Any takers? I thought that GW fell short. OK speech, just not what I had hoped for. I was really disappointed in all the childish crap that went on. The cat calls and the ink on the fingers were way out of line. Over all I was not that impressed with our leadership.
Me Solomon Grundy
I don’t agree.
I agree on the cat calls – very untoward. Irrespective of British or Australian parliamentary traditions, this is neither of those two countries, nor is the State of the Union simply an address to the legislature.
As to the ink on the fingers, I think it was not a well thought out gesture. An attempt to show respect is good, but no one thinks that the Republican freshmen in Congress did anything approximating the perils of voting in Baghdad.
W/r/t the speech, I thought it was well written and powerfully delivered – especially through the cat-calls. I think Bush’s continued, strong delivery through that simply made the Dems look even worse.
Now, what about those ideas? Social security reform? No setting of a withdrawl date for Iraq? Calling attention to the miscreance of Iran and Syria? Thoughts?
[quote]BostonBarrister wrote:
Now, what about those ideas? Social security reform?[/quote]
I’ll agree we need to do something about Social Security, but from what I’ve read until now that Bush is planning to do: it has already been tried in other countries and failed miserably.
However, I’ll give him the benefit of the doubt (it’s not like I or anyone can really do anything to stop him unless the Republicans turn against him!) so I’ll abstain from commenting further on that until I read more details and compare it point by point to the failures I mentioned above.
[quote]BostonBarrister wrote:
No setting of a withdrawl date for Iraq?[/quote]
Didn’t surprise me – and honestly I think he’s being smart (for a change) about that, since we really have to wait a while before the dust settles and we can figure out when withdrawal will be possible.
[quote]BostonBarrister wrote:
Calling attention to the miscreance of Iran and Syria? Thoughts?[/quote]
I think that was a big mistake. Why?
First, if the Shiites win in Iraq, there will be a fundamental religious shift in the region – the domination of Shiites – which can completely alter the landscape.
Also, Syria and Iran have nukes and possibly other WMDs and, even if they don’t use them, are far harder to do threaten – much less topple – than Iraq ever was. They’ll just ignore him for a while, at least until he actually makes a direct threat.
On the other hand, if Bush does go into either country, he’s got to have some gigantic balls, and my respect for him would skyrocket.
So, what I fear is that he’s just throwing around words without the balls to back them up and makes a foul out of himself if they call him on it.
I wasn’t able to see much of it - saw the tail end and read it.
What happened with the catcalls exactly?
The speech was good, not overwhelming, but I thought a moderate tone was a good move. Bush needed to blend pragmatism into the much talked about idealism of his Inauguration Speech, and it was wise, in my view, to not try and go for too much in terms of rhetoric.
I like the insistence on Iran and Syria - the pressure cannot let up.
I especially liked his reference to using nuclear power. It was a brief stop on the subject, but one that should be explored more vigorously than wind or solar power.
As for Social Security reform, I think keeping it an option is just throwing good money after bad. The whole program should be scrapped.
I’ll never see a dime of it, and I think I could do a much better job with 15.3% of my money than the goddamn left-wing big brothers.
I have to start catalogueing my reading materials. I hate to cite reading and not be able to provide links. I know that it was in Scientific American(2002) that some political and military analysts were examining the work being done on the badly decrepid logistical infrastructure(traintracks,highways) through the middle east and through out the “stans”. Their conclusion was that we were gearing up for long term operations throughout the entire region. I would consider Bushs’ addressing Iran and Syria forshadowing.At the risk of sounding like an alarmist, I would say that they are next.
On Social Security, here is a good article on the background from the WSJ the other day:
The Basics of Social Security
Why It’s at a Crossroads Now,
And What It Might Become
By DAVID WESSEL
Staff Reporter of THE WALL STREET JOURNAL
February 1, 2005
What’s the matter with Social Security?
The fundamental problem is demographic. In 1960, there were five workers for every Social Security beneficiary. Today there are slightly more than three. In 30 years, there will be only two. That means fewer tax-paying workers to support more benefit-receiving retirees.
If tax rates and benefits remain as they are under current law, the system will begin paying out more in benefits than it collects in taxes around 2018, according to Social Security actuaries.
Today, Social Security collects more in taxes than it spends in benefits. It invests the surplus in U.S. Treasury bonds to be cashed in when the big baby boom generation retires, a way of prefunding their benefits. Cashing in bonds will allow the system to pay promised benefits until about 2042 or 2052, depending on whose estimates one uses. If changes aren’t made sooner, benefits at that point would have to be cut about 30% so they don’t exceed revenue devoted to the program.
A typical worker born during the 2000s is promised about $24,300 (in today’s dollars) in initial Social Security benefits at retirement, the Congressional Budget Office estimates, but there would be money to pay only $18,300.
So what’s the urgency?
Although Social Security can pay promised benefits for many years, changing retirement programs abruptly is a bad idea. Workers need time to save more from their paychecks if government benefits are to be reduced, and they deserve notice about changes to the retirement age.
President Bush and members of Congress are promising that any changes they make will leave current retirees largely untouched; the same goes for workers older than 55. But the longer the government delays, the bigger the eventual tax increases or benefit cuts have to be. And putting off changes until the baby boomers are collecting benefits risks unpleasant political conflict between generations.
Over 75 years, the usual metric for Social Security, the agency’s actuaries say the government has made promises that cost about $3.7 trillion (in today’s dollars) more than projected tax revenue. Any such projection relies heavily on assumptions about life spans, economic growth, wages and immigration. Some critics say the Social Security actuaries are too pessimistic, particularly in forecasts about the pace of economic growth and immigration. Others counter that the trustees’ expectations about life spans underestimate medical progress; if they’re wrong on that, the hole is bigger.
How big a tax increase would stabilize Social Security?
Social Security today depends on the payroll tax, income taxes collected on benefits paid to the highest-income elderly and interest on agency’s holdings of government bonds. The system could be financed by other federal taxes. An immediate 15% increase in the payroll tax – from today’s 12.4% on wages to about 13.9% – would stabilize the system for 75 years, according to Social Security’s trustees (four government officials and two outsiders).
The tax rate would have to go much higher if the increase were phased in over several years. Today’s payroll tax applies only to the first $90,000 of wages, a ceiling adjusted annually for inflation. That’s about 85% of all wages. An alternative to higher tax rates is taxing 90% of wages – that is, moving the ceiling to $140,000 over a decade – which would solve about 40% of Social Security’s problem.
How much would benefits have to be cut to stabilize the program for 75 years?
The Social Security trustees say it would take an immediate and permanent reduction in benefits of 13%. If the changes were phased in gradually, the cuts would have to be bigger. And fixing the program so it would be sustainable after 75 years would take even bigger changes.
There are lots of ways to reduce benefits promised by current law. The formula used to calculate a retiree’s initial benefit could be altered. The annual cost-of-living adjustment could be reduced. The age of eligibility for full benefits – which is rising gradually for workers born after 1938 and will reach 67 for workers born after 1959 – could be increased. Benefits for upper-income retirees could be reduced. (Today, benefits of the highest-income retirees are subject to federal income taxes.)
What is President Bush proposing?
Nothing specific yet. He has ruled out raising taxes and insists on private accounts. Aides make clear that he will also seek other reductions in benefits from levels promised in current law, arguing that the promises made in current law are unaffordable.
The White House has praised an option crafted by a commission he appointed in his first term. (See the chart.) This plan would allow workers to voluntarily divert four percentage points of payroll taxes into private accounts – up to $1,000 a year – in exchange for smaller benefits in the future. In addition, it would reduce Social Security benefits promised to all future retirees by tweaking the formula by which wages are used to compute initial retirement benefits. And to help people at the bottom, it would sweeten benefits promised to some low-wage and disabled workers and widows.
What would private accounts do to stabilize Social Security’s finances?
In the short run, they would cause a problem. Social Security depends on taxes paid by today’s workers to pay today’s retirees. If those taxes are diverted to private accounts, then the government has to find another way to cover those retirees’ benefits. Mr. Bush proposes to borrow the money, perhaps $1 trillion or $2 trillion over 10 years.
Over the long run, private accounts are a wash, at best, for the system. Diverting payroll taxes to private accounts would reduce the flow of tax money into the system in exchange for reducing government benefits when workers with private accounts retire. That’s why the White House, to the consternation of some Republicans, says the president will seek other money-saving changes to the program.
But for individuals, accepting smaller government benefits in exchange for the right to divert some payroll taxes to a private account could be a winner – depending on the performance of the stock and bond markets. If the markets do well, growing private accounts could offset some of the likely cuts in government benefits. “Personal accounts,” Mr. Bush said recently “are very important … to make sure that young workers have got a shot at coming close to that which the government promises.”
If markets do poorly, workers would be expected to absorb the losses, though there could be pressure for the government to provide a safety net.
Mr. Bush and other advocates of private accounts see them as much more than a financing scheme for Social Security. They say they would create an “ownership society” in which every worker has a stake in the economy.
Are there other sorts of private accounts?
Yes. Many Americans already have Individual Retirement Accounts or 401(k) retirement accounts. Several Democrats would expand those, creating private accounts alongside Social Security without diverting payroll taxes into them.
Brad DeLong, an economist at the University of California at Berkeley who writes a blog influential among Democrats, says: “Private accounts are a good idea. Most Americans save too little. Social Security was never intended to be all of anyone’s retirement income: Everyone was supposed to have private pensions and personal savings as well. But private accounts funded by cutting Social Security contributions are a bad idea.”
What are the leading alternatives to Mr. Bush’s proposal?
All sorts of packages are circulating; none has garnered a critical mass of support. This is politically tricky because retirees tend to get scared even though they would be exempt. And it’s always easy for politicians to postpone deciding on something that isn’t an imminent crisis.
Economists Peter Diamond and Peter Orszag offer a detailed plan to raise payroll taxes to 14.2% (split between employer and employee) by 2055, increase the base on which taxes are levied, lift the age for the full retirement benefit, and trim benefits for higher-income recipients while increasing them for low-income workers.
Robert Pozen, a former Fidelity Investments vice chairman who served on Mr. Bush’s Social Security commission, embraces the structure of the plan that the Bush administration praises – but he would make it more generous to lower-income workers and less so to higher-income workers.
Sen. Lindsey Graham, a South Carolina Republican, would offer workers under age 55 a choice: Stay in today’s Social Security program and pay two percentage points more in payroll taxes or accept lower benefits or divert four percentage points of payroll taxes into a personal account in exchange for accepting lower benefits. Full-time workers who took the private-account option would be guaranteed a retirement benefit 20% above the poverty line.
Two other Republicans, Rep. Paul Ryan of Wisconsin and Sen. John Sununu of New Hampshire, would allow workers to divert an average of 6.4% of wages (10% on the first $10,000 of wages and 5% on wages above that) to private accounts in exchange for accepting lower benefits. They say they would guarantee that all workers would get at least as much from combined government benefits and personal accounts as Social Security promises today. To pay for all this, they vow to restrain the growth in other government spending and count on a tax windfall from the added saving and corporate investment generated by private accounts.
What is the Social Security trust fund?
The trust fund is an accounting device, but one with enormous political significance. Franklin D. Roosevelt wanted a program that workers would see not as a welfare program, but as one into which they made contributions and got old-age pensions. “If I have anything to say about it,” he once said, “it will always be contributed, both on the part of the employer and the employee, on a sound actuarial basis. It means no money out of the Treasury.” The creation of a Social Security trust fund in 1939 to serve as a holding pen for worker contributions solidified this notion.
Social Security revenues began to exceed benefits after 1983 when President Reagan and Congress, accepting recommendations by a panel headed up by Alan Greenspan, then a private economist, increased payroll taxes, reduced benefits and began a gradual increase (to age 67) in the age at which workers are eligible for full benefits. This altered Social Security from a pay-as-you-go system into one that partially prefunds benefits. Last year, Social Security collected $151.1 billion more in taxes and interest than it paid out.
The growing Social Security trust fund, now about $1.5 trillion, is invested in interest-paying U.S. Treasury securities, or, essentially, lent to the rest of the government. This sometimes leads to charges that Congress is “spending” Social Security funds. But there isn’t any safer investment.
If investing retirement funds in the stock market is such a good idea, why not invest the trust fund in the market?
President Clinton proposed just that, arguing that the higher returns on stocks would help solve the Social Security financial problem. The notion of putting Social Security assets into mutual funds supervised by an independent board continues to circulate. Opponents fear it would lead inevitably to undesirable government interference in business.
What about Medicare, the federal health-insurance program for the elderly and disabled?
Medicare faces even bigger long-term financial problems than Social Security and eventually will force Congress to contemplate tax increases and changes to benefits. But Medicare is even more complicated because it involves all of Social Security’s demographic and intergenerational issues plus the vexing issues of rising health-care costs and ever-improving health-care technology.
Social Security “involves only money. People get a bit more, a bit less. Medicare, by contrast, involves medical treatments, which may involve risk of loss of life,” says Edward Gramlich, a Federal Reserve governor who was chairman of a Social Security advisory panel a decade ago.
Write to David Wessel at david.wessel@wsj.com
[quote]rainjack wrote:
I especially liked his reference to using nuclear power. It was a brief stop on the subject, but one that should be explored more vigorously than wind or solar power.[/quote]
Interesting.
The other day I got my PG&E bill and within it was a notice that they’re basically replacing coal-based thermoelectric plants with nuclear-based, while other sources are being kept at their current % levels. So it seems that this is not news, just a reiteration and support of an obvious industry move.
Most of the World is moving away from Nuclear Power because storing Nuclear Waste is a non-trivial problem for most of the countries that have nuclear plants: they simply don’t have enough space to store it properly.
The NRC (U.S. Nuclear Regulatory Commission) doesn’t seem to think that’s a problem over here, maybe because we were “blessed” with plenty of desert – they’re planning on a facility in Nevada for long-term storage (Yucca Mountain Review Plan (NUREG-1804, Revision 2) | NRC.gov).
The waste management, even if we have plenty of space, makes nuclear power usually more expensive in the long run than coal, though.
So, what confuses me is the duality of this strategy – on one hand, we have a President and his party saying Global Warming is not a problem; on the other, we have him supporting a nove from Coal-based to Nuclear-based for no better reason than to prevent emissions to the atmosphere, with the huge tradeoff of the responsibility of having to store tons of High-level waste for thousands of years – not to mention the hassle of decommissioning the plants when they become too old.
To summarize my question: is this change an admission that CO2 is Evil, so much so that nuclear is a better compromise, or not?
And, if the latter, are we really sure we want to produce tons of highly dangerous waste just to save us the extra 2% of GDP that would cost building wind and solar plants in the same desert of Nevada (rather than the nuclear waste storage facility)?
If you’d like an interesting outlook on the gravity of the situation of social security and medicare over the coming decades, I suggest reading a book titled “The Coming Generation Storm: What you Need to Know about America’s Economic Future” by Laurence J. Kotlikoff and Scott Burns. It goes step by step as to why social security and in particular medicare are in so much trouble, and why none of the proposed alternatives are enough to save either of them. It also uses generational accounting to recalculate the possible future deficit if we don’t change anything…and comes to a number of 40 trillion dollars. In fact there has been at least one think tank group, I don’t remember which, that came to similar conclusions…that benefits will realistically have to be cut near 50% or more to have any measurable impact.
[quote]BostonBarrister wrote:
On Social Security, here is a good article on the background from the WSJ the other day:[/quote]
Good article, BB, thank you for that.
It’s more or less the information I had before, so, again, I’ll refrain from expanding my comments to details until I get more of those and can make a more direct comparison and assessment.
As I mentioned above, what worries me is that in every single country were there was an attempt to similarly officially “privatize” Social Security it was a complete disaster – people simply are not good at thinking that far ahead themselves and a multitude of problems erupted: from under-investment (too little money put away for retirement), to over-investment (too much money put away, leaving no margin for current life costs and heavy debt), “angry”-investment (people being forced to invest x% and being extremely unhappy about the impact on their current lifestyle), to investment in low-yield funds that ultimately didn’t perform better than Government SS, to investment in grossly high-risk investments that ultimately made them loose everything. It basically proved that as bad as the Government is at managing money, most individuals are even worse.
Of course, there are individuals that are actually pretty good at investing and a small percentage of people ended up with very fat retirement funds – but that didn’t make up for the majority of people that basically will have to live on the streets if they retire. Even if that’s due to their own stupidity, I guess nobody wins if the streets are filled with poor elderly people.
Then again, there are ways things can be done that will get the best of both worlds – if Bush pays attention to the mistakes of others, we might end up with a pretty good compromise.
So, as long as his strategy does not underestimate the complexity of the problem, and understands the premises that a) most people are completely incapable of managing their own money without a lot of help (look at the average credit score, especially in Texas!) and b) people want to keep their lifestyle after they retire, I’ll be happy.
Hspeder:
On that, here’s a good article that explains why this particular proposal – the one Bush is said to favor but hasn’t specifically endorsed – would work well for investors who chose to invest. It won’t solve all the problems with Social Security, but it should put investors ahead without harming the risk averse (this doesn’t include any further actions, such as benefit cuts, rising retirement age, etc. that would hit everyone, irrespective of whether they chose to do private accounts):
Doing the Math on Private Accounts:
Why Investors Will Want to Fund Them
January 19, 2005; Page D1
You may not like the idea of Social Security private accounts. But you will almost certainly want to fund one.
I am not arguing that the partial privatization of Social Security is a good idea (I have my concerns), and I am not arguing that private accounts will fix Social Security’s financial problems (they won’t). But suppose Social Security is overhauled, and suppose, as many pundits expect, that we end up with a mix of traditional Social Security benefits and private accounts, as called for in “reform model 2” suggested by President Bush’s 2001 Social Security commission.
At that point, you will face a critical decision: Should you direct part of your payroll taxes into a private account, or should you continue to put everything into the traditional Social Security system? As best I can figure, it’s no contest: You should go for the private account.
? Model behavior. When I sat down to analyze reform model 2, I thought I was in for some heavy-duty math, comparing potential rates of return. But in fact, the break-even rate of return is built into the model – and it’s so low it makes private accounts look awfully attractive.
With model 2, you would have the option of putting four percentage points of your payroll taxes, up to $1,000 a year, into a private account. The rest of your payroll taxes would continue to flow into the old system and eventually earn you the right to a monthly check. That check, however, would be smaller than the check you would receive if you continued fully funding the traditional system.
How much smaller? In calculating the reduction, the Social Security Administration, or SSA, would make two assumptions, explains Jeffrey Brown, a finance professor at the University of Illinois at Urbana-Champaign and a staff member on the 2001 commission.
First, it would assume that the dollars in your private account grow two percentage points a year faster than inflation. Second, when you claim your traditional benefit, the SSA would assume that you simultaneously took the money in your private account and used it to purchase an immediate annuity that pays a lifetime stream of inflation-indexed income, just like you get from Social Security. The SSA would then reduce your traditional benefit by this hypothetical monthly income.
Keep in mind that these are just the SSA’s assumptions. The SSA won’t care how your account has really performed, and it won’t insist you buy an inflation-indexed annuity.
Confused? Maybe an example will help. Suppose that, if you had continued to shovel all your payroll taxes into the traditional system, you would receive $1,500 a month at age 66. But instead, years earlier, you opted for a private account. Based on its two assumptions, the SSA calculates that your private account should generate $500 a month. As a result, the SSA would reduce your $1,500 traditional Social Security benefit by $500, leaving you with $1,000.
Model 2’s methodology can also be applied to family and survivor benefits, Prof. Brown says. For instance, if your full Social Security benefit was $1,500 a month and your spouse never paid much into Social Security, he or she would qualify for $750 based on your earnings record. In that case, if your assumed income from your private account was $500, your combined benefit would be reduced to $1,750.
? Private benefits. The hope, of course, is that your private account will grow to generate more income than the SSA assumes. And there’s a good chance it will, because the break-even rate of return – just two percentage points a year above inflation – is so low. Indeed, you should be able to beat the break-even with a fairly conservative investment strategy.
Not being forced to annuitize is also a big advantage, says John Cogan, a member of the 2001 commission and a senior fellow at the Hoover Institution at Stanford University. With your private account, you could delay buying an annuity until your 70s or, if you are in poor health, skip the annuity entirely and instead pass on the money to your heirs.
Make no mistake: None of this will fix Social Security’s financial problems. In fact, the transition to private accounts could create a huge fiscal mess. Instead, the fix for Social Security lies in other solutions, like raising taxes or slowing the growth in traditional benefits.
Let’s say that traditional benefits are pared back, so that your full benefit is reduced from $1,500 to $1,300. In that case, if your private account is assumed to generate $500, you would receive just $800 from Social Security.
As this example suggests, benefit cuts and tax increases will hit everybody, whether they plunk for private accounts or continue fully funding Social Security. But while the pain will be felt by everybody, only those who opt for private accounts will have the chance to make up the lost ground, by earning more than two percentage points above inflation.
How easy will it be to beat that threshold? I asked Baltimore fund manager T. Rowe Price Group to calculate the probabilities, by analyzing the historical performance of different investment mixes. The results, shown in the accompanying chart, don’t reflect investment costs, and future results could be lower [Note: The table won’t post, but I’ll give you the high and low ends: 100% stocks would have a 98% chance of beating the return in 30 years, and 75% over 20 years; 100% bonds would have a 76% chance over 30 years and a 56% chance over 20 years]. Still, if history is any guide, the odds of beating the break-even rate look pretty good.
[quote]hspder wrote:
Interesting.
The other day I got my PG&E bill and within it was a notice that they’re basically replacing coal-based thermoelectric plants with nuclear-based, while other sources are being kept at their current % levels. So it seems that this is not news, just a reiteration and support of an obvious industry move. [/quote]
My statement never implied that it was news, just that it was refreshing to hear the president voicing support for nuclear power, rather than giving lip service to inefficient alternatives.
Is this opinion, or fact? You use the word ‘most’ as if it is supposed to mean something. Are their published reports to support ‘most’ of what you say?
Usually? Like ‘most’, this appears to be you spouting opinion rather than fact. Are there numbers to back up a ‘usually’? How often is ‘usually’?
I don’t think Bush referenced coal. I think he mentioned nuclear power in the context of reducing our dependence on foreign oil. I donb’t think global warming was even mentioned. Your assumptions seem to be a bit of a stretch.
No right thinking person can say definitively what the causes of global warming are. The best anyone can manage is politically motivated junk science.
[quote]…with the huge tradeoff of the responsibility of having to store tons of High-level waste for thousands of years – not to mention the hassle of decommissioning the plants when they become too old.
And, if the latter, are we really sure we want to produce tons of highly dangerous waste just to save us the extra 2% of GDP that would cost building wind and solar plants in the same desert of Nevada (rather than the nuclear waste storage facility)?
[/quote]
It’s not just a function of the cost, it’s an efficiency issue. A pop-gun is a hell of a lot cheaper than a .30/.30, but the .30/.30 is a lot more efficient. Why waste our money on pop-gun energy sources when nuclear power is so much more efficient?
20-30 years ago, the anti-nuke crowd was against the construction of nuclear plants because of 3 Mile Island, and Chernobyl(sp). Now it’s a cost factor? A waste storage problem?
[quote]BostonBarrister wrote:
On that, here’s a good article that explains why this particular proposal – the one Bush is said to favor but hasn’t specifically endorsed – would work well for investors who chose to invest. It won’t solve all the problems with Social Security, but it should put investors ahead without harming the risk averse (this doesn’t include any further actions, such as benefit cuts, rising retirement age, etc. that would hit everyone, irrespective of whether they chose to do private accounts):[/quote]
I’m starting to think we should pay you for the public service of finding all those articles… 
That article does go into a little more detail…
I think it actually touches very well most of the potential problems – including the ones you mention on your quote above – except for two that could have been more explicit:
A system like this has the potential to not only propagate, but even amplify the already brutal income differentials in this country – i.e., make the rich even richer, and possibly the poor even poorer.
Should we actually let people pick their venom? I mean, what if a person that has no clue about investment picks the private account choice and blows all their money in high-risk stocks?
In Europe, they “solved” that problem by only allowing people over a certain income to use private accounts – the problem is that’s based on the bad assumption that people with higher incomes are inherently better at investing. They’re not – in many cases it’s quite the opposite, especially for the ones that made their fortune exclusively by working for others. On the other hand there are people who were just born poor and were unable to get into a high-paying job, but if given the opportunity they would excel at investing.
One possible compromise would be to force people that do pick the private account option to have a certain % of their income go to low risk investments. However, that, again, can benefit the rich most of all, since it would prevent poor but smart people from getting a good retirement, since it would limit their investment potential.
Of course, if Bush just takes the right-wing approach of leaving people on their own, this discussion is pointless: create no limits or criteria, just have everybody use private accounts and use the law of the jungle, which is the survival of the fittest. But then don’t get surprised if in 30 years the streets are filled with homeless elderly people.
Unless, of course, he just decides to re-channel into Social Security the billions of dollars that he’s funneling into the “Defense” budget. But the chances of that happening are actually below the ones of us seeing a Pink Elephant fly over the Capitol, so I won’t even count that as a possibility.
I won’t pretend I know the solution to all of this – my point, at this moment, is that unless you take an extreme left (higher taxes, no private option) or extreme right (survival of the fittest, all private with no limits) approach, this will need some SERIOUS discussion since it’s an extremely hard problem to crack without hurting someone, especially the lower income croud, who is growing in numbers every day.
Oh, by the way, Medicare has definitely to be solved too. However, I’m pretty sure that if we want to fix things, first of all the Federal Government must find some way of reducing the cost of Health services in this country, which several times higher than the European average.
As long as Rx meds cost over $200 for a one-month supply each, and going to the doctor costs over $200 per consultation, there’s no way we can afford to cover people that earn the medium wage – much less minimum wage people.
Reducing health costs would essentially kill two birds with one stone: because Europeans managed to curb increases in health services costs, some countries there can afford to now be moving towards a completely privatized health insurance system (with capped health insurance premiums AND SLAs with the insurance companies, though), i.e., they won’t have Medicare or any state-run health insurance system 5 years from now, because health services are so cheap and efficient that selling health insurances with a $50-a-month premium is actually good business over there.
Now compare that to the $600 a month a family PPO plan costs over here in California…
You sure have a chip on your shoulder, don’t you rainjack?
[quote]rainjack wrote:
Is this opinion, or fact? You use the word ‘most’ as if it is supposed to mean something. Are their published reports to support ‘most’ of what you say?[/quote]
FACT: ALL of the countries in the World that have nuclear power plants EXCEPT the US have difficulties in finding places to store the radioactive waste, because of their population density and/or lack of proper location.
(“most” meant “all the countries but the US”)
[quote]rainjack wrote:
Usually? Like ‘most’, this appears to be you spouting opinion rather than fact. Are there numbers to back up a ‘usually’? How often is ‘usually’?[/quote]
FACT: electricity produced by a MODERN coal power plant is cheaper (i.e., has a lower cost per MWh, i.e., is more efficient) than the one produced by a MODERN nuclear power plant, IF you take into account the cost of storage of radioactive waste.
(“Usually” meant “if you compare modern coal plants to modern nuclear plants” – numbers look different if you compare old to new)
Read this:
http://www.nucleartourist.com/basics/costs.htm
[quote]rainjack wrote:
I don’t think Bush referenced coal. I think he mentioned nuclear power in the context of reducing our dependence on foreign oil. I donb’t think global warming was even mentioned. Your assumptions seem to be a bit of a stretch.[/quote]
Foreign oil? Huh? How many power plants use “foreign oil”?
If you mean foreign Natural Gas, there might be a point there. There is a significant amount of power plants that use Natural Gas as their source, and a small percentage of the Natural Gas we use comes from outside the US. But, again, if there’s no Global Warming problem why not move to coal instead? It’s cheap… pardon me, more efficient…
Read this please:
http://www.careenergy.com/powering_life/coal-power.asp
(NOTE: both nuclear, coal and natural gas are technically “steam power plants”, aka thermoelectric)
[quote]rainjack wrote:
No right thinking person can say definitively what the causes of global warming are. The best anyone can manage is politically motivated junk science. [/quote]
So, again, why not coal then?
[quote]rainjack wrote:
It’s not just a function of the cost, it’s an efficiency issue. A pop-gun is a hell of a lot cheaper than a .30/.30, but the .30/.30 is a lot more efficient. Why waste our money on pop-gun energy sources when nuclear power is so much more efficient?[/quote]
I wasn’t talking about absolute cost, but about cost per MWh, aka efficiency. If you need me to spell it out for you: coal is more efficient than nuclear. And Natural Gas. In great part because we have gigantic amounts of coal readily available in the US.
And, yes, Wind and Solar are less efficient on the short run, but not if you consider the long-term costs of nuclear, including the decommisioning of plants after a while, storage, distribution network, etc.
Some scientific reading on that subject:
http://www.ese.ogi.edu/~waldemer/solarpaper.htm
http://www.defenders.org/wildlife/arctic/econorthwest.pdf
http://www.cnp.ca/resources/phasing-out-nuclear.pdf
[quote]rainjack wrote:
20-30 years ago, the anti-nuke crowd was against the construction of nuclear plants because of 3 Mile Island, and Chernobyl(sp). Now it’s a cost factor? A waste storage problem? [/quote]
20-30 years ago, nuclear plants were not safe, so that was the priority concern. These days they’re much safer (unless terrorists use them against us, but that’s science fiction in my book), so the chief concerns are, yes, cost and storage. At least those are the reasons for them being decommissioned in Europe.
[quote]hspder wrote:
You sure have a chip on your shoulder, don’t you rainjack?[/quote]
No chip, at least as far as I can tell. Just a mounting weariness of left-wing idiots ejaculating opinion and telling me it’s a fact.
[quote]FACT: ALL of the countries in the World that have nuclear power plants EXCEPT the US have difficulties in finding places to store the radioactive waste, because of their population density and/or lack of proper location.
(“most” meant “all the countries but the US”)[/quote]
No proof? just your own opinion I suppose. ("most’ meant “all the countries in Western Europe, who we should be emulating”)
[quote]FACT: electricity produced by a MODERN coal power plant is cheaper (i.e., has a lower cost per MWh, i.e., is more efficient) than the one produced by a MODERN nuclear power plant, IF you take into account the cost of storage of radioactive waste.
(“Usually” meant “if you compare modern coal plants to modern nuclear plants” – numbers look different if you compare old to new)[/quote]
At a difference of less than a dollar per Mw-hr, I would hardly run and hide from nuclear power. If there was a demand for nuclear power( read money to be made), efficiencies will be found. You made a point to emphasize MODERN coal plants which suggests that efficiencies have been found that cheapens the coal process when compared to OLD plants. The same will happen with nuclear.
None. My point was that Bush was not speaking about coal. He specifically mentioned nuclear power in the context of reducing our dependence on foreign oil. Perhaps the idea is to think outside the box, and develop a renewable fuel source that would support our lifestyles without the use of fossil fuels. I’m sure you are adept enough to connect the dots - but then again -
Bush is an oil guy. He knows full well what he said and the context in which he said it.
You are the one who brought up coal. I didn’t, and neither did Bush.
How in the HELL do you get an admission of guilt from something that the president never said?
But I’ll play your elitist B.S. game. It’s cheaper in the short run, and will be cheaper in the long run once efficiencies are found.
By a whopping .90/Mw-h. Let’s all run and hide from 3 per cent. If that’s the cost differential between an old world technology(coal), and one that has seen little competition(nuclear), given time the costs for nuclear will drop considerably.
On the matter of similar SS reforms failing in other countries, perhaps we need to revisit Chile:
Chile’s Personal Pension
Accounts a Failure? Says Who?
By MARY ANASTASIA O’GRADY
The Wall Street Journal
February 4, 2005; Page A9
George W. Bush’s plan to create personal retirement accounts is not simply an actuarial adjustment designed to boost old-age financial security. It is a lunge for the jugular vein of the welfare state.
This explains why Democrats sent up a collective moan during the State of the Union address when Mr. Bush repeated his intention to allow people to own their retirement savings. It also explains why the news pages of the New York Times are editorializing against reform, most recently with a tendentious report on the world’s most successful government-created private pension system in Chile.
Mr. Bush has promised not to reduce benefits for anyone over 55, so the “scare grandma” strategy doesn’t pack nearly the punch it used to. Plan B of the opposition is to terrify the rest of us into clinging to the nanny state for fear of elderly destitution.
With it’s filing from Santiago last week titled “Chile’s Retirees Find Shortfall in Private Plan,” the Times demonstrates its loyalty to this cause. Indeed, the claim that “many” Chileans are unhappy with the plan has “many” Chileans wondering if Jayson Blair isn’t back on the staff of the Times, reporting on Chile under a pen name from a city housing project in the South Bronx.
Chile’s personal savings account system was established in 1981 because the state-run system was unsustainable. The new plan did not force workers already in the system to change. It offered the option to use either the old government program or switch to the new personal account system. But with the goal of eventually closing the failing government system, first-time workers were given no choice but the new program. Reformers believed that if retirement savings were in the hands of their owners, incentives for saving and investing in productive assets would be greater and Chileans paying payroll taxes would be better off.
They were right, as even the Times was forced to acknowledge well into its “yes-but” article by saying, “. . . what all here agree is the main strength of the privatized system: an average 10 percent annual return on investments. Those results have been achieved by the pension funds largely through the purchase of stocks and corporate and government bonds – investments that helped fuel an economic expansion giving Chile the highest growth rate in Latin America over the last 20 years.”
But trust the Times to find the hole in this tasty doughnut. Its report indicts the Chilean model on the grounds that “Only half of workers are captured by the system.” Of course the same was true of the old system. The difference is that the old income transfer system was not capable of supporting future retirees, a problem not unlike the one in the U.S.
The large number of nonparticipating Chileans is not a shortcoming of the personalized system but a reality of a developing economy. Sadly, Chile still has a rather large underground economy and these self-employed do not pay into the system. Indeed, as Catholic University of Chile economics professor Salvador Vald?s has noted, it would be cruel to force the self-employed in the informal economy to contribute, “because most have low take-home wages anyway, and because if they ever self-financed a minimum pension for old age, they would be excluded from the programs that support the [elderly] poor.”
To bring these workers into the formal economy requires totally separate policy changes, mainly to make legality less expensive. The Socialist government of President Ricardo Lagos has gone in the opposite direction, aggravating the problem by raising labor regulations on business. To blame the ensuing lack of financial security on PSAs is irrational, especially when those accounts are returning 10% a year.
The Times observes that “Over all, Chile has spent more than $66 billion” on social security benefits since 1981. This sounds scary but actually works out to $2.75 billion per year in a country with a gross domestic product of $88 billion. The story then quotes Chilean Socialist minister of labor and social security as warning that the gap could widen. Yet surely the transition cost will go down at some point, as no new participants join the old system and state obligations fall as people die.
In fact, the only way the gap can widen in the long run is if a large number of Chileans in the private sector have to resort to the safety net because the Chilean economy goes in the tank and underground employment swells. This argues for more economic liberalization to produce faster growth, an admittedly difficult concept for the Socialist government. Even so, Chile is far richer than it was prior to 1981 and as Mr. Vald?s points out, “Chilean social policy has reduced poverty among the old to a third of the national poverty rate.”
The article also suggests, consistent with one of the arguments used by the opposition to the Bush plan, that transition costs have been high, 5% to 6% of GDP. The actual transition cost, Mr. Vald?s asserts, has been 2% of GDP.
But never mind that. The first rule of any political agenda is to spare no effort in uncovering an anecdote that proves inequality of outcomes, from which lessons for an entire population can be extrapolated. In this case, reporting from a developing country of 16 million people, the Times found a disgruntled laboratory technician in Santiago: Dagoberto Saez, a 66-year-old who is set to retire in March. Mr. Saez has been in the private system for 24 years and will receive a monthly check of $315 while some of his colleagues who remained in the government system will collect $700 per month.
Yet as Mr. Vald?s points out, Mr. Saez contributed for only 24 years and “so any earnings-related benefit formulas will pay him far less than the target replacement.” Most people work at least 40 years. More to the point, as the professor gently suggests, “What a journalist should be inquisitive about is how does the old system manage to pay his colleagues $700?” Perhaps that would uncover some of the distortions and inequities of the state-run plan.
PSAs have made young workers who pay into the system better off, for the simple reason that their investment earns a tidy return, something not possible with a system that merely transfers income to seniors from working persons. What PSAs do not do is redistribute income or create a dependency on the political system. Maybe that is what most bothers those who fear George Bush’s initiative.
[quote]hspder wrote:
I’m starting to think we should pay you for the public service of finding all those articles…
That article does go into a little more detail…
I think it actually touches very well most of the potential problems – including the ones you mention on your quote above – except for two that could have been more explicit:
I don’t understand this objection, because there is a maximum of $1000 that can be pulled out per person. Unless you’re implying that the fact that some people will get better returns than others due to investment choices is the problem.
I don’t see that as a large problem due to the relatively small amount of money being discussed: 4% or $1000 each year (likely adjusted for inflation). Add that to the actuarial assumptions that adjust for a certain amount of gain, and the likely restrictions on investments (see below), and the effect of this versus the effect of other savings (401(k)s, for example) is negligible.
I should note that I don’t spend a whole lot of time worrying about income inequality anyway, provided that the standard of living is rising for everyone.
I think what they have in mind will be based on the system that is already available for Congress (yet again, Congress has given itself a better, more market-based program that what is available to the rest of us).
In the Congressional plan – sorry, I forget the name, but it’s called some sort of “Saving Plan” – people are restricted to a small number of index funds.
If people were restricted to picking funds indexed on the Wilshire 5000 for equities and a mix of short- and long-term bonds, then the only decision they would need to make is in allocation, which would be based on their risk tolerance. (And of course, the truly risk intolerant could just stick with the normal SS system – and if both the Wilshire 5000 and the bond market bottomed out simultaneously, my guess is that we’d have a lot more to worry about that those two happenings…).
[quote] In Europe, they “solved” that problem by only allowing people over a certain income to use private accounts – the problem is that’s based on the bad assumption that people with higher incomes are inherently better at investing. They’re not – in many cases it’s quite the opposite, especially for the ones that made their fortune exclusively by working for others. On the other hand there are people who were just born poor and were unable to get into a high-paying job, but if given the opportunity they would excel at investing.
One possible compromise would be to force people that do pick the private account option to have a certain % of their income go to low risk investments. However, that, again, can benefit the rich most of all, since it would prevent poor but smart people from getting a good retirement, since it would limit their investment potential. [/quote]
I think it would be fine to let them choose how much to allocate between stocks and bonds based on their individual risk tolerances.
I think that’s just a wee bit of an overstatement of the case. But in any event, I’m sure there would be limitations on allowable investments (for one thing, such limitations radically reduce the cost of administering the plan).
[quote]Unless, of course, he just decides to re-channel into Social Security the billions of dollars that he’s funneling into the “Defense” budget. But the chances of that happening are actually below the ones of us seeing a Pink Elephant fly over the Capitol, so I won’t even count that as a possibility.
I won’t pretend I know the solution to all of this – my point, at this moment, is that unless you take an extreme left (higher taxes, no private option) or extreme right (survival of the fittest, all private with no limits) approach, this will need some SERIOUS discussion since it’s an extremely hard problem to crack without hurting someone, especially the lower income croud, who is growing in numbers every day.[/quote]
The only thing that really needs to be hammered out is how much to allow folks to take out – and how to index it. When Clinton was president he proposed 15% – I believe Daniel Patrick Monyihan had a similar proposal. Bush’s seemingly favored proposal right now is 4%, which I think is kind of low.
[quote] Oh, by the way, Medicare has definitely to be solved too. However, I’m pretty sure that if we want to fix things, first of all the Federal Government must find some way of reducing the cost of Health services in this country, which several times higher than the European average.
As long as Rx meds cost over $200 for a one-month supply each, and going to the doctor costs over $200 per consultation, there’s no way we can afford to cover people that earn the medium wage – much less minimum wage people.
Reducing health costs would essentially kill two birds with one stone: because Europeans managed to curb increases in health services costs, some countries there can afford to now be moving towards a completely privatized health insurance system (with capped health insurance premiums AND SLAs with the insurance companies, though), i.e., they won’t have Medicare or any state-run health insurance system 5 years from now, because health services are so cheap and efficient that selling health insurances with a $50-a-month premium is actually good business over there.
Now compare that to the $600 a month a family PPO plan costs over here in California…[/quote]
Medicare is a huge problem. There are quite a few things that need to be done on this front, including ending the subsidization of world drug development by U.S. health consumers, establishing more medical schools and training more doctors, and making some sense of the morass of regulations that affects health care insurance – if one area is crying out for the benefits of a national market, it’s that one.
I think it’s called ‘Thrift Savings Accounts’, or ‘Thrift Accounts’ - I know it has ‘thrift’ in there somewhere.
After watching it again, I must recant my original opinion. I was more powerfully given that I thought. I stand by my statement about the cat calls. It made the Democrats look bad. I have to say that I disagree with his stance on immigration.
Me Solomon Grundy