From: gpalo@digi.lonestar.org (Gerry Palo)
Newsgroups: tx.politics
Subject: Re: Social Security
Date: 6 Jan 93 16:55:52 GMT
Distribution: tx
Organization: DSC Communications Corp, Plano, TX

In article <1993Jan6.062713.20522@mksol.dseg.ti.com> mccall@mksol.dseg.ti.com (fred j mccall 575-
3539) writes:
>In <1993Jan5.170358.1226@digi.lonestar.org> gpalo@digi.lonestar.org (Gerry Palo) writes:
>

>Oh, I think you're right about the number of people who would accept
>the payout.  This leaves you with a couple of problem, though.  First,
>you have just made a huge payout from the Social Security fund --
>perhaps even more money than it currently contains, since the thing is
>only ACTUARIALY sound.  You're liable to have to take a massive hit on
>general tax revenues to be able to give all the people currently
>paying in their money back, since that money is supposed to be used to
>fund CURRENT requirements of the system.  There's a surplus, but I
>question whether it's enough to give everyone their money back who
>would want it.
>
>Secondly, once you let all those people opt out, how do you fund the
>people who are left?  You have a large number of people who are close
>enough to retirement that they are probably going to stay -- or they
>are currently drawing benefits and are certainly going to have no
>large incentive to stop.  The current soundness of the plan relies on
>the revenue stream from all those folks who would probably opt out of
>the system.  
>
>In general, I agree with what you're proposing, but I don't think the
>payout is practical.  I think you're going to be faced with simply
>writing those past contributions off.  If you don't, you're still
>going to wind up robbing Peter to pay Paul, because you're going to
>have to fund the liabilities of the Social Security system out of the
>general tax revenues.


You may be right, Fred.  We may have to write off the earlier payments.  I just
suggested, without any idea of the numbers, that the the total hit might not be
so bad if people had an option to buy out of it.  At least some of those who
are receiving benefits now might do so simply because they don't believe in
the solvency of the system and would rather take a bird in the hand. But this
is mere speculation.  Indeed, you may be right. But with every passing year I
begin to feel like Hough.  I'm younger than he is, but my dependence on SS is
at least as great as his.  I don't think I am alone in this.  How do you, then,
deal equitably with people who have put into the system on the good faith that
they will receive their retirement benefits?  Is there not some partial solution
that would at least recover some of it?  It is especially those over forty who
will be in a more difficult position to build up something on their own before
retirement, even those who have been conscientiously contributing to 401Ks and
such.

I have to say that the right wingers who cried out in the wilderness that
SS was a scam and that it would be bankrupt by the time my generation retired
turn out to be right after all.  Big promises with neither the means nor the
will to keep them.  It is really robbing Peter Junior or III to pay Paul I.

If "we" have to bite the bullet, the question becomes, "What you mean 'we',
white man?"  Suppose we  actually did cut it off cold turkey.  If as a substitute
every working person would be required to pay the current FICA percentage into
an IRA, matched by the employer as it is now, how young would you have to be in
order to make up - not for the lost contributions, but for the loss in expected
benefits.  Based on a reasonable rate of inflation and return on investment?
E.g., could a forty year old build up enough of a nest egg to cover his retirement
by age 65?  This would have to include some form of disability insurance and 
life insurance as well for the surviving dependents.  What would the numbers
look like?  If we could come up with some, then some possible sliding scale
process could be designed to at least provide relief for people who are too close
to retirement to recover for themselves.

Of course, this is all a pipe dream. What will probably happen is that the aging
boomer generation will pack more and more clout and stick it to the younger ones
and the politicians will be terrified to propose anything at all until it is too
late.  I guess I will be voting with the boomers - unless my ship comes in, in
which case, perhaps I will become more objective.  Another problem is that as
soon as the amounts in the private retirement accounts began to accumulate,
the pols would figure out some way to get their hands on it anyway.  But that
is another thread.

This is interesting, Fred.  From previous exchanges, especially on education,
I would have concluded that we never would have agreed on as much as the time
of day.

Gerry Palo (73237.2006@compuserve.com)