Posted: Tue Nov 15, 2005 12:55 pm Post subject: Social Security & Medicare
i wonder if someone can let me know why these programs still exist as they do? why do we let the government just take this money to do with as they please instead of putting them in actual accounts? why are so many americans dumb enough to think that they need it?
what are the groups that benefit from these programs?
Posted: Tue Nov 15, 2005 1:25 pm Post subject: Re: Social Security & Medicare
CaptainAwesome:
> i wonder if someone can let me know why these programs still exist as
> they do?
Just curious - you complain about this program (SS and Medicare are really the same thing, afaic), but I'm not sure that the exact nature of your complaint has ever been spelled out. So you don't like them.... why not? I'm not defending SS, I'm just interested in hearing your take on it.
> why do we let the government just take this money to do with as they
> please instead of putting them in actual accounts?
Doesn't matter. It's like Monopoly money to them. They control the banks and the monetary supply. They want more they either take it from you, they borrow it from foreigners, or they print it.
> why are so many americans dumb enough to think that they need it?
The ones who paid into it for a lifetime need their SS check to survive.
> what are the groups that benefit from these programs?
Working people. The rich couldn't care less about the $6885.00 that FICA took from them last year.
Posted: Thu Nov 17, 2005 5:09 pm Post subject: Re: Social Security & Medicare
samjones wrote:
CaptainAwesome:
Just curious - you complain about this program (SS and Medicare are really the same thing, afaic), but I'm not sure that the exact nature of your complaint has ever been spelled out. So you don't like them.... why not? I'm not defending SS, I'm just interested in hearing your take on it.
Doesn't matter. It's like Monopoly money to them. They control the banks and the monetary supply. They want more they either take it from you, they borrow it from foreigners, or they print it.
The ones who paid into it for a lifetime need their SS check to survive.
Working people. The rich couldn't care less about the $6885.00 that FICA took from them last year.
because its basically a low interest loan to the government. if you estimate all the payments you will make into SS and Medicare over your working career and then find the future value at the time that you start receiving benefits you will find that you are either getting less or you are giving the government a low interest loan. basically, you would be much better off putting that money in an account of your own all that time.
they wouldnt need to depend on their SS check to survive if they had saved that money all along without the government stealing it from them. they would have much more money than they are going to get from SS.
The money may not mean much to them but the tons of money that are wasted on SS are disgusting. Not to mention the fact that you hear complaints that SS will run out of money in the year 20__ while today SS collects more money than it gives out. the problem is the government spends the excess instead of saving it for the future. thats criminal as far as im concerned and people should be thrown in the streets and their heads blown off for it.
Posted: Mon Nov 21, 2005 5:29 pm Post subject: Re: Social Security & Medicare
Why no response? Did you actually do the math and figure out (oh my god!) that social security and medicare are extreme rip offs! Oh no, it couldnt be! Did a liberal actually pick up a calculator and do some calculations of his own?
I dont believe thats possible so im just going to assume you forgot about this subject.
Posted: Tue Nov 22, 2005 2:11 am Post subject: Re: Social Security & Medicare
CaptainAwesome wrote:
i wonder if someone can let me know why these programs still exist as they do?
Interesting topic. These entitlement programs were created years ago when the demographics of our country were very different from today. Back then many people believed that the US would grow forever. And with tons of baby boomers entering the workplace, Social Security worked becuase you had almost 10 people working (and paying into it) for every one person that was receiving benefits from it. But you can't grow forever, and now we're at a ratio of 3 workers per retiree.
We're seeing a similar problem at GM, where pension plans put into place back when the US was king are now haunting them to the tune of $13 billion in unfunded pension liabilities. Who wants to bet when GM will file for bankruptcy?
As for why these programs exist, well senior citizens and their lobby group, the AARP are much more active than slacker Generation X'ers. And they vote. They've made it loud and clear to the government: don't touch our Social Security. So the squeaky wheel gets the grease and the system/pyramid scheme doesn't change. And remember, we live in a political era where a reduction in the amount of an increase in a benefit is referred to as a decrease.
CaptainAwesome wrote:
why do we let the government just take this money to do with as they please instead of putting them in actual accounts?
Well the cash Social Security receives can only be invested in US Treasury bonds. So in a way the money is invested in the world's safest and most trusted security. It would be nice if young people could pay into an account and have ownership and limited control of it while keeping baby boomers on the old system. But in reality that would be extremely expensive (cost billions if not trillions of dollars) to fill in the gap between now and when all citizens have their own accounts. Bush tried to float that one and it got shot down.
Private accounts also raises the problems of managing the accounts. Imagine seniors who are not financially saavy being taken advantage by Wall Street hustlers who convince them to drop their Social Security nest egg on some crappy penny stock, or a mutual fund or annuity product with huge sales loads/fees.
So the alternatives are: raise taxes, cut benefits, raise the Social Security eligibility age, or some combination of them.
CaptainAwesome wrote:
why are so many americans dumb enough to think that they need it?
what are the groups that benefit from these programs?
Well many Americans do need it, and at this point its not really fair to pull the rug out from under the feet of many seniors who have known their whole life that this was there for them. Many seniors have been paying into it for years. You can't change the rules of the game on them at this point. These types of plans fall into the category of "defined benefit", ie the traditional pension. The other category is "defined contribution", the best example of this being the poplular 401(k) plan. 401(k)'s are great if you're young and you have 30 or 40 years to contribute and watch your money grow. Seniors and aging boomers don't have the luxury of time to take advantage of that.
I don't know that much about Medicare, but I imagine there's some slack that can be cut there. I think about that when I see some ad for a scooter for old people and they say you can charge it to Medicare. Sounds like a scam, but the real costs are in prescription drugs. So unless you're going to tell grandpa he can't take his heart medicine, you're not going to cut much slack there either.
Posted: Tue Nov 22, 2005 9:56 am Post subject: Re: Social Security & Medicare
Social Security has stolen money from working people from a long time. They should get that money back. In eliminating Social Security im not proposing we stop paying out benefits. You would have to pay out to people what they were owed. Then you would stop collecting for the purpose of social security. Paying off the social security obligations would just be like paying off any other government loan.
The loss of social security would be crippling to the government. As you said they invest in treasury bonds which means your social security is just a huge cheap loan that the government forces on you. The government would lose incredible sums of money.
It would be nice if the government had to file for bankruptcy. Then maybe we could get people with brains involved in the handling of our country's finances.
Posted: Tue Nov 22, 2005 2:17 pm Post subject: Re: Social Security & Medicare
Anonymous wrote:
CaptainAwesome wrote:
i wonder if someone can let me know why these programs still exist as they do?
Interesting topic. These entitlement programs were created years ago when the demographics of our country were very different from today. Back then many people believed that the US would grow forever. And with tons of baby boomers entering the workplace, Social Security worked becuase you had almost 10 people working (and paying into it) for every one person that was receiving benefits from it. But you can't grow forever, and now we're at a ratio of 3 workers per retiree.
We're seeing a similar problem at GM, where pension plans put into place back when the US was king are now haunting them to the tune of $13 billion in unfunded pension liabilities. Who wants to bet when GM will file for bankruptcy?
As for why these programs exist, well senior citizens and their lobby group, the AARP are much more active than slacker Generation X'ers. And they vote. They've made it loud and clear to the government: don't touch our Social Security. So the squeaky wheel gets the grease and the system/pyramid scheme doesn't change. And remember, we live in a political era where a reduction in the amount of an increase in a benefit is referred to as a decrease.
CaptainAwesome wrote:
why do we let the government just take this money to do with as they please instead of putting them in actual accounts?
Well the cash Social Security receives can only be invested in US Treasury bonds. So in a way the money is invested in the world's safest and most trusted security. It would be nice if young people could pay into an account and have ownership and limited control of it while keeping baby boomers on the old system. But in reality that would be extremely expensive (cost billions if not trillions of dollars) to fill in the gap between now and when all citizens have their own accounts. Bush tried to float that one and it got shot down.
Private accounts also raises the problems of managing the accounts. Imagine seniors who are not financially saavy being taken advantage by Wall Street hustlers who convince them to drop their Social Security nest egg on some crappy penny stock, or a mutual fund or annuity product with huge sales loads/fees.
So the alternatives are: raise taxes, cut benefits, raise the Social Security eligibility age, or some combination of them.
CaptainAwesome wrote:
why are so many americans dumb enough to think that they need it?
what are the groups that benefit from these programs?
Well many Americans do need it, and at this point its not really fair to pull the rug out from under the feet of many seniors who have known their whole life that this was there for them. Many seniors have been paying into it for years. You can't change the rules of the game on them at this point. These types of plans fall into the category of "defined benefit", ie the traditional pension. The other category is "defined contribution", the best example of this being the poplular 401(k) plan. 401(k)'s are great if you're young and you have 30 or 40 years to contribute and watch your money grow. Seniors and aging boomers don't have the luxury of time to take advantage of that.
I don't know that much about Medicare, but I imagine there's some slack that can be cut there. I think about that when I see some ad for a scooter for old people and they say you can charge it to Medicare. Sounds like a scam, but the real costs are in prescription drugs. So unless you're going to tell grandpa he can't take his heart medicine, you're not going to cut much slack there either.
Posted: Tue Nov 22, 2005 2:42 pm Post subject: Re: Social Security & Medicare
CaptainAwesome wrote:
Social Security has stolen money from working people from a long time. They should get that money back. In eliminating Social Security im not proposing we stop paying out benefits. You would have to pay out to people what they were owed. Then you would stop collecting for the purpose of social security. Paying off the social security obligations would just be like paying off any other government loan.
The loss of social security would be crippling to the government. As you said they invest in treasury bonds which means your social security is just a huge cheap loan that the government forces on you. The government would lose incredible sums of money.
It would be nice if the government had to file for bankruptcy. Then maybe we could get people with brains involved in the handling of our country's finances.
Social Security isn't "just a huge cheap loan". Treasury bonds are highly convertible and as secure as the cash with which they are purchased. Treasury notes effectively are cash and the fact that they are the only investment vehicle that the SSA can utilize is an attempt to ensure that the fund is in no way imperiled by exogenous factors. (Whether that will work in the long run or not remains to be seen)
The US Government can't file for bankruptcy. Their debts are (almost) always backed by the full faith and credit of the Government of the USA, meaning that they will pay back the money they owe. If the Government needs more money, they just ask for it and you give it. Men with guns will come take that money from you if you refuse. And if that doesn't work, they'll just print more of the stuff. A fundamental change to the handling of the finances government would require rewriting the Constitution. I think that you're just the man to do it, Cap'n.
Speaking to the topic at hand, I see a need for a Government program for the care of the elderly and disabled. It's what separates the first world from the second and third world. Having traveled, I can say that the sight of elderly people flocking to an underground train station to sleep night after night is heart-wrenching. And the treatment of the disabled in the 3rd world is so appalling that I hesitate to even discuss it.
I'm not necessarily defending Social Security in its present form, but I haven't really heard any specific criticisms of it.
Cap'n, you seem to be concerned about the rights of working people. Do you advocate getting rid of the upper limit of FICA (stops at 90K this year right)?
From Wikipedia
--------------------------------
Government pension expenses
As a % of GDP during 2000
Italy 14%
France 12%
Germany 12%
Sweden 9%
Japan 8%
USA 4%
South Korea 2%
Hong Kong 2%
Posted: Tue Nov 22, 2005 3:19 pm Post subject: Re: Social Security & Medicare
A treasury bond is just a cheap loan. Social Security invests in them because its revenue for the government. Its worse though because with SSA you could get an even lower return than you would investing in T-Bonds yourself. Of course, if you had a brain you could do much better than that by investing in things other than T bonds.
I realize the government wont be filing for bankruptcy. I was just trying to get across that I think professionals should be dealing with the finances of our government not elected morons. In bankruptcy professionals get involved in order to turn an organization around. The government has so much waste to chop off it would be a perfect job for a turnaround firm.
Social Security hurts the elderly by taking money from people while they work and then giving them back less than the people would have if they saved it themselves. That people believe SS helps elderly demonstrates how easy people can be tricked. I supposed if government added 15% to my income tax and then gave me a card that i can get all my food for "free" with people would think we need the government to feed us also.
If the program wasnt a complete rip off i would think the cap should be eliminated. The problem is that SS has more money than it needs so all you are doing is giving them more money to waste. You are funding a program that rips people off and fuels governments mishandling of working peoples money.
Posted: Tue Nov 22, 2005 3:47 pm Post subject: Re: Social Security & Medicare
CaptainAwesome wrote:
A treasury bond is just a cheap loan. Social Security invests in them because its revenue for the government. Its worse though because with SSA you could get an even lower return than you would investing in T-Bonds yourself. Of course, if you had a brain you could do much better than that by investing in things other than T bonds.
A treasury bond is not "just a cheap loan." And if you insist that it is then I'll be forced to point out that cash is an even cheaper loan. Forcing the SSA to invest only in Treasury Bonds is not simply a form of finance for the US Government. They would be better off if they simply told the SSA that they couldn't invest it in anything, since currency is a treasury note that is non-interest bearing. T-Bonds are a way of telling the SSA to stuff its money under the mattress.
Which is fine. I can't imagine the SSA ever investing in any form of private enterprise or in any foreign government's notes without becoming as corrupt as hell in about 2 minutes.
The investment in T-Bonds is really more of a way of promising that you'll get back the money that you put in (or some portion thereof). Let's hope that works out.
As of the time of this writing, approximately $4.7 Trillion (with a T) worth of T-Bonds is held by the public. Approx $3.3 Trillion is intra-governmental. T-Bonds held by the government amount more to a promise to pay something in the future than anything else. In Social Security's case, that's a promise to pay you the benefits that you'll be owed. Let's hope that works out.
I predict that if the SSA were abolished, our national debt would still increase and t-bond ownership would merely switch to being nearly 100% publicly held. We would all own T-Bonds, much in the same way that our Grandparents all had savings accounts. As it stands, Social Security obviates the need for most of us to own T-Bonds and other extremely conservative investment. Most (or at least many) of us take 100% of invested money and plop it right into privately-held funds that turn around and invest it in corporate equity and loans to corporations and municipalities. After all, we always have Social Security to fall back on if the economy really, really tanks. Let's just hope that doesn't happen any time soon.
Posted: Tue Nov 22, 2005 5:09 pm Post subject: Re: Social Security & Medicare
[quote="samjones"]
In this case, currency is a cheaper loan. Its 0% return (less if you figure inflation into it). Im not sure why you are so opposed to calling it a cheap loan. Thats what a bond is. They can offer low interest rates because its pretty much guaranteed.
And why would a person want that when they can get a better return on their money if the invested it on their own? I know people are worried that many will invest poorly and lose money but that it something easily avoided.
I wonder why you think its better for government to take tons of money and invest it in T-bonds without creating individual accounts rather than let individuals have the accounts that they can watch grow. The government isnt qualified to manage peoples finances. If they did they wouldnt only allow investment in t-bonds. It demonstrates the financial savvy of a monkey (or a con artist tricking people into believing that giving them cheap loans is somehow good for the elderly).
Im sure many would put money in treasury bonds as part of a diversified portfolio. If they wanted they could put all of it in. However, smart people (and smart portfolio managers) will easily be able to get a better yield than social security even if the market tanks. As you get closer to retirement you would shift your holdings into more secure assets to reduce the risks associated with things like stocks and mutual funds.
Posted: Tue Nov 22, 2005 6:00 pm Post subject: Re: Social Security & Medicare
CaptainAwesome wrote:
In this case, currency is a cheaper loan. Its 0% return (less if you figure inflation into it). Im not sure why you are so opposed to calling it a cheap loan. Thats what a bond is. They can offer low interest rates because its pretty much guaranteed.
I'm not opposed to calling Treasury notes a cheap loan. I'm opposed to calling them "just a cheap loan". There is practically 0 chance of default on a US Treasury Note. And since they're easily exchanged for goods and services and the issuer keeps it's financial books open to anybody who cares to review them (we hope). The possibility that a T-Bond could suddenly lose its value seems preposterous to any sane person. It may be a "cheap loan", but it's an exceptional "cheap loan."
Also, to say that T-Bonds aren't a good investment seems to be demonstrably false. The world's public has decided that it is a good enough investment to pour 4.7 Trillion dollars (that's more than 1/3 of our GDP) into this investment. It must have something going for it.
I personally own no T-Bonds. Not directly any way.
I was one of those who wasn't too happy with the private investment accounts idea for Social Security. It didn't seem to make any sense to me. The Government is going to take money from me and force me to invest it? Why not just lower my taxes and let me do with the money as I please?
In the end, I don't trust the Government that much more than the Cap'n does, so I bristle at any suggestion that they're going to give money to any private concern.
Posted: Tue Nov 22, 2005 7:55 pm Post subject: Re: Social Security & Medicare
CaptainAwesome wrote:
I wonder why you think its better for government to take tons of money and invest it in T-bonds without creating individual accounts rather than let individuals have the accounts that they can watch grow.
Private accounts sound nice, and I'd love to have one. But who's going to pay for the gap it creates?
All I can say is re-read the part about the problem with suddenly switching all or a large part of Social Security to private accounts. If younger people get their own private accounts, then that money is basically being set aside for the retirement of the people who pay into them. Meanwhile, the other part of Social Security, the "old" system, gets clobbered because the cash from the younger workers is not going to those who need the benefits right now. The only way to make it work is for the government to step in and borrow $1 trillion dollars or so to make up the difference. And that opens up another can of worms by screwing with the economy even more. Social Security does not exist in a vacuum, and changes made to it will have big ripple effects.
If the government is able to borrow a trillion dollars, then we'll see a big increase in the demand for loanable funds, which results in higher interest rates for all of us. In economics this is called "crowding out".
http://www.investopedia.com/terms/c/crowdingouteffect.asp
I know I'm going off on a tangent, but part of the reason that the US has such a large trade deficit is due to the strong dollar relative to other currencies. This is related to our having budget deficits for most of the last 20 years or so. Strong dollars make foreign currencies "cheaper", which means imports seem to cost less. This gets worse if the world's investors rush to buy US currency so they can buy more of our debt. The dollar gets stronger, trade deficit gets worse, more US companies have a harder time competing with foreign firms, and more US jobs are threatened. Why make this worse?
My unsolicited advice: be proactive about securing your own retirment. If you're eligible for a 401(k) plan at work, then enroll in it now and contribute as much as you can afford. The company match is free money. If you can, open up a Roth-IRA and contribute the annual maximum, if you can afford it. Get informed about how these other plans work and make saving a priority, even if its not a lot of money at first. If you're young and delay 10 years to do it you'll never make up for the loss of what you could have made by the compounding of returns.
I don't worry too much about Social Security becuase I don't think it will be around when I retire. But I'm taking steps now to ensure that I won't miss it if I'm correct about never receiving a check. You should, too.
samjones wrote:
The possibility that a T-Bond could suddenly lose its value seems preposterous to any sane person.
Bond prices are inversely related to interest rates. If rates go up, then the market value of your bonds will fall. But there would be no threat of the US not paying off the bond when it matures. I'm sure that's what you meant.
Posted: Tue Nov 22, 2005 9:02 pm Post subject: Re: Social Security & Medicare
Hey, to someone who is extremely risk averse a t-bond is wonderful or it could be a very low risk portion of your portfolio. But it is a portfolio of someone who doesnt know anything about managing money that is 100% t-bonds. There is nothing exceptional about it because the interest rates reflect its benefits. It would be exceptional if it had that low risk and an unreasonably high rate of return.
Id rather have the government force me to save for myself then have them take my money so they can save it for me.
Posted: Tue Nov 22, 2005 9:11 pm Post subject: Re: Social Security & Medicare
DaveTheRave wrote:
I don't worry too much about Social Security becuase I don't think it will be around when I retire. But I'm taking steps now to ensure that I won't miss it if I'm correct about never receiving a check. You should, too.
I wouldnt want to keep contributing to a horrible program because there may be some challenges that arise from ending it. The gap would have to be filled by tax/bond revenue and in the long run it will be made up by the fact that people will have more money in their pockets (and government spending cuts couldnt hurt). The sooner the better because now we pay in more than SS pays out. This will be harder in the upcoming years when thats not the case (not that i think it will really happen but i can dream).
I dont expect a penny from social security when I retire. Ill be fine. Of course, if i could have that money thats contributed to SS for me id have a great deal more when i retire. Its a ridiculous program just like anything the government gets involved in.
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