Hidden Nook

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Sunday, January 16, 2005

Bush and Social Security...

[Media Source*]

Their seems to be opposition to social security in general among some congressmen (and congresswomen--don't sue me ladies!). Their are many pro's and con's about each, and times did an "OK" analysis of the issue (although I still feel like they don't exactly love the President despite giving him his second "Man of the Year" award). Here is an example of the pro's and con's (by Jyoti Thottam). More below if your interested.

THE PROS--1)Control. Under the current system, each generation of workers pays for the retirees ahead of it. With a private account, some of the money you put in would be there for you alone rather than fund someone else's golden years.

THE CONS--1)Risk. Getting a good return on your private account is up to you. If you make poor choices, you can lose money, and your nest egg will suffer. Invest too conservatively, and you will not be able to make up for the cuts in benefits.

Those were the first two reasons from each side of the debate. The rest are below

2)Better Returns. With Social Security, funds set aside for the future earn a minimal return over time, because the government invests them conservatively, in Treasury bonds. Investing in the stock and bond markets via private accounts could allow those dollars to grow faster.

3)Offset the Pain. Benefit cuts will probably be necessary to keep Social Security solvent as the number of retirees grows. The appeal of private accounts might persuade voters to accept the trade-off.

4)Encourage Savings. Private accounts reinforce a mind-set of saving. When you see a direct connection between what you put in now and how it can grow in the future, you may be motivated to save more elsewhere.

5)No New Taxes. The commission's plan, if adopted, avoids the unpleasant medicine of higher payroll taxes. Set at 12.4% of taxable wages, they already squeeze earners.


2)Debt. The costs of making the transition to a private-account system are estimated at up to $2 trillion. That burden will widen the government's already yawning budget deficit, and could put the economy at risk for higher interest rates.

3)Uncertainty. Private accounts on their own do nothing to solve Social Security's solvency challenge and may discourage people from supporting real solutions.

4)Undersaving. With private accounts in place, some people may be tempted to save less elsewhere. Americans' record of saving is not encouraging; two-thirds of retirees rely on Social Security as their primary income.

5)Delayed Reaction. By promising to preserve current benefits and funding the transition costs through borrowing, this plan shifts costs to future generations, who will have to pay off the debt.

So which side are you? As for me, I am for the changes. I have talked to a few individuals "getting up there" in age, and as far as I can tell unless you are wealthy the current system won't benefit you. Don't believe me? Ask the elderly folks at Wal-Mart why they're working there. Although WAL-MART is a great place to work and shop at our grand parents deserve something better in life than to continue working there.

As far as the arguments against the privatization of social security goes, I find them pretty much weak. Risk is a factor in any new thing we do. Columbus took risks to discover (or rediscover) America. Bush took risks fighting the war on terror in Iraq. There is risk with this option, but their is plenty of information (not to mention many companies in the financial services industry) who would help not only help their clients with information but could take on the "burden" of transferring or setting up accounts (as they do with many IRA's and Annuities).

The issue of whether Social Security would do anything to solve the "system" to me is not the case to me. The purpose of Social Security is to provide financial security for the future. If the system is not meeting these needs, a new one needs to replace it. What President Bush is doing is providing options for individuals, so it would be up to them how much they save using the system. The argument of "some" undersaving is dumb because that would be a small group of people who are probably not enlightened to the benefits of the system.

Of course their may be a debt for the future generation but if we do nothing the future generation will not have enough to live off of and will have to adopt the "work 'till you die" lifestyle that is not pleasant to too many people. If you doubt this ask your local senior citizen whether or not they want to continue to work instead of relax and reflect on the blessings of life.

It seems there seems to be a few people who are nervous about the change. If they are, let them choose not to invest and wait until the inevitable day when they realize that they don't have an option when it comes to working 9am to 5pm. As for me and the brave souls out there, let us risk our money on our own future so that we may reap whatever consequences (the good and the bad) that are out there. After all, isn't that what capitalism is all about?


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By Darnell Clayton • 5:22 PM • Email Post • •


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