uk.

“When they retire, they continue to draw the same pay until they die”
WRONG: The maximum, by law, is 80%.

Virtually every fact you cite is WRONG.
So much Fox News - so little information.

Good luck to you!

By the way, you quoted the Concord Coalition in your second citation of the group’s two main concerns for any reform, but a Google search fails to bring up what you quoted. Can you please point us to your source material if it is on the Web, other readers reading this discussion can be on the same page as you?

My personal position is if we drastically curtail eligibility to those who are facing Third World level shanty-town destitution, then the programs can thrive without endangering our economic superpower standing. Anything short of that will incrementally bleed off the productivity of America until at some point we can no longer catch up with more vigorous economic blocs, and we will then be fortunate to count ourselves a perceived has-been superpower like the U.K. (even though they still wield enormous power) or worse, a Second World nation.

I have pointed you to the actual numbers that the SSA Trustees themselves computed for long-term (75 years and up) sustainability, and these numbers and methodologies were not challenged by pension specialists, so they are generally accepted to be accurate. Unless you reject these projections, and can defend why the projections are incorrect, we can start discussing what reform makes sense in light of those numbers. These numbers spell the fiscal doom of even the most financially powerful nation in not just the world, but the world’s entire history whether measured in absolute or comparative terms. Not doomed today, not in ten years when you retire, perhaps not even in 40 years when you are likely to have passed from this mortal coil.

But in 60-75 years hence, the numbers tell us that we face a stark choice. Either we effectively give up all national economic progress for the next 2-4 generations (and every year of economic progress not spent on social programs mortgages future generations further into debt), or give up on a set of social programs as currently constituted that however well meaning, simply cannot be afforded. That doesn’t mean we can’t have any such programs whatsoever; that’s a discussion for another day. But any amount of demanding that “taxes are taxes” or raging at tax burdens is not going to repeal numeric reality. That reality says we must consider drastic actions to even hope to retain a sustainable program that is even a shadow of its former self. This is assuming we have the luxury of not having our currency’s users force a decision upon us any sooner, an assumption that the sad history of many long-dead currencies cannot support.

Your generation and older generations today can demand and successfully defend your benefits. You can even magnanimously allow the passage of “tweaks” and convince yourselves that you saved the system. You will be long gone and turned to dust when the reckoning comes to the fore in full force.

If the Federal Reserve chooses to respond to the future reality with inflation, we risk forever losing America as a democratic representative republic. There are no recorded instances of any First World level republic surviving hyper-inflation of its currency. John Law’s Mississippi Bubble-era France and Weimar Republic-era Germany are two major examples; neither nation’s governing systems survived the hyper-inflationary responses to the fiscal crises of their day intact. They remain republics today largely through exacting a terrible price in blood from internal (in France’s case) and external (in Germany’s case) strife.

The Federal Reserve cannot force the nation to respond to the reality by paying up and simultaneously enacting emergency cuts in expenditures; only Congress and through them, the citizens, can make that choice. History’s lessons are very bleak indeed here as well; no First World level nation has ever chosen a path out of ruinous level national debt that instantly guaranteed devastating depression, which most central bankers are convinced is an economic death spiral.

The chains the older generations are heaping upon the younger generations if they are successful (as I sardonically expect) in retaining or largely retaining their benefits are chains that will force a future soul-rending national decision turning upon whether we shall enter a struggle to survive the fires of hyper-inflation or the icy depths of depression. We as a nation are fiscally fouling our own nest in a tragic drama that the ancient Greeks would have forked over copious amounts of electrum to watch, all the more so because unlike the Greeks with their maddeningly cryptic Delphinic oracles, our oracles have shown us with breathtaking clarity the future that lies in store for us if we continue on our spendthrift ways.

As an optimist in human endurance I know that the nation will survive. But it would be foolhardy to believe that we would be the exception to the historical empiricism that once a superpower loses its perch it never regains it again without a wrenching change in national and cultural identity.

Dying to defend freedom is relatively easy because often someone else like an enemy soldier makes that decision for you. Living with tangible and/or intangible privation to retain liberty is much more difficult because you have to volunteer for an unheroic, unremarked upon, and even harsh life, except possibly in the eyes of your family and friends. Saying you pay your own way and take care of your own is so much more mundane and far less dramatic (but far more ennobling for lovers of liberty) in our celebrity-soaked era than saying you fight for investing in the people while leaving the actual decisions in other people’s hands.

It is far more soul satisfying to seize the moral high ground and demand “social justice”. Nobody likes to delve the arcana of finance, investment theory, money theory, etc. and come back with dry answers for the price of that lofty real estate.

This is my last participation on the discussion; you have the last word Carol if you desire. I have some clients with major projects to serve in the next several months and by the time I’m done this thread will be long dormant. In any case, I literally can afford to not care about any adverse outcomes, and any veiled threats of “social justice or else you won’t like the revolution” simply don’t impress me. Coming from a family that escaped one of the most murderous regimes in history that used rhetoric as blithely unaware of economic laws and human nature as we hear today from supporters of bankrupt social programs, we’ve been planning and preparing for a long, long time for similar follies to befall our beloved adopted nation, ever since we sadly (but not surprisingly, now) noticed the same familiar echoes. We’ll speak out for as long as we can, but when the mortal madness grips the crowds, we’ll be long gone and not to be found by those crowds.

Carol, you are evaluating a compromise, made necessary and desperate by the stranglehold the older generations have on this issue. What you leave out is what would happen without the compromise, and we went about business as usual, or even with any “tweaks” you so heartily approve of but fail to share with the rest of us benighted souls. You are applying a solvency test for the proposal when solvency simply does not exist for the system as constituted today.

The SSA Trustees’ own words damn your condemnation of the proposal. Unfunded liabilities identified in their reports exceed the total net worth of the nation. By almost two times over.

More relevant to your personal situation is the termination liability of Social Security and Medicare. Assume that Social Security and Medicare will be closed to all new entrants, starting January 1, 2004 (last year). Determine what today’s workers and retirees are due to receive in future benefits over and above what those same workers and retirees are due to pay in future contributions. That comes to about the net worth of the nation.

You are due to retire within 15-20 years, 10 years by your own words in an optimistic time frame. I guarantee you that this nation will not find the productivity to capitalize an expense equal to its own net worth out of pocket in either of those time frames, and the majority would have to be funded through debt issuance. While you are “connecting the dots” over a $3.4 trillion symbolic gesture (because that is the most your generation and older will even even take under consideration), a $30 trillion freight train is bearing down on us all.

Greenspan is not indicting Bush’s proposal. He is indicting the entire edifice.

From the Concord Coalition’s explanation of termination liability:

This number represents the subsidy that today’s adults expect from future generations, which is another way of saying that it measures the extent to which future generations will fail to get a fair return on their contributions. It also tells us the cost of transitioning from today’s pay-as-you-go entitlement system to a new funded system. It is the sunk debt that future generations would have to liquidate before they can invest their own contributions free and clear.

In good years, if you treat America as an investment vehicle, the nation throws off about 3% of annual growth that could conceivably be reinvested. Taking only the termination liabilities (perpetuity calculations of liabilities more appropriate to public financing and accounting discussions balloon to almost twice as much), Social Security and Medicare on their own have effectively consumed the next 33-1/3 years of national growth, assuming the national economy hits on all cylinders for the next three decades (a foolhardy assumption). In investment climate terms, imagine facing what is effectively 1970’s stagflation over the long haul, pretty much your entire working life if you are just graduating college today.

Evaluated with the same eye as any practiced investor or trader, or more appropriately with the same eye as a pension fund administrator, Social Security and Medicare already are past the point of insolvency. If you care that is, as most Gen X and younger generations do, to not bequeath a debt-soaked legacy to your children and grandchildren, and not simply run the numbers for only the period you happen to expect to live.

The liberals are right. There really isn’t a solvency problem with Social Security or Medicare. If you plan on dying within the next 30-50 years. Beyond that, our Treasury instruments will start glowing radioactive, and investors will touch it only at their peril.

The proposal was never meant to tackle the solvency problem in any substantive way. It was meant to open the eyes of the citizens to the murky map of the future, especially that section beyond the impassable mountain range of our deaths leading to the golden plains of our childrens’ lives, there is a little legend the map maker wrote down, reading: “Here there be dragons.”

http://www.capmag.com/article.asp?ID=1771