Social Security Reform Risks

**-- ECONOMIC SECURITY & RETIREMENT --**
BEWARE OF CONNECTING SOCIAL SECURITY TO THE STOCK MARKET -- learn from what happened to the IRA Swindle! Before young Americans decide that the Bush proposal to allow Personal Accounts to be invested in the Stock Market is a great idea, they should consider the 'personal accounts' hoax by the Reagan Administration in the 1980s. That system permitted workers to set aside $2,000 a year per worker (tax-deferred) to be invested in an Individual Retirement Account (IRA). Billions of dollars flowed into the Stock & Bond markets after which Federal Reserve Chairman Allen Greenspan dropped the interest rates. From the early 1990s until today -- more than fifteen years -- those IRA accounts have not grown any significant amount. In fact, the original promise that the IRA's would add greatly to Senior's retirement income has turned out to be a lie! That was not Reagan's fault, however. Democrats in the Senate have been happy to see interest rates plummet because it makes Reagan's IRA Plan look bad. When today's Seniors were working through the 1940s to the late 1980s, they paid mortgage rates averaging 9% to 12%. If they borrowed money they paid 15%-%18 on car loans. Even more than that on other loans. The Federal Reserve experts use all kinds of smooth numbers to show inflation is almost non-existent, but Greenspan makes no effort to calculate the abnormal increases in costs for Seniors, all resulting from an inflation rate at least three times the amount that the FED will recognize. In Washington, we have two different worlds of economic numbers living side-by-side: the Democrats and the Republicans. The President has his Office of Management & Budget, as well. The result is: numbers in Washington do not mean a damn thing! Today's interest rates are actually negative numbers since Greenspan has pushed the rates so low that they are less than the real inflation rate! The Bush Personal Account Scheme, while voluntary, will be seen by younger workers as a great opportunity to pull money away from the SS Trust Fund (a Fund that is a fiscal mirage since the Treasury has been using that surplus ever since President Johnson arbitrarily moved it into the General Federal Budget). The Treasury's IOU to the Trust Fund means that when those IOUs are redeemed, taxes will have to be increased to restore the money to the pension system! Rob Peter to pay Paul is alive and well in the Dark City by the Potomac! Bush can take some credit for pure guts to bring this issue before the country, but there are two parts of this dilemma that must be viewed and solved separately: 1. Re-establish or guarantee solvency of the SS System. and 2. Consider a way of assuring younger workers that they already have ways to increase retirement savings that is held in their name. They deserve fairness but not a windfall at the hands of a bunch of carping, crass politicians! 3. Regulate the excesses of the Credit Card industry that intentionally entrap young consumers who clearly are incompetent managers of their wages and assets. The first -- solvency -- cannot be done without some pain and sacrifice. There are 4-5 ways to adjust the numbers. No matter what they are, one thing must be accepted: those receiving the maximum monthly pension -- many who already enjoy generous company pensions and health care benefits -- will have to lose some of that gravy! The second -- considering younger workers complaints that they will not have Social Security benefits when they retire -- will have to be convinced how well-off they are compared to previous generations due to a variety of ways to save for retirement already given to them. Those benefits are: a). expanded IRAs, b.) dual income families, c.)401k plans, d.) advantages of student loans, and other opportunities formerly denied or non-existent for the so-called Greatest Generation. The third -- establish a real Consumer Money Management course in all public schools and make it a required course beginning in the 8th grade through 12th. Of course, this strategy would be blocked by the Business Lobby who makes huge profits off the Ignorant and Juvenile-minded buyers! Neither Democrats nor Republicans are being forthright about this issue. Bush has given the Nation an opportunity to think about reforming the Retirement entitlement. So, why don't we think about it and lay politics aside and deal with it intelligently? Start tomorrow by stopping the Credit Card folks indiscriminately sending cards to persons who have no credit standing. (e.g., teenagers). Also, change the Bankruptcy laws so it is not another government handout by making taxpayers and consumers pay for those failures while those whose business failed drives away with a new Mercedes! DOING THE NUMBERS First question should be: how much should a Citizen receive in overall retirement benefits compared to his/her at-work income? Example: if a man has a gross income of $50,000 a year, how much retirement should the SS system guarantee? Three-quarters or one-half or one-third the annual income when he retires? Suppose he receives an $800.00 retirement check every month. And has a fully-funded health insurance and receives the maximum Social Security payment? (currently about $1,300/ month) Many people are saving thousands of dollars each year even though retired! Yes, they planned it smart but should they amass more wealth while workers whose pension is much smaller can barely pay their bills. The wide gap between people's earning capacity, their lifestyles and their spending habits pose a challenging enigma! But it was predictable that in our kind of economic environment, many will be frugal and well-off while a larger number will be reckless and incompetent in managing their money. No matter how you cut this turkey, reasonable and fair Citizens will agree that the entire savings and pension package has to be revealed before a fair retirement figure can be set. Unfortunately, many Citizens are so sneaky and fraud-prone, a valid, honest picture of a person's assets will be impossible to access and evaluate. Such a system will keep lawyers working night and day on court challenges. Means-testing, however, seems to have arrived provided people inside The Beltway have the courage and fortitude to put it on the table. It remains the most feared Third Rail in politics! Face it, folks, Americans will not give up their right to cheat and lie when it comes to money! As a People, we have chosen to become the most exploitive creatures on Earth. That is the one attribute that we have acquired from the Jews who have dominated business and commerce in the USA for over a hundred years! When you live among crocodiles, you learn to be like a crocodile! The current plan to divert 4% of an individual's SS payments into a Personal Account is much too large. Try 2% and then look at those figures. Of course, the experts have no idea how many young people will opt to setup Personal Accounts. I would predict many will opt out of the regular SS formula. Why? They are incompetent money managers and they have to have everything they see and hear about on TV! There are many enticing numbers games to be played and there may be a "deal" struck in the Congress that could result in a reformed SS system. Be assured, however, if the President and Congress do not explore the economic advantages already enjoyed by the typical X-Generation worker, they will break the system! A political solution to saving SS will be a disaster! Don't forget our first point: as long as Greenspan and the FED can drop interest rates to 1% and 30 year mortgages are going at 5.4% during these times, there is no promise that Personal Accounts will create more, significant wealth -- unless you invest in high risk paper which most Seniors will not do! With the economic tsunami headed our way from the European Union marketplace, we see very few bright days ahead. C. Q. Hall Previous articles on Related Subject are: other

-- ECONOMIC SECURITY & RETIREMENT --

BEWARE OF CONNECTING SOCIAL SECURITY TO THE STOCK MARKET
-- learn from what happened to the IRA Swindle!

Before young Americans decide that the Bush proposal to allow Personal Accounts to be invested in the Stock Market is a great idea, they should consider the 'personal accounts' hoax by the Reagan Administration in the 1980s. That system permitted workers to set aside $2,000 a year per worker (tax-deferred) to be invested in an Individual Retirement Account (IRA).

Billions of dollars flowed into the Stock & Bond markets after which Federal Reserve Chairman Allen Greenspan dropped the interest rates. From the early 1990s until today -- more than fifteen years -- those IRA accounts have not grown any significant amount. In fact, the original promise that the IRA's would add greatly to Senior's retirement income has turned out to be a lie! That was not Reagan's fault, however. Democrats in the Senate have been happy to see interest rates plummet because it makes Reagan's IRA Plan look bad.

When today's Seniors were working through the 1940s to the late 1980s, they paid mortgage rates averaging 9% to 12%. If they borrowed money they paid 15%-%18 on car loans. Even more than that on other loans.

The Federal Reserve experts use all kinds of smooth numbers to show inflation is almost non-existent, but Greenspan makes no effort to calculate the abnormal increases in costs for Seniors, all resulting from an inflation rate at least three times the amount that the FED will recognize. In Washington, we have two different worlds of economic numbers living side-by-side: the Democrats and the Republicans. The President has his Office of Management & Budget, as well. The result is: numbers in Washington do not mean a damn thing! Today's interest rates are actually negative numbers since Greenspan has pushed the rates so low that they are less than the real inflation rate!

The Bush Personal Account Scheme, while voluntary, will be seen by younger workers as a great opportunity to pull money away from the SS Trust Fund (a Fund that is a fiscal mirage since the Treasury has been using that surplus ever since President Johnson arbitrarily moved it into the General Federal Budget). The Treasury's IOU to the Trust Fund means that when those IOUs are redeemed, taxes will have to be increased to restore the money to the pension system! Rob Peter to pay Paul is alive and well in the Dark City by the Potomac!

Bush can take some credit for pure guts to bring this issue before the country, but there are two parts of this dilemma that must be viewed and solved separately:

1. Re-establish or guarantee solvency of the SS System. and

2. Consider a way of assuring younger workers that they already

have ways to increase retirement savings that is held in their

name. They deserve fairness but not a windfall at the hands of a

bunch of carping, crass politicians!

3. Regulate the excesses of the Credit Card industry that intentionally

entrap young consumers who clearly are incompetent managers of

their wages and assets.

The first -- solvency -- cannot be done without some pain and sacrifice. There are 4-5 ways to adjust the numbers. No matter what they are, one thing must be accepted: those receiving the maximum monthly pension -- many who already enjoy generous company pensions and health care benefits -- will have to lose some of that gravy!

The second -- considering younger workers complaints that they will not have Social Security benefits when they retire -- will have to be convinced how well-off they are compared to previous generations due to a variety of ways to save for retirement already given to them.

Those benefits are: a). expanded IRAs, b.) dual income families, c.)401k plans, d.) advantages of student loans, and other opportunities formerly denied or non-existent for the so-called Greatest Generation.

The third -- establish a real Consumer Money Management course in all public schools and make it a required course beginning in the 8th grade through 12th.

Of course, this strategy would be blocked by the Business Lobby who makes huge profits off the Ignorant and Juvenile-minded buyers!

Neither Democrats nor Republicans are being forthright about this issue. Bush has given the Nation an opportunity to think about reforming the Retirement entitlement.

So, why don't we think about it and lay politics aside and deal with it intelligently?

Start tomorrow by stopping the Credit Card folks indiscriminately sending cards to persons who have no credit standing. (e.g., teenagers). Also, change the Bankruptcy laws so it is not another government handout by making taxpayers and consumers pay for those failures while those whose business failed drives away with a new Mercedes!

DOING THE NUMBERS

First question should be: how much should a Citizen receive in overall retirement benefits compared to his/her at-work income? Example: if a man has a gross income of $50,000 a year, how much retirement should the SS system guarantee? Three-quarters or one-half or one-third the annual income when he retires? Suppose he receives an $800.00 retirement check every month. And has a fully-funded health insurance and receives the maximum Social Security payment? (currently about $1,300/ month)

Many people are saving thousands of dollars each year even though retired! Yes, they planned it smart but should they amass more wealth while workers whose pension is much smaller can barely pay their bills.

The wide gap between people's earning capacity, their lifestyles and their spending habits pose a challenging enigma! But it was predictable that in our kind of economic environment, many will be frugal and well-off while a larger number will be reckless and incompetent in managing their money.

No matter how you cut this turkey, reasonable and fair Citizens will agree that the entire savings and pension package has to be revealed before a fair retirement figure can be set. Unfortunately, many Citizens are so sneaky and fraud-prone, a valid, honest picture of a person's assets will be impossible to access and evaluate. Such a system will keep lawyers working night and day on court challenges. Means-testing, however, seems to have arrived provided people inside The Beltway have the courage and fortitude to put it on the table. It remains the most feared Third Rail in politics!

Face it, folks, Americans will not give up their right to cheat and lie when it comes to money! As a People, we have chosen to become the most exploitive creatures on Earth. That is the one attribute that we have acquired from the Jews who have dominated business and commerce in the USA for over a hundred years! When you live among crocodiles, you learn to be like a crocodile!

The current plan to divert 4% of an individual's SS payments into a Personal Account is much too large. Try 2% and then look at those figures. Of course, the experts have no idea how many young people will opt to setup Personal Accounts. I would predict many will opt out of the regular SS formula. Why? They are incompetent money managers and they have to have everything they see and hear about on TV!

There are many enticing numbers games to be played and there may be a "deal" struck in the Congress that could result in a reformed SS system. Be assured, however, if the President and Congress do not explore the economic advantages already enjoyed by the typical X-Generation worker, they will break the system! A political solution to saving SS will be a disaster!

Don't forget our first point: as long as Greenspan and the FED can drop interest rates to 1% and 30 year mortgages are going at 5.4% during these times, there is no promise that Personal Accounts will create more, significant wealth -- unless you invest in high risk paper which most Seniors will not do! With the economic tsunami headed our way from the European Union marketplace, we see very few bright days ahead.

C. Q. Hall

Previous articles on Related Subject are: other