Saturday, June 25, 2005

Bunched undies

In the true spirit of bipartisanship, Democrats -- the party of NO! -- continue their refusal to even discuss overhauling Social Security unless Dubya publicly abandons individual private personal accounts as a part of it.

Social Security is collecting far more than it pays out. It's been doing that for decades. That surplus hasn't been and isn't put aside for future payments. There is no Social Security Trust Fund with real money in it. Instead, there's actually a filing cabinet filled with printer-generated IOUs because the government has been "lending" money to itself.

Think of it this way: You have envelopes marked Utilities, Rent, Car Payment and Mad Money. When you get paid each week, you put a set amount inside each in order to pay the bills when they come due. But since there's not enough Mad Money for you to do what you want, you use money from the Utilities Envelope and replace it with an IOU. When the electric bill does come in, the only thing in the Utilities envelope is a crumpled wad of IOUs.

Excess Social Security revenue goes into the Fed's general fund, to be spent by congress critters on gawd only knows what pork so they look really good to their constituents when it's time for re-election.

This week Wisconsin Congressman Paul Ryan and South Carolina Senator Jim DeMint proposed legislation that not only would require the surplus in Social Security payments remain within that system, but (Oh, the horror!) that the people paying that excess actually have a claim to it.

Under the GOP proposal, sponsored in the Senate by Sen. Jim DeMint, R-S.C. , the money would instead be apportioned to workers according to their payroll tax contributions and invested in marketable Treasury bonds with their name on them. In two years, a special government board would decide whether those investments could be expanded to other assets.

"It has more momentum than any bill has so far," DeMint said, citing 11 Senate co-sponsors. Private-account strategists said Senate Majority Leader Bill Frist, R-Tenn., had quietly signaled his approval, and DeMint said he had White House support. - San Francisco Chronicle.
Paul Ryan noted three principles behind this legislation:

The Social Security surplus should only be used for Social Security.

The surplus should not be used to fund other government programs.

The surplus should not be used to mask the true size of the national debt.
It's not a complete solution but it's a start. And it makes sense.

You can immediately tell it does by just how quickly Nancy Pelosi responded with the standard rhetoric that, as usual, all translates to NO! But . . .

We are eager to discuss how to make Social Security strong into the next century, and we have many ideas on how to do so.
How Kerry-esque. They have a plan!

Have they shared it with anyone?

Yes. Pelosi herself did last March in an interview with Chris Wallace on FOX News Sunday.

WALLACE: Congresswoman Pelosi, you complain — and I think there's some legitimacy to it — about where is the president's plan, but Democrats like to say that Social Security is a hallowed Democratic idea, created by FDR. Where is your plan?

PELOSI: The facts are that we want to wait and see the president's plan.
And no matter what's floated, they'll say NO!

But that may be about to change. The Wall Street Journal's Political Diary noted:

[Clay Shaw, R FL] believes that when it comes to a vote, as many as 30 or 40 Democrats will likely jump onboard for two reasons. One, this bill is going to be rolled into a larger package to include pension and other reforms aimed at helping older Americans. And secondly, Democratic leaders Nancy Pelosi and Harry Reid have put a "gag order" on their party, preventing members from saying anything positive about Republican reform proposals. "But you can't stay silent on a vote," he said.
Why the possible change?

Could it be they're starting to sense that the voters back home may be just a little tired of them blindly following the party line, rather than serving the people that elected them?

After all, 2006 is coming.



Anonymous Doug said...

On target except for one thing: Social Security does not collect far more than it pays out. Right now, about 88 cents of each dollar collected is paid to current retirees immediately. The rest buys the IOU's, but even if it were put into commercial bonds, there would be only $1.6 trillion of th $11.5 trillion needed for promised benefits that future collections won't cover.

6:34 PM  
Blogger doyle said...

If Social Security is paying to recipients 88 cents of every dollar currently being collected, then it is collecting more than it pays out.

The remaining 12 cents of each dollar isn't being paid to anyone right now. Instead, it supposedly is being put aside toward future obligations but in reality it isn't. Eventually the T- bills (in the trust fund) the government has been selling to itself will have to be redeemed, but where is that money going to come from. (Remember the envelopes?)

When it comes to specific dollar amounts I don't have confidence in any of the projections. There are too many variables involved and none of the "promised benefits" are guaranteed. The Supreme Court decided that decades ago, but that's another subject.

I do agree completely, though, that there's a whopping big bill coming due with the way Social Security is structured unless changes are made. Not that I'd understand it, I would be interested in reading the information you got your figures from.

Scroll down my sidebar. If you're not already familiar with them, I think you'll find some of the sites there on overhauling Social Security worthwhile.

10:17 AM  

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