Recent Social Security Proposal

[lehighguy]

Recently a bipartisan group introduced a new social security reform. It is essenially the same as the "lockbox" program Al Gore desribed in his 2000 campaign. Here are the take-aways:

1) Benefits are not cut, the retirement age is not raised.
2) There are no private accounts involved at all.
3) The SS trust fund would remain invested in tresuary bonds, no stock market.
4) The real change is that instead of using the SS trust fund to finance current spending, it would be used to purchase treasury bonds on the open-market. These treasury bonds would have real value, as opposed to the "special" treasury bonds that are currently issued and have no value. Essentially, the trust fund would be a real trust fund (sort-of).

To explain the above statement, I need to give a brief review in SS accounting. Essentially, the government takes in $X in SS tax revenue and pays out $Y in benefits. For the moment X > Y.

Now how does this effect the budget? We run a deficiet of $400Bln according to the treasury department. In reality, we run a deficiet of $600Bln, but use the extra $200Bln ($X-$Y) to bring down the debt. However, this is a false accounting entry. That $200Bln was supposed to go into the SS trust fund. We have to pay it of in 2017 when people retire. Why are we reporting a deficiet of $400Bln when the real deficiet is $600Bln? Because politicians want to mask the true cost of SS for political gain.

If spending isn't reduced the plan will do nothing for solvency. We would need to adopt the change and then reduce spending to the old deficiet level. In other words, all the plan really does is show the American people the true cost of SS. I have no doubt they will have no clue wether $400Bln versus $600Bln means anything, nor do I think it will change thier spending habits. But at least we will have been honest with them about what is going on. After all of the corporate scandals of the last few years its amazing that we allow the government to blantently cook the books right in front of our eyes.

So why am I all wrapped up over this. Because I was reading the paper today and there was a full page add from the AARP regarding the plan. It used the words PRIVATE is giant bold 100 size font to explain why people should oppose it. It criticized it for increasing the debt and not solving solvency. This is puzzling. First of all, no private accounts are in the proposal AT ALL. Second, it doesn't really increase the debt. The debt is already $600Bln, we just lie about it and say its $400Bln. Lying doesn't reduce the debt, and being honest about it doesn't increase it. It's also amazing the AARP can afford to take out full page adds in national newspapers considering the plan has NO effect on current or future retirees. All it really proposes is more honest accounting practices.

Dems also dissapoint me. This is Al Gore's plan from 2000. Why are they opposing it? Do Dems even think about issues anymore or do they inflexively oppose everything?

[[censored]]

The AARP is only concerned with the redistribution of income to the current elderly population. This isn't even a bad thing. However I would not look to them for solutions for SS.

I'm not sure why you would ever believe the Democratic party as a whole would want to solve the Social Security crisis, it is a huge issue of them in every election. You need only to look at their refusal even acknowledge the full extent of the looming problem to see that.

good post

[Matty]

[ QUOTE ]
Why are we reporting a deficiet of $400Bln when the real deficiet is $600Bln? Because politicians want to mask the true cost of SS for political gain.

[/ QUOTE ]This is where your post goes horribly wrong. Provide some evidence for this claim. What gain is to be made?

The overwhelming disapproval cutting SS benefits would bring far outweighs the public's attention to the exact numbers in our budget deficit.

[lehighguy]

What evidence? It's a fact. Read the US budget if you don't believe me. Try the CBO or White House websites. SS surpluses are recorded as a debit, but no approriate credit it made to reflect the fact that obligations are being made to the SS trust fund.

Debits without credits.

[Matty]

This part:

[ QUOTE ]
Because politicians want to mask the true cost of SS for political gain.

[/ QUOTE ]

I didn't do more than skim past that point. What gain is to be made?

Also would you mind linking to something that better explains this proposal, and also AARP's ad?

[lehighguy]

Kinduv like how the president bush said his perscription drug benefit would cost $X and it actually costs alot more. It is easier to sell something if you tell them they will get certain benefits for very little money. That's basic political theory.

[Matty]

Social security doesn't need to be sold. It is here to stay.

[lehighguy]

Until its bankrupt.

Moreover, you posts illustrate the current Dem/AARP attitude on everything. Oppose it. It doesn't matter what it is. It doesn't even matter if its your own proposal form four years ago. Just oppose it. Change is always bad.

[LaggyLou]

[ QUOTE ]
4) The real change is that instead of using the SS trust fund to finance current spending, it would be used to purchase treasury bonds on the open-market. These treasury bonds would have real value, as opposed to the "special" treasury bonds that are currently issued and have no value. Essentially, the trust fund would be a real trust fund (sort-of).

[/ QUOTE ]

Anyone who can make this statement clearly has NO idea what he is talking about.

[lehighguy]

How do you think the SS trust fund works.