Centerfield

FYI -- Here's a CBO report on privatization efforts in five countries -- Chile, the UK, Australia, Mexico, and Argentina. My understanding is the system performed reasonably well in Chile, but I haven't read the rest of the report.

There are also some very detailed analyses of various plans at Centrists.org. The following quote from a piece posted last week by Ed Lorenzen suggests their overall take on it:

Individual accounts can be an important component of a comprehensive reform plan, but they are not a magic bullet. Centrists believe that personal accounts are not a magic bullet that will save Social Security, but coupled with progressive reforms to the benefit structure, they offer workers a much better deal than current law can afford. This approach is exemplified in legislation authored by Senator Graham, as well as the Kolbe-Stenholm bill introduced in the 108th Congress.

Individual accounts offer a more effective method to save current payroll taxes to pre-fund a portion of future benefits. Past efforts to pre-fund Social Security's future liabilities via trust funds or other accounting mechanisms have failed to work in an economic sense, because Congress tends to spend the money in trust funds, or "off-budget" accounts, anyway. In a sense, individual accounts are the ultimate lock-box, ensuring that current payroll taxes are truly saved for future retirement benefits.

Tough choices will be necessary to eliminate the deficit facing Social Security, regardless of whether individual accounts are included in a reform plan. Including individual accounts in a reform plan does not require deeper benefit reductions than would otherwise be required, nor does it make such reductions unnecessary. However, individual accounts can help make the task easier for policymakers and limit the impact on future beneficiaries.

The benefits from the higher returns earned by accounts could offset some of the reductions in promised benefits that will be necessary to restore solvency with or without individual accounts. Analyses conducted by the independent Social Security Actuaries and the Congressional Research Service have found that reform plans which include individual accounts provide a better deal than plans which restore solvency through tax increases or benefit reductions alone.

I'm concerned about the president's plan -- at least what we know about it at this point. But I'm also impressed by the strengths of some very carefully constructed plans like Kolbe-Stenholm.

I would argue against raising the retirement age. As an educated professional making good money flying a desk, it wouldn't bother me. For the minimum wage earner doing manual labor while suffering from arthritis, it would be a very unpleasant prospect.

I would much rather institute a need test.

My dad was a used car salesmen. He always said he didn't go to work ever morning to help people, he went to work to make money. The person who sells you an IRA or personal SS account is doing it to make a profit. Let the buyer beware!

The quote from Norma Cohen reminds me of the old saying about churn and burn stockbrokers and their commissions.
“Where is the client's Yacht?”

The easiest way to raise the ratio of benefits from private accounts compared to administrative costs is to go into them in a big way. If only a small percentage of the total funds go into the accounts, the administration cost of small dollar accounts have a higher percentage.

Thus, it seems the lowest percentage administrative costs are in Chile, where the massive shift to a privatized program was done under the dictator, Gen. Augusto Pinochet. I suspect any program change in the US will be more incremental, and therefore smaller as a percentage of total assets, and a higher administrative costs.

First off, the old British system didn't really resemble the American system that much, and I haven't seen any seriously-considered proposal that resembles what Britain did. Nor do we yet even have the details of the Bush admin proposal, so the Prospect article is comparing apples to an imaginary fruit we have yet to see.

Which means that, at the moment, until we have details, all we're getting is dressed-up demogoguery and propaganda.

Let's start with the 800-lb gorilla that the Democrat party-line river-in-Egypt opposition wants us to ignore. Social Security funding will not run out in 2042. (In fact, it will never "run out," unless the payroll tax is killed. It just won't be able to pay full benefits at current schedules.) 2042 is a non-date signifying nothing but an accounting fiction. In 2018 or thereabouts, payroll tax revenues will fall under expected payouts for the system. If nothing has been changed, at that point the government must do one of three things or some combination thereof. It must cut benefits, raise taxes, or borrow more money.

This fiscal reality is the exact same regardless of balances recorded in the so-called "trust funds." The "trust funds" are nothing more than the accounting of how much the government has received in payroll taxes but not spent on benefits. If the "trust funds" had forty trillion or nothing at all, in 2018 the government would still have to cut benefits, raise taxes, or borrow more money, and in the exact same amounts. The Democrat denial line is "the government will just have to come up with the money." But hey, that's no problem! The taxpayers will be happy to cough it up, right? [/sarcasm]

I've said this over and over right here, but apparently not loudly enough. So I'll just throw in the punch line. Any reform plan that claims that boosting the "balances" in the "trust fund" will extend the life of the SS plan is full of crap. As the government spends all surplus payroll tax revenues, all that generating additional surplus payroll tax revenues accomplishes is to boost future tax bills, and through the most regressive form of income tax in the book at that.

This is all mathematically demonstrable with any knowledge of budgetary mathematics. It's all well-known. Anyone arguing differently is either ignorant, or lying. Social Security spending is government entitlement spending. It can be changed at the stroke of a pen and the whim of Congress. Social Security has no assets not provided by the government. Social Security is part of the government. Owing money to yourself is not an asset. The only claim any of us have on Social Security is that of qualifying for the currently approved entitlement.

So if you want to consider Social Security reform, you first have to tune out the partisan propaganda machines of both sides, and start with the facts. The system begins to run a deficit in or about 2018. What do you think we should do about that? Cut benefits, raise taxes, or borrow more money? Slow the rate of growth in benefits? Attempt to put some of that current incoming surplus into private asset management? What kind of assets? What kind of management? Should people own their contributions to the system, or should they remain just flat-out taxes?

Those are the questions. I'm willing to consider annything--except more politicans' sleight-of-hand to double-tax us some more and call it "assets" when they aren't.

The heavyweights on the left side of the blogosphere -- Kevin Drum and Josh Marshall, for examples -- are offering a stream of fundamentally misleading posts on this.

For example, it's simply stated as a fact that the current system is solvent until some date very far out in the future. The latest from Kevin Drum:

A decade ago the Social Security trustees forecast that the trust fund would be exhausted in 2029. Today they've moved the date out to 2042 — you can see the details here. The Congressional Budget Office thinks it's good until 2053. And if you use slightly less pessimistic economic projections than these guys do — something a lot of economists think we should — it's good until at least 2060 or 2070.

In other words, Social Security is in good shape for at least 40 years and maybe more like 60 or 70 years. So our best bet is to leave it alone and revisit the subject in another decade or so.

As Tully says, the date the sytem starts receiving less money than it needs to pay is much more significant -- projected at 2018 by the Social Security trustees. It will run a $7 trillion deficit between 2018 and 2042, the supposed first date of "insolvency".

Of course, we're also using the cushion created by the Social Security surplus for all kinds of current spending (and to reduce the deficit). We have to give up that revenue stream in addition to finding ways to cover the gap.

That may or may not be legitimately described as a "crisis". Maybe it's just a problem that could be solved by tweaking the system. But it's not nonexistent. Saying the system is "in good shape" for 40, 60, or 70 years is simply wrong.

Of course, we're also using the cushion created by the Social Security surplus for all kinds of current spending (and to reduce the deficit). We have to give up that revenue stream in addition to finding ways to cover the gap.

Yup. And that's a big problem--of which SS is a part. Even bigger will be Medicare. For one brief moment in the '90s it looked like we might even grapple with that--the overall problem of govrnment spending like drunken sailors on a 48 hour pass with six month's pay. But....

There is a tendency to point at other, larger problems and say "Why aren't we doing that instead (or first)? What about that?" To the extent that kind of criticism is effective, it leads to us doing nothing at all about ANY problems.

Gotta start somewhere.

The comparison with the British system is appleseeds with appleseeds. They have the same family tree. It seems that the initial privatization germ line stems from Gen. Pinochet turning over the Chilean economy to the "boys" from the Chicago School of Economics. This inspired Margaret Thatcher, and is also the basis for the policy initiatives in the United States. The details may differ, but there is a strong family resemblence.

Regarding whether you think the money people pay in for Social Security is really for social security fund, or that's just a fiction--well, if it's a fiction, then it's a fiction that has allowed an extremely burdensome wage tax to be perpetuated. I don't consider it a fiction--I consider it a committment. That means that yes, if the government is insolvent because tax rates were cut far below expenditures, it means that tax rates must go up to meet those commitments. Yes, tax rates must go up, or pensions must go down. If we're not saving enough money for the future, and I think that's the case, we need to take clear steps to raise savings or reduce expenditures.

The more I hear about the private account initiative, the most it sounds like it relies on illusory gains of higher return financial instruments while ignoring the higher risk associated with the higher return, and ignoring the higher administration costs.

The "family tree" is that any privatization would remove some money from government consumption and place it in the markets in some fashion--even if it was being invested for real in US Treasuries legally owned and inheritable by individuals, but still held and managed by the government. That's the only resemblance I see so far, as I still haven't seen any proposal yet. The Bushies have floated vague trial balloons, but haven't come up with details. And as always, the devil will be in the details. Read the CBO report to see the devil at work.

What I have seen is a lot of hot air and hyper-inflated straw men and silliness arguing against things that have not yet been proposed. Thus my statement about demogoguery and propaganda. As the CBO report notes "...those countries have implemented policies that either replace the public pension system with mandatory personal retirement accounts or encourage their workers to opt out of the existing public pension system....Comparisons should be made cautiously, however, because the countries and their pension systems differ considerably from the United States and its system."

Regarding whether you think the money people pay in for Social Security is really for social security fund, or that's just a fiction--well, if it's a fiction, then it's a fiction that has allowed an extremely burdensome wage tax to be perpetuated.

It's not what I think--it's what I know. And your closing statement there is entirely accurate. For twenty-plus years we have paid extra on the fiction it was being "saved." Had the government taken that money and simply burned it instead of spending it, caused it to cease to exist, thereby shrinking the money supply by that amount rather than inflating it, there would be some validity to the "savings" argument. Instead, they have spent it, and issued IOU's to themself in its place. Thus we were taxed on a fiction, the money spent, and we will be taxed all over again with interest to pay it back to ourselves.

What kind of a fund is it that spends every dime you put in it, and then makes you and your children and their children pay it back so you can pay yourself? Hint: "Savings" is not involved. It's an income tax slush fund. And a very regressive income tax that hits from dollar one of earnings. As I keep pointing out, if the existence of the "trust fund" does not change overall government revenue and spending requirements by one single dime whether it exists or not, what is it? A fiction. A means of keeping score, and nothing more.

I object much less to keeping benefits as they are but only taxing enough to meet them as required one hell of a lot less than any scheme that involves taxing us more to boost the balances of a fiction. A fiction that will have to be paid back with more future taxes. Which is the Krugman fix--just boost the current payroll tax and "lend" more money to the government, which will in turn spend it today and promise to pay it back in the future by taxing it from our children and their children. With interest.

You can view SS as a commitment, and I won't even argue that point, because it's political rhetoric irrelevant to the basic reality. Commitment, entitlement, birthright, longevity lottery, whatever. Tomayto, tomahto. The reality is that there are no actual resources in the "trust fund," just IOU's from the government to the government promising to provide resources to itself at some future date.

Those resources do not come from thin air. They must come from somewhere and someone. Since both debtor and debtee are the government, there are a limited number of sources, all external to the government. The date of reckoning can be pushed back by reducing scheduled increases, or by increasing the amount of resources coming in. Meaning the money can be taxed from us, or borrowed by the government to be taxed from us in the future, or we can find some way to increase economic growth enough that the tax base broadens, or gain a higher return on surplus revenues. Or we can go a'conquering and steal those resources from other nations. Or some combination thereof. That is the reality. Those are the choices. There are no others.

I'm not making a partisan argument, or even a political one. I'm simply stating the fiscal reality of the situation.

I have to admit that the tone of this article didn't work for me - it seems too bitter to convince me.

And I didn't have to search long for places to disagree with the article.

Let me start with the bit that seems right on target to me: fiscal dubiousness. The British plan was arranged so that it gave a tax break the system couldn't afford.

The Administration's plan would have a similar problem: it would remove some of GenX's contributions to the private account at the moment they're most needed. Yes, I know some of you don't trust Congress. But a refusal to let the plan be funded properly because you distrust goverment is as bad as Kerry's opposition to let SS be funded properly via denial that there is any problem.

The "right" way to do the transition is to start with some of the investment capital from the private account going to fund the rest of the system, and upfront have legislation that gradually phases out the "tax," until eventually it's the kind of strictly bimodal system y'all want.

Now for the fun part, the meow mix:

Easy: "up to 30% fees?" Norma, Norma, Norma. Just how common is a 30% fee, and under what circumstance does it happen?

I wasn't impressed with her comparison of the basic pension with other countries' public pensions, because, as she herself notes, if the system was working correctly, Britons would all get more in addition to that.

There is another pretty vast difference between SSI and the British system: pensions and 401ks aren't involved at all. Nobody is suggesting that Social Security be replaced by employer pension plans. It's remarkable how few of the problems she mentions in the quasi-privatized part would crop up in any SSI plan I've seen.

In particular, I didn't see how she supported the idea that "the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn", even in the UK system, much less as they might apply to SSI. I saw no cost or risk or return numbers anywhere in the article. Did I just miss them?

For those who have been scared away by the British experience with private accounts I would suggest this article:

http://www.techcentralstation.com/122304E.html

It deals with some of the misinformation that this article presents, particularly the idea that the British experience has been a "failure."

the obvious solution to the problem that social security funds may run out in 2042 is to raise the retirement age. Life expectancies are much longer now than they were in the 1930's, when Social Security was first instituted. A simple change to the retirement age for my generation can easily and equitably defer the social security problem.

In my political frame of mind, only in tandem with privatization is this equitable. Raising the retirement age without providing private account flexibility greatly disadvantages those with lower life expectancies.

Missed your update Rick. My mistake.

I checked the tech central station article, and its worth reading. However, the parliamentry report it relies on which claims the British system is a success is from 1998, which was a time when stocks in the US at least were achieving astounding growth. Considering that the British system started in the late 80's, that's a short, and lucky interval to have invested.

Cohen's article including returns through 2004, which certainly in the United States and probably in Britain, have not been so good over the last few years.

I'd go with the later assessment.

The more I hear about the private account initiative, the most it sounds like it relies on illusory gains of higher return financial instruments while ignoring the higher risk associated with the higher return, and ignoring the higher administration costs.

The "illusory gains" part may or may not be true. At a minimum, though, we would be replacing a pay-as-you-go system with one that begins to save. Even if there are no gains, the system collects assets and has something to draw upon when meeting future obligations.

The "higher administration costs" is probably also overstated. Most of the plans under discussion use a simple and relatively inexpensive basic system. The plans presented by the president's commission rely on the Thrift Savings Plan, which is simple and low-cost. The Kolbe-Stenholm plan also uses the Thrift Savings Plan, as does the Graham plan.

I'm not suggesting that the president's plan will be a good one. I would note that Lindsey Graham, author of the last plan mentioned above, has expressed skepticism about whether the president is willing to do this in a fiscally responsible fashion. But there are a lot of careful, serious people who believe in the basic idea and who have put time and effort into forumulating reasonable plans.

I'm not suggesting that the president's plan will be a good one.

Certainly not before we see it! He is, after all, a politician. And his lips will be moving.

Seriously, what I see going on now is a full-court press by one faction of the Democrats to pre-emptively shoot down anything at all the GOP might offer before it can even be proposed, and assert that all GOP proposals will be hienous robberies of the treasury, etc. Their alternative plan is (surprise!) the usual prescription of saying there's no problem as long as they can raise taxes. On the GOP side there's the "free lunchers" that claim everything can be made peachy keen by just turning it all over to the markets. And somewhere in that vast middle ground are some very thoughtful and serious people in both the DLC and the GOP moderate faction that will have (do have) some serious and reasoned proposals that will actually address the problems.

But if we listen to the ideologues, either the tax & spenders or the free-lunchers, instead of the serious moderates, we're fools.

I'm not suggesting that the president's plan will be a good one. I would note that Lindsey Graham, author of the last plan mentioned above, has expressed skepticism about whether the president is willing to do this in a fiscally responsible fashion. But there are a lot of careful, serious people who believe in the basic idea and who have put time and effort into forumulating reasonable plans.

Yes, Bill, that's the thing, isn't it. I'm getting more and more frustrated by the people who keep ignoring the primary importance of the absence on any true savings under the current plan and giant sea change that occurs when the goverment starts needing to pay out more than it is collecting. We can't seem to even get the reform bus out of the station.

Integrating investment into SS is not a magic bullet, but it can help. Just the fact that actual dollars will go into accounts instead of getting spent by the government is a big help. But whether or not adding investments to SS will be a big help depends entirely on the nature of the plan, as you point out, and as Tully points in calling the critics on the carpet for demagoguing in the absence of any details to consider. I don't trust Bush to come up with a good responsible plan instead of a "give everyone what they want especially my buddies" plan. But I'll at least wait until I see what the plan is.

Many people are opposing integrating investment into SS on some principle, and I don't really get why that principles, something about what SS is supposed to be, and who it's supposed to protect, gets to be disconnected from financial and demographic reality. Fine, SS is supposed to protect Americans in their old age, and help most those who need help most. But the problem is the jump from this decent principle to stubbornly clutching to panglossian fiction that it is on course to keep metting its promises with no real changes.

If Britian's plan didn't work. that's definitely proof that the plan was executed poorly. It's not proof that investing money for retirement is a bad idea. People do it successfully all the time. So Rick, I find your choice to focus on Britain to be a distraction. Over the next 2 decades, the surplus SS dollars that congress has been spending to finance other government spending wil dry up. So right now, today, this already going to stress the budget, and demand either more cuts or more borrowing. Then in about 15 years, the government will actually have to find additional revenue to finance SS.

Like Tully,. Bill, and I keep trying to stress, all this IS a problem, and the poorer you are, the bigger the problem it is. And the possible changes to fix it are constrained to a small number of choices. And invesntment is the only one that actually hold any hope whatsoever of making pool of the available retirement dollars grow without pain. So if you want to take this possible tool off the table because you are afraid of risk, fine. But face the pain of the remaining tools: cutting benefits, raising the retirement age, and raising taxes not just once, but continually as the gap grows. And face the fact that these remaining tools are bound to be most painful for low income retirees.

If I'm looking at the right chart
2003 income were 631.9 billion
2003 costs were 479.1 billion
So as of 2003: 152.8 billion was being diverted to the general fund by way of creative bookkeeping (the trust fund) to pay for the war, pork barrel.......

Every year between now and 2018 that number will be smaller (forcing the government to raise taxes or cut spending)

So where is the money for these private accounts going to come from?

Until the President puts forth a plan, it will be hard to know whether other plans are similar or not. But once the President presents a plan, there will be intense pressure to steamroll it as soon as possible, probably within 100 days I expect. I've already seen extremely simplistic advertisements on TV trying to prime viewers to support the plan without presenting details.

So even though we don't know the details, ironically, this may actually be the time when we can have the most dispassionate discussion of them. Indeed, before the Administration makes a decision, it does show flexibility about details. Once the decision is made, it tries to create inexorable momentum, and responds to criticism with spin and defensiveness.

I get the point that at least private accounts would be real savings for the future--but only if their funded in the present. If contributions to private accounts are deficit funded, then the future taxes that aren't needed to support pensions will be needed to fund the deficit. And if deficits don't matter, then why not fund Social Security payments after 2018 with borrowing rather than borrowing immediately? (bogus answer: we'll earn money off the arbitrage between the rate the government can borrow at, and the return from equity investments. This is what I believe is illusory)

Rick has a point. If we are going to borrow the money anyway, why not wait till we actually need it?

That's what I mean by focusing on whether the president's plan is fiscally responsible. If we're going to fund the transition costs through borrowing (as was suggested in some early comments from the administration), I think this is irresponsible and inconsistent with our current fiscal environment.

Sen. Graham and Sen. Conrad published an op-ed piece in USA Today a few weeks ago that laid the proper fiscal framework, I think. Read the piece itself and the analysis of it from Centrists.org.

Under our current fiscal circumstances, any move to a prefunded Social Security plan probably involves an increase in the payroll tax and/or increasing the wages cap, among other changes.

If the choice were borrowing the money now versus having to borrow it beginning in 2018 (under the current system), I choose the latter.

On the other hand, if the choice is reforming the system now (with benefit reductions and/or tax increases), I strongly prefer doing it with private market accounts rather than without them. Simply adding to the Social Security Trust Fund, and increasing the amount the government will borrow for more spending every year, is not a solution.

I think there's a responsible direction that can be taken on this issue. It seems like some of the more reasonable centrist Republicans (like Graham) are leading the way on this. And organizations like Centrists.org and the Concord Coalition are making those same basic points -- that we need to put everything on the table on the fiscal/revenue side of the equation if we want a solid, stable program.

The biggest problem I have with privatization (and I am in favor of it otherwise) is the idea that the investments will only be made in index fund or large cap companies. The idea of investment, and capital markets in general, is that money be given to companies that have the steadiest profit-making ability. If the only companies Americans can invest in are large-cap types, the lobbying by these companies to be included on the Russell/Dow Jones/S&P indexes will be fierce, done regardless of the health of the company, and a drain on profit-making ability. If this is all privatization becomes, I'll be off the wagon entirely.

I hate to divert from all of the financial details but I keep coming back to a basic question: Is SS a welfare program or a retirement/pension program? As a welfare program it seems very costly and covers far too many who "don't need it". As a pension program it's returns suck. I beleive the original intent of the program was to address the large (then) problem of retired/out of work/destitute elders. That sounds like a welfare program to me.

Here's a radical idea. Convert it to a welfare program. Establish income limits for beneficiaries and then provide welfare payments to those below. That would certainly reduce the "social security roles" and therefore the cost. The financial question I would have for such a program is "Would this radical change reduce the SS tax?" and therefore give the wage earner more dollars to put into the pension plan of his/her choice (or spend it).

I guess a personal bias of mine is that the Government will always do a lousy job of managing my money. ("Administrative fees too high and investment returns way too low")

And finally on another separate note, I really do see another elder crisis coming long before SS crashes. Not only is Medicare soon to run out but Medicaid (healthcare for the poor) is spending more and more of its budget (>50%) to house elders who can't care for themselves. When the baby boom retires, that will become a huge issue. The "Sophie's choice" we'll face is 1) shorting the poor on their healthcare or 2)putting frail and disabled elders into the street. I hate to say it, but that problem makes my concern about whether I'll have those "extra retirment dollars" that SS will provide (above and beyond my other retirment plans) seem much less important.

Is SS a welfare program or a retirement/pension program?

It's a near-comprehensive entitlement program with partial indirect means-testing for current earned income to determine the current benefit amount payable (if you are collecting SS but still working, past a certain point any additional earned income reduces your current benefits--this is adjusted as your earned income changes). A working person over retirement age may collect Social Security, but could conceivably lose all current benefits by making too much money. Boo hoo! A non-working person with considerable outside taxable income will pay income tax on up to 85% their benefits, regardless of the source of the other income, earned or unearned.

For any other interpretations about what SS is, your mileage may vary considerably by ideology.

Medicare began real revenue deficits this year.

There is a tendency to point at other, larger problems and say "Why aren't we doing that instead (or first)? What about that?" To the extent that kind of criticism is effective, it leads to us doing nothing at all about ANY problems.

Gotta start somewhere. Real Medicare/Medicaid reform will require real comprehensive structural reform of the entire American health care system. Don't hold your breath waiting for it.

Bush believes that cutting taxes and making the 2001 and 2003 tax cuts permanent will in the long run hold down government's share of the gross domestic product. Many Democrats act out of fear that Bush is right. They would like to see America move some distance toward a western European-style welfare state. They know that permanent tax cuts would tend to prevent even a President Hillary Rodham Clinton from doing this. It's a serious difference over a serious issue.

Something to keep in mind as the partisans gear up for the donnybrook. I've said for quite a while that the SS debate involved a fervent Democratic desire for advancing Euro-socialism, and vice versa for the GOP. I'm not the only one who thinks so.

When we talk about privatized accounts, it seems to me that you can look at in terms of a mandatory 401K account and it would make a great deal of sense to take a look at the current 401K program in the US and see how much costs go towards administration costs, the return on investments in the past, and the pitfalls the current system has in place. It seems as good an evaluation as looking at the British system (the two aren't mutually exclusive).

At least for my wife and I, heading quickly into our forties, the 401K program has been fantastic despite the downturns the economy has experienced throughout the years. If some of that payroll taxes we pay directly (or indirectly through our employer; it's a complete fiction to believe that isn't coming from our pocket as well) could go into the 401K, it can only get better.

Of course, 401K investors typically have more investment knowledge than the Americans and an evaluation would have to take that in account. Certainly though, it would be a good starting point in accessing the costs, and I can't imagine it comes anywhere near Cohen's 30% claim for the Brits.

A good comparison for the types of funds used would be the funds used by the Thrift Savings Plan, the pension plan that government employees and Congresscritters get. The administrative expense ratio on the funds available ran 10 basis points in 2003. (For the non-financially inclined, that's one-tenth of one percent or $1 for every $1000 in balances.) That's impressively low.

Yes, it can be made a no-brainer limited-option plan and still be in broad-based equities and bonds, both without massive expenses or exposure to the circling high-commission sharks of Wall Street. For example, a combination of two index funds would cover almost the entire US equity and real estate trust market. TOugh to get much broader than that! One S&P 500 index and one Wilshire index.

No, Congress is not exempt from SS, no matter what anyone has told you. But how about extending the TSP to everyone? Just a thought.

Tully

You said

I've said for quite a while that the SS debate involved a fervent Democratic desire for advancing Euro-socialism, and vice versa for the GOP. I'm not the only one who thinks so.

You charge the "do nothing" Democrats with socialist goals. Whereas with the GOP, they are only guilty of "vice versa" What's vice versa?

Actually, it seems to me that the GOP is trying to get the private accounts in there for the hell of it, by borrowing if necessary, which makes no fiscal sense, and in a small way if necesssary, which means high administration fees. Their goal is to get a foot in the door for privatization. Even if they're plan makes no immediate financial sense, people like Grover Norquist justify it as a "foot in the door" for their ultimate goal, which is to undo the "socialist security" system.

Well I didn't want to be the first one to say it, but I also think the whole point of this "crisis" is to destroy SS. Of course the only proof I have is the little voices in my head.

Oh yeah, I guess we could site the financial crisis created by "Medicare reform".

Obviously, Rick, "vice versa" is limited-government goals as compared to expanded-government goals. To be more precise, that would be low-tax fiscal conservatism as compared to the high-tax fiscal "liberalism" of the Euro-socialists. (As compared to Congress' current high-tax social conservatism.)

The Democrat "approach" to SS right now is to hold onto the current sytem without doing anything, or to raise those regressive payroll taxes to keep it "solvent" by pumping up the "trust fund." Once again, in baseline overall effect on government revenues and expenditures, this does absolutely nothing at all for reforming SS. It simply increases the tax revenues available for general government expenditure. This by itself increases the amount of government debt my kids and grandkids will be paying, but without accomplishing anything more than increasing government spending. No savings are produced, no future benefits actually funded. Noting this truth is not "sliming."

Actually, it seems to me that the GOP is trying to get the private accounts in there for the hell of it, by borrowing if necessary, which makes no fiscal sense, and in a small way if necesssary, which means high administration fees.

As Stuart Butler points out in today's Pittsburgh Tribune-Review, there can indeed be good reasons to borrow the transition costs. Namely, if it'll reduce future expenditures by more than the borrowing cost in net present value terms. On the other hand, the Democrat "do nothing" approach automatically requires large future tax increases to sustain benefits, or in the "stuff up the trust fund" variant, immediate tax increases and more immediate and future borrowing from SS surplus revenues for flat-out deficit spending. Why does the former make less fiscal sense than the latter?

I've already pointed out that large limited-choice investment programs run by the government can indeed be low-fee, efficient, and effective. This isn't an assumption or an empty claim, it's been demonstrated by the government itself with the TSP. Even a "small" government privatization investment program would be large by ordinary assessment, and have maximum efficiencies of scope and scale available for keeping expenses down to minimal rates--as the TSP does.

I don't know what the Bush admin will propose. When I see it, I'll analyze it. It may make sense, or it may be sheer idiocy. But I will not condemn it blindly in advance, as you are doing, nor will I credit the Democrat's "do nothing and/or raise taxes" faction with wisdom for practicing active deceit. If you don't like the description of "raise taxes for social spending" as a generic Democratic mantra or an inclination towards Euro-socialism, I'd be happy to hear a more apt one.

Correction: That should read "Congress' current high-spending social conservatism"

Their (GOP's)goal is to get a foot in the door for privatization...for their ultimate goal, which is to undo the "socialist security" system.

Should we undo it quickly or undo slowly, over many years (as we presently are)?