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Date: Fri, 18 Feb 2005 18:26:58 -0500
To: ckiekint &AElig engin.umich.edu
CC: improvetheworld &AElig umich.edu
From: Matthew R Rudary <mrudary &AElig eecs.umich.edu>
Subject: Re: Keep the Security in Social Security!
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One thing to note here: The very thing that threatens SS with insolvency 
(i.e. the shrinking ratio of retirees to workers) means an improved 
labor market. In particular
a) the medical industry (doctors, nurses)
b) the pharmaceutical industry (drug manufacturers and designers)
c) the elder care industry (nursing home workers, physical therapists, etc)
will all grow relative to the general GDP, and these are just off the 
top of my head. This is fairly good news, as all three have limited 
prospects for further automation (for the time being) and a and c can't 
be replaced by foreign-based labor.

Matt

Chris Kiekintveld wrote:
> Wow, there's a lot to cover here.  First, a link to an interesting
> article I found awhile back entitled "Twelve Reasons Why Privatizing
> Social Security is a Bad Idea":
> 
> http://www.socsec.org/publications.asp?pubid=503
> 
> Now, other points:
> 
> 1) The social security trust fund is not entirely silly, since there is
> a legal obligation for the US government to redeem the treasury bonds 
> held in the fund when they are needed, exactly like any other treasury
> bond held by a private party. Of course, this means that the general
> fund is going to need to come up with the money to redeem these bonds,
> by cutting spending, raising taxes, or issuing new bonds to private 
> parties. So, the real problem we need to be worried about is the general
> solvency of the US government. I fail to see how adding 2-3 trillion
> dollars in debt to privatize social security helps with this problem.
> 
> 2) Kevin's solutions are basically correct:
> 
>  a) more babies
>  b) increased savings i.e. reduced consumption
>  c) reduction in benefits
> 
> Solution a is really "increase taxable wages", which requires more
> people working (birth or immigration), but also the creation of enough
> jobs for them.  More on this in a bit.
> 
> Solutions b and c are essentially the same thing, just time-shifted. b
> translates to "reduce consumption while working" and c translates to
> "reduce consumption during retirement".
> 
> 3) The core problem behind several most of the most pressing problems
> facing the US today is simply overconsumtion. We are living beyond our
> means, both individually and in aggregate. Individuals are deeply in
> debt (particularly credit cards and mortgages), bankruptcies are rising,
> and the government is running record deficits. Quite simply, this is
> unsustainable; the only question is where the limit is. This is the
> heart of the SS and medicare problems (medicare being in much worse
> shape than SS), as well as environmental problems, political problems
> (oil anyone?), etc.
> 
> The solution is rather obvious, but politically untenable. The platform
> "I want to reduce the standard of living for all Americans and shrink
> the GDP" just doesn't seem like a vote-getter.
> 
> 4) Solution a depends on increasing the wage base. This points to
> another issue that really worries me: labor markets.  My guess is that
> US labor markets are going to undergo drastic changes over the next
> 20-30 years, and we probably won't like most of them.
> 
> There are two big forces working against the middle-class laborer right
> now:
> 
> a) A rising supply of cheap labor in foreign countries due to the
> increasing globalization of world markets.
> 
> b) A falling demand for many kinds of labor, due to productivity
> increases driven by technology. Think of automation on factory floors,
> replacing grocery store checkout clerks with self-serve automated kiosks
> (or even scanning carts...), no more cashiers at fast-food resaurants.
> These sorts of jobs that are vulerable to automation represent millions
> of jobs in the US economy.
> 
> The only way I see to combat this changes is massive investments in
> education and research. Unfortunately, it seems that these areas are
> being cut more than anything else in this era of deficits. (Ironically,
> these may be among the only things that it might actually be *worth*
> running a deficit to pay for, since they increase the future revenue
> stream).
> 
> 5) A brief summary of my practical take on the current SS discussion:
>  - The system is not in "crisis", but could use some tweaks. Future 
>    uncertainties are such than any projection over 75 years (much less 
>    an infinite horizon, like the figures often cited) are almost 
>    completely useless.
> 
>  - The critical thing for SS is to maintain some guaranteed minimum 
>    level of living for retirees. Let's face it, we're going to end up 
>    bailing them out anyway.
> 
>  - Several proposed tweaks seem reasonable, such as raising the cap,
>    calculating based on *after*-tax wages (currently base on pre-tax 
>    wages), more aggressive means-testing to determine benefits, and
>    indexing retirement age in some way.
> 
>  - I support the idea of individual accounts (possibly with some 
>     addition incentives for low-income folks), but only in addition
>     to the current system. Anything that makes normal americans save
>     more is probably a good thing. Of course, this is exactly what 
>     IRAs are. . .
> 
> 6) It's impossible to say for sure, but I am inclined to agree to some
> extent with predictions of the fall of the US (particularly falling 
> power and standard of living, relative to the rest of the world). The
> incredibly robust statistical principle of reversion to the mean alone
> would suggest this (we've been way out in front for a long time now).
> 
> Buckle up folks, we could be in for a bumpy ride. And for those of you
> that do have investment portfolios, now would be a great time to make
> sure that you're suitably diversified across global markets, not just US
> stocks.
> 
> 
> I hope this email doesn't come across as too pessimistic, since I see a
> lot of of reasons for optimism as well (eg the rapid pace of
> technological progress, history of sucessful adaptation to new
> conditions). However, much seems to depend on our willingness to adapt
> to change and make some very difficult decisions that will not be
> popular.
> 
> Chris
>      
> 
>>yeah, there will certainly need to be adjustments to get our govt/economy
>>back into a stable state, probably including a lower dollar,
>>increased interest rates, and likely a reduced quality of life for a lot
>>of americans
>>
>>i just wanted to point out how silly it is to say that there is
>>money in a social security trust fund.  It's like me being in debt for
>>$100, but saying I have $20 in a trust fund because i owe it to myself.
>>
>>--
>>   -------   kevin lochner    -------------------------------------
>>    -----     http://www.eecs.umich.edu/~klochner/    --------------
>>
>>
>>"Our priorities is our faith."
>>-- G.W. Bush, Greensboro, N.C., Oct. 10, 2000
>>
>>
>>On Fri, 18 Feb 2005, Matthew R Rudary wrote:
>>
>>
>>>Well, all treasury bonds are just IOUs from the government. If we
>>>default on those bonds, I have a feeling that the market will fall out
>>>from under US treasury bonds in general; the government running out of
>>>money (and being unable to borrow to cover) would have effects more
>>>serious than shortfalls in SS. Clearly we have to do something to
>>>address the problem; not running a budget deficit would help a lot.
>>>Growing the GDP so that tax receipts increase would also help.
>>>
>>>Matt
>>>
>>>Kevin Lochner wrote:
>>>
>>>>The "trust fund" is just an iou from the government to the government.
>>>>Since  our taxes pay off these iou's, having treasuries in the trust fund
>>>>is like saying "it's okay, we're going to pay ourselves to keep funding
>>>>social security".  If the governement runs out of money, there isn't
>>>>going to be anything for social security regardless of these iou's,
>>>>meaning that we will get higher taxes, or reduced benefits, or whatever
>>>>else is necessary to fund both social security and these IOU's.   read the
>>>>following, but ignore the advice about creating private accounts :-)
>>>>
>>>>http://www.heritage.org/Research/SocialSecurity/em940.cfm
>>>>
>>>>
>>>>--
>>>>   -------   kevin lochner    -------------------------------------
>>>>    -----     http://www.eecs.umich.edu/~klochner/    --------------
>>>>
>>>>
>>>>"Many of the punditry.of course, not you (laughter).but other
>>>> punditry were quick to say, no one is going to follow the United
>>>> States of America."
>>>>-- G.W. Bush, Washington, D.C., Jan. 21, 2003
>>>>
>>>>
>>>>On Fri, 18 Feb 2005, Matthew R Rudary wrote:
>>>>
>>>>
>>>>
>>>>>Stealing from social security == investment in treasury bonds.
>>>>>Essentially, the government borrows the surplus from social security
>>>>>taxes every year by issuing treasury bonds in that amount to the social
>>>>>security trust fund.
>>>>>
>>>>>http://www.ssa.gov/pressoffice/factsheets/WhatAreTheTrust.htm
>>>>>
>>>>>Also, I think raising/eliminating the FICA cap is a good idea;
>>>>>regressive taxes are, well, regressive. However, raising the cap may
>>>>>raise benefits for people making more than the cap; as I understand it,
>>>>>you benefits are calculated based on your average income over your
>>>>>highest 35 years of earnings, but the amount for each year is limited to
>>>>>the tax cap for that year.
>>>>>
>>>>>Also, it should be noted that the caps have been growing; it's $90k for
>>>>>2005, but it was 87.9k for 2004, $76.2k in 2000, 51.3k in 1990, etc.
>>>>>
>>>>>http://www.ssa.gov/retire2/maxtax.htm
>>>>>
>>>>>Lisa raises a good point about raising the retirement age--I think that
>>>>>the retirement age should be indexed with actuarial tables in some way
>>>>>(with the proviso that when you're within X years of retirement, your
>>>>>retirement year can't increase again, where X = 10 or 15).
>>>>>
>>>>>Matt
>>>>>
>>>>>Robert Felty 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.
>>>>>>>
>>>>>>>
>>>>>
>>>>>--
>>>>>Matt Rudary
>>>>>Graduate Student
>>>>>Intelligent Systems
>>>>>University of Michigan
>>>>>(734) 262-4760
>>>>>
>>>>>i'm not an egomaniac.  i'm a *realist*. --mlt
>>>>>
>>>
>>>--
>>>Matt Rudary
>>>Graduate Student
>>>Intelligent Systems
>>>University of Michigan
>>>(734) 262-4760
>>>
>>>i'm not an egomaniac.  i'm a *realist*. --mlt
>>>

-- 
Matt Rudary
Graduate Student
Intelligent Systems
University of Michigan
(734) 262-4760

i'm not an egomaniac.  i'm a *realist*. --mlt