Bush, FDR and Social Security (PONZI)
Fri Apr 29, 2005 14:56
64.140.158.177
Bush, FDR and Social Security
http://www.techcentralstation.com/021705X.html
02/17/2005
By Nick Schulz
Shortly after President Bush's State of the Union address New York Times columnist Paul Krugman accused President Bush of trying to "destroy" the America created by FDR by introducing private accounts into the Social Security system. I wrote a column at the time claiming Krugman was wrong and that, based on some principles FDR outlined in a message to Congress when Social Security was being constructed, one could reasonably conclude that Bush's effort was in keeping with the principles outlined by FDR.
The invocation of that message to Congress by advocates of Social Security reform has left-wing critics of the Bush administration in a lather. In early February, some prominent journalists and talking heads such as Brit Hume of Fox News discussed the principles FDR articulated in that message to Congress. What Hume et. al. claimed FDR meant in his message got the political left in high dudgeon. David Brock's group Media Matters accused them of bad-faith and misrepresenting what FDR actually said. Radio host Al Franken picked up on the Media Matters attacks and pilloried Hume and others. And now TV anchor Keith Olberman is in on the act, attacking Hume et. al. You can read their arguments and decide for yourself who is correct.
Then on Tuesday night Al Franken's blog linked to my piece and my email box started filling up with people calling me an idiot, saying I was clueless, didn't understand FDR, and worse. With Franken et. al. beating this drum, let's see if we can't revisit the FDR quote to make some sense of the debate over it.
So what did FDR say? Let's look again at the quote:
"In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities that in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."
It seems plain that FDR was calling for a system that was predicated on two essential components. The first was that it be "self-supporting". That sounds reasonable enough -- who wants to create a system that can't support itself? The second is that part of it be "compulsory". Given the context -- a Great Depression that left many older Americans in dire straits -- that made sense, too. The government would encourage you to save by creating mechanisms that force you to save, taking your money away from you so that you can't spend it on something else. That way there would be no excuses for being old and being without. FDR also called for a voluntary component to the system as well.
Now, let's look at those components in the context of the current Social Security system and then in the context of Bush's proposed private accounts.
Is the current system "compulsory"? Of course. Is the current system "self-supporting"? In one sense, yes but in a more important sense, no.
The current system is pay-as-you go, meaning today's contributions from workers go to today's retirees. The government taxes over 12% of income and retirees get their benefits from that tax base. The system supports itself � today.
But the system as currently constructed is not self-supporting in any meaningful sense in the long term. As William Sterling has pointed out, the wage indexing changes initiated to the program in the 1970s mean benefits rise much faster than they used to. Couple that with demographic shifts in which the worker-to-retiree ratio drops dramatically, and the system literally can't support itself without changes -- without massive tax increases, benefit cuts, means testing, the inflationary printing of more money, or any of a series of other possible changes.
Now let's look at FDR's principles in the context of Bush's proposed private accounts.
Is what Bush proposes compulsory? Yes, in the sense that people would still be forced to contribute to their retirement. They would have more choice over what form that contribution should take. They could decide to take smaller checks from the government in the future in return for being able to use some of their contributory funds to invest in stocks and bonds. But they would not be able to spend that money on groceries or housing or clothes or vacations or anything else. Bush's plan involves just as much compulsory saving for retirement as the system we have inherited from FDR.
Is what Bush proposes self-supporting? In an important sense it moves Social Security in a direction that's by definition more self-supporting than the current system. Money that's put into a private account with your name on it will be there for you when you retire. Your money, your retirement. And the cuts in future benefits that Bush appears to favor would make the program solvent.
No, FDR never wanted a completely voluntary or purely private system to replace Social Security -- and some commentators may have spoken carelessly in suggesting that he wanted it replaced. Either way, that's not what Bush is proposing. By making the system more transparently self-supporting while keeping it compulsory, Bush's effort is in keeping with the broad principles outlined by FDR. The benefits from private accounts will supplement government checks, not replace them.
What's more, it's important to remember that Social Security taxes and benefits have grown enormously since FDR's day. So cutting benefits two generations from now as a way of making some room for the financing of private accounts within the Social Security system today can't possibly be viewed as a violation of FDR's original vision -- and probably brings us closer to it.
Lastly, rather than being an attack on the New Deal -- "destroy"ing FDR's America, as Krugman alleged -- the kinds of changes initiated by the Bush administration can just as easily be considered an expansion of the welfare state. Up until now, the welfare state has given Americans only income support. Bush's proposal would have it give Americans the opportunity to accumulate wealth, as well. But it is an expansion of the welfare state that reduces the public's dependence on the state -- which may be why some of FDR's self-styled heirs hate it so.
If you are a producer or reporter who is interested in receiving more information about this article or the author, please email your request to:
interview@techcentralstation.com
==================
Key House panel expects to produce bill by June
MarketWatch - 37 minutes ago
WASHINGTON (MarketWatch) -- A key Republican leader in the House on Friday set a June target for producing a wide-ranging bill intended to overhaul Social Security and boost retirement savings. House Ways ...
Bush on offensive as ratings hit floor Australian
White House calls Social Security headlines "irresponsible" KRQE
ABC News - USA Today - CNN - San Francisco Chronicle
- all 1,639 related �
===============
Fixing Social Security / Saving Social Security Ponzi Scheme
GOOGLE: MORE>>
The Social Security Ponzi Scheme Paradox
By Erik Chavez
Published: Thursday, October 14, 2004
http://www.chibus.com/news/2004/10/14/Perspectives/The-Social.Security.Ponzi.Scheme.Paradox-754139.shtml
Faced with the inevitable financial failure of social security, one would expect Presidential candidate John Kerry and President George Bush to address this topic with more emphasis than they have done to date. Most economists, including Alan Greenspan, argue for major reform for the program before it becomes unsustainable. Greenspan has said, "If we have promised more than our economy has the ability to deliver, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels. If we delay, the adjustments could be abrupt and painful."
It is possible to push back the inevitable failure with adjustments to the current system. The two adjustments most often discussed are increasing the age of retirement and reducing the annual inflation adjustments, which are tied to the CPI. However, both of these actions are analogous to a finger in the hole of a dike. Social security is not facing financial ruin because the baby boomers are coming of retirement age. It is failing because the structure of the plan more closely resembles a ponzi game than it does insurance. That is, it relies on the payments of young workers, new to the system, to pay for the benefits of retired workers. As birth rates decline, the value of payments surpasses the amount collected through taxes - the perfect recipe for ruin, which many countries with similar pension plans will face in the not so distant future.
The major reason social security will fail is that it attempts to provide a free lunch and as all the Chicago thinkers know, "there is no free lunch." This program is F.U.B.A.R. It is time that we turn off the power and begin to dismantle the third rail because the perverse incentives and mismanagement of wealth that it creates does a huge disservice to society. It is time we demand that our President and our Congress address this issue. The only possibility of ever dismantling this program is to have a lame duck president with a majority Congress of the same party.
Continued...
http://www.chibus.com/main.cfm?include=subApplication&subApplicationName=quickRegister&fuse=registrationOrLoginRequired&thereferer=http%3A//www.chibus.com/news/2004/10/14/Perspectives/The-Social.Security.Ponzi.Scheme.Paradox-754139.shtml%3Fpage%3D2
================
Social Security: Ponzi Path to Dystopia, Executive Summary
... Social Security: The Ponzi Path to Dystopia. David Simcox *. ... See the complete essay, Social Security: The Ponzi Path to Dystopia, on the MFS Website here. ...
http://www.mnforsustain.org/social_security_dystopia_exsum_simcox_d.htm
http://www.techcentralstation.com/021705X.html
02/17/2005
By Nick Schulz
Shortly after President Bush's State of the Union address New York Times columnist Paul Krugman accused President Bush of trying to "destroy" the America created by FDR by introducing private accounts into the Social Security system. I wrote a column at the time claiming Krugman was wrong and that, based on some principles FDR outlined in a message to Congress when Social Security was being constructed, one could reasonably conclude that Bush's effort was in keeping with the principles outlined by FDR.
The invocation of that message to Congress by advocates of Social Security reform has left-wing critics of the Bush administration in a lather. In early February, some prominent journalists and talking heads such as Brit Hume of Fox News discussed the principles FDR articulated in that message to Congress. What Hume et. al. claimed FDR meant in his message got the political left in high dudgeon. David Brock's group Media Matters accused them of bad-faith and misrepresenting what FDR actually said. Radio host Al Franken picked up on the Media Matters attacks and pilloried Hume and others. And now TV anchor Keith Olberman is in on the act, attacking Hume et. al. You can read their arguments and decide for yourself who is correct.
Then on Tuesday night Al Franken's blog linked to my piece and my email box started filling up with people calling me an idiot, saying I was clueless, didn't understand FDR, and worse. With Franken et. al. beating this drum, let's see if we can't revisit the FDR quote to make some sense of the debate over it.
So what did FDR say? Let's look again at the quote:
"In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities that in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."
It seems plain that FDR was calling for a system that was predicated on two essential components. The first was that it be "self-supporting". That sounds reasonable enough -- who wants to create a system that can't support itself? The second is that part of it be "compulsory". Given the context -- a Great Depression that left many older Americans in dire straits -- that made sense, too. The government would encourage you to save by creating mechanisms that force you to save, taking your money away from you so that you can't spend it on something else. That way there would be no excuses for being old and being without. FDR also called for a voluntary component to the system as well.
Now, let's look at those components in the context of the current Social Security system and then in the context of Bush's proposed private accounts.
Is the current system "compulsory"? Of course. Is the current system "self-supporting"? In one sense, yes but in a more important sense, no.
The current system is pay-as-you go, meaning today's contributions from workers go to today's retirees. The government taxes over 12% of income and retirees get their benefits from that tax base. The system supports itself � today.
But the system as currently constructed is not self-supporting in any meaningful sense in the long term. As William Sterling has pointed out, the wage indexing changes initiated to the program in the 1970s mean benefits rise much faster than they used to. Couple that with demographic shifts in which the worker-to-retiree ratio drops dramatically, and the system literally can't support itself without changes -- without massive tax increases, benefit cuts, means testing, the inflationary printing of more money, or any of a series of other possible changes.
Now let's look at FDR's principles in the context of Bush's proposed private accounts.
Is what Bush proposes compulsory? Yes, in the sense that people would still be forced to contribute to their retirement. They would have more choice over what form that contribution should take. They could decide to take smaller checks from the government in the future in return for being able to use some of their contributory funds to invest in stocks and bonds. But they would not be able to spend that money on groceries or housing or clothes or vacations or anything else. Bush's plan involves just as much compulsory saving for retirement as the system we have inherited from FDR.
Is what Bush proposes self-supporting? In an important sense it moves Social Security in a direction that's by definition more self-supporting than the current system. Money that's put into a private account with your name on it will be there for you when you retire. Your money, your retirement. And the cuts in future benefits that Bush appears to favor would make the program solvent.
No, FDR never wanted a completely voluntary or purely private system to replace Social Security -- and some commentators may have spoken carelessly in suggesting that he wanted it replaced. Either way, that's not what Bush is proposing. By making the system more transparently self-supporting while keeping it compulsory, Bush's effort is in keeping with the broad principles outlined by FDR. The benefits from private accounts will supplement government checks, not replace them.
What's more, it's important to remember that Social Security taxes and benefits have grown enormously since FDR's day. So cutting benefits two generations from now as a way of making some room for the financing of private accounts within the Social Security system today can't possibly be viewed as a violation of FDR's original vision -- and probably brings us closer to it.
Lastly, rather than being an attack on the New Deal -- "destroy"ing FDR's America, as Krugman alleged -- the kinds of changes initiated by the Bush administration can just as easily be considered an expansion of the welfare state. Up until now, the welfare state has given Americans only income support. Bush's proposal would have it give Americans the opportunity to accumulate wealth, as well. But it is an expansion of the welfare state that reduces the public's dependence on the state -- which may be why some of FDR's self-styled heirs hate it so.
If you are a producer or reporter who is interested in receiving more information about this article or the author, please email your request to:
interview@techcentralstation.com
==================
Key House panel expects to produce bill by June
MarketWatch - 37 minutes ago
WASHINGTON (MarketWatch) -- A key Republican leader in the House on Friday set a June target for producing a wide-ranging bill intended to overhaul Social Security and boost retirement savings. House Ways ...
Bush on offensive as ratings hit floor Australian
White House calls Social Security headlines "irresponsible" KRQE
ABC News - USA Today - CNN - San Francisco Chronicle
- all 1,639 related �
===============
Fixing Social Security / Saving Social Security Ponzi Scheme
GOOGLE: MORE>>
The Social Security Ponzi Scheme Paradox
By Erik Chavez
Published: Thursday, October 14, 2004
http://www.chibus.com/news/2004/10/14/Perspectives/The-Social.Security.Ponzi.Scheme.Paradox-754139.shtml
Faced with the inevitable financial failure of social security, one would expect Presidential candidate John Kerry and President George Bush to address this topic with more emphasis than they have done to date. Most economists, including Alan Greenspan, argue for major reform for the program before it becomes unsustainable. Greenspan has said, "If we have promised more than our economy has the ability to deliver, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels. If we delay, the adjustments could be abrupt and painful."
It is possible to push back the inevitable failure with adjustments to the current system. The two adjustments most often discussed are increasing the age of retirement and reducing the annual inflation adjustments, which are tied to the CPI. However, both of these actions are analogous to a finger in the hole of a dike. Social security is not facing financial ruin because the baby boomers are coming of retirement age. It is failing because the structure of the plan more closely resembles a ponzi game than it does insurance. That is, it relies on the payments of young workers, new to the system, to pay for the benefits of retired workers. As birth rates decline, the value of payments surpasses the amount collected through taxes - the perfect recipe for ruin, which many countries with similar pension plans will face in the not so distant future.
The major reason social security will fail is that it attempts to provide a free lunch and as all the Chicago thinkers know, "there is no free lunch." This program is F.U.B.A.R. It is time that we turn off the power and begin to dismantle the third rail because the perverse incentives and mismanagement of wealth that it creates does a huge disservice to society. It is time we demand that our President and our Congress address this issue. The only possibility of ever dismantling this program is to have a lame duck president with a majority Congress of the same party.
Continued...
http://www.chibus.com/main.cfm?include=subApplication&subApplicationName=quickRegister&fuse=registrationOrLoginRequired&thereferer=http%3A//www.chibus.com/news/2004/10/14/Perspectives/The-Social.Security.Ponzi.Scheme.Paradox-754139.shtml%3Fpage%3D2
================
Social Security: Ponzi Path to Dystopia, Executive Summary
... Social Security: The Ponzi Path to Dystopia. David Simcox *. ... See the complete essay, Social Security: The Ponzi Path to Dystopia, on the MFS Website here. ...
http://www.mnforsustain.org/social_security_dystopia_exsum_simcox_d.htm
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