A recently released poll from Rasmussen Reports shows that the major factor behind the public's opposition to Personal Savings Accounts is the fact that they don't have the facts straight. The two commonly held misconceptions dogging the president's sales pitch right now are 1.) seniors believe that their benefits will go down under the new plan, and 2.) younger generations of Americans believe that PSAs will be mandatory. Both of these notions are completely false, and as the president has said repeatedly, though not clearly enough, anyone fifty-five years or older will see no change in their benefits and PSAs will be optional. If younger workers so choose, they can remain in the current Social Security system.
If the president has any hope of passing a Social Security reform package with PSAs included than he and the White House are going to have to disabuse the American people of these misconceptions. The president has been out on the road now for a couple of weeks and these misconceptions have only grown worse, signaling to me that the White House needs to step up it's communication effort. Townhall meetings simply aren't going to cut it, for the media can pick and choose which sound bites, if any, the American public hears on the news each night. If there is one thing we Republicans have learned more than anything else it is that you can't trust the MSM to get your message out. The president and the White House should follow the example of President Reagan and go over the media's head completely, scheduling a prime-time speech where the president lays out in clear terms what his plan is. Of course this means he will finally have to develop a full and complete plan, instead of simply saying he is "open to all good ideas". To address the poll numbers above, the president must say clearly and definitively that benefits will not change for those fifty-five and above and younger workers will have the option of starting a PSA or remaining in the current system.
It was Thomas Jefferson who once said that if the American people are given all the facts than they will never make the wrong decision. I still believe that, and the White House must get out and finally give the American people all the facts about the president's plan. The MSM, the Democrats, and special interests groups such as the AARP have done a good job in scaring the American people away from reform, it is up to the president to get up in front of the people and reassure them with the facts of the matter. If given all the facts the American people will make the right decision and give the president the support he needs to reform Social Security once and for all.
UPDATE (3/29/05 9:12 P.M.): Former vice-presidential candidate Jack Kemp dispels the misconception that Personal Savings Accounts won't fix Social Security's long-term solvency crisis. Hat tip to From The Bleachers.
You have to understand why many people (the majority of the country, including myself) are suspicious of these private accounts. It is going to throw the country into a larger deficit. So people like the AARP, and other organizations that have come out against it, are actually concerned about the welfare of the nation and not just themselves.
ReplyDeleteAlso, it doesn't make sense to many people. Why would we possibly do this to the system when President Bush himself has even said that they will not fix the "crisis", they will just be there as a safety net when it does come. Why don't they just try and make the fixes now? If it is going to strike in decades from now, it doesn't make sense to do something so drastic when it won't even help.
The democrats have actually a nice plan (a first, I know). They want to get Republicans and Democrats together and work on reform program. They want this to be a bipartisan plan. The Republicans are set for this private accounts program.
But, you don't even have to worry. It's not going to pass anyway. Support is waning, and nothing is going to bring it back. The Republican Party needs to worry about saving themselves after there disastrous Terri Shiavo stance.
-Lord Smert (LordSmert.blogspot.com)
The problem with your assertion in your first paragraph is that either way we go we are going to assume large portions of debt. Either we borrow now to cover the transistion from government accounts to personal accounts, which is the same as taking out a thirty year debt for a mortgage, or we allow Social Security and entitlement spending to grow and consume larger and larger portions of the budget. If we do the latter than in thirty years entitlements will consume 100% of the Federal Budget, forcing us to either severely cut benefits, raise taxes, or borrow large sums of money. We need to get out ahead of the problem now.
ReplyDeleteYou make a good point in your second paragraph that President Bush has acknowledged PSAs won't solve the problem. This has befuddled not only myself but many conservatives, for PSAs will address the problem of growing entitlements by reducing the government's obligations.
As to the "good plan" you say the Democrats have, I still haven't heard it. Harry Reid has made it quite clear that he doesn't have much interest in negotiating with the president, instead searching more for a way to embarrass him.
To address your predictions that PSAs won't pass, that might be true in the short term. They may not pass this year or in the president's term, but as time moves on and the problems with the system grow more and more apparent the demand for PSAs will grow. In this information age workers will want to control their own retirement, they won't want it in the hands of a congress that has an insatiable thirst for spending money. The poll I cited in this editorial shows that when the public is asked their feelings on the actual Bush plan a majority supports it.
Finally, while I agree that Republicans made the wrong move by stepping into the Terri Schiavo case, it was by no means "disastorous". Once the media storm desists the whole ordeal will slip from the public memory, though Republicans might have accumulated some brownie points among the ardent, right-to-lifers. Michelle Cottel over at THE NEW REPUBLIC comments on that:
http://www.tnr.com/doc.mhtml?i=w050321&s=cottle032605
The reality of this morass is that the Social Security Trust Fund ("SSTF") insolvency crisis is but a symptom of a much larger problem - the mandatory spending that federal entitlement programs take out of the federal budget that cannot be slowed because these programs utilize taxation to support the goal of wealth redistribution (to one degree or another).
ReplyDeleteIn a country that conducts commerce under a free market system, the introduction of wealth redistribution thru taxation of income is a doomed choice that has no basis as a sustainable social policy due to the laws of mathematics and business economics. This is no longer a question of theoreticals, but a simple matter of reviewing the historical outcome of these modern day policies to see what they have in fact produced in outcomes for the resources they swallow up.
First, let us look at the most dramatic result - the rise in mandatory spending as a percentage of the total federal budget. In 1964, this amount was 26% of the total federal budget. By 1984, it had risen to 42% of the total federal budget. Last year it was an astonishing 54% of the federal budget. It's the monster hovering at the edge of reason that continues to grow like the blob and consume every resource available and still need more.
If you don't like the Department of the Interior, or Homeland Security, or Defense, or any other governmental unit that is not part of mandatory social spending - you're in luck. Starting in 2018, you're going to get your wish as they are forced to cut these programs an average of 12% per annum to balance the budget. In 2028 we will have the military capacity of Mexico and the homeland security capacity of present day Iraq. You envrionmentalists will just be SOL because there will be no EPA and our kids will get to experience the kind of schooling that was available to the average person in the 19th century.
Next, let us take a hard look at what we have gained for this unprecedented level of taxation for the sake of wealth redistribution:
a) Social Security is broke. We have finally (maybe) come to the point in the road where we have begun to realize that political rhetoric cannot change the outcome of a program that is governed by the laws of mathematics and business economics. When FDR first signed it into law, the program was to only be voluntary and would tax the first 1.0% of taxpayer earnings up to $1,400 per annum. Since 1935, the taxation rate has increased at an average annual rate of over 17% - a rate that is a MULTIPLE of inflation, yet the program is broke.
b) Medicare and Medicaid are also broke. Yet we have poor people who cannot get access to health care, have no health care at all, or cannot afford health care - 40 years after the program was introduced. The same problems that brought these programs into place are still "unfunded federal mandates" some 40 years later.
c) Education remains a fiscal and service quality mess. You can't find any reasonable person who believes the quality of a public education is as good as that in a private school, yet we spend almost double per pupil/per annum on public education and we still have dumb kids, useless education workers and a refusal to accept the fact that public education is a total and complete failure for the American people.
If you want to know why these programs must fail from a purely mathematical or economic viewpoint, it comes down to two (2) things:
1. Competition.
The federal entitlement programs set forth above operate outside the free market system and the most confounding and direct negative impact of this approach to the funding and delivery of these entitlement programs is a lack of competition. Without competition, there is no efficient allocation of investment capital for capital expense, so the federal government (even though it is the biggest fish in the pond) gets a continuing raw deal for the investment of each of its capital dollars. Because there is no competition, worker productivity gains are non-existent and there are no competitive pressures placed on revenues, so costs spiral out of control. Now the math works against you because IT HAS TO WORK THIS WAY - THERE IS NO WAY TO STOP IT. Period. The end.
2. Inflation.
A little inflation is great because it provides a counter-balance to worker productivity efforts and thereby effectively awards competition, but in the case of these quasi-command economic structures under which our federal entitlement programs operate, the impact of inflation only ensures that it is impossible to control spending. Inflation eats at tax revenues, so it places pressure on the government to raise tax rates to gain the same inherent revenue value ("bang for your buck"). In turn, this means the government has to raise interest rates and this creates a negative pressure on capital investment as more and more money is taken out of the economy to service the programs. This isn't a merry-go-round. This is a vicious cycle that cannot be stopped because it creates a negative impact on the economy on a continuing basis - BY ITS VERY DESIGN.
So what does this mean to the average American out there? What can be done? What do we really have left to work with to fix this?
All you have is about $80 billion in SSTF surplus investment income the SSTF will receive until around 2018 when the income is then needed to start paying benefits that revenues won't cover.
A reasonable person would conclude that you must then come up with a fix that addresses the SSTF insolvency crisis based upon this $80 billion in proceeds (such that it is) - and fix it now.
This means the only solution will be to actually create wealth where none existed and have the government act as a co-investor in the program instead of a drag on the growth. In other words, the only fix for the government is to invest in the private economic sector and use its returns to pay down its obligations because it is already bankrupt (I should know, I'm a corporate bankruptcy consultant and I can assure you the federal government is indeed broke by every business accounting measure there is in existence today).
But the doom also carries within it a seed of hope. A single chance. A light at the end of the tunnel that has been heretofore ignored - INSTICERT.
INSTICERT is a proposed new electronic capital market exchange that is similar in concept to the existing NASDAQ. It won't trade stocks in corporations, or bonds, or futures. No, those are too risky my friends and we need risk-proof investing to solve this crisis, if we are to solve it for good and leave this world as good as we found it (at the very least).
INSTICERT will allow institutional, governmental, and public investors to trade a new class of securities in a special kind of business organization (that any business can use) that is inherently bankruptcy-proof and tort-proof so that the investment has less total investment risk than those cheesy Treasuries the Trustees now purchase on behalf of us (supposedly). Yes, there is a kind of business organizational approach that will make a company bankrupty-proof and tort-proof: it's called a "Royalty-Based Structured Finance Business Combination". The most common construction is known as a "Royalty Limited Partnership" (please visit our corporate website for whitepapers and further information on this matter).
The funny thing about Royalty Limited Partnership (or "RLP") constructions is that they are THE most cost-efficient stewards of capital investment because they are not capitalized (financed) with any debt capital (no debt means no liabilities and that means you CANNOT go bankrupt)- just cold, hard cash. This arrangement creates a massive competitive edge for the business and it creates the highest amount of financial investment leverage possible for the investors resulting in long-term earnings in the range of a 12% per annum IRR to over 20% per annum IRR - consistently.
Now back to our $80 billion question and INSTICERT...
If the federal government took its $80 billion per annum and invested it into companies listed on INSTICERT and reinvested its gains back into the system - in 10 years it would be able to completely defease (cancel out) the $11 trillion in SSTF borrowings that are now missing.
Guess what that will do for taxpayers?
Now here's the killer part - Republicans in Congress and the White House want nothing to do with INSTICERT because they are more interested in beating the Democrats to death over the failure of social security which they believe they can hang around the liberal's necks as the millstone to prevent them from making an electoral comeback.
Smart politics? Maybe. Smart policy? Nope. Never. No better than the Democrats who say and do nothing.
It sounds as though you took that drivel from a Fox News report. I hadn't heard that Rupert Murdock had taken over the spin/bullshit office, officially. There's nothing righteous about the religious Right. You're wrong, nimrod. Just like your prisident. Stop the true asshole of evil and the American theocracy!
ReplyDeleteHow about you actually provide some facts to prove his assertions wrong instead of just throwing around insults and the typical liberal talking point about America becoming a theocracy.
ReplyDeleteDoes anyone here know a poor person? If I asked you to define "poor" would you use the word "lazy" in your definition? There are folks in this country who are trying to earn a living and it costs them every cent they have. Without Social Security or Welfare some folks would be on the street. And I don't mean fake people, I mean real people. Actual living, breathing humans. They might not exist in predominantly white, affluent suburbs of Washington state. But they are out there. And some of us believe that they can be helped by the government, which takes as much as 33% of its people's annual incomes. You want all of these "entitlements" to go away. Who will help the downtroden, not you.
ReplyDeleteI know its easy to watch FOX all day and think that the only poor people are lazy beggars and everyone has plenty of money for retirement just laying around. But that is simply not true. That is a fantasy...I'm sorry you can't see that.
Don't slip into demagoguery here Rob, everyone wants to help out the less fortunate, but there is a right way and a wrong way to do it. Inevitably, the more the government tries to help the more damage it causes. Welfare is a fine program, but there has to be some accountability with it's benefits as well. Help them out by giving them the resources to seek training, provide them incentive to seek work and employment.
ReplyDeleteYou say that without Social Security many people would be out on the street. The fact of the matter is many low-income workers receive minimal rates of return and many end up receiving less in benefits than they paid into the system. A man in his middle twenties from Harlem will receive a -4.46% rate of return. If given the chance to put money into a PSA he will receive far greater returns and will be able to retire at an earlier age than he previously could have. He will also be able to pass on that account to his children and grandchildren.
Furthermore, Washington State is one of the most diverse states in the nation. The only thing holding us back is a high tax burden and overregulation, which makes our unemployment rate one of the highest ones in the nation. Taxing a third of income ends up hurting those at the bottom of the totem pole, it doesn't help them.