hit break-even this year.

Medicare is going to be (already is) a much bigger long-term fiscal problem than SS. But Medicare reform depends largely on overall health-care system reform....

One more point: The Dow30 is a very narrow measure, while the S&P 500 is a much broader one. When measuring historical market returns, the S&P is the index to use, not the Dow30. With the exceptions of WW2 and the post-Vietnam "flat spot" of the mid '70s, the S&P has risen steadily and consistently since it was developed in 1923, with no catastrophic drops. The worst "hit" it has taken in the last half-century was the tech bubble of the late '90s, but it fell back to trend line and not below.

Tully, I agree with you on the stock market and diversification, as well as, those fictional "trust funds". The Federal Employees "Thrift Savings Plan" is an excellant model for an Universal Retirement Program which was introduced by the DLC. But, I still believe that the present Social Security program can be saved by the Federal Goverment replacing the funds which they transferred to the general fund. This would include borrowing a somewhat large about of money (hey the national debt is already out of sight) and placing that money into the Social Security fund and loaned out to state and local goverments at interest. This would do three things: 1. It would generate increased revenue to the fund with the interest repaid with the original loan 2. It would create further employment increasing the number of people paying into the system 3. It would help rebuild our crumbling infrastructure.

I'm progressively stunned by the politics of this. Now I understand the concern over significant short-term increase in debt BUT what blows me away is the "new" Democratic line that there really isn't a problem and even if there is it way off in the future.

I understand being the loyal opposition and not agreeing with your opposition. Therefore I'd expect an alternative "long-term" solution to SS. The Dems to be saying "no problem" as their long-term solution. Given that the majority of younger folks (i.e.

Yep, the "non faint-hearted" of the "reality-based community" are fighting tooth and nail to do nothing. Nothing at all. Ignore it and hope it'll go away.

I'd comment on what the Bush administration is proposing, but the details are somewhat vague so far. The administration says its plan is "still being crafted." Which leads me to believe they're not really all that sure what they're going to propose, they're just sure it will involve privatization and market investment instead of giving the government all that extra money to play with and calling it "Trust Funds."

Paul, let me get this straight, because I don't want to get it wrong. Your proposal would be to exchange some of those SS Trust Fund IOU's for real market debt, creating an SS cash fund, with the proceeds then re-loaned out to the states, creating a revenue flow from the states to the SS fund? Or to directly loan out some/all of the current excess revenues to the states for infrastructure, with the money to be paid back to the SS fund instead of the feds? Or some combination of those?

The only reason I'm sitting here right now is my 80 year old aunt is in the hospital and couldn't come visit us for Christmas as planned. If she were here, I would be watching her drink the case of Milwaukee's Best I bought her while I drink something a little more to my taste. When I went to visit her in the hospital yesterday she said the bills are still coming in from her last hospitalization earlier this fall, totalling over 10k as I write this. So yes, Medicare is a much bigger current problem than SS.

But my aunt is a classic example of why I disagree with whomever said it was a mistake that SS was ever started. She makes about 700/mo in SS, works part time and makes another 300/mo (and yes, she's 80) and gets money from family members to help her make ends meet. Without SS there would be millions more elderly people living in poverty while other millions are living in luxury or at least relative affluence.

But even as an FDR Democrat I recognize the need for reform of the system. In 1983 they raised the payroll tax rates with the idea the extra money would be used to pay down or pay off the national debt, allowing the government to borrow to finance the boomer's eventual demands on the system. We've seen that doesn't work. Raising the payroll taxes now will just lead to more raids on the treasury.

Privatizing a portion going forward is a good idea if the choices are limited to a balanced portfolio of conservative choices. People should read the book "worry free investing" by Svi Bodi, a Boston U. economist and international money manager. He recommends for most people to stay out of the stock market because they cannot afford to lose money. He recmommends i-bonds for non retirement investing and TIPS for retirement funds. Only those who have truly disposable income or guaranteed jobs should invest in the market. Like Tully says, it's all in the timing. So if you are 68 and decide to retire, and the market tanks for much of the next 10 years as it has a few times in the last century, you won't make up the losses because you have removed too much principal in a bear market. Bodi's analysis makes sense to me. History has shown him to be correct.

And for what it's worth, Ford makes sense too. He left himself an out (transition costs). And I would never trust Bush and his followers to do the right thing. They simply want to get rid of SS because they hate it. If they can, and more Bush-types get elected in the future, they'll get rid of Medicare too. They want to shelter all investment income from taxes to protect the wealthy. Anyone who disagree's with that has never listed to Grover Norquist.

Tully, I'd say to loan out the excess funds as well as the money procured (stole actually) that should be repaid to the fund and then loan out that money to state and local goverments at interest and have that money repaid back to the FUND not to the feds who'll just spend it on something else. I'm also in favor of establishing a universal retire plan i.e. Federal Thrift Savings plan. Where people could invest money for their retirement. I was a federal employee but since went into the private sector and I was able to "role over" that money. I think everyone should have to same opportunity to invest in a large pool that would most likely give them more diversification as well as get them better rates of return.....I'm just fishing but I know something has to be done not only for us, but our children. Now Tully as far as Medicare goes, I believe it will take DIVINE intervention to help that program...lol....paul

Now I understand the concern over significant short-term increase in debt BUT what blows me away is the "new" Democratic line that there really isn't a problem and even if there is it way off in the future.

But what is the problem? Currently the Social Security trust fund is fine for 40 years. A small change (like raising payroll taxes 1%, or stop raising benefits by more than inflation, or means-testing) would fix it for 70 years.

Right now we have a $400 billion annual deficit, and Medicare is a looming disaster. To act like social security is the real crisis makes no sense at all. As I said, I think it's crazy to pay social security to everyone, but I don't see how adding $2 trillion to the federal deficit thru privatization is supposed to solve anything.

And Tully, why are the Trust Funds "fictional"? If your point is that the government could change the rules on who gets SS payments (i.e. start means-testing) so therefore it's not really a trust fund -- I agree. But if your point is the federal government will default on Treasury Bonds held by the SS fund -- that's a different story. Yes, those debts are taxes to be paid in the future. But that's true whether the bonds are held by the SS fund or the Bank of China.

And here's a random question for somebody -- if investing in the stock market would really solve the SS problems, why doesn't the SS trust fund invest in the stock market?

Oberon, I agree that edicare is the greatest crisis facing this country. I think the answer would to be create a univaersal health care system in which the care would be provided by the private sector and the Fed's collecting the premiums. People who have the choice as to which plan they wanted. and this program should also take in programs like medicaid and some parts of military and veteran health care. I know this sounds like a huge new federalprogram, but it will be dealt with thru the private sector. and Oberon I also agree that putting excess Social Securityfunds should never be invested in the stock market. A universal retirement program based on the "Thrift Savings Program" should be the model for that, also it is administered by the private sector

Two points to your questions, Oberon.

The SS "trust funds" are fictional, an accounting device. Using the single assumption that the government will fulfill its promises on SS, there is absolutely no difference to the impact on federal revenue from the accounts either existing or not existing. So, the "trust funds" are merely an accounting device to track the money we have been overtaxed to date, and will be RE-taxed in the future, with interest, when the revenue is actually needed by the SS System.

We currently pay more than required. The gov't "saves" this extra on our behalf by "lending" the extra to itself and spending it--thereby falsely reducing the deficit. Then it pays itself (us!) back by taxing us again--with interest. This makes Ken Lay look honest and ethical. "Fixing" SS by boosting the "trust funds" is just another way of taxing us double-plus some more. It's not a "fix," except in the junkie usage for drunken-sailor congresscritters hungry for more money to waste. ("I'm gettin' the dollarium tremens, gimme a fix!") An honest system would tax us as needed, or use the extra to create funds containing real assets, not promises to tax us even more as a reward for having paid our taxes.

SS is the most regressive taxation we have, falling disproportionally on the working poor, and unavoidable from dollar one of earned income. So why is the purported "progressive party" that claims to represent the working class so adamant about sticking it to the working class even harder with most regressive tax we have, now and in the future?

Q2: By law SS may "invest" only in those very special government bonds....that's what much of the debate is about. Depriving the drunken sailors of those free bottles.

One thing to keep in mind when discussing Social Security and the various investment schemes:

The return of the average investor does not match the return of the major stock market indices. On average, the annualized return of the average American investor is less than 3%.

There is no reason to believe that with a larger pool of investors (i.e. everyone who participates in Social Security under whatever plan becomes law) would perform significantly better.

A 3% return is barely sufficient to keep up with inflation.

Of course, the average investor manages their own portfolio, complete to chasing hot tips and frequent switching. Brokers love people who manage their own porfolios. The commissions are enormous, and often eat up the returns.

As mentioned previously, there are some very succesful models for low-overhead massive program retirement investment, most notably the Federal Thrift Savings Plan and the TIAA/CREF program. My mom was in TIAA/CREF all through the tech bubble, and she never had a single down quarter.

In any case, even a 0% return with conservation of principal and inheritability of balances beats the hell out of sub-zero returns with zero ownership. And the question still stands--why is the purported "progressive party" that claims to represent the working class so adamant about sticking it to the working class even harder with most regressive tax we have, now and in the future?

SS is the most regressive taxation we have, falling disproportionally on the working poor, and unavoidable from dollar one of earned income. So why is the purported "progressive party" that claims to represent the working class so adamant about sticking it to the working class even harder with most regressive tax we have, now and in the future?

My last post was cut off. To finish and follow up to Tully's last post, I'm still trying to understand the politics of the debate. As Tully points out the present system does seem tipped to favor the leisure class at the expense of the working class. Additionally, few younger voters seem to believe Social Security will be there when they retire. I wouldn't assume that means they don't want its benefits, just that they're convinced they won't be there. Therefore, my political question is "To what constituency is the 'Do nothing' approach appealing to?". My best guess is the retired vote based on a "fear factor". (I.e. "Oh my gosh they're going to take my benefits away, I better vote for the other party")

SS is the most regressive taxation we have, falling disproportionally on the working poor, and unavoidable from dollar one of earned income. So why is the purported "progressive party" that claims to represent the working class so adamant about sticking it to the working class even harder with most regressive tax we have, now and in the future?

I don't think it's the Democrats who insist that only the first $85k of income be taxed.

Second, why is this point directed at me? I'm the one saying SS ought to be massively cut back. My objection here is to making SS an even bigger mess.

The SS "trust funds" are fictional, accounting device..

Well, you do a great job of slinging insults at anyone who backs the trust fund concept --junkies, drunks, animals, worse than Ken Lay, etc.

But before I agree or disagree, please answer this question (and I'm asking b/c I just wasted 30 minutes looking online for an answer): when we talk about the deficit being $421 billion for 2004, is the $100 billion taken from the SS trust fund included in that number? Or not?

I had thought the money borrowed from SS showed up as part of the federal deficit. But you wrote The gov't "saves" this extra on our behalf by "lending" the extra to itself and spending it--thereby falsely reducing the deficit -- so it seems I was wrong. Right?

But...why does this matter? Either way, the federal deficit is really friggin' bad. That's the real crisis. For SS "privatization" to solve anything, it has to cut federal spending a lot in the long run (despite the $2 trillion in short term "transition costs"). You know much more about this than I do. I just know enough to be very nervous that President Bush and the Republican-controlled Congress is going to make the deficit a lot worse. And Harold Ford's position doesn't matter.

Tully:

TIAA/CREF is an excellent investment family, but if your mom didn't have a down quarter throughout the tech bubble it was because she was heavily weighted in TIAA, bonds, international funds or all 3. My wife and I have been in this fund family for almost 20 years and even with a balanced portfolio of about 50% equities 50% bonds/TIAA annuities we had about 3 years of negative returns. The only thing that kept the overall balance from dropping was our continued contributions.

Oberon - the current deficits include the SS excess. Without SS, the 2004 deficit would be about $65B larger than it already is. The national debt now totals $7.5T, of which $4.5T is owed to the public and $3.0 is owed to itself - the trust funds. Of the $3.0, about half is the SS trust fund, the other half is for federal employee and military retirements, among others. Over time, as the SS excess is slowly replaced by deficits, the real effect will be to force the government to make harder decisions about where to spend that year's money: current needs like the war on terror, or meeting the responsibilities embodied by the trust funds. To my way of thinking, the trust funds are non-existent. There's no assets there. The only use they have is to remind future governments of the commitments that have been made.

Oberon, only remarks directly prefaced with your name are directed at you. Truly. If the continuity leads you to think I'm accusing you of those particular sins, my apologies. Yes, I do go off on rants through digression...The question about regressivity is directed at anyone who wants to defend the current financing scheme.

Well, you do a great job of slinging insults at anyone who backs the trust fund concept --junkies, drunks, animals, worse than Ken Lay, etc.

Thank you! That's exactly my intention. To ridicule a political con job as a con job. :-) And to ridicule any "fix" that insists that doubling a stake in a rip-off is a "solution." It's only a "solution" if you're in a hurry to reach the nanny-state Euro-socialist standard where government gets 50% or more of everything.

Either way, the federal deficit is really friggin' bad. That's the real crisis. For SS "privatization" to solve anything, it has to cut federal spending a lot in the long run (despite the $2 trillion in short term "transition costs").

Yep! Exactly! The federal finance system has a real problem, and bigger ones coming. You should demand details, and explanations of real finance that anyone can understand, in terms that don't hide the grisly details.

And yes, the excess SS collections are included in deficit figures, as cw details. They reduce the deficit. The "trust funds" are off budget, so money "borrowed" from them counts as revenues, reducing the deficit figure. But those excess SS collections are peaking, and some are now going to subsidize Medicare, so that "free money" is shrinking and will soon go away altogether, putting even more upward pressure on the deficit. The "just raise the SS tax and throw more money into the trust funds" argument is a bid to double up the stakes in the con job. Ever watch The Sting? Same thing.

The Bushies say we can save ourselves with privatization, but they won't offer details (which is where the devil is, of course). The Democrats say "Don't worry, just give us more money." Which is how we got into this mess.

This is something that I posted at another blog, but I figured I'd repost it here:

Private accounts were part of a proposal by Democrats Bob Kerrey and Daniel Patrick Moyhihan way back in 1998. I don't think centrist Democrats need to back off from long-held positions just because Bush has stolen elements of their proposals.

Josh Marshall may be right that the best political strategy for Democrats is a Gingrichian one of total opposition. As we know, it was Democrats who first proposed a Department of Homeland Security. Yet Bush claimed it, and used it as a club against Democrats. Still, going along with the concept, but requiring it not add to the deficit, might be just as effective in frustrating Bush's plans while appearing fiscally responsible rather than obstructionist.

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I'll also add that there will be inevitable demand that private accounts allow trading. But on its face, trading is a zero-sum game which after transaction fees becomes a negative sum game. The reason trading is useful in an economy is that it provides liquidity for initial stock purchases, and provides feedback on performance. But I don't see any advantage in perfecting the market further by churning stocks. Retirees have time on their hands, and the temptation to become day traders would be strong.

I agree with alot of the issues brought up by Tully and Oberon. Right now the Federal Goverment takes the excess Social Security receipts and places them in the general fund for two reasons: To make the budget deficent look smaller; 2. To use the money for general use. hey we already have to much "pork" in the system. We need to come up with a solution to protect the excess Social Security receipts and we must not allow that money to be put in the Stock market. We need bipartisan cooperation to come up with a formula to save Social Security for our children and grandchildren. Right now the system is in pretty good shape. But, something has to be done now to protect it for future generations. Creating a universal health care system must also be created which also could be used to save medicare. We need solutions and ideas not political rhetoric. As a "cenrist" I'm open to suggestions from both sides.

Day trading? I haven't seen any proposals to let beneficiaries have unrestricted power to do any stupid thing they wish with an SS privatized account as they can with their IRA's. The proposals I have seen have been passive program fund investing with a very limited choice of allocation options. The "too stupid to own their accounts" argument is so much bushwa (that's "steer manure" to non-Midwesterners).

The standard in limited-choice pension funding is usually the allowance of annual or semi-annual re-allocations between the different funds. This doesn't allow for the (stupid) frequent tip-chasing and day trading that many individuals attempt. It doesn't even allow for individual stock picks, just large diversified funds.

Still, going along with the concept, but requiring it not add to the deficit, might be just as effective in frustrating Bush's plans while appearing fiscally responsible rather than obstructionist.

If only Bush would offer a plan we could analyze, I might second the sentiment. But it sounds like you're simply determined to not reform the system. Which would be, of course, obstructionist. How far can centrism go if it relies on the same tactics of evasion and blatant dishonesty that got us in this mess to begin with?

In any case, NOT doing anything about the problem WILL result in higher deficits all by itself, as the "free money" that currently reduces the reported deficit figure dries up. Which it is doing right now as the SS surpluses get diverted to the Medicare fund shortfalls.

Why not start exmaining options, instead of swimming in that Egyptian river?