So what's your alternative to Social Security?
h...@waikato.ac.nz
>
> In article <92092.21...@psuvm.psu.edu>, <DG...@psuvm.psu.edu> writes:
>
> Who knows? I would assume that it would do at least as well, and
> my program would provide real investment capital which would help
> the economy as a whole. The answer to the question is really
> irrelevent, however. The government has no Constitutional authority
> to take from one group of people and give to another to make them
> better off. That is the role of private individuals acting through
> charity.
and
> |> Does a democratically elected government have any duty to re-distribute
> |> income/wealth if a) the public commonwealth is threatened b) to equalize
> |> opportunities?
>
> Nope. Not in a country that values freedom and honors the rights
> of the minority. Democratically elected governments can only
> wield those powers which have been granted to it by the governed.
> In this country, there is no Constitutional power granted to the
> government which gives it the authority to redistributed income
> or wealth.
I agree that a democratically elected government should only wield those powers
which have been granted to it by the governed, or, to put it slightly
differently, a government derives its right to govern only by consent of the
people. The question is how do we establish exactly what the people have
consented to? Even referenda only sample the willingness of those who vote.
They can be expected to reveal a large minority of voters who dissent from any
decision. Have these people granted the powers in question to that government?
Constitutional powers do not necessarily imply powers granted by the governed.
Most constitutions, whether written or otherwise, were devised by the few
strong and powerful and often have taken away rights from the weak and
powerless. The weak and powerless cannot be supposed to have consented to these
arrangements.
Specifically governments have usually taken it upon themselves to define
property rights. In doing this the have accepted the status quo from
pre-government days when property rights were established on a 'might is right'
basis.
I believe it is definitely the role of just government to remove the last
vestiges of the 'might is right' era and adjust property rights in recognition
of the equal rights of all human indiviuals to a share of what was not created
by anyone's labour.
Government is itself mighty and by its nature represses dissent. It behoves it
to strive to consider the rights of the weak and powerless. The strong and
powerful can defend their own rights and usually have an inflated idea of what
these are.
Helen Marsh
R Michael Medwid
maximum amount of tax-deferred pre-tax contribution to 20 or 25% of gross
income. I belive current penalties for early withdrawl are appropriate
at 10% plus full income tax.
Second I wound have a sharply reduced *very long term* capital gains tax.
That is, there would be NO income tax paid on securities held for
say 20 years. Perhaps there would be a 5% capital gains tax on
earnings on securities held for 10 years, 10% for 7 years and
15% for 5. This type of policy would correct quite a bit of
fiscal myopia.
When I recently calculated my social security benefit at age 65 ]
(in 2026) it came out to $776/mo. Now that assumes I work until
around age 60. In any case nearly all my income I suspect will
come from a combination of pension, 401k payout and miscellaneous
investments. All I can say about $776/mo in 2026 is WHO CARES?
Peter Nelson
From: j...@citi.umich.edu (Jim Howe)
> The government has no Constitutional authority
> to take from one group of people and give to another to make them
> better off.
Justice Howe must be speaking for the minority. The rest of the
Supreme Court has never found the US tax system unconstitutional.
> In this country, there is no Constitutional power granted to the
> government which gives it the authority to redistributed income
> or wealth.
Funny, I could have sworn Michigan was part of the United States.
When Mr. Howe successfully challenges this practice in the courts
then his statement becomes true. Until then it is false.
---peter
nels...@apollo.hp.com
From: ami...@cup.portal.com (R Michael Medwid)
>First I would change the laws governing 401k plans. I would increase the
>maximum amount of tax-deferred pre-tax contribution to 20 or 25% of gross
>income. I belive current penalties for early withdrawl are appropriate
>at 10% plus full income tax.
Another problem with 401k law is this: in an effort to be "equitable"
the law requires that companies balance the participation of their
higher and lesser-paid employees. In other words, the government
wants to be assured that the 401k plan is not used just to benefit
the wealthy. So they have a formula which limits participation
based on the ratio of contributions from the lower-paid employees
and higher-paid ones. At this company (Hewlett Packard) this has
the effect of setting a 6% (of gross income) ceiling on the amount
I'm allowed to contribute. The company would be forced to offer
some extra incentives to its lower-paid employees to correct this.
On the other hand, this does illustrate the problem with Mr.
Medwid's basic proposal.
>Second I would have a sharply reduced *very long term* capital gains tax.
For highly paid and financially sophisticated workers like me, Social
Security is a burden and 401k limits are likewise. I can live com-
fortably on a fraction of my gross and save or invest the remainder.
But as a practical matter many or most workers live paycheck to
paycheck and many others who could do better aren't that sophisticated.
And while it may be easy to dismiss it as "their problem" if they
fail to provide for their own retirement the real world doesn't
work that way.
Libertarians and their ilk have no trouble admitting to the existence
of natural forces such as gravity. But social forces like *culture*
are powerful and nearly as implacable and they must be acknowledged
and dealt with, too. They are every bit as real as gravity and any
plan or proposal has to factor them in. A western society witnessing
its elderly population spending their twighlight years in abject poverty
will demand that "something be done" and they will look to government
for that "something".
Someone might reply, "hey, I'm sorry but I can't be responsible for
the public's foolish ideas". The answer is: You can't be responsible
for gravity either, but you'd look pretty foolish proposing an idea
that didn't take it into account.
---peter
Jim Howe
Previous Supreme Court decisions have been know to be overturned. Can
you show me the Constitutional authority to redistribute income from
one group to another? I don't see it listed as one of the powers
granted to Congress. I am well aware of some of the twisted reasoning
used to justify Congressional actions, I just happen to disagree.
I personally don't let the government control my opinion on matters.
My opinion most certainly doesn't have any legal authority, but it
does have a valid basis. Why don't you take the time to look into
the matter a little more and post a reasoned opinion instead of
simply stating that if the Court says its true it must be true.
As I stated earlier, the Court has been know to be wrong.
James W. Howe internet: j...@citi.umich.edu
University of Michigan uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI 48103-4943
Jim Howe
|>
|> Libertarians and their ilk have no trouble admitting to the existence
|> of natural forces such as gravity. But social forces like *culture*
|> are powerful and nearly as implacable and they must be acknowledged
|> and dealt with, too. They are every bit as real as gravity and any
|> plan or proposal has to factor them in. A western society witnessing
|> its elderly population spending their twighlight years in abject poverty
|> will demand that "something be done" and they will look to government
|> for that "something".
|>
If society is really interested in helping its elderly population, then
a non-coercive solution should be easy to find. People run to the
government for two reasons that I can think of, either they don't
have sufficient support to accomplish their goals in a non-coercive
manner or they are mesmerized by all the marble and stone buildings
and think Washington is some kind of Oz where you only have to ask
the wizard for something and it will happen.
An argument can be made that the government has the authority to
require people to contribute to a personal pension plan so they
do not become a drag on others when they get older. I see no
rational reason why people should be forced to purchase the
government 'retirement' plan.
Cameron Laird
>In article <1992Apr3.1...@apollo.hp.com>, nels...@apollo.hp.com (Peter Nelson) writes:
.
.
>|> > The government has no Constitutional authority
>|> > to take from one group of people and give to another to make them
>|> > better off.
>|>
>|> Justice Howe must be speaking for the minority. The rest of the
>|> Supreme Court has never found the US tax system unconstitutional.
.
.
>Previous Supreme Court decisions have been know to be overturned. Can
>you show me the Constitutional authority to redistribute income from
>one group to another? I don't see it listed as one of the powers
>granted to Congress. I am well aware of some of the twisted reasoning
.
.
Oh, you're both exhibiting silly behavior (as
opposed to, "you're both silly"; I like some
of the other articles you've both posted).
Yes, the Supreme Court did declare income
taxes unconstitional at least once (and I
know some of the sci.econ readers can cite
year and case), but the Sixteenth Amendment
says exactly this:
The Congress shall have the
power to lay and collect taxes
on income, from whatever source
derived, without apportionment
among the several States, and
without regard to any census
or enumeration.
--
Cameron Laird +1 713-579-4613
c...@lgc.com (cl%lgc...@uunet.uu.net) +1 713-996-8546
cla...@Neosoft.com
Jim Howe
I'm not arguing the validity of the income tax, there is a clear Constitutional
amendment allowing it. Congress clearly has the power to tax and to
spend the tax revenue. I'm only arguing that a reasonable reading
of the Constitution and supporting material does not support the notion
that Congress has the power to spend tax proceeds in a manner
which simply redistributes wealth. (Or provide health care, or
education, etc).
Doug Fierro
My novice alternative is...
Since Social Security is meant to provide assistance to people when they
retire, why not just mandate some sort of contribution plan where individual
contributions would be on behalf of that person only, not a big pool of
revenue to be re-distributed. It would be called Individual Security,
instead of Social Security, since other peoples' contributions would not
affect your retirement income. You could have a minimum mandatory percentage
deduction, like 7.65% of your annual income, but people could put more than
that into THEIR account (not the program) if they want, up to a certain
limit. Interest earned would not be taxed until retirement, and unlike
a 401K or IRA, you CANNOT withdraw the money for any hardships. You could
name a beneficiary in case you died before retirement age.
The idea is that the government forces you to save, but the money you
save is an individual account for you, not a savings program to re-distribute
your wealth. Maybe there could be some choices of how you can receive the
money from your account once you retire- let's say you you have to spread out
payments to be received over at least a 20 year period. Of course if you keep
living after your account is zeroed out, that would be a problem; hopefully
the mandatory savings would accumulate enough wealth to be dispersed over a 20
year period or longer. There could be some kind of assistance program to deal
with cases where people have exhausted their retirement income. But don't
forget also that your money still continues to earn interest even while you
are at retirement age.
To continue this idea, I just thought of a way around the problem of
living past your account balance- when you retire, you never withdraw
the principal- you are paid interest on the amount present at the
age you retire. So let's say your compounded savings amounts to $300,000
by the time you are 65; at this point, you stop contributing to your
account. Instead of having the interest of that $300,00 being re-invested
into your account, you now receive payment of that interest, tax free;
you are paid the interest it bears annually. So if the 'secure investment'
yields 7%, you are paid $21,000 that year. No matter how long you live,
the money will always be there. You also have beneficiaries that will receive
that large principal when you pass away, so the money is not given to the
government, unless you choose it to be :-)
With this program, people can't complain that they are paying money "that
they will never see when they retire."; no pyramid scheme; the government
assures itself a large number of buyers of Bonds, Treasury Bills, etc. (which
is what I think is purchased w/ SS money now). You only get out what you
put into this new Individual Security program- if you don't start working until
you are 45, you won't have as much assistance when you retire. Of course
you would have to work out details for married people, and what would
happen to the joint savings account if they got a divorce, etc.
Now to implement this program, there will be people already retired
when it goes into effect. That is a cost of this program that must be paid
by all of us unless we are to cut off these retired people, which is not a
kind thing for our society to do. This cost would be less and less every
year, and some kind of grandfather clause could be worked out for people
close to retirement age- like combining their Individual Security money
contributions with Govt. contributions. After 20 years, no more Govt.
assistance would be needed. Every American would be guaranteed some kind
of savings program if they worked. If you didn't work your whole life and
you retire, it would be up to society if you received assistance or not.
Would the people who fall under this category be elligible for welfare
the rest of their lives? Do we just say 'tough luck'? There must be some
incentive worked in to award contributions from employment, and non-employed
spouses must be protected as well ( I think splitting the retirement payments
would be fair- you could always means-test each family to see if they need
more assistance).
But when SS was implemented, didn't retired people start receiving money even
though they never contributed? I don't think the Social Security program was
delayed 20 years or so to build up a savings- it just took from the workers
and paid the retirees in the same year, with the excess being invested in
Govt. funds. This was fine in the '40s since there were a lot more workers
than retired folks.
We are going to have pay one way or the other, now or later. Might as
well take the pain now instead of letting it snowball later on.
I'm sure people can point out flaws with this idea and maybe better
ways to accomplish the same thing. Does anyone like it? If we
Doug
--
Doug Fierro
|\ UTS System Software
O __________|_\______ CASE tools development
\_.______________________| * * * * * * * * */ fie...@uts.amdahl.com
__\____ |=================/ (408)746-7102
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
R Michael Medwid
to be invested. Perhaps it could be made an option..a certain percentage
of your income must be set aside for retirement. Either you can choose
to invest those dollars yourself..or you can have Uncle Sam do it for
you (yeah right).
It is my impression that the contribution funds of those people retiring
today were squandered years ago. I have to pay into social security in
order to cover payments which should be coming from investment income
on the past ss contributions of those now retiring. I am contributing
to a sinking ship and it pisses me off.
DG...@psuvm.psu.edu
system. All an old age insurance system has to do is force savings
(Doug's plan does this) and re-distribute income to those who outlive
their savings (Doug's plan could do this).
There are a few minor problems.
One of the reasons that SS was set up as a public system was because
FDR advisors argues that too many people at that time would invest their
money risky assets, leading the program to be unstable actuarily. Many
of us have witnessed in recent years the mismanagement of private pension
funds. Many of us would resent being forced to pay for the retirement
years of those who took a flyer on some start-up. So I would think
there would have to be some limits on where people could invest
their savings.
Also, the estimates of what would have to be saved seem a little low.
Most of the retirement plans that I know of recommend at least 20%
being set aside for retirement.
Dennis G. Shea, Penn State <<USUAL DISCLAIMER>>
"I believe that there is social and psychological justification
for significant inequalities of incomes and wealth....But it
is not necessary....that the game should be played for such
high stakes as at present." John Maynard Keynes
nels...@apollo.hp.com
From: <DG...@psuvm.psu.edu>
>I have no major problem with Doug's ideas about an Individual Security
>system. All an old age insurance system has to do is force savings
>(Doug's plan does this) and re-distribute income to those who outlive
>their savings (Doug's plan could do this).
I agree that there seems to be some merit in a concept like this.
BTW, I hope readers realize that anyone can contact SS at any
time and find out what *their* estimated benefits are at that
point in time. (my wife just did this as part of a retirement
planning exercise) In other words we do actually have separate
accounts from SS's p.o.v. But maintaining accounts which are
*more* separate might be even better.
Also, several people have suggested that the age of eligibility
for SS be raised since lifespans have increased quite a bit
since SS was started. I think this is a good idea but I
would only agree with doing this on *one* condition: That age
discrimination laws be much more aggressively enforced, and
that forced retirement based on age (preferably at at any
age, but at minimum before the SS eligibilty age) be banned.
I like this business; it's exciting. I can't imagine retiring
even in 25 years. Do 65 or 70 years-olds get any *less* thrill
out of closing a deal, designing a new <circuit/program>, or
wowing them at a trade show than 39 year-olds, or 22 year-olds?
Note also that if we ban forced retirement there will be more
people to contribute to SS and fewer demands on Medicare and
welfare. (not just because they'll be paying their own way,
but also because studies consistently show that the emotional
toll of retirement causes an increase in health problems).
Gratuitous editorial comment follows . . .
******************
It's incredible that a society which reacts with rage at refusing
to hire someone based on skin color or gender, sees nothing
wrong with discriminating based on age. I recently had an
argument with a very senior executive of a Fortune 50 computer
company, because in a talk he mentioned how his company hoped to
hire more college students instead of workers in their 30's and
40's because of the students' "fresh ideas". Now, I have *no sym-
pathy* whatsoever with a worker my age (39) who doesn't keep
up with with the latest technology, theories, or papers.
But to automatically *assume* that because I'm 39 my ideas
are any less fresh than a college student's is moronic. Indeed,
companies like this one (HP) are often driving the cutting edge
of new technology or methodologies. With many colleges forced
to cut back purchases due to budget problems, a college student
might find himself using *older* technologies than someone in
industry. Industries which want to avoid more heavy-handed
government regulations must do a better job policing themselves.
The current curse of "affirmative action" rules could have been
largely avoided if race and sex discrimination had not been so
prevalant in the decades leading up to that legislation.
IEEE has repeatedly warned about the problems of age discrimination
in our industry.
******************
---peter
DG...@psuvm.psu.edu
SS doesn't maintain separate "accounts" of how much you've paid into
the system. They do keep records that allow them to calculate the
PIA (primary insurance amount) which determines the amount of SS
you will receive. That amount depends on your average indexed monthly
earnings (AIME) or aaverage monthly wage (AMW). For more details
consult the Social Security Bulletin, Annual Statistical Supplement
ISSN (0037-7910)
SARCASTIC COMMENT ABOUT TO FOLLOW (Paul Sands asked me to do this so
he can tell when I'm being sarcastic)
Paul, is that a complete enough citation???
It is only in the last 10 years that the SSA has begun to pile up
large reserves in the form of government debt. In 1980, the total SSA
trust fund was 26 billion dollars, not even 3 months of payments to
beneficiaries. With the current pre-funding going on to pay for
the boomer retirement reserves have risen to 225 billion (these are current
not constant dollars) in 1990. That's equal to 70% of total payments
to beneficiaries for one year. It will go much higher in the coming
years. Many economists have argued that Congress is making a big mistake
and using these funds to finance continued consumption rather than
channeling them into investment in one way or another.
In any case, SSA, concerned about their image, created this phone number
so you can find out how much is in your "account". The true answer is
$0. However, using their tables they will tell you how much you can
expect to receive, assuming no change in government policy.
Dennis Shea
Jim Howe
|> I have no major problem with Doug's ideas about an Individual Security
|> system. All an old age insurance system has to do is force savings
|> (Doug's plan does this) and re-distribute income to those who outlive
|> their savings (Doug's plan could do this).
|>
|> There are a few minor problems.
|>
|> One of the reasons that SS was set up as a public system was because
|> FDR advisors argues that too many people at that time would invest their
|> money risky assets, leading the program to be unstable actuarily. Many
|> of us have witnessed in recent years the mismanagement of private pension
|> funds. Many of us would resent being forced to pay for the retirement
|> years of those who took a flyer on some start-up. So I would think
|> there would have to be some limits on where people could invest
|> their savings.
|>
If the government is going to impose limits the government (or preferably
independent research) should show that mis-investment is a significant
problem. Does it occur 1% of the time, 10%, 50%, etc. I see no
reason for the government to place limits if the problem is not
significant. Governmental restrictions are likely to be as much of
a problem as the problem it attempts to fix.
DG...@psuvm.psu.edu
Howe) says:
>
>|>
>
>If the government is going to impose limits the government (or preferably
>independent research) should show that mis-investment is a significant
>problem. Does it occur 1% of the time, 10%, 50%, etc. I see no
>reason for the government to place limits if the problem is not
>significant. Governmental restrictions are likely to be as much of
>a problem as the problem it attempts to fix.
>
Let's look at it this way. If the government is going to require savings
of some level to be paid into Individual Savings Accounts (ISA), and,
will insure those who outlive their savings, for example by using the ISA
monies of those who die before retirement, then they have to place some
limits on the riskiness of investments. If they don't I'm going to go
out and invest my IRA in as many schemes with high-risk, high return
investments i can find. If I win I can spend my retirement living high
on the hog. If not, the government will pick up the tab. Since economics
argues that any rational investor would do this, the government has
two choices. First, it could not insure those who outlive their
savings. This scheme penalizes those persons who made bad investments,
who just lived longer then they thought they would, etc. Most people that
I know feel that this is just too harsh. The other alternative is that
the insuring agency (government) tries to limit risk-taking in investing
activities. Only by doing this could the govt. insure that the system
remains actuarially sound.
Dennis G. Shea, Penn State
<<DISCLAIMER>>
Ain't nobody's bizness but my own. I'll be happy to accept all
the credit for anything I've written. It's funny, however, how
employers only acknowledge the profitable ideas.
Edward Pavelchek
> Since Social Security is meant to provide assistance to people when they
>retire, why not just mandate some sort of contribution plan where individual
>contributions would be on behalf of that person only, not a big pool of
>revenue to be re-distributed. It would be called Individual Security,
My problem with this type of approach is that it will turn this into a
SOCIALIST country. In 1989 76M people were between 25 and 44. IN
2019, this bulge will be bracketing the age of 65, 1/2 retired, and half
needing to be nearly fully funded. How much will they have invested,
together? Keeping things in current dollars, mean SS distribution for
single worker is $8500. Figuring a 3% real return, the total investment
pool for IS must be $21T. Some will have died, but their account
belongs to the heirs, and some of the older generations will be hanging
around still. Some will still be married, if all were, and half of the
spouses received no IS of their own, and you got 4% real return,
then at current benefit levels only $11T would be needed(*).
This money has to be invested by the government; if an individual has
loaded up on Eastern Airlines, then we are going to bail him out -
that's the whole idea behind this to start with. If the gov is covering
the mistakes, it must be in charge, or wild speculation will ensue.
You're 64, got a good account, try those naked options, could win big!!
Now the market value
of the top 50 stocks was $1.1T in 1989. At even $11T, the government
would be the defacto owner of the entire publicly traded market,
including real estate rich insurance cos. And we would be
nationalized.
(* Annuitizing will be some improvement, but if life expectancy at 65
goes to 20 yrs, it will be fairly small)
--
That is the land of lost content, Ed Pavelchek e...@mcnc.org
I see it shining plain,
The happy highways where I went
And cannot come again AE Housman
Doug Fierro
>In article <7c2j02A...@amdahl.uts.amdahl.com> fie...@uts.amdahl.com (Doug Fierro) writes:
>> Since Social Security is meant to provide assistance to people when they
>>retire, why not just mandate some sort of contribution plan where individual
>>contributions would be on behalf of that person only, not a big pool of
>>revenue to be re-distributed. It would be called Individual Security,
>
>loaded up on Eastern Airlines, then we are going to bail him out -
>that's the whole idea behind this to start with. If the gov is covering
>the mistakes, it must be in charge, or wild speculation will ensue.
I thought I said in the original posting that the Govt. would indeed
control such investment for individual retirees; in fact I'm sure I said
that because I said that this program would ensure that the Govt. could
still finance its debt.
I agree that only safe investments should me made in such a retirement
plan, and Govt. securities are about as safe as them come...
Jim Howe
|>>In article <7c2j02A...@amdahl.uts.amdahl.com> fie...@uts.amdahl.com (Doug Fierro) writes:
|>>> Since Social Security is meant to provide assistance to people when they
|>>>retire, why not just mandate some sort of contribution plan where individual
|>>>contributions would be on behalf of that person only, not a big pool of
|>>>revenue to be re-distributed. It would be called Individual Security,
|>>
|>>This money has to be invested by the government; if an individual has
|>>loaded up on Eastern Airlines, then we are going to bail him out -
|>>that's the whole idea behind this to start with. If the gov is covering
|>>the mistakes, it must be in charge, or wild speculation will ensue.
|>
|> I thought I said in the original posting that the Govt. would indeed
|>control such investment for individual retirees; in fact I'm sure I said
|>that because I said that this program would ensure that the Govt. could
|>still finance its debt.
|>
While I would agree that your 'Individual Security' plan would be better
than what we have now I think it would only be marginally better.
I don't have much of a problem with a government mandate for people
to contribute to a retirement plan. I strongly disagree with the notion
that the government should control where that investment should go.
In the first place, the government should not be in a position to
require people to fund its deficit spending. Under current SS, and
under your IS plan, this is exactly what happens. An investor should
be free to invest in any plan that meets his needs. I believe most
people would be conservative in their investments simply because
they wouldn't want to end up being wards of the state.
|> I agree that only safe investments should me made in such a retirement
|>plan, and Govt. securities are about as safe as them come...
As I stated above, I believe that a person should be free to invest
in whatever they want. The prudent thing to do is to invest in
higher risk, growth oriented investments when you are younger and
gradually shift capital to more conservative investments as you
near retirement. The government can't possibly know what is best
for all the people that would be covered by the plan, and they
shouldn't try.
Michael Sierchio
First, do away with it. It's a ridiculous system in which you're taxed, over
the course of your productive life, hundreds of thousands of dollars in
exchange for a promise that they'll do the same to your children.
Second, do away with welfare.
Third, provide direct payments to those who qualify (poor, disabled, aged)
directly from the IRS as a negative income tax. This will be a flat tax
of 15% of all income above (X + Y * Z), where X is some amount ($10,000)
and Z is the dependent exemption ($2,500) and Y is the number of dependents
you claim. A single person making $15,000 and a family of four making
$25,000 pay the same tax - $750.00. A family of four making $15,000
will receive assistance in the amount of $5,000/year.
Since the 15.3% SS/Medicare tax is eliminated, and a VAT is substituted,
capital will be taxed at a higher rate than labor for the same net tax.
The VAT is a disincentive to consume and an incentive to export.
Combine this with zero tax time-deposit savings accounts, and we might
actually save this country!
--
Michael Sierchio TRW Financial Systems
ku...@tfs.com 1947 Center Street
Berkeley, CA 94704-1105
(MKS2) 510.704.3380
DG...@psuvm.psu.edu
investments made by private pensions.
WRONG. They most certainly do, and the ERISA legislation of 1972
places very strict limits on the financing and investments of
pensions plans because of the very problesm I mentioned before--over-
investment in risky assets.
If the government is going to set up a mandatory savings program
then it has to establish rules for what happens if you outlive
your savings. Presumably this will happen for some people, unless
the government is going to make it mandatory to save at a rate that
will fund the longest possible retirement.
The intent of Social Security is to insure against a longer than
expected lifetime. Numerous economic studies show that when lifetimes
are uncertain, insurance is economically efficient. I'll say it for
the umpteenth time. READ MUNNELL'S BOOK ON PRIVATE PENSIONS (THE
ECONOMICS OF PRIVATE PENSIONS) and learn a little bit about why
pensions and social security are economically efficient and why
government controls must be part of such a system.
Dennis Shea
Jim Howe
|> James Howe argues that the government does not currently control the
|> investments made by private pensions.
|>
I don't believe that I made that argument. If I did, I was in error.
I may have said that the government doesn't control where I put
my retirement savings. If I participate in a pension plan, the
government controls the investments the plan can make, but I'm not
required to invest in any pension plan except the government's.
|>
|> If the government is going to set up a mandatory savings program
|> then it has to establish rules for what happens if you outlive
|> your savings. Presumably this will happen for some people, unless
|> the government is going to make it mandatory to save at a rate that
|> will fund the longest possible retirement.
|>
I think there are two items here. Are we talking about savings
or some form of retirement insurance (pension plan)? My feeling
is that it is up to the individual to determine the level of
savings needed for their retirement. If they misjudge, they would
be entitled to welfare and public charity. I believe people should
be able to invest their 'mandatory' retirement savings in anything
they want. If they invest in a pension plan, government regulations
would apply. However, if they want to invest in pork belly futures,
that is their right. My point is that most people tend to be
conservative when they invest their savings. I see no reason to
abridge freedoms of the majority because a small minority is
reckless with their investments.
|> The intent of Social Security is to insure against a longer than
|> expected lifetime. Numerous economic studies show that when lifetimes
|> are uncertain, insurance is economically efficient. I'll say it for
|> the umpteenth time. READ MUNNELL'S BOOK ON PRIVATE PENSIONS (THE
|> ECONOMICS OF PRIVATE PENSIONS) and learn a little bit about why
|> pensions and social security are economically efficient and why
|> government controls must be part of such a system.
|>
I don't care how 'efficient' Social Security may or may not be. Its
funding model is coercive and is therefore wrong. The government
should not have the power to force me to spend 15% of my salary on
government 'bonds' in the hopes that maybe I will see something in
the future. If the government is going to force me to save for
my retirement -- and I'm not convinced that it should -- I should
be free to choose where I put *my* savings.
Edward Pavelchek
SPeaking about Doug Fierro's Individual Security suggestion...
>under your IS plan, this is exactly what happens. An investor should
>be free to invest in any plan that meets his needs. I believe most
>people would be conservative in their investments simply because
>they wouldn't want to end up being wards of the state.
Currently, most Americans do not invest at all, and wind up wards
of the state, drawing SS.
I missed the reason you thought this would
change - a 15% pay raise?
Jim Howe
|> In article <ACp...@engin.umich.edu> j...@citi.umich.edu writes:
|>
|> SPeaking about Doug Fierro's Individual Security suggestion...
|>
|> >under your IS plan, this is exactly what happens. An investor should
|> >be free to invest in any plan that meets his needs. I believe most
|> >people would be conservative in their investments simply because
|> >they wouldn't want to end up being wards of the state.
|>
|> Currently, most Americans do not invest at all, and wind up wards
|> of the state, drawing SS.
Care to cite a source for this statistic? Remember, you need to
count employee pension plans as investment. Also, remember that
every working person currently 'invests' 15% of their salary in
the government scam known as Social Security.
|> I missed the reason you thought this would
|> change - a 15% pay raise?
|>
If Social Security were privatized and the individual no longer
forced to donate to the U.S. government at gun point, each working
person would see a 15% pay raise. If the government stopped
wasting money in other areas, stopped artificially raising prices
on food and imported goods, current incomes would go a lot further
than they do now. However this isn't the point that I was
addressing. My point was that if people were still forced to
invest a percentage of their income for retirement purposes,
the investments would tend to be conservative.
Edward Pavelchek
>In article <88...@alvin.mcnc.org>, e...@mcnc.org (Edward Pavelchek) writes:
>|> Currently, most Americans do not invest at all, and wind up wards
>|> of the state, drawing SS.
>
>Care to cite a source for this statistic?
Unfortunately, no, but I can derive a good argument. Currently ~30M
people on SS. 1989 SS & Medicare expenses $368B, or $12,280 per capita.
1989 per captia income, $17,500. Assumption: elderly at or below
average income. Implication, elderly per
capita income <$5220 (without SS),
which is below poverty level, I think. That makes them considered as
wards of the state.
>Remember, you need to
>count employee pension plans as investment. Also, remember that
>every working person currently 'invests' 15% of their salary in
>the government scam known as Social Security.
Please be consistent - I didn't say they were investing in SS; you don't
believe they are either. They are paying a tax, and receiving SS for
the time being. It's not quite welfare, since it's not means tested,
but it is closer than a return on investment.
>My point was that if people were still forced to
>invest a percentage of their income for retirement purposes,
>the investments would tend to be conservative.
Please describe more fully. Do notes written by yourself constitute
investment? Do notes signed by your brother in law? How about your
house? At a minimum, you (or Doug) need to describe this plan, and to
describe the welfare system you will put in place for the victims of bad
judgement or fraud in their investments. Currently there is no nation
wide welfare for able bodied adults; relatively few states have such a
program (Food Stamps excepted).
Please also describe how minimum wage earners will have sufficient funds
for retirement.
--
Ed Pavelchek e...@mcnc.org
...to seize two good holds of warm sunlit granite,
and pull up on them, possibly over and over again.
Jim Howe
|> In article <V8r...@engin.umich.edu> j...@citi.umich.edu writes:
|> >In article <88...@alvin.mcnc.org>, e...@mcnc.org (Edward Pavelchek) writes:
|>
|> >|> Currently, most Americans do not invest at all, and wind up wards
|> >|> of the state, drawing SS.
|> >
|> >Care to cite a source for this statistic?
|>
|> Unfortunately, no, but I can derive a good argument. Currently ~30M
|> people on SS. 1989 SS & Medicare expenses $368B, or $12,280 per capita.
|> 1989 per captia income, $17,500. Assumption: elderly at or below
|> average income. Implication, elderly per
|> capita income <$5220 (without SS),
|> which is below poverty level, I think. That makes them considered as
|> wards of the state.
|>
A few things to consider. First, elderly people do not need as much
income to live on as younger people. Second, do your 'income' figures
include receipts from pensions, investments, etc. Third, what is
the distribution of wealth among the elderly. I don't doubt that
there are many poor elderly people. The question is, what percentage
of the elderly population is poor from a practical standpoint? However,
this discussion is irrelevant to my point. The fact that there may
be poor elderly *currently* is not an indication that current working
people are not or will not save for their retirement. Many people
currently drawing SS were convinced by the government that they
would be taken care of. More and more people are now coming to
the realization that this isn't going to happen. I still maintain
that if the government stopped lying to the public people would
be more likely to invest for their old age. If this isn't the
case, then an argument could be made for a compulsory contribution
much as we have currently. This still does not imply that people
should be forced to 'invest' this contribution in government 'bonds'.
|> >Remember, you need to
|> >count employee pension plans as investment. Also, remember that
|> >every working person currently 'invests' 15% of their salary in
|> >the government scam known as Social Security.
|>
|> Please be consistent - I didn't say they were investing in SS; you don't
|> believe they are either. They are paying a tax, and receiving SS for
|> the time being. It's not quite welfare, since it's not means tested,
|> but it is closer than a return on investment.
|>
What I am saying is that if people were no longer required to donate
to the government, but still required to have retirement investments,
they would have the money to invest because the government would no
longer be taking the 15% from them. In other words, the current
SS tax would be converted into retirement investment.
|> >My point was that if people were still forced to
|> >invest a percentage of their income for retirement purposes,
|> >the investments would tend to be conservative.
|>
|> Please describe more fully. Do notes written by yourself constitute
|> investment? Do notes signed by your brother in law? How about your
|> house?
As I said, I believe that most people would be conservative in their
retirement investments. How is investing in a not written by myself
going to help me at retirement? You seem to be focusing on some way
to avoid compilance. I don't think that will be a major problem.
|> At a minimum, you (or Doug) need to describe this plan, and to
|> describe the welfare system you will put in place for the victims of bad
|> judgement or fraud in their investments. Currently there is no nation
|> wide welfare for able bodied adults; relatively few states have such a
|> program (Food Stamps excepted).
|>
If we are to have a nationwide welfare system I would like to see one
based on the negative income tax. If your earn less than a particular
amount you receive money from the government. If you earn more, you
pay a flat percentage of that income in tax. This plan does not penalize
you for working, unlike SS and other 'welfare' programs. I personally
prefer a network of private charities, but I'm willing to accept the
NIT in lieu of our current welfare system.
|> Please also describe how minimum wage earners will have sufficient funds
|> for retirement.
|>
Most people do not work for minimum wage for their entire life. Once
again, if income is too low, charity or NIT is available to supplement
retirment income.
nels...@apollo.hp.com
From: j...@citi.umich.edu (Jim Howe)
>Food costs are less simply because older people tend to eat less
>than younger people. Housing costs are less because most elderly
>move out of larger houses that they no longer need
> Since most elderly
>no longer work, work related expenses are decreased or eliminated.
>Driving costs are down, clothing costs are down, etc. The
>biggest change, however, is that most elderly are no longer taking
>care of a family.
>>|> But this really illustrates my point: The reason why people like
>>|> Mr. Howe think that the elderly have a lower cost of living is that
>>|> it is *assumed* that the elderly will change their lifestyle to
>>|> accomodate having less money: [...]
>>
>>You don't think they will?
In general statistical sense, perhaps, but this is meaningless for
computing retirement benefits.
It's like saying, "in general the average person spends $2250 a year
on health so let's have a health insurance plan that simply pays
everybody $2250 a year." The fact is that many people are healthy
and spend nothing on health. Some people have a few office visits
or minor procedures amounting to hundreds of dollars. And some people
have major diseases or injuries costing tens or hundreds of thousands
of dollars.
What I'm really complaining about is the stereotype of old people
being promoted by Mr. Howe. It's like Hillary Clinton's recent
remark about housewives "baking cookies".
---peter
Jim Howe
I don't think I'm sterotyping at all. The simple facts are that
older people (retirees) need less income to maintain a lifestyle
to which they have become accustomed for some very sound reasons.
When you plan for your retirement it would be foolish to assume
that you had to save enough money to provide you with the income
you earned during your peak years, unless you simply want to
give that money to your heirs upon your death. Note that I'm
also not determining what level of income is needed by older
people. I'm only saying that the level of income needed during
retirement years is less than was needed in working years for
most people.
I would also like to say that this thread has gone completely
off track. So much so, that I don't even remember what my
original comments were referring to.
Alex Martelli
...
:>When you plan for your retirement it would be foolish to assume
:>that you had to save enough money to provide you with the income
:>you earned during your peak years, unless you simply want to
:>give that money to your heirs upon your death. Note that I'm
:>also not determining what level of income is needed by older
:>people. I'm only saying that the level of income needed during
:>retirement years is less than was needed in working years for
:>most people.
:>I would also like to say that this thread has gone completely
:>off track. So much so, that I don't even remember what my
:>original comments were referring to.
I don't know either, but would like to take exception to your
statement anyway. ``Need'' is one thing, and perhaps, excluding
the rising level of medical expenses, you are right; but many
older people have plenty of *opportunity* to use a higher income,
if they have planned in such a way to make that income available.
Retirees have abundant free time, and generally no committments
to small children; if health allows (and often today it does),
they are thus able to enjoy life, particularly by taking extended
trips of tourism and culture - IF, that is, they have the
financial resources needed. More and more retirees are taking
advantage of such opportunities.