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View Full Version : Greenspan: Not Making Changes To Social Security Is "Risky" and "Not Sustainable"


RINGLEADER
02-16-2005, 02:34 PM
NEW YORK (CNN/Money) - Fed Chairman Alan Greenspan said Wednesday the economy is in good shape but warned that Americans urgently needed to save more -- and he endorsed the idea of private accounts as part of Social Security reform.

But while Greenspan waded into one of the more contentious issues facing Congress by coming out in favor of fundamental changes in the Social Security system, he urged caution. The Fed chief said the move toward private accounts should be gradual to limit borrowing needed to keep benefit payments while payroll taxes are diverted into the new accounts.

And under questioning by Democrats, he conceded that private accounts by themselves would not boost the nation's saving rate. But he said that not making changes to Social Security was risky and not sustainable.

He urged action before 2008 to prepare Social Security for the coming wave of retiring "baby boomers," and said it was "imperative to restore fiscal discipline" in the United States to help narrow the nation's huge trade deficit.

"If you're going to move to private accounts, which I approve of, (you) have to do it in a cautious, gradual way," he said in response to the first question he received from Committee Chairman Richard Shelby, an Alabama Republican.

In response to another question from the ranking Democrat on the committee, Paul Sarbanes of Maryland, Greenspan said he would back some borrowing for the transition to private accounts, but not more than $1 trillion. Some experts say $2 trillion or more might have to be borrowed to pay for the move to the accounts.

Greenspan said the current system of paying promised benefits to retirees cannot be sustained as the Baby Boomers start retiring.

"There are basically two models we're confronting, one a pay-as-you-go model, if we can fully fund, will work, and the other is the forced savings model. I've always supported a move to private accounts. The issue with respect to the financing is difficult to answer. But because the pay-as-you-go system will be very difficult to manage, we need an alternative," he said.

"Real progress on these issues will unavoidably entail many difficult choices," he said in his opening comments. "But the demographics are inexorable, and call for action before the leading edge of baby boomer retirement becomes evident in 2008."

http://money.cnn.com/2005/02/16/news/economy/fed_greenspan_testimony/index.htm

RINGLEADER
02-16-2005, 02:36 PM
Also today: Bush open to raising the cap on payroll taxes that are subject to the social security tax to help reduce the amount of the transition cost.

Amnorix
02-16-2005, 02:40 PM
Also today: Bush open to raising the cap on payroll taxes that are subject to the social security tax to help reduce the amount of the transition cost.

HOOOO-FREAKING-YAY!!!! 'bout damn time he spent some effort on figuring out how to fund this freaking plan.

IMHO we should also reduce the COLA benefit starting a few years down the road, eliminate (or greatly reduce) benefits prior to the minimum withdrawal age, and consider delaying eligibility for benefits by a year or so. These changes, while undesireable, are simply necessary.

alnorth
02-16-2005, 02:40 PM
If we have to temporarily raise SS taxes to get the personal accounts going, I'm all for it. At age 27, I'm looking at my SS taxes as a black hole from which I'll never see any of that money again anyway, so bring on privatisation.

Donger
02-16-2005, 02:43 PM
Also today: Bush open to raising the cap on payroll taxes that are subject to the social security tax to help reduce the amount of the transition cost.

RL, maybe you've not heard, but Bush wants to abolish Social Security.

jAZ allegedly told me.

SBK
02-16-2005, 02:45 PM
RL, maybe you've not heard, but Bush wants to abolish Social Security.

jAZ allegedly told me.

Bush is evil cause he won't send his daughters to Iraq either.

Amnorix
02-16-2005, 02:46 PM
Seriously, I'd uncap it as follows (whacking, unfortunately the wealthy as per usual for us Democrats):

increase cap to $100,000 for both employees and employers, increasing annually by CPI or some other index system.

From $100,000 to $250,000, eliminate employer match, and reduce employee tax from 6.2% to 3.1%

From $250K-$1M, still no employer match, reduce employee tax to 2%

$1M+, still no employer match, reduce employee tax to 1%

This will affect a very small percentage of wage earners at the top of the economic ladder. It is, admittedly, a case where they will never get back what they put in to the system, but this helps balance off the low tax bracket capital gains income that they get that are SS-tax free.

(and for those who will criticize me -- WTF is your plan to fund the $1 trillion funding shortfall).

ALSO realize that if we can really improve the country's finances in the long run, and (hopefully) reduce our deficit, this will improve the economic environment which, of course, will benefit the wealthy quite nicely.

Donger
02-16-2005, 02:48 PM
(and for those who will criticize me -- WTF is your plan to fund the $1 trillion funding shortfall).

Soylent Green.

RINGLEADER
02-16-2005, 02:53 PM
HOOOO-FREAKING-YAY!!!! 'bout damn time he spent some effort on figuring out how to fund this freaking plan.

IMHO we should also reduce the COLA benefit starting a few years down the road, eliminate (or greatly reduce) benefits prior to the minimum withdrawal age, and consider delaying eligibility for benefits by a year or so. These changes, while undesireable, are simply necessary.

I agree with you about COLA, but that's a much stickier fight. I'll be happy for the caps to be raised as long as it GUARANTEES private accounts.

RINGLEADER
02-16-2005, 02:54 PM
RL, maybe you've not heard, but Bush wants to abolish Social Security.

jAZ allegedly told me.


Fake, but accurate. ;)

RINGLEADER
02-16-2005, 02:56 PM
Seriously, I'd uncap it as follows (whacking, unfortunately the wealthy as per usual for us Democrats):

increase cap to $100,000 for both employees and employers, increasing annually by CPI or some other index system.

From $100,000 to $250,000, eliminate employer match, and reduce employee tax from 6.2% to 3.1%

From $250K-$1M, still no employer match, reduce employee tax to 2%

$1M+, still no employer match, reduce employee tax to 1%

This will affect a very small percentage of wage earners at the top of the economic ladder. It is, admittedly, a case where they will never get back what they put in to the system, but this helps balance off the low tax bracket capital gains income that they get that are SS-tax free.

(and for those who will criticize me -- WTF is your plan to fund the $1 trillion funding shortfall).

ALSO realize that if we can really improve the country's finances in the long run, and (hopefully) reduce our deficit, this will improve the economic environment which, of course, will benefit the wealthy quite nicely.


Ick.

As I stated when we were talking about this last week Amnorix, I'm against raising taxes on business as part of this plan. If it's slight and that's the only way you get a dozen Dems to sign on then OK, but we don't need to add any more drags on business...after all the numbers get really scary if there's a recession.

RINGLEADER
02-16-2005, 02:57 PM
Seriously, I'd uncap it as follows (whacking, unfortunately the wealthy as per usual for us Democrats):

increase cap to $100,000 for both employees and employers, increasing annually by CPI or some other index system.

From $100,000 to $250,000, eliminate employer match, and reduce employee tax from 6.2% to 3.1%

From $250K-$1M, still no employer match, reduce employee tax to 2%

$1M+, still no employer match, reduce employee tax to 1%

This will affect a very small percentage of wage earners at the top of the economic ladder. It is, admittedly, a case where they will never get back what they put in to the system, but this helps balance off the low tax bracket capital gains income that they get that are SS-tax free.

(and for those who will criticize me -- WTF is your plan to fund the $1 trillion funding shortfall).

ALSO realize that if we can really improve the country's finances in the long run, and (hopefully) reduce our deficit, this will improve the economic environment which, of course, will benefit the wealthy quite nicely.


Actually, on second read I don't think you're unreasonable...but I'd really like to see an economist's opinion on what that would do to hiring.

RINGLEADER
02-16-2005, 02:58 PM
Soylent Green.

I'm actually partial to Soylent Red.

Lefty_the_Right
02-16-2005, 03:00 PM
Boy, you guys sure seem to be a bit ignorant of history.

When has the Bush family EVER been a supporter of FDR and the New Deal?

Are you forgetting which president charged grandpa with Trading with the Enemy?

Are you forgetting that Bush in college said that it was a socialist program that should be dismantled?

Or that he has been talking down the viability of SS as a politician since 1978?

There is historical precedence for what you say jAZ has said.

Is there any for plans to privatize it?
Can you cite an example of a society without some sort of plan for the weak and elderly?

Is the quality of life for ALL, truly "better" there, than in America?

Amnorix
02-16-2005, 03:24 PM
Ick.

As I stated when we were talking about this last week Amnorix, I'm against raising taxes on business as part of this plan. If it's slight and that's the only way you get a dozen Dems to sign on then OK, but we don't need to add any more drags on business...after all the numbers get really scary if there's a recession.

"ick"?? The part where the business tax goes from its current $87K or so to $100K? That's about 800 bucks per employee who makes over $87K.

The rest, as I noted, is not matched by the employer.

That really isn't much.

Amnorix
02-16-2005, 03:27 PM
Actually, on second read I don't think you're unreasonable...but I'd really like to see an economist's opinion on what that would do to hiring.
I'm no economist, so I couldn't give that opinion, of course. (but of course now I'll babble on as if I can...:p )

IMHO a very small percentage of jobs are at $87+K, and they are all jobs that are pretty damn important to fill. It's not like line workers make that much and you can easily cut back. And at a maximum increase of $800 per person hired at that wage level, I'd be shocked if it had any impact whatsoever.

"Hrmm....I'd hire that guy at $100K, and give him the health benefits and other benefits we offer, but that $800 extra FICA really is the straw that breaks the camel's back" I just can't imagine that's going to happen...

Amnorix
02-16-2005, 03:29 PM
Boy, you guys sure seem to be a bit ignorant of history.

When has the Bush family EVER been a supporter of FDR and the New Deal?

Are you forgetting which president charged grandpa with Trading with the Enemy?

Are you forgetting that Bush in college said that it was a socialist program that should be dismantled?

Or that he has been talking down the viability of SS as a politician since 1978?

There is historical precedence for what you say jAZ has said.

Is there any for plans to privatize it?
Can you cite an example of a society without some sort of plan for the weak and elderly?

Is the quality of life for ALL, truly "better" there, than in America?

Even accepting all of what you say as true, what difference does it make? SS as currently constituted cannot last indefinitely. It needs to change somehow, and the longer we wait, the harder it will be to do it in a way that isn't extremely damaging to recipients, the economy, or both.