The only investments proposed are index investments. You'd own everything. There wouldn't be the kind of political gamesmanship that an entity like Calpers does by trying to "socially invest" money.

You also have the option of not selecting the private accounts, and remaining in the current system.

You also have the option of not selecting the private accounts, and remaining in the current system.

Given the prognosis for privatization, I'd say that's your only option.

Mr. Dog,

The president would have to present some sort of actual plan first before you could say that only index funds would be used for the private accounts.

Since no plan has been presented that contains this sort of detail, you are clearly just blowing wind.

Actually under the WH phantom proposal you WOULD NOT have a real 'choice' of staying in the existing system because they aggressively attack benefits if you stay in the 'existing' system... this according to leaks. The existing system is to be phased out de facto...

Result is you get guaranteed shitty returns if you stay and likely shitty returns if you privatize... even if your private accounts perform, they plan to 'back charge' the transition costs... so you don't have the option to stay in and have it the 'old way'...

If the WH had the balls to 'annuitize' the benefits schedule (guarantee a generous minimum return - say 95% of the current schedule) and have SS step up and take most of the risk as they should... then maybe all this bitching would go away...

But like I said before... to make this work would require setting up expensive hedged funds (puts and options managed right in the fund to eliminate the down side risk) and hefty up front cash from tax increases instead of added debt to fund pay off current retirees...

GOPers don't have the stomach for any of that - they want to dump the old farts and get something for nothing, the Bush way... but then what else is new.

Which is why they are scared shitless to release their plan to the public... they want this done behind closed doors and in conference committe and then spring this wonderful 'bipartisan solution' on everyone at once at a staged WH press conference as it is about to be signed.

Fuck them. I want this dragged out and messy.

Well, you'll have to do a little research and get down the learning curve on that one. I'll leave you with three words: Thrift Savings Plan. Even a 3rd-grader could figure it out from there. Are you up to the challenge?

dry fly, annuities are horrible investments. Well, they're good for insurance companies.

Growth Factor,

While I am not a fan of privatization, I am going to agree with some of what Muckdog said. One of the few details Bush has revealed about his plan (and of course they may deny it later) is that it would be similar to the Fed's Thrift Savings Plan (TSP). As a TSP contributor, I will tell you that you don't get many choices and all of them are funds of some sort. Each of them has a slightly different focus (small growth, market index, blended, etc).

My prediction on this is: If Social Security is in as bad shape as Bush claims to believe it is, he has created a scenario where "doing nothing" is not an option. He has effectively painted himself into a corner. If the creation of private accounts fails (and I suspect/hope they will), Bush will either let his SS campaign die (a hard choice for someone investing so much time painting SS in dire straits)or resort to a plan that appeals to more moderates. What I suspect will happen is that we will see an increase in social security taxes which will effectively erase the benefits of the Bush tax cuts.

If limited choice private funds (or Clinton's investment plan) had been in effect in 2000 we could assume Kenny Boy might have benefitted greatly from his friend in the White House. Image, trillions of dollars all invested in Enron - makes you wonder...

it would be similar to the Fed's Thrift Savings Plan

The key word here being "similar." Since no formal plan exists, we're just supposing. Well, it's not like anyone ever went wrong taking Bush at his word, right?

The argument made in Samuelson's column is the same one used against Clinton's plan to invest the trust fund surplus (those were the days). The argument is that government interference will distort the market. Even if the money is invested in index funds. Market fundamentalists should agree with this position.

"dry fly, annuities are horrible investments. Well, they're good for insurance companies."

They are only terrible when the commissions are included and the down side risk of alternatives are ignored... Pull out the hefty commission loads most private annuities pay and they converge on bond yeilds.

It is 'assumed' that any 'privatized SS' system would not allow insurance-company-like commission structures but that isn't even for sure because there are no details.

What is attractive about an annuity model is that they have to guarentee the return - losses are not an option. So they invest the money in private stocks and bonds and treasuries - there is your growth... then HEDGE via puts & options to make sure they don't lose more than a small amount at anyone time - an amount they know up front they can make back.

That is the ONLY privatized model that makes sense for SS - and if you look at the returns from this kind of model... they suck as bad as the public system... and if you include the debt load from the transition costs (make the funds support them... the returns are worse than the current system...

This is why people (including the WH wonks) are back tracking so fast from the claim privatization produces solvency - it doesn't.

Like I have said all along - private systems can be made to work as well as the current system but only if the funds are adequately hedged and fresh money is injected up front - REAL money, not additional debt - to buy down the transition costs.

The model is very similar to current annuities less the commisions.

What I suspect will happen is that we will see an increase in social security taxes which will effectively erase the benefits of the Bush tax cuts.

Increasing social security taxes won't help at all.

We'd initially have a surplus.

The politicians would take the surplus, and put it in the general fund.

They would then encumber new spending on social programs, weapons, and wars. The growth rate of that new spending would exceed growth+CPI, as all government programs tend to.

We'd thus, still have a social security crisis because when 2018 came, the money would be gone.

The only solution? Ownership. Take the money FROM the government and put it in private accounts instead of the general fund.

Muck,
Remember everytime you or Bush says ownership, it really means sharecropper. Promoting a "sharecropper" society is what you guys are all about.

Sharecroppers had "ownership" but the owner took most of what they had.

the current system as well as private accounts both subject our populace to an acceptable standard of adopted socialism, so instead we should eliminate the ideal system of reliable retirement and allow the individual to invest or save for their future and retirement as they would like.

oh and muckdog, if you are going to compare people to 3rd graders then you should bring dubya up to the learning curve himself: i mean that motherfucker cannot even talk,

Brad deLong gets it right. How Stupid Does the Cato Institute Think We Are?

The first thing that struck me is that the Cato Institute does not speak of "moral hazard." If we believe--as we do--that in the long run we will not allow significant numbers of the elderly to live in dire poverty, then giving future beneficiaries "more control and ownership" of their retirement funds is a very dangerous thing to do, for it creates a situation in which future beneficiaries have powerful incentives to pursue high-risk investment strategy: if the coin comes up heads, they win big; if the coin comes up tails, the government pays. As we saw in the late 1990s with the S&L crisis, such incentives create very dangerous and very costly situations.

The Bush administration (well, at least some fractions in the Bush administration) realizes this: that's why one of their talking points is how extremely restricted private account investment options will be under their plan. But Cato does not.

Now who will explain it to muckdog?

I think a 3rd grader needs to sit down and explain things to DeLong. Somebody send him a link to the Thrift Savings Plan website, for goodness sakes.

for it creates a situation in which future beneficiaries have powerful incentives to pursue high-risk investment strategy

DeLong is either an idiot, ignorant, or just lying/spinning. Maybe he just isn't aware of how a diversified index fund like the Total Stock Market or SP500 fund works.

The politicians would take the surplus, and put it in the general fund.

They would then encumber new spending on social programs, weapons, and wars. The growth rate of that new spending would exceed growth+CPI, as all government programs tend to.

Hey Muck: Lockbox, ring a bell?

LonelyMessiah,

How about some Hobbs :

"Life in an unregulated state of nature is solitary, poor, nasty, brutish, and short."

Wow muck, we actually agree again on something. You also admit and agree Republicans can't handle or manage money. They are irresponsible because we cant trust them to keep their hands off the Social security trust fund surpluses.

You forgot another choice...raise the payroll tax cap on Social security and tell republicans they cannot touch that money except for spending on social security payouts. Why can't they do that muck...why can't republicans live within their means just like everyone else is expected to and usually does muck.

Anyway Here is a great exchange from the Bamboozlepalooza Road trip Tour Dear Leader is currently embarking. The Alabama show yesterday had this interesting exchange coming straight from Horses ars...eerrr from Dear Leeder's freudian slip mouth. Remember this exchange is also with a handpicked person who supports the Preztledent's plan (and still didn't invest in the stock options but took the "safe" bond option..haha)

Here it is...

THE PRESIDENT: Let me ask you something about the Thrift Savings Plan. This is a Thrift Savings Plan that has a mix of stocks and bonds?

MS. WEBSTER: Yes, sir.

THE PRESIDENT: Now, how hard was that to learn how to do that?

MS. WEBSTER: And I chose the safe plan, government bonds. (Laughter.)

THE PRESIDENT: That's all right. Well, not so safe, unless we fix the deficit. But other than that -- (laughter). We're fixing the deficit. (Applause.)

this is just so interesting on so many levels isn't it.

As to your ignorant comments about DeLong (btw still waiting for your resume and CV highlighting your real world economic policy formation experience in it muck) but like most people(obviously not you though muck) DeLong knows the difference between and insurance program and an investment program.

Muck, DeLong is criticizing Cato's plan, not the one that the President hints at having. Cato's plan would not insist on index funds, hence the possibility of moral hazard with risky investments.

Muckdog-

Don't tell it to us. Professor DeLong's website has comments.