Friday, February 25, 2011

Everything old is new again: Democrats propose "lockbox" for Social Security

Continuing on their path of irresponsibility, Senate Democrats want to resurrect another old and failed idea for Social Security ... Al Gore's Lockbox.
The Hill: Senate Democrats want to put the Social Security trust fund in a lockbox and insulate it from a broader budget-cutting package designed to reduce the national deficit.
It’s a revival of the concept that former Vice President Al Gore (D) made famous when he sparred with George W. Bush over a proposal to invest a portion of Social Security funds in the private market.[...]
Leading Senate Democrats say Social Security reform should not be part of a deficit reduction package under negotiation.
Senate Budget Committee Chairman Kent Conrad (D-N.D.), who is at the center of bipartisan talks, said he wants to prolong the solvency of Social Security to 75 years. Under its current setup, the program is projected to pay 100 percent of benefits for the next 26 years.
But Conrad does not want Social Security to be part of a broader proposal to reduce the $1.6 trillion federal deficit. [MORE]
This isn't serious thinking. Spendthrift Congress members are expert lock pickers and have raided Social Security funds in the past.  Nothing about this proposal would stop it in the future.  Furthermore, trying to balance our budget without addressing Social Security is a fantasy.  Everyone knows that Social Security is one of the big three items blowing a whole in our budget.  It simply cannot be left out of the equation.

The left love to accuse Republicans of being the party of No Ideas, yet time and time again, Democrats prove themselves to be the Party of Failed Old Ideas.

4 comments:

49er16 said...

Darrell Hammond portraying Gore and talking about the "Lockbox" on SNL was one of my all-time favorite skits.

Euripides said...

We won't see any real reform to "protected" entitlements since those in power wish to keep power. And since people are stupid enough to demand entitlements over national stability, the equation cannot change. We'll see a few, brave individuals, like Wisconsin's Walker, either get ousted or succumb to the inherent greed of the system.

Janelle said...

Bipartisan is one of my least favorite words. I actually liked the behavior from Wisconsin - more honest. But this is really humorous. They seem to have forgotten they are the a$$holes who raided SS in the first place.Never mind creating it.

Nick Rowe said...

OK, let's understand this lock box BS.

For many years, the taxes collected under the auspices of Social Security exceeded expenditures on Social Security. This created a notional surplus.

But there really is no such thing as Social Security. It's a legal fiction.

FDR couldn't get a Constitutional amendment passed to enact Social Security, so he used the taxation powers of government to raise revenues and the expenditure powers of government to distribute benefits. There is no "right" to collect Social Security and the connection between taxes paid and benefits received is flimsy.

FICA taxes are just like any other tax revenues. When the government gets them, it spends every dollar (and then some).

With all the money spent, how are we going to pay future beneficiaries? Why, we'll pay them either from future tax revenues or from issuing government debt.

The "lock box" idea is to take the Social Security notional surplus and buy non-negotiable US Treasury securities which pay interest. But the Treasury securities are nothing more than a promise of government to pay you from future tax revenues or from issuing government debt.

So the "lock box" contains IOUs for IOUs.

Bush's plan to invest in private assets was different. First of all, they would pay a higher yield. Second, the returns on those investments were not guaranteed by the notional ability to raise taxes or debt.

Indeed the privatization of Social Security has its risks - the investments could go belly-up just as you are ready for retirement. But as you approach retirement, you're supposed to rebalance your portfolio away from risky assets toward less risky assets.

The "lock box" is just a government accounting gimmick learned from the Arthur Anderson and Enron School for Accounting.

A person my age and income can expect to LOSE more than $200,000 from Social Security - that's not security and it's not a very good investment. The benefits system redistributes wealth from high income people to low income people. It also pays people as survivors who contributed little into the system.

In a word, Social Security is insolvent. In two words, it's a Ponzi Scheme.

Chile privatized their pension system and tripled people's rates of return. For those given an option to remain in the government system or opt out, 95% opted out. I expect similar results here in the US if given a chance.

We need a fully-funded, privately owned retirement system, and we needed it decades ago. Every day that goes by, the cost of the transition grows.

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