Patrick's Rants


Design By Humans

3/15/2005

Is it time for Greenspan to go?

Filed under: Politics,Sensible Tax Reform,Social Security — site admin @ 5:23 pm

Alan Greenspan has been a long time neutral voice concerned merely with the financial fitness of the country. He has run the Federal Reserve Board with pragmatism without letting politics get in the way of his recommendations on interest rates. He bucked George HW Bush’s request to lower interest rates when it would have been in GHWB’s favor to have lower rates. Indeed GHWB blamed Greenspan for his election loss to Bill Clinton in 1992.
Greenspan urged Clinton to lower the national debt, lower the deficit. Clinton did and one of the best economies that we have seen in years, some might say since before Jimmy Carter, followed. Mr Greenspan cautioned against “exhaulted exuberance” in the stock market, he saw stocks that could not reasonably be priced the way they were without some kind of correction. The “tech bubble” popped not too long after.
He has been right more times than not, he is even arguably a financial genius. Why is it then that he is backing Dubya’s Social Security private accounts? Perhaps senility is setting in, perhaps he wants to be reappointed to his position on the board which expires in 2006, perhaps he is letting his politics get in the way of rational thinking. (more…)

10/18/2004

Private Social Security accounts

Filed under: Politics,Sensible Tax Reform,Social Security — site admin @ 12:19 pm

Private Social Security accounts have been subject of some debate. George W Bush wants ‘younger’ workers to be able to contribute to private accounts. That’s all well and good but it raises questions about the current Social Security recipients. The Social Security system was designed to be pay as you go… meaning that while some people are drawing out of the system others are contributing. This is the biggest problem facing the system today… fewer people working, more retiring and living longer are putting a strain on the system. The Social Security trust fund is ‘seperate’ from the general budget by law. Unfortunately SS funds may only be invested in government debt instruments, meaning that the Federal government has borrowed the money from the SS trust fund for use in the general budget. Of course the higher drain on the system due to more retirees means that the federal government will have to redeem the notes held by the Social Security Administration. This puts a tremendous strain on a budget already strained by war, increased spending and tax cuts.
While I wrote a paper once upon a time supporting the concept of private accounts, another angle needs some attention and consideration. Private accounts can be discussed at another time. The maximum monthly SS benefits for someone retiring at 70 is $2,111. That’s $25,332.00 yearly.
So here’s the idea: allow people to opt out. Not opt out of paying in, out of receiving. Let’s assume that an individual at or near retirement age has managed a decent retirement account- whether it be in a company sponsored pension plan or some kind of personal account. Give this person a break for not drawing on SS benefits. Give them a break for managing their personal or company plan and having a sufficient amount to pay for their own retirement. Make the break voluntary and reversible. Make the break scaled so that one can get a partial break for an account that isn’t quite enough to cover a full retirement. The break would have to be somewhat equivilant to what someone would make now… perhaps no tax on up to $100,000.00 when it is all personally funded and it is a married couple. This would give a fantastic break to those currently drawing a personal retirement, ease the stress building on the Social Security system like the magma slowly rising in Mt. St. Helens, and helps not only the so-called wealthy, but also those whose only retirement is SS benefits and most importantly, it can be done today not at some nebulous point 30 – 50 years in the future that hurts those receiving benefits today.
Now, I haven’t run the numbers. Partly because it takes time to do that, but also partly because no matter what numbers I might come up with, the ‘right’ numbers will be complex to figure. They have to allow for the amount the government doesn’t have to pay out balanced against the reduced tax revenues.
It’s time to start looking for real and sensible answers to tax reform and the precarious state of the SS system.