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Date: Fri, 18 Feb 2005 11:34:55 -0500 (EST)
To: improvetheworld &AElig umich.edu
From: Kevin Lochner <klochner &AElig eecs.umich.edu>
Subject: Re: Keep the Security in Social Security!
Status: O

I'm opposed to privatization, just because it doesn't induce any extra
saving, it only shuffles money around, essentially borrowing to invest on
a massive scale.  There is no "money" to invest right now, social
security has always been a pay-as-you-go system where current workers
pay benefits for current retirees.  Social Security is in trouble
because of a declining birth rate + a historic low saving rate.  Real
solutions therefore include any combination of the following:

 a) more babies
 b) increased savings i.e. reduced consumption
 c) reduction in benefits

All the money for bush's system would be financed by massive governemnt
borrowing.  If we could get real wealth from borrowing and investing on
this kind of scale, the governement could just borrow infinitely & give
us the money to put in the stock market.  The result would only be asset
price inflation (prices of stocks and bonds, real estate, etc.  would go
up artificially in the short run).  The only way to create real economic
profit would be to invest the money in new business ventures that create
value, of which there are a limited supply.  I think the only winers in
this scheme will be the stockbrokers that are delegated the job of
administering the accounts.

Stephen Roach from morgan stanley is one of my favorite economists,
here's what he has to say:

http://www.morganstanley.com/GEFdata/digests/20050121-fri.html

- kevin

On Fri, 18 Feb 2005, Lisa Hsu wrote:

> i also am not necessarily opposed to privatization, but i am sure that
> there are many ways to do it wrong, including bush's plan.  also, i am
> not sure there is a crisis looming the way there are other crises
> looming, namely our deficits (both trade and budget).
>
> i agree that we shoudl stop stealing from social security, and the cap
> raising idea seems good.  i also think it wouldn't be crazy to raise
> the age where you start getting benefits since people are living
> longer.  but mostly, i just don't think bush's plan will do any good,
> and thus i signed to try and tell him so.
>
> i recently read yet another article in the NYT international edition
> talking about how the Chilean privatization process has not gone well,
> and yet even so, bush holds them up as a shining example to the media.
>
> lisa
>
>
> On Fri, 18 Feb 2005 10:41:48 -0500, Robert Felty <robfelty &AElig umich.edu> wrote:
> > I am not opposed to privatization in theory, but after reviewing Bush's
> > plan, it does not seem very good.  In order to do better than what
> > social security would normally pay out, one has to have investments
> > that get 3% above inflation, which could be anywhere from 4%-8%
> > probably, which is not terribly difficult, but not that easy either.
> > The risks also seem quite great.  So to me the potential reward does
> > not seem worth the risk.  In talking with my dad, I suggested that they
> > simply invest the social security money in U.S. treasury bonds, instead
> > of having it just sit around not earning any money.  My dad informed me
> > that they already do this.  However, there usually isn't much money
> > sitting around.  When there is some money sitting around, our
> > legislators usually pillage it for other reasons.  So that leads to my
> > first proposal
> > 1.  Stop stealing from social security.
> >
> > My dad also made another recommendation, which president Bush has
> > recently said he will consider, which is raising the cap on how much of
> > income is subject to social security tax (FICA).  Currently one only
> > pays FICA on up to $90,000 of income (it has been going up slowly -
> > $76,200.00 in 2000).  This obviously benefits the rich greatly.  If we
> > got rid of the cap entirely, that would greatly increase social
> > security money.
> > 2.  Lift CAP
> >
> > Unfortunately, Stabenow's petition offers no suggestions, merely,"We
> > need to build on the success of Social Security by developing bold and
> > innovative ways for Americans to build wealth and save for retirement.
> > Privatization is not the answer."  Why not suggest some alternatives?
> > I am not going to sign her petition, but I will send her my suggestions.
> >
> > Thanks.
> > Rob
> >
> > On Feb 18, 2005, at 10:15, Lisa Hsu wrote:
> >
> > > hey guys,
> > >
> > > by writing to our senator (whom i like, she always sends back a
> > > relevant message), i guess i've now gotten on the list to receive
> > > emails on her pet issues.  this one is about social security and what
> > > our michigan senator is doing about it.  she includes a petition to
> > > tell Bush to take privatization adn shove it.
> > >
> > > lisa
> > >
> > > ---------- Forwarded message ----------
> > > From: Senator Debbie Stabenow <senator &AElig stabenow.senate.gov>
> > > Date: Fri, 4 Feb 2005 20:53:42 -0500
> > > Subject: Keep the Security in Social Security!
> > > To: kerry &AElig lisazapato.com
> > >
> > >
> > >
> > >
> > > February 4, 2005
> > >
> > > Miss Lisa Hsu
> > > 2200 Fuller Court, Apartment 401B
> > > Ann Arbor, MI  48105
> > >
> > > Knowing of your interest . . .
> > >
> > >  . .  in critical issues affecting the future of our country, I am
> > > writing to update you regarding the current debate over Social
> > > Security.  As you may know, I am leading efforts in the United
> > > States Senate to keep Social Security secure and ensure its
> > > solvency through the 21st century.
> > >
> > > Social Security is a great American success story.  We need to
> > > reject privatization schemes that would require deep benefit cuts
> > > and massive increases in the national debt and work together to
> > > strengthen and improve Social Security. We should look to the
> > > future to create new ways for Americans to build wealth and
> > > retirement security.
> > >
> > > Working together, we can achieve these important goals. But I
> > > need your help. We need to join together and fight these
> > > privatization schemes to keep Social Security safe for all
> > > Americans.  I invite you to visit my website at
> > > http://stabenow.senate.gov/socialsecurity for more information and
> > > to sign my online petition to encourage President Bush and the
> > > Congress to reject privatization and instead, build on the success of
> > > Social Security.
> > >
> > > As always, thank you for your interest in the important issues
> > > facing our country.
> > >
> > > Sincerely,
> > > Debbie Stabenow
> > > United States Senator
> > >
> > > ---------------------------------------------------
> > > You are receiving this e-mail because you have previously
> > > communicated with my office about a related issue. If you would
> > > rather not receive e-mails like this in the future, please respond to
> > > this message with the word REMOVE in the subject line.
> > >
> > >
> >
> >
>