Comments on: How Much Does SS Screw You?

By: Gareth

Gareth — Sun, 06 Feb 2005 20:06:00 +0000

Jason,

All financial assets are IOUs. IOUs from the US Federal Government are generally considered the safest financial assets around.

Sure, to pay off US Govt bonds, the US Govt will eventually have to either raise taxes or reduce spending (almost certainly, raise taxes BTW). That is solely because of George W. Bush and his enablers in Congress.

But how is that an argument that the Bonds are not really financial assets? They are only not really financial assets if the US Govt is going to default on them. That would be unconstitutional, and would result in a global financial crisis.

By: Jason Nichols

Jason Nichols — Sat, 05 Feb 2005 21:37:00 +0000

“It assumes half your money is invested in US government bonds, ie, the same thing it’s invested in now. Hmmm”

Soc Sec is NOT ‘invested’ in bonds right now. It’s not ‘invested’ in anything. The surplus is spent and the ‘bonds’ represent an IOU from one portion of the gov’t to another. To pay that off, the gov’t will have to either raise taxes or cut benefits.

By: Gareth

Gareth — Sat, 29 Jan 2005 23:32:00 +0000

it’s a funny kind of insurance that pays off if you manage to avoid disaster for 65 years.

It’s not so funny if you outlive your savings.

Especially if you’re forced into it…

Tu quoque, my friend, since you are defending a forced defined contribution scheme.

Anyhow, there is a good reason why insurance is (sometimes) more efficient if people are forced into it. It’s called adverse selection.

By: muckdog

muckdog — Sat, 29 Jan 2005 02:16:00 +0000

Good job. I think the whole argument isn’t about Social Security. It’s about winning elections. If Bill Clinton came up with this idea in 1998, Krugman and others would be lovin’ it.

By: Ken

Ken — Fri, 28 Jan 2005 23:48:00 +0000

“Please explain the possible scenario under which you get nothing.”

If you die before you hit 65, you get bupkis.

Next question?

And yeah, you can say it’s “insurance”, but it’s a funny kind of insurance that pays off if you manage to avoid disaster for 65 years. Especially if you’re forced into it…

By: Anonymous

Anonymous — Fri, 28 Jan 2005 23:47:00 +0000

“Please explain the possible scenario under which you get nothing.”

If you die before you hit 65, you get bupkis.

Next question?

And yeah, you can say it’s “insurance”, but it’s a funny kind of insurance that pays off if you manage to avoid disaster for 65 years. Especially if you’re forced into it…

By: Gareth

Gareth — Fri, 28 Jan 2005 13:32:00 +0000

BTW, you need to respond to the point made by the numerate members of the liberal blogosphere: the whole calculator is based on 4% *real* annual salary growth. See Atrios.

By: Gareth

Gareth — Fri, 28 Jan 2005 11:57:00 +0000

A defined benefit plan has insurance aspects a defined contribution plan doesn’t because the beneficiary shifts investment risk and the risk of living longer than average (SS has additional insurance features). Since both of these risks are bad, a rational person will prefer a defined benefit plan to a defined contribution plan with the same expected rate of return.

Will knows this. He also knows that SS is not pay-as-you-go, that actuarial analysis is not just guessing and that Social Security faces no greater risk of insolvency than the US Government itself. He doesn’t care because he wants to social engineer Americans into a mass investment class. He calls this the “moral argument”.

What I don’t get is why the moral argument requires so much sophistry…

By: washerdreyer

washerdreyer — Fri, 28 Jan 2005 10:50:00 +0000

What Gareth did is a rhetorical excess in response to Will’s at least equivalent excess of ignoring the actual purpose of social security in his post. Here’s a nice quote from Dan Froomkin in yesterday’s WaPo on what it means to describe OASI as “social insurance.

“Sir, Social Security isn’t really a retirement plan, it’s more like an insurance plan, making sure that the elderly, the disabled, their dependents and survivors don’t go destitute. Some people get a lot more out than they put in; others get a lot less; it’s like insurance that way.”

By: Paul Zrimsek

Paul Zrimsek — Fri, 28 Jan 2005 07:43:00 +0000

Yes, privatization– to the extent that it supplants OASI as we know it– would represent a change from defined-benefit to defined-contribution. But I thought we were talking about existing OASI. The idea of comparing that to actual insurance was Gareth’s, not mine; I was just pointing out that the comparison is absurd. You can call SS “social insurance” if it suits you, just as you can call an apple a “social orange”, but the label does nothing to improve its resemblance to actual insurance (which is slight).

By: washerdreyer

washerdreyer — Thu, 27 Jan 2005 21:30:00 +0000

Sorry, didn’t fill in the name field for the above post.

By: Anonymous

Anonymous — Thu, 27 Jan 2005 21:18:00 +0000

Tom-
I didn’t know that refuting a false claim was bragging, thank you for clearing that up.

Paul-
Maybe I’m confused (not saying that for rhetorical flourish) but wouldn’t a privatization scheme function as a switch from defined benefit to defined contribution? If privatization would function as a defined benefit scheme in which no person’s benefit is less than it would be under the status quo and some people’s benefits are higher, I’ve been misled. Also, it’s defined benefit plus additional disability and other types of insurance, but I assume you just mean the primary function of social security.

By: Paul Zrimsek

Paul Zrimsek — Thu, 27 Jan 2005 19:46:00 +0000

Washerdreyer clears things up nicely: When people say SS is an insurance policy, they mean it’s really nothing at all like an insurance policy but they’re calling it one to avoid having to judge its merits as the defined-benefit pension plan it actually is.

By: monkyboy

monkyboy — Thu, 27 Jan 2005 19:25:00 +0000

When the sham companies the republicans set up to receive Social Security funds go under…we’ll be happy to get 10 cents on the dollar.

By: Tom Hanna

Tom Hanna — Thu, 27 Jan 2005 19:12:00 +0000

“you would get somewhere between 75-80% of Social Securities obligations to you…Please explain the possible scenario under which you get nothing.”

Why don’t you explain th scenario in which paying 75-80% of what is owed is something to brag about?