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Economist: 71% Would See Lower Social Security Benefits

By Jeralyn, Section Other Politics
Posted on Mon Mar 21, 2005 at 11:48:58 AM EST
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President Bush comes to Denver today to push his social security plan. A leading Yale finance economist says,

Nearly three-quarters of workers who opt for Social Security personal accounts under President Bush's "default" investment option are likely to earn less in benefits than those who stay with the traditional Social Security system.

A new paper by Yale University economist Robert J. Shiller found that under Bush's default "life-cycle accounts," which shift assets from stocks to bonds over a worker's lifetime, nearly a third of workers would bring in less in benefits than if they remained in the traditional system. That analysis is based on historical rates of return in the United States. Using global rates of return, which Shiller says more closely track future conditions, life-cycle portfolios could be expected to fall short of the traditional system's returns 71 percent of the time.

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    • Economist: 71% Would See Lower Social Security Benefits | 16 comments (16 topical)
    Re: Economist: 71% Would See Lower Social Security (none / 0) (#1)
    by Dadler on Mon Mar 21, 2005 at 01:01:53 PM EST
    i think this study was done by communists. must've been. ahem.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#2)
    by Che's Lounge on Mon Mar 21, 2005 at 01:38:58 PM EST
    Ralph Nader and Boob Novak on Crossfire right now.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#3)
    by john horse on Mon Mar 21, 2005 at 02:32:39 PM EST
    According to my congressman, who favors privatization, personal accounts are the reward for "significant benefit cuts." In order to set up personal accounts and continue to pay current benefits, the federal government will have to borrow trillions of dollars. Rather than being the solution, personal accounts may create or aggravate the problem. The only way that personal accounts can work is if the economy grows at a faster rate than the pessimistic 1.6% rate that the Social Security trustees predict. However, there is a Catch 22 to this. If the economy grows at a rate greater than this, revenues will be sufficient to meet expenditures and there is no Social Security "crisis."

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#4)
    by Talkleft Visitor on Mon Mar 21, 2005 at 02:54:51 PM EST
    come on the system will remove all social benefits in the end, can't people see that one fact? its not a fight its an attack on all people.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#5)
    by pigwiggle on Mon Mar 21, 2005 at 04:09:19 PM EST
    Anyone able to find the report itself?

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#6)
    by Talkleft Visitor on Mon Mar 21, 2005 at 05:24:56 PM EST
    I don't understand how a broad investment in the U.S. economy can under perform the tax revenue the government can take in. Where is the tax comming from? What part of the economy is going to grow enough to generate these taxes yet isn't available for investment?

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#7)
    by Talkleft Visitor on Mon Mar 21, 2005 at 06:14:57 PM EST
    dadler - What part of "are likely" do you not understand? ahem. "David C. John, a Social Security analyst...... said Shiller's downward adjustment for lower future earnings is not supported by other studies..." Pick your poison. The unfortunate facts are that when the number of people paying in reaches two for everyone being paid, then the tax burden will be so high that the system cannot sustain itself. I think the Left knows this, they just won't do anything to cooperate. Frankly, they look like spoiled children.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#8)
    by Talkleft Visitor on Mon Mar 21, 2005 at 09:01:52 PM EST
    But they will be bigger smaller benefits than we will have if we do nothing... yes, let's take the bigger smaller benefits... Dubya is a business man, he knows best. He has run several successful businesses. Well, one successful baseball business... Well he didn't actually run the baseball business... Well his actual business ventures all went Arbusto as they say in the Permian Basin. We can trust him with our economic futures, can't we? What's the worst that could happen?

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#9)
    by brian on Tue Mar 22, 2005 at 01:36:09 AM EST
    Since this claim is suggesting that someone would bring in less in benefits with private accounts, I'm actually curious what you think "the traditional system's returns" is? The way I see it is that your odds of actually receiving in SSI benefit's more than you paid in the system by means of the SSI Tax are worse than anything that you'd currently find in Las Vegas! Let's consider the following: Let's say for example you and your wife earn the average income of $41,000.00 a year (current US Avg. Per Capita income)and with the average per capita income doubling every ten years over the last 40 years we will say that their income will only increase by 70% every ten years over the next 40 years of their working career. * You and your spouse will have paid into the social security system a whopping $1,964,000.00 throughout your careers. * Assuming that the SSI benefit increases by the same amount that it did in 2001 over the next 40 years(the last year of record on the SSI website) , then let's say you and your spouse retire and live for twenty years receiving benefits, you would receive $805,760 in total benefits, that's not even half of what you and your spouse paid in! The SSI system will be keeping about 1.1 Million dollars for itself! in fact you would need to live somewhere around 33 years just to get back what you paid in! I am really curious as to how often this occurs? the current retirement age being 62 that would mean after you reached 95 you would start to receive your return! how many 95 year olds do you know? For all of you who think that the current SSI System is a great deal and something that makes you feel more secure in your future retirement, I say more power to 'ya and I do not advocate in any way forcing you or anyone else into the private accounts option! By all means stay in the current system for as long as you'd like, but of course it's not the supporters of private accounts who are trying to force a social security system that they feel comfortable with on those who don't! No, that would be your side! For a party that claims us on the Right are alway's trying to impose our Value's on society, I sure find it ironic that here you are fighting to force my family to pay quite a large sum of the income that we will earn in our lifetime into a system that we do not like! and fighting against reforms that would simply offer more choices, I guess I forgot that we do not live in a sytem that Value's choice and freedom!

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#10)
    by john horse on Tue Mar 22, 2005 at 04:25:49 AM EST
    Brian, How about answering a simple question. Why do most people receive more in benefits than they pay in social security taxes? If your scenario is correct, then isn't the Social Security trustees projection incorrect and there is no crisis? I am not an economist but there are several things about your scenario that don't match my reality. 1. social security taxes are tied to wages, not income. 2. if your income kept doubling every ten years you will soon reach the point where you will exceed the cap. Under the current system, you don't pay social security tax on any wages over the capped amount. 3. I don't know what you do, but my wages sure haven't doubled every ten years. As a matter of fact, adjusted for inflation they have probably regressed. 4. Social security is an insurance program, not an investment scheme. The comparison should be with other insurance programs (also don't forget that it should also include survivor and disability benefits). Those who advocate private accounts like to hide behind the mask that they are ony trying to strengthen social security, not destroy it. Thanks for removing the mask.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#11)
    by pigwiggle on Tue Mar 22, 2005 at 05:57:05 AM EST
    “Social security is an insurance program, not an investment scheme. The comparison should be with other insurance programs” I agree; find me an insurance program that even remotely resembles investement portion of SS.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#12)
    by Talkleft Visitor on Tue Mar 22, 2005 at 07:23:49 AM EST
    So, because an economist says that 71% of those who choose, of their own free will, to partake in an opportunity to invest their own money as they see fit, will end up losing in comparison to what that same economist believes Social Security would pay in return for that same amount of money (leaving out entirely the issue of whether or not Social Security will in fact pay one thin dime), we are all to be stopped from making that decision freely? What has happened to the liberal dream of personal freedom when the government can force you into a specific retirement plan based on its determination of what risk you should be willing to accept? No one is putting forth a plan that would require people to create personal accounts. Anyone who buys into this economist's analysis is free to remain full vested in Social Security as it is. Why does their fear have to forclose the opportunity for those willing to embrace it?

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#13)
    by john horse on Tue Mar 22, 2005 at 06:11:51 PM EST
    justpaul, I guess the truth hurts. Why believe a finance economist when you can get your facts from folks like Brian. At least the economist can add ($41,000 increased 70% every ten years for 40 years does not equal $1.9 million, not even close). But putting out misleading facts is what the promoters of privatization have been reduced to doing. Take this statement from Congressman Allen Boyd, "Social Security's current surplus is expected to dwindle and become a deficit after 2010" Actually this statement is technically not a lie but it is misleading. It implies that the sh*t will hit the fan in 2010 when in fact the surplus will last until 2043 (which is technically "after 2010"). These guys would make a used car salesman blush. By the way, the Kolbe-Boyd bill would mandate personal accounts for all younger workers.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#14)
    by Talkleft Visitor on Wed Mar 23, 2005 at 05:41:24 AM EST
    JohnHorse, You missed the point entirely, but then I doubt very much it was by mistake. I stated that I accepted every thing the economist is saying. Then I asked, so what? Even if this economist is correct, what right does the government have to tell me that, because some economist feels that the risk is too high, that I must be forced to forgo that option and buy into the government's plan instead? Where in the Constitution is the government granted the authority to protect me from finanical risks I choose to take? As for the truth: I regularly compare the statements sent by the Social Security Administration, which tell me how much I've paid in and what benefit I can expect to receive against similar statements from my privately funded and well-invested 401K. Want to guess which one is going to pay me more, even though it has taken less money to create? Finally, if you think for one moment that anyone can tell you the exact state of the U.S. economy in 2043, you should be using that information to invest heavily in the market. These same people who tell you what will happen in the next 38 years can't even tell you with absolute certainty what happened in the last 38 years. Their projections are notoriously and regularly off by billions of dollars. All of which is, of course, beside the point. I didn't take issue with the numbers, only with the claim that I can be forced into this system for my own good. Maybe you like the idea that the government is going to protect you from all risk, but I don't believe that was what it was intended to do.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#15)
    by Talkleft Visitor on Wed Mar 23, 2005 at 08:14:12 AM EST
    The problem does not lie with the people who retire. It lies with all the people who have never worked getting their "share" of SS. Let's get the money to the people who retire first. If we are to pay out for disabled people who have never worked, maybe it should come out of a different fund. Why is no one addressing this? SS for retired people first.

    Re: Economist: 71% Would See Lower Social Security (none / 0) (#16)
    by Talkleft Visitor on Wed Mar 23, 2005 at 10:28:54 AM EST
    Oh lookie The Social Security trustees, in their 2005 report released Wednesday, offered an earlier date for trust fund exhaustion and revised upward estimates of the shortfalls facing the system over the next 75 years. So much for 2043? Who can tell when they change the numbers every other day, but this should at the very least make one leery of accepting any set of numbers as 100% accurate In addition: "They also now estimate that by 2017 the system will not be taking in enough in payroll taxes to pay all benefits promised and will need to tap the special-issue bonds that make up its trust fund. That date was moved up from 2018." Oops! It seems (given the assumption that this is accurate) that we just lost a year of time to do anything about it before it's too late. And: "Another way to measure it is in terms of benefits, which would need to be cut by 13 percent to achieve solvency over 75 years." Translation: Sorry dude, but we're not going to be able to pay you what we promised. But hey, aren't you glad you paid the full amount into the system for all those years since that does mean we'll be able to pay you something.

    Economist: 71% Would See Lower Social Security Benefits | 16 comments (16 topical)