Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

The Social Security Timebomb?

  1. Dec 30, 2004 #1
    I haven't read much about the current social security 'crisis' in this forum, which is strange given that this is the politics forum. Whether or not social security should be reformed (or deformed) seems to be the pressing issue in Congress these days. Do you think Social Security should be partially privatized?

    Do you think that the Bush administration has other motivations for privatizing other than for the welfare of the people?

    Do you agree with this Boston Globe article that the President is exaggerating the 'threat' of a social security crisis much like the exaggeration of the Iraqi threat?

    Why would Bush exaggerate such a threat?
     
  2. jcsd
  3. Dec 30, 2004 #2

    Gokul43201

    User Avatar
    Staff Emeritus
    Science Advisor
    Gold Member

    It's pretty commonly held belief that SS is going bankrupt. I think I've seen bi-partisan support for this belief, but I may be wrong. This imminent bankruptcy, is not, in itself a problem with SS as much as it's a problem with the system that is used to fund it. You can not sufficiently support social security when you have an ever-growing deficit.

    There are clearly two ways out...very crudely :

    1. Be thrifty; raise taxes; cut the deficit; revive social security

    2. don't worry about deficit; phase out/eliminate/privatize social security; also eliminate most taxes

    Equally clearly, you will not find bi-partisan support for either of these approaches. So, you need a middle ground, or a sufficient majority in the senate and house. Right now, it looks like we're closer to the latter than the former.
     
  4. Dec 30, 2004 #3

    Kerrie

    User Avatar
    Staff Emeritus
    Gold Member

    if social security is privatized, what would happen to medicare? what would happen to those who are young and on disability? what would happen to widows/widowers left with young dependents? as for retirement, i am all for privatization, but social security does a lot more then help support our elderly.
     
  5. Dec 30, 2004 #4

    GENIERE

    User Avatar
    Science Advisor

    Nothing, but I would hope it would be privatized also. Actually privatize is not descriptive of the what I understand the plan may be.
    More money available for greater benefits, not immediately but in the long term.
    I don’t see a connection
    Think of how much more money will be available for all social programs. Governments do not produce wealth, they consume it, and at ever greater rates.
     
  6. Dec 30, 2004 #5
    if the extremist republicans privatize social security how much more from the new-deal era will be left to roll back? & isn't it called social SECURITY for a reason, rather than social "investment" or social "speculation" or social "gambling"? if stuff like that is privatized & working people have to depend on the stock markets for their pensions, health care, etc they'll oppose wage increases & whatnot, and basically have a stake in undermining their own interests won't they?
     
  7. Dec 30, 2004 #6

    Kerrie

    User Avatar
    Staff Emeritus
    Gold Member

    when privatization occurs, then profits become more of a profit over the quality of care.

    do you realize how many people are all ready dependent on the little amount of money received from disability? if this money is not readily available, the welfare system will be seriously overloaded.

    are you not aware that mothers/fathers of multiple children depend on social security to help support their children if a parent dies? especially young children when it costs $600/monthly for full time day care?

    but when profiting becomes a priority, those who are in need tend to suffer. i agree that there will be a lot of money available for social programs, but those private companies aren't looking out for the well being of the public, but for the profits of their company. ideal isn't always realistic.
     
  8. Dec 30, 2004 #7

    russ_watters

    User Avatar

    Staff: Mentor

    If done correctly this wouldn't be an issue. Just like with an IRA, the government won't let you do whatever you want, but would require that you invest it in a certain way. IRA's work great (far better than SS). There is no reason why privatized SS can't work just as well.
     
  9. Dec 31, 2004 #8
    Just out of curiosity, is Bush ultimately looking for a way to channel investment to the US stock market in an effort to support it, as we all know the dollar has been hitting all time low?
     
  10. Dec 31, 2004 #9

    plover

    User Avatar
    Homework Helper

    Bush's commitment to SS privatization is of much longer standing than current economic circumstances—he would be pursuing it whatever the status of the dollar.
     
    Last edited: Dec 31, 2004
  11. Dec 31, 2004 #10

    BobG

    User Avatar
    Science Advisor
    Homework Helper

    I think Kerrie's point is the benefits besides retirement that Social Security provides. Social Security is more than a retirement program. It's also government disability and life insurance.

    If you die at 30, you won't have accumulated much of a death benefit for your family. A privatization plan also has to take into account the disability and death benefits that Social Security provide. That's doable, but it's also more expensive, which is part of the reason the transition costs are so high.
     
  12. Dec 31, 2004 #11

    Kerrie

    User Avatar
    Staff Emeritus
    Gold Member

    i agree with what you are saying Russ, however, social security is a mandatory withdrawal from a person's paycheck, whereas IRA's are not. as i stated above, social security does a lot more then provide extra money for those older then 67. social security is mandated to provide the safety net of those who are disabled and left to raise children if another parent passes away. it is unrealistic to expect that all people of america will start IRA's and have life insurance policies. without some kind of social security, our welfare system will be seriously affected.
     
  13. Dec 31, 2004 #12

    Kerrie

    User Avatar
    Staff Emeritus
    Gold Member

    a young person who has passed away and has some kind of death benefit through the social security is certainly better than nothing. social security was never intended to be the total source of income, but merely a supplement to additional savings.
     
  14. Dec 31, 2004 #13

    russ_watters

    User Avatar

    Staff: Mentor

    I didn't mean it would be an IRA, I meant it would be like an IRA. The issues you bring up are real, but can easily be integrated into the program:

    -It would still be mandatory
    -You'd still have the same amount taken out of your pay
    -Some would be earmarked for other pieces of the program, such as disability

    I may have different ideas about the scope and method of fixing it than Bush, but pretty much the only thing that needs to change is how the trust fund itself operates. If the money was split relatively evenly between a bond fund and an S&P Index Fund, it wouldn't just be self sustaining - it'd be profitable. People would retire with many times the SS income that people have today.

    The main reason to truly privatize it (to make it basically a mandatory IRA) is that the government isn't managing the trust fund well right now: its basically being treated like a pyramid scheme, not as a trust fund. All this talk about 100 people paying in for every 1 retiree at inception vs 2:1 now shouldn't be relevant. You should get back what you paid in, plus growth - and if managed correctly (not as hard as people think) the growth should be substantial.
     
    Last edited: Dec 31, 2004
  15. Dec 31, 2004 #14

    loseyourname

    User Avatar
    Staff Emeritus
    Gold Member

    Another huge piece of any SS reform package should be the protection of the funds. A large part of the reason SS is going bankrupt in the first place is that the government has spent the money raised by social security for purposes other than those enumerated to the program (to cover up deficits elsewhere, basically). Edit: I should mention that a good deal of this is also due to the programs Kerrie is talking about. Welfare and medicare recipients are also paid with social security funds, but because they didn't put any money into the fund, they are simply taking the retirement savings of taxpayers, leaving less there for retirement benefits. A privatized fund could potentially still do this, but without any loss, because the money paid to the fund could be increased through smart investment, leaving enough for all social security programs without cheating the elderly out of their retirement savings.

    Privatization provides an advantage in that private companies must either invest profitably or go out of business. They can't simply cover up their mistakes by plundering your funds and failing to pay out while remaining in business, the way government does. A private company that attempted to operate like the government would not last very long.
     
    Last edited: Dec 31, 2004
  16. Dec 31, 2004 #15

    Kerrie

    User Avatar
    Staff Emeritus
    Gold Member


    i absolutely agree. so long as the focus and profits of the new private social security program remains for the people and not for a rich few. it would be ideal if our government had this focus more in general.
     
  17. Dec 31, 2004 #16

    Kerrie

    User Avatar
    Staff Emeritus
    Gold Member

    what would happen if the stock market crashes?
     
  18. Dec 31, 2004 #17

    GENIERE

    User Avatar
    Science Advisor

    I’ve read quite a bit on SS so I can’t provide a specific citation. The little guy is always the most affected by economic downturns so would be the most affected by a market collapse. The good part is that there would have to be a decline in market value of about 38% for him to feel the crunch. In the Great Depression that loss was only realized in one year when the value decreased by about 60%. Over a several year period, the little guy would be better off with the market indexed privatized system than he is with the present system in the worst of scenarios. If the economy is bad for extended period we all bite the bullet even if all the wealth of the “haves” was distributed among us. Economic security can only be attained by the creation of wealth. Wealth can only be created by business. An influx of a great deal of money into the market will allow business to expand, modernize, do more research, more easily compete in the world…
     
  19. Dec 31, 2004 #18
    here are some points from a www.cmaj.ca commentary (written by americans) on the canadian (private, not-for-profit) & US (corporate) health systems. i don't know how closely they relate to social security but i don't think it's crazy to conjecture that they might have some things in common:

    - "it is absurd to think that frail elderly and seriously ill patients, who consume most care, can act as informed consumers (i.e., comparison-shop, reduce demand when suppliers raise prices or accurately appraise quality). Even less vulnerable patients can have difficulty gauging whether a hospital's luxurious appurtenances bespeak good care"

    - "the "product" of health care is notoriously difficult to evaluate, even for sophisticated buyers like government. Physicians and hospitals create the data used to monitor them; self-interest puts the accuracy of such data into question. By labelling minor chest discomfort "angina" rather than "chest pain," a US hospital can garner both higher Medicare payments and a factitiously improved track record for angina treatment. It is easier and more profitable to exploit such loopholes than to improve efficiency or quality"

    - "a real market would require multiple independent buyers and sellers, with free entry into the marketplace. Yet, many hospitals exercise virtual monopolies. A town's only hospital cannot compete with itself, but can use its market power to inflate its earnings. Not surprisingly, for-profit hospital firms in the United States have concentrated their purchases in areas where they can gain a large share of the local market. Moreover, many health care providers and suppliers enjoy state-conferred monopolies in the form of licensure laws for physicians and hospitals and patent protection for drugs. Additionally, government pays most health costs — even in the United States. Indeed, public funding for health care in the United States exceeds total health spending in Canada on a per capita basis. It's an odd market that relies largely on public funds"

    - "Privatization results in a large net loss to society in terms of higher costs and lower quality, but some stand to gain. Privatization creates vast opportunities for powerful firms, and also redistributes income among health workers. Pay scales are relatively flat in government and not-for-profit health institutions; pay differences between the CEO and a housekeeper are perhaps 20:1. In US corporations, a ratio of 180:1 is average. In effect, privatization takes money from the pockets of low-wage, mostly female health workers and gives it to investors and highly paid managers"

    http://www.cmaj.ca/cgi/content/full/170/12/1814

    or from the new england journal of medicine:

    "Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible" - milton friedman

    - "The most serious problem with such care is that it embodies a new value system that severs the communal roots and samaritan traditions of hospitals, makes doctors and nurses the instruments of investors, and views patients as commodities"

    - "In our society, some aspects of life are off-limits to commerce. We prohibit the selling of children and the buying of wives, juries, and kidneys. Tainted blood is an inevitable consequence of paying blood donors; even sophisticated laboratory tests cannot supplant the gift-giving relationship as a safeguard of the purity of blood. Like blood, health care is too precious, intimate, and corruptible to entrust to the market"

    http://content.nejm.org/cgi/content...a3093374654637f28471b8b3&keytype2=tf_ipsecsha
     
  20. Jan 1, 2005 #19

    loseyourname

    User Avatar
    Staff Emeritus
    Gold Member

    The rich few already have superior retirement benefits and health plans that they obtain from private providers. Heck, even my dad does, and he's anything but rich. The great thing is, providers can profit and make themselves rich, even while providing better services than the public sector can give. The two goals need not be mutually exclusive. I understand people's apprehension with private money-grubbing, but how many companies have honestly been able to last long without bankruptcy or prosecution by rampantly exploiting customers and providing bad service? The government has been able to do so since its inception.
     
  21. Jan 1, 2005 #20

    Kerrie

    User Avatar
    Staff Emeritus
    Gold Member

    the exact opposite is happening in the health care system. i know from personal experience. health care companies have raised premiums and given a lot less care. capitalism is healthy, but there comes a point when the basic needs of people can be sacrificed in the name of profit. if social security becomes privatized, there still needs to be strict regulations set in place to protect the americans.
     
Know someone interested in this topic? Share this thread via Reddit, Google+, Twitter, or Facebook

Have something to add?



Similar Discussions: The Social Security Timebomb?
  1. Social Security (Replies: 15)

  2. Social Security (Replies: 16)

Loading...