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News 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?
     
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  3. Dec 30, 2004 #2

    Gokul43201

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    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

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    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
    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

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    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

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    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

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    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

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    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

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    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

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    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

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    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

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    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

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    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

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

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    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

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    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.
     
  22. Jan 1, 2005 #21

    loseyourname

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    I find it difficult to believe that you have received shoddier service that you paid for than you would have received as a medicare recipient. Healthcare companies have mostly raised premiums because healthcare is more expensive. They pay more, and they have little choice but to pass the cost on to their customers or go out of business. The real question here is why does healthcare cost so much? There are several reasons. Two of the major ones are frivolous malpractice lawsuits that have required medical doctors to purchase expensive insurance plans and pass the cost on to their customers, and very stringent FDA testing laws that make it very expensive to bring a new drug to market (guess who the cost gets passed on to? See a pattern forming yet?). The common thread here: The government, not private companies, is responsible for both of these factors that go into making healthcare so expensive, which has in turn caused your premiums to go up.

    Of course, there are other factors, but I'm just trying to poke holes into this notion that the government can somehow do a better job of providing services than the private sector, or that the government is perfectly benevolent and has only the best interests of its citizens in mind, whereas private companies are pure evil and want to exploit and trick you every chance they get. There is a basic principle at play here that needs to be remembered. Government officials need not be good at their job to get elected. They only need to be good campaigners or simply be lucky enough to run against an inept opponent. Boards of directors and large shareholders, on the other hand, are much smarter voters than American electorate, and have a far wider pool from which to select. They actually require that the CEO they select perform well. The best way to make a profit has always been, and always will be, to provide a good service at a reasonable price. It gets pretty complicated from there and is rarely as black and white as I've made it seem, but that basic principle always remains.
     
  23. Jan 1, 2005 #22
    It is true that medical science is too complex for most people to make an informed decisions by themselves. But they can pay others to do that. For example as is done today for cars and computers by reading non-technical reviews. Or they can pay someone to make most or all decisions for them, similar to a HMO.

    The true problem with health-care in the US is that is it not a free-market system but that it is in fact enormously regulated, centrally planned and with many outright legal monopolies. In such a system the important thing is not to compete and provide better service, but instead to find loopholes in existing regulations and do political lobbying to make new.

    The large central planning have the classical problems with such systems like difficulty in controlling where resources are going, being slow and difficult to change, promoting corruption and in general have little processing power compared to a free market.

    Articles somewhat old but still god for a theoretical explanation of the problem with health-care today:
    http://www.econlib.org/library/Enc/HealthCareIndustry.html
    http://www.econlib.org/library/Enc/HealthInsurance.html

    Pay inequality is not inherently evil, if a free market reduces corruption, waste and inefficiency, then both the CEO and low-paid employees may gain. As can be seen by comparing living standards in socialistic and capitalistic countries.

    Regarding the not so altruistic medical guild, one of the special interest groups fighting to keep the medieval regulations protecting them in place:
    http://www.mises.org/fullstory.aspx?Id=1547
    http://www.mises.org/fullstory.aspx?control=1588
    http://www.mises.org/fullstory.aspx?control=1252
     
    Last edited: Jan 1, 2005
  24. Jan 1, 2005 #23

    kat

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    Actually, it's quite possible that she could have recieved shoddier service then someone with medicare or medicaid, it would all depend on the HMO that the Medicare/Medicaid program is accessing.

    I believe ;(someone correct me if I'm wrong) that the single highest cost of medical care is a result of administrative cost. Health care providers often have to deal with as many as 600 to 700 (or more) different insurance plans, each with different coverage and payment rules and referral networks that must be tracked. It's estimated that the bureaucracy alone consumes almost 400 billion dollars annually or approximately 1/3 of all health care cost.

    I'm not a proponent of socializing medicine as I believe that government business breeds waste and squelches competition that improves quality of service as well as cost BUT government regulation can sometimes increase competion and quality. In this case perhaps forcing some use of universal forms for healthcare would decrease health care expenses *shrug*.
     
  25. Jan 1, 2005 #24

    Kerrie

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    i have received less healthcare for the money i pay. healthcare is definitely more expensive, but the pharmaceutical companies are certainly playing their part in those rising costs because of the profits to be made.

    anyway, i don't want to steer this off topic. my point was, there needs to be a regulated balance between social services for the people and the ability to keep those companies/organizations financially afloat like a private business. high profits fot these organizations should not be the #1 factor in staying in business, but rather the quality of the service first.
     
  26. Jan 1, 2005 #25
    "Why does investor ownership increase costs? Investor-owned hospitals are profit maximizers, not cost minimizers. Strategies that bolster profitability often worsen efficiency and drive up costs. Columbia/HCA, the largest hospital firm in the United States, has paid the US government US$1.7 billion in settlements for fraud, the payment of kickbacks to physicians and overbilling of Medicare.9 Tenet, the second largest US hospital firm, paid more than half a billion dollars to settle charges of giving kickbacks for referrals and inappropriately detaining psychiatric patients to fill beds during the 1980s, when the firm was known as NME.10In March 2004, Tenet agreed to pay the US government US$22.5 million to settle one of several cases;11recent allegations against them have included performing cardiac procedures on healthy patients, offering kickbacks for referrals and exploiting Medicare loopholes to claim hundreds of millions in undeserved payments.

    For-profit executives reap princely rewards, draining money from care. When Columbia/HCA's CEO resigned in the face of fraud investigations, he left with a $10 million severance package and $324 million in company stock.12Tenet's CEO exercised stock options worth $111 million shortly before being forced out in 2003,13 and the head of HealthSouth (the dominant provider of rehabilitation care) made $112 million in 2002,13the year before his indictment for fraud.

    Enormous CEO incomes explain part, but not all, of the high administrative costs at investor-owned health care firms. Investor-owned hospitals spend much less on nursing care than not-for-profit hospitals, but their administrative costs are 6 percentage points higher14 (presumably reflecting their more meticulous attention to financial details)

    (from the same www.cmaj.ca editorial)
     
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