Answer to the SS entry
ok, so here is the response i have to your responses, this is also a paper i wrote
Social Security and the Millennial Generation:
Hearsay, Fear, but No Cash
By Melissa Alfano, Economics BS candidate at James Madison University
It is January 20th, 2050 and you are headed out the door of the private company that you’ve been with for many years. As you head into retirement, you are faced with having to finance not leisure activities, but being able to sustain yourself on the payments coming to you from the investments you made into your private retirement accounts (PRA.) It was a good thing the Bush administration decided to switch over Social Security benefits to PRAs all those years ago, because the benefits you are receiving now would far outweigh the benefits you would have gotten under Social Security. Switching to PRAs was the best solution for everyone.
The previous statement is a lie. The talk that is going one right now with switching the current Social Security “pay as you go” system (“pay as you go” referring to when money is taken out of income and being transferred directly to someone receiving Social Security benefits) to individual privatized retirement accounts is being spoken of by politicians and hopefuls as if it is the great retirement panacea, but in reality, someone has to pay for a switch. In the long run, we, as a generation, will end up paying.
There is a problem with Social Security that lies in demographics. Since this is a pay as you go system, money right going in now is being used to supplement current retirees. In the beginning there were 16 workers per person receiving benefits, now there are three workers per retiree, and once the baby boomers retiree, there will be only two workers per retiree. As political author Stephen Moore had put it, “demographics are destiny” in this system, but the way that this issue is being framed in the media makes it seem as if it were doomed by demographics. There is a difference between destiny and doom. The year 2042 has been floating around for quite awhile in both economic and political circles as the date that the Social Security Trust Fund will run out, and the massive amounts of retirees of the echo boom (the baby boomers’ children) will not have any benefits whatsoever. The reality of the situation is that when the system began, there was no “trust fund,” and that is in fact a reform made in 1983 made by Regan (Conan.) There was so saving originally intended, which is why when the system was in surplus, the money was “borrowed” by the government and spent on other programs. (Conan) This does not ruin the financial future for our generation at all. In the year leading up to 2024, benefits will be able to be paid out in full, and after that year arrives 75% of promised benefits to each retiree will still be able to be distributed, which is still more than what current retirees are receiving now. (Conan) Contrary to what we are being told to believe, there will be money there, even if we do not take any action.
The Bush administration has yet to make a decisive move in their reform that the President had called for in his State of the Union Address, but in that speech, the Inaugural Address, and in the speeches he is making on his cross country tour to “Strengthen Social Security,” it is clear that he is pushing for some sort privatized individual accounts. What he fails to mention the estimated costs of any of the proposed ideas. By mentioning the doomsday numbers of $200 billion and $300 billion debt growth per year, he is creating a scare among voters, both young and old, and then save them with a program that he does not even have fully developed yet. David C. John, a research fellow at the Heritage Institute has given the estimate that PRAs would cost approximately $7-8 trillion dollars up front if a PRA plan was selected now, saving $20 trillion. Where would the government get $7-8 trillion to supplement this cost? Some of it would come from the money in the existing Social Security fund (which has little savings in it as is) and the rest would have to come from either borrowing or raising taxes (which is exactly what Bush said he does not want to do) (John.) Furthermore, the GOP made it clear that they will not cut the benefits of those who are born before 1950 (Weisman;) which coincidentally just happens to be the strongest voting block. The most vulnerable voting block to any reform would be the 18-29 year old group because of our consistent low voter turnout (Weisman.)
All this discussion leads up to the very real possibility that this generation is going to miss out on some sort of benefits if there is a switch to PRA before we retire. One pro PRA argument, as stated by David C. John, is that part of the money that can be used to go towards the switch are “general (non Social Security) revenues and loans in the form of government bonds,” and the other part would come from requiring Congress to “balance the Social Security’s needs against those of the rest of the economy,” meaning that funding for other programs would be cut. Couple this with what Bush said about not cutting current benefits and not raising taxes: it means that the switch would this generation would miss out on funding for such things as education, pollution controls, and science grants, which all lead to technology change and eventually economic growth. There stands a good possibility a switch can hurt the generation that it is intended to help.
Optimists of the PRA plan (which also happen to be great pessimists of Social Security) give the warning that doing such things as cutting funds for other programs, depending on economics growth, and raising Social Security tax will only delay the eminent problem by six years per idea. (Although David John said raising the retirement age would alleviate the problem greatly.) Bush said in Orlando that the system needed not just a 75 year fix, but a “permanent fix,” and using the ideas listed about would by no means offer a permanent fix, but it would give the government more time to develop a new, more efficient, and more accepted, plan to solve this problem. The current “solution” of PRA is now running into problems with every age group that it encounters. According to a Washington Post poll, 58% of all people polled said “the more they hear about Bush’s plan, the less they like it.” The plan is running into a great problem with gaining acceptance with the elderly voting block. “A majority of elderly voters have turned against the plan for private accounts, even though the White House has assured them that it would have no impact on their Social Security benefits (Weisman.)” Middle aged voters are not too thrilled with the idea because they would not benefit from any investment in the short time there is between now and their own retirement. For the group that this plan would affect- the 18-24 year old voting block- 60% did say that they are interesting in investing some of their Social Security contributions into the stock market, but at the same time only 38% said that they know much about the proposed plan (Weisman.)
Since the plan is not being widely accepted across all of the voting age groups, it seems that it may be best at the moment to use a temporary solution in order to give the government more time to create a better permanent solution. A new Social Security alternative will not come overnight, or even within a matter of a few months. Be wary if it does, because that may very well mean that our generation will pay greatly for the new plan.
Social Security and the Millennial Generation:
Hearsay, Fear, but No Cash
By Melissa Alfano, Economics BS candidate at James Madison University
It is January 20th, 2050 and you are headed out the door of the private company that you’ve been with for many years. As you head into retirement, you are faced with having to finance not leisure activities, but being able to sustain yourself on the payments coming to you from the investments you made into your private retirement accounts (PRA.) It was a good thing the Bush administration decided to switch over Social Security benefits to PRAs all those years ago, because the benefits you are receiving now would far outweigh the benefits you would have gotten under Social Security. Switching to PRAs was the best solution for everyone.
The previous statement is a lie. The talk that is going one right now with switching the current Social Security “pay as you go” system (“pay as you go” referring to when money is taken out of income and being transferred directly to someone receiving Social Security benefits) to individual privatized retirement accounts is being spoken of by politicians and hopefuls as if it is the great retirement panacea, but in reality, someone has to pay for a switch. In the long run, we, as a generation, will end up paying.
There is a problem with Social Security that lies in demographics. Since this is a pay as you go system, money right going in now is being used to supplement current retirees. In the beginning there were 16 workers per person receiving benefits, now there are three workers per retiree, and once the baby boomers retiree, there will be only two workers per retiree. As political author Stephen Moore had put it, “demographics are destiny” in this system, but the way that this issue is being framed in the media makes it seem as if it were doomed by demographics. There is a difference between destiny and doom. The year 2042 has been floating around for quite awhile in both economic and political circles as the date that the Social Security Trust Fund will run out, and the massive amounts of retirees of the echo boom (the baby boomers’ children) will not have any benefits whatsoever. The reality of the situation is that when the system began, there was no “trust fund,” and that is in fact a reform made in 1983 made by Regan (Conan.) There was so saving originally intended, which is why when the system was in surplus, the money was “borrowed” by the government and spent on other programs. (Conan) This does not ruin the financial future for our generation at all. In the year leading up to 2024, benefits will be able to be paid out in full, and after that year arrives 75% of promised benefits to each retiree will still be able to be distributed, which is still more than what current retirees are receiving now. (Conan) Contrary to what we are being told to believe, there will be money there, even if we do not take any action.
The Bush administration has yet to make a decisive move in their reform that the President had called for in his State of the Union Address, but in that speech, the Inaugural Address, and in the speeches he is making on his cross country tour to “Strengthen Social Security,” it is clear that he is pushing for some sort privatized individual accounts. What he fails to mention the estimated costs of any of the proposed ideas. By mentioning the doomsday numbers of $200 billion and $300 billion debt growth per year, he is creating a scare among voters, both young and old, and then save them with a program that he does not even have fully developed yet. David C. John, a research fellow at the Heritage Institute has given the estimate that PRAs would cost approximately $7-8 trillion dollars up front if a PRA plan was selected now, saving $20 trillion. Where would the government get $7-8 trillion to supplement this cost? Some of it would come from the money in the existing Social Security fund (which has little savings in it as is) and the rest would have to come from either borrowing or raising taxes (which is exactly what Bush said he does not want to do) (John.) Furthermore, the GOP made it clear that they will not cut the benefits of those who are born before 1950 (Weisman;) which coincidentally just happens to be the strongest voting block. The most vulnerable voting block to any reform would be the 18-29 year old group because of our consistent low voter turnout (Weisman.)
All this discussion leads up to the very real possibility that this generation is going to miss out on some sort of benefits if there is a switch to PRA before we retire. One pro PRA argument, as stated by David C. John, is that part of the money that can be used to go towards the switch are “general (non Social Security) revenues and loans in the form of government bonds,” and the other part would come from requiring Congress to “balance the Social Security’s needs against those of the rest of the economy,” meaning that funding for other programs would be cut. Couple this with what Bush said about not cutting current benefits and not raising taxes: it means that the switch would this generation would miss out on funding for such things as education, pollution controls, and science grants, which all lead to technology change and eventually economic growth. There stands a good possibility a switch can hurt the generation that it is intended to help.
Optimists of the PRA plan (which also happen to be great pessimists of Social Security) give the warning that doing such things as cutting funds for other programs, depending on economics growth, and raising Social Security tax will only delay the eminent problem by six years per idea. (Although David John said raising the retirement age would alleviate the problem greatly.) Bush said in Orlando that the system needed not just a 75 year fix, but a “permanent fix,” and using the ideas listed about would by no means offer a permanent fix, but it would give the government more time to develop a new, more efficient, and more accepted, plan to solve this problem. The current “solution” of PRA is now running into problems with every age group that it encounters. According to a Washington Post poll, 58% of all people polled said “the more they hear about Bush’s plan, the less they like it.” The plan is running into a great problem with gaining acceptance with the elderly voting block. “A majority of elderly voters have turned against the plan for private accounts, even though the White House has assured them that it would have no impact on their Social Security benefits (Weisman.)” Middle aged voters are not too thrilled with the idea because they would not benefit from any investment in the short time there is between now and their own retirement. For the group that this plan would affect- the 18-24 year old voting block- 60% did say that they are interesting in investing some of their Social Security contributions into the stock market, but at the same time only 38% said that they know much about the proposed plan (Weisman.)
Since the plan is not being widely accepted across all of the voting age groups, it seems that it may be best at the moment to use a temporary solution in order to give the government more time to create a better permanent solution. A new Social Security alternative will not come overnight, or even within a matter of a few months. Be wary if it does, because that may very well mean that our generation will pay greatly for the new plan.