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Simple enough for a Congressman

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Let’s say we assemble a package of changes to Social Security, including a diversion of funds from Social Security to private accounts that somehow manages, by the necessary combination of tax increases and benefit cuts, to achieve solvency for th eprogram. If you put it all on a balance sheet, the diversion would have to count as an outflow…a reduction of the cash available to pay benefits.

Now. Remove that diversion from the balance sheet.

Suddenly the size of the necessary tax increase or benefit cut is reduced. Drastically.

It’s that simple.

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About Prometheus 6

  • http://www.roblogpolitics.blogspot.com RJ

    Social Security, in its present form, is a Ponzi Scheme.

    The money one currently “invests” for their “pension” is spent NOW, and is not guaranteed at all. It is simply a poorly-managed welfare program.

    It’s that simple.

  • Eric Olsen

    I am absolutely confused about this in just about every way possible

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    Oh wow…. I get it…

    Wait, I really don’t.

  • Eric Olsen

    exactly

  • http://www.prometheus6.org/ P6

    *sigh*

    More proof of the desperate state of American education in mathematica.

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    I don’t like to toot my own horn very often, but I’m actually reasonably bright.

    It’s obvious you’re trying to convince us of something, but for the life of me, I can’t figure out what that might be. Therefore, I’m left neither swayed nor enlightened.

    Perhaps you can do a job of improving the education system on BlogCritics, if not the United States, and better explain yourself and what you’re trying to accomplish.

  • http://www.prometheus6.org/ P6

    Cmon guys, this is PRE-algebra.

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    Why don’t you SPELL out how simple it is, then.

    Whatever IT is.

  • http://www.prometheus6.org/ P6

    The less you divert, the less you have to collect on the other side.

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    I give up.

  • http://adamantsun.blogspot.com Steve S

    P6, you are saying that the money taken out of SS for private accounts, does not help SS but makes it worse off, because less money is going into it?

    I think that’s a given. Bush does not want to save SS, he wants to destroy it.

  • http://adamantsun.blogspot.com Steve S

    Or what you are saying is that diverting money to private accounts AND tax increases AND benefit cuts can save SS, BUT that by diverting money, you need to compensate with MORE tax increases and MORE benefit cuts.

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    I think the Bush Administration has been going after a longterm Starve the Beast strategy since they took office.

  • http://www.prometheus6.org/ P6

    Steve, both statements are true.

    Is it really that hard to see? It seems so blatant…

  • http://adamantsun.blogspot.com Steve S

    No, I got it. I began to question if I got it or not, because of the comments, but apparently, I got it.

  • alienboy

    i don’t understand Prometheus 6 either, and it seems a moot point.

    there is absolutely no way on earth that the USA will do away with its social security system.

    If you want the streets of every burb in america clogged with the poor, the needy, the losers of the free market, the returned victims of war, to turn the usa into some kind of post-Dickensian superslum, it would be a great idea.

    I’m fairly sure every serious politician understands this. the public debate seems more manipulative than serious policy debate…

  • http://www.prometheus6.org/ P6

    i don’t understand Prometheus 6 either

    Did you understand Steve S?

    If you want the streets of every burb in america clogged with the poor, the needy, the losers of the free market, the returned victims of war, to turn the usa into some kind of post-Dickensian superslum, it would be a great idea.

    <set cynicism=”on”>
    Why not? It would save the government money and lower the unemployment rate with a single gesture.
    <set cynicism=”on”>
    Seriously, mathematics is never moot. And the only way to get rid of the manipulation in the debate is to confront it with fact.

  • http://www.prometheus6.org/ P6

    Hm. It seems my cynicism is stuck in the “on” position…

  • alienboy

    you can get treated for that these days, p6…

  • http://www.prometheus6.org/ P6

    Penicillin? :-)

  • http://watchingwashington.blogspot.com Terry Turner

    I think what you’re saying is that if you take money out of Social Security to pay for the private accounts, then you’ll have to raise taxes or cut benefits to make up for the loss.

  • Richard

    You have not explained shit, and it ain’t simple

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    “post-Dickensian superslum” — great great phrase, alienboy.

  • SFC SKI

    I asked this question on a similar thread and it got lost in a lot of other partisan snark.
    If under the current SS plan, there will be fewer workers paying into SS and more retirees taking out of SS, to the point where eventually there will be more going out than coming in, why shouldn’t alternatives be on the table?

    I don’t agree that Bush is trying to kill SS, short of disbanding it entirely, today, and emptying the fund, how could he possibly destroy it in the less than 4 years he has in office?

  • Maurice

    I think I can summarize P6’s point:

    If we are going to jump through hoops to supplant SS why not jump through the same hoops to save SS?

    The problem is SS is not worth saving. It is one of the few government programs that you can call bad with absolute certainty. I don’t mind paying my property taxes knowing that they are used for many things that don’t affect me. I do mind paying SS knowing that it is used for many things not associated with people trying to retire. Also the benefit is negligible ($1000/month) for most people.

    I think a very realistic goal would be to just get them to quit robbing SS to pay other bills.

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    Maurice – the benefit may be “negligible,” but millions of people depend on it in old age. If it’s jerked around with and disappears, it will be a catastrophe.

    So I agree that there should be ideas on the table for reform, but nothing has convinced me that private accounts are the best one.

  • http://www.prometheus6.org/ P6

    Guys, you’re reading way too much into the post.

    The decision to “save Social Security” has been made. That’s not even open to discussion. And the solvency of the system is now the stated goal of Bush and Congress. So now it’s all mathmatics.

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    P6: Your post is akin to the most cryptic of haikus.

  • JR

    Question: How can you just “remove that diversion from the balance sheet”?

  • Maurice

    Eric:

    can you live on $1000 a month?

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    Maurice: Hell no, but many many people are forced to.

  • Maurice

    Eric:

    There may be a number of people that live on the SS benefits exclusively (pity!). I just feel bad for them putting more money into an account than they will ever get back.

    If you were convinced that private accounts would provide more than the current benefit (75 cent on the dollar loss) would you be for SS reform?

  • http://dumpsterbust.blogspot.com/ Eric Berlin

    As I said, I’m for some kind of reform, but I’m not nearly convinved that private accounts is the way to do it (for a variety of reasons). And I don’t see myself getting convinced anytime soon.

  • http://adamantsun.blogspot.com Steve S

    I thought we already had private accounts. Did I just dream of 401k’s and IRA’s this last two decade?

  • http://adamantsun.blogspot.com Steve S

    decades.

  • http://www.prometheus6.org/ P6

    Question: How can you just “remove that diversion from the balance sheet”?

    Use the delete key.

  • http://www.prometheus6.org/ P6

    Your post is akin to the most cryptic of haikus.

    Thank you Eric. I try.

  • JR

    Seems to me like the post is just making the point that they’re cooking the books.

    Did I miss something?

  • http://www.prometheus6.org/ P6

    No. You added something.

    There’s no secret meanings in the post.

  • JR

    The reader can’t not add something.

  • Dan

    P6, I think one factor you might be missing is that the ones who “opt out” are still in the SS system but to a lesser extent. If the opt outs are keeping 33% of their retirement income, then they would only be eligible for 66% of SS benefits when they retire. Their check, instead of $1000 a month, would only be $666 a month.

    In that sense, it’s a zero sum game, and doesn’t affect solvency.

    One hopeful expectation is that the 33% opt outers place in private funds will outpace the return rate of SS. In that case, when the day of reckoning comes, they could better afford to handle a reduction in SS benefits. When their SS check goes from $666 to $555 for example.

  • http://adamantsun.blogspot.com Steve S

    so the government wants to place the secured retiremental supplement of millions upon one hopeful expectation?

  • http://www.prometheus6.org/ P6

    The reader can’t not add something.

    Fine. Just be clear it’s your addition, not my statement.

  • http://www.prometheus6.org/ P6

    Sorry for the terseness, JR. My point is, I’ve stated a simple mathematical reality. It is actually more that you should account for the fact in your own calculations of how to get the system solvent.

    Now, if you look at that mathmatical fact and what you know of the politics and economics of the discussion and feel the fact implies fraud on the part of the government, that’s interesting enough that I’d like to understand how you came to that conclusion. But it’s not an accusation I’m making.

  • http://www.prometheus6.org/ P6

    P6, I think one factor you might be missing is that the ones who “opt out” are still in the SS system but to a lesser extent.

    No, I didn’t miss that. The difference between full participation and the lesser participation you describe is the referenced diversion of funds.

  • Dan

    “so the government wants to place the secured retiremental supplement of millions upon one hopeful expectation?”

    Only those “millions” who want to take the risk. And only for the third that they put at risk.

  • Dan

    “No, I didn’t miss that. The difference between full participation and the lesser participation you describe is the referenced diversion of funds.”

    Then you understand that it would have no effect on solvency?

  • http://www.prometheus6.org/ P6

    I started with the assumtion of a package including a diresion to private accounts that achieves solvency.

    The diversion to private accounts is on the same side of the equation as benefits. It is part of what must be paid for by tax increases or benefit cuts. Reduce what must be paid for and you reduce the size of the tax increase and/or benefit cut.

    We want the smallest tax increase and/or benefit cut possible, right?

  • Dan

    Those who divert part of their retirement to private accounts will later be drawing a percentage out of SS that will be less by the same percentage they diverted. So it would be a wash.

    SS is solvent now, that is, more money is going in then coming out. The downside is that the diversion to private accounts will hasten the day of reckoning. It won’t increase the amount needed to clean up the mess. It won’t decrease it either.

    The upside is that as that day approaches, those who the mess falls to will have some accelerated growth private funds to soften the blow.

    I see what your saying, but there’s no need to combine the two things–diversion to private accounts, and tax increases / benefit cuts.

  • http://www.prometheus6.org/ P6

    The upside is that as that day approaches, those who the mess falls to will have some accelerated growth private funds to soften the blow.

    Can you guarantee that?

    I see what your saying, but there’s no need to combine the two things–diversion to private accounts, and tax increases / benefit cuts.

    I agree. And I hope you see that only one of the two is optional. And it’s not progressives that are pushing the combination. In fact, progressives are demanding they be split.

    You can do this without private accounts. You can not do this without tax increase and/or benefit cuts.

    If you divert funds to personal account, it MUST be offset by greater tax increases or benefit cuts.

  • Dan

    “Can you guarantee that?”

    No, but I would bet on it.

    “If you divert funds to personal account, it MUST be offset by greater tax increases or benefit cuts.”

    People who divert funds to private accounts will already be accepting voluntary benefit cuts from SS. That’s why it’s a wash.

    The hard choices needed to satisfy SS’s bail out will remain unaffected by private account diversions.

  • Dan

    Speaking of mathematical conundrums, here is one of my favorites:

    Three guys are partying in Vegas. They eventually decide to go sleep it off in a cheap hotel room downtown at the Plaza. The Plaza desk clerk charges them $30 for a room. They split the cost $10 each. When the Bell hop brings them the roll-away they requested he tells them there was a mix-up and the room only costs $25 and gives them a $5 refund. The guys decide to split 3 bucks between them and give the Bell $2 for his trouble. Now they’ve each spent $9 for the room, (3×9=27), and the Bell has $2, (27+2=29). Where did the other dollar go?

  • JR

    What other dollar?

  • Dan

    good answer.

  • JR

    Thanks. Nice conclusion in that last sentence in Comment 51. That’s what I should have gotten out of the original post.

  • http://www.bhwblog.com bhw

    People who divert funds to private accounts will already be accepting voluntary benefit cuts from SS. That’s why it’s a wash.

    It’s a wash in the future, but not today. Today, it would create the need to add money from somewhere else to pay today’s benefits. The money coming in today is going back out right away — if you decrease the money coming in, you have less to give out right now.

    Ironically, if you leave things as they are, we don’t have a problem paying benefits right now. The problem we’re trying to fix is the one for the future. So private accounts are trying to solve a future problem by creating a problem today.

    I’m not saying that we don’t need to fix what’s going to happen in 2040 before 2040 gets here, but the privatization is not without problems today.

    Even George W. admits that it could cost us $2-3 trillion to offset the money that would be taken out from today’s coffers.

  • http://www.bhwblog.com bhw

    Where did the other dollar go?

    In some girl’s g-string.

  • http://www.prometheus6.org/ P6

    “Can you guarantee that?”

    No, but I would bet on it.

    On what would you base that bet?

    And would you accept a plan that gave stock maket returns without private accounts?

  • http://www.elitistpig.com Dave Nalle

    >>Maurice – the benefit may be “negligible,” but millions of people depend on it in old age. If it’s jerked around with and disappears, it will be a catastrophe. << But Eric. No one has even hinted that we wouldn't preserve SS for those nearing retirement age. Not even the most radical plans suggest anything like that. But it is quite true that fixing the current system and replacing it for future generations are two different issues. We have to do both, and unfortunately fixing the existing system is going to be quite expensive. Dave

  • http://www.roblogpolitics.blogspot.com RJ

    (9X3) – 2 = 25…