One of the aspects of Fred Thompson's campaign for President that has appealed to me is that I've always had the sense that he was willing to take on tough issues. Early on he said that he'd be talking about things that might cause him to lose the race, but he was prepared for that.
Last week, he took on the toughest of issues, Social Security, the so called third rail of politics, that will kill anyone who dares suggest any changes to the system. Unlike Barack Obama, who is not touching the third rail himself, but rather throwing taxpayers on the rail and letting the trains run at the same time, Thompson's plan doesn't involve tax hikes and puts some common sense back in the system.
The plan has two parts. One is to index initial benefits to wages as adjusted by inflation, instead of by wage growth. Thompson's proposal mirrors the work of University of Illinois Professor Jeffrey Brown whose 2005 article on the subject demonstrates how this simple change to the program can actually fix the problem of social security running out of money in the future. Essentially what it means is this. Under the current system, in calculating your initial retirement benefit, your past wages are adjusted based on the average growth in wages. So if wages increase at more than the rate of inflation (typical) then the money you earned twenty years ago is actually valued at more than its inflation adjusted amount. My recollection of this back in the 70s was that it was done because during the Carter years, inflation actually was higher than wage growth, although my memories are certainly sketchy on that.
The other part of the plan allows workers to voluntarily start private retirement accounts, much like 401Ks. Under this part of the proposal, workers who opt into the voluntary retirment accounts would see their retirement age for maximum benefits rise.
Positive review from the Wall Street Journal and interesting analysis from ABC News.
Of course, if our current "leader" had shown any ability in the last eight years, this wouldn't be an issue in the current campaign.
and if our previous leader had shown any ability, or the one before that. or the one before that. laying the blame for the social security mess at the feet of any one leader or party is pretty absurd.
Anything that stabalizes retirement earnings is hardly controversial. I think Anon M. Muss's comment was a fair one though. Kind of like the question of why we did not hear anymore about Clinton Health Care (Health care run by govnment patronage employees) after they proposed it the last time.
Make ALL income subject to Social Security withholding and the "problem" solves itself, without any need for fancy footwork. Of course, there will be lots of whining from the wealthy, who vastly enjoy the fact that social security taxes cut-off at a relatively low rate of $90,000 a year. There is really only a "social security problem" in the first place because the system is set up to allow the welathy to avoid the taxes most of the rest of us pay on 100% of our income.
No, it's not absurd. Read Paul O'Neill's book about what happened when he was Treasury Secretary.
They Said It: Thompson Social Security Plan Applauded as ‘Courageous,’ ‘Honest,’ and ‘Substantive’
Courage & Honesty
Republican presidential contender Fred Thompson’s plan to save Social Security and protect seniors, which he introduced Friday afternoon in a Washington, D.C., hotel, differs starkly from standard election year pablum on the subject in one key way: He’s actually treating voters like adults. (ABC, 11/9)
Thompson...is seeking to show he is willing to take on tough issues if elected in November 2008, telling a news conference in Washington he was the only candidate to offer an extensive Social Security plan. (Reuters, 11/10)
“You certainly have to admire his courage for putting this out,” said Alan Viard with the American Enterprise Institute. (Tennessean, 11/10)
Supporters contend that Thompson’s willingness to take on the so-called third rail of politics will impress voters. (Bloomberg, 11/10)
Conservative economic experts applauded Thompson for offering specifics on an issue considered to be politically dangerous. (Tennessean, 11/10)
“He’s not afraid to be brutally honest with the American people about the challenges that lie ahead,” said Representative Zach Wamp, a Tennessee Republican who is working to recruit supporters for Thompson. “People can tell the difference between a strong leader telling the truth and a weak leader talking politics.” (Bloomberg, 11/10)
Substance
[Thompson is] the first candidate of either party to offer a detailed proposal to fix the nation’s retirement system. (WP, 11/10)
The Republican candidate laid out a detailed, four-page proposal (WSJ, 11/10)
Mr. Thompson’s plan...was more specific than what the Bush White House put on the table when it sought to overhaul the system. It also varied substantially from the traditional conservative approach of focusing primarily on personal investment accounts. (NYT, 11/10)
Economist Jason Furman said Thompson deserves credit for offering a detailed plan to address the projected Social Security shortfall...(Bloomberg, 11/10)
In discussing policy, Thompson was in his element. (Politico, 11/9)
He’d prefer to talk about substance. (Politico, 11/9)
Thompson’s plan draws on ideas favored by conservatives: a reduction in benefits, rather than an increase in payroll taxes; and a shift toward private accounts, rather than government-provided payments. (WP, 11/10)
Rivals
[Thompson] ventured Friday into an area few rivals have tread: advocacy of a fundamental overhaul of Social Security. (WSJ, 11/10)
Although all of the presidential candidates have spoken, when asked, about the need to fix the Social Security system, none has offered such a detailed plan nor talked so eagerly and often about the issue. (WSJ, 11/10)
Among Republicans, former New York mayor Rudolph W. Giuliani, Arizona Sen. John McCain and former Massachusetts governor Mitt Romney have talked in general terms ... but none has offered a specific plan. (WP, 11/10)
Mr. Thompson is the only one of the Republicans running for the White House who has made Social Security a central theme of his campaign. (NYT, 11/10)
He is the only presidential candidate so far to make Social Security an anchor of his campaign. (WSJ, 11/10)
But with less than two months before the 2008 voting begins, candidates have generally been reluctant to confront the Social Security issue. (WP, 11/10)
Saving and Protecting Social Security
A Plan to Ensure Retirement Security for All Americans
http://www.fred08.com/virtual/socialsecurity.aspx
anon 10:45,
Why do you believe that other people should pay for your retirement?
Why do you believe that other people should pay for your retirement?
Ah! Now *that* is the question.
PB - I am sure you know the history around social security, and what it is used for today. While it is easy to whittle the question down to "why should I pay for that guy's retirement", a more accurate question might be: why should I send that widow a check until her kids turn 18? Or why should I pay for somone with a disability so they don't have to work?
That is where the real problem lies, not in payments to retirees but payments to non-retirees. So the question really becomes, "why should I give a shit about the next guy? Take care of yourself!"
Dare I say it is a question that clearly separates liberals from conservatives? Obama wants slightly higher taxes to insure more people, Thompson wants less taxes and less benefits. Classic.
"Social Security is fine"
- Boon, you might want to inform Clinton, Obama, Edwards, and Richardson. They are all in agreement that there serious financial problems facing Social Security with the Boomer retirement. In fact, the only Democrat presidential candidate that believes "Social Security is fine" also believes he had an encounter with a UFO. You're in good company.
Thompson wants less taxes and less benefits.
So people will have the money to insure themselves. What really separates libs from conservatives is that libs want the government to solve their problems. Problem is that government doesn't do a very good job. Doesn't have anything to do with your "why should I give a @#$% about the next guy" question. Classic lib deception.
So when the inevitable happens and some chunk of people choose NOT to insure themselves and invest in retirement, but instead to live large, and those people run out of money in their dotage and show up destitute in the street, what should the society do about them? Should we just look the other way and let them die?
Or will we do the usual compassionate thing and save them to a minimum level? If we choose "yes, we'll pay for them to live" then it becomes a reasonable prudent measure as a society and body politic to plan ahead for this, and dare I say it, continue to "force" people to pay for retirement so that the surprise bills don't pop up in the end.
Are the ants really willing to let the grasshopper freeze to death? Or will they lose their nerve?
Make ALL income subject to Social Security withholding and the "problem" solves itself, without any need for fancy footwork. Of course, there will be lots of whining from the wealthy, who vastly enjoy the fact that social security taxes cut-off at a relatively low rate of $90,000 a year.
I am sure that this member of the anon army is aware that the benefits are based on contributions, and that those contributing the max get a much smaller % benefit than those earning $20k. The wealthy are already getting the worst deal from Soc Sec.
Taking off the cap makes it a welfare program. Once you do that, you may was well means-test the benefit and go all the way. Then you can get rid of the special tax, just merge it into the general fund.
We need no more evidence of the danger of moving to private retirement accounts than the current real estate crisis. Too many people are irresponsible and/or lack sufficient knowledge about how to handle the most important financial issues of their lives.
Is this the conservative position? "We will provide a method for individuals to invest for the future and retirement. They must learn what they need to learn in order to take advantage of our program. If they don't learn, or if they invest unwisely, nuts to them."
And is this the liberal position? "We know you better than you know yourselves. If we leave it up to you to invest for your own retirement, the rich who already know how to do this will get even richer while everybody else ends up old and broke. So we'll do this for you, using your own money deducted from your paycheck." (Wait -- isn't this what Social Security is now?)
I don't know what the right answer is. I'll read Derf's proposal when I have time, but my mind is open to new ideas.
thompson is not suggesting less taxes. d. boon, did you read his website?
You are right that social security is not merely a retirement program but also a disability program. it's going to be around forever, and thompson isn't changing who is going to be covered.
And who are the "more people" that Obama wants to insure with his higher taxes? I missed that part.
there are major problems with the current system
1. It is based on ever-increasing population - we don't have that.
2. There is no investment of the contributions to actually create wealth. Letting the US gov't actually invest it is probably worse - can you imagine the potentials for problems with that?
3. Congress gets to pretend SS receipts are general revenue receipts and spend them.
4. People who die early are not able to pass any of their contributions on to their heirs.
Private accounts would solve all these problems, but would create new ones. What do you do with someone who "blows it"? How does the gov't pay for the transition? Can you really trust the general population to be able to manage this much money? Those are not small problems either.
"Letting the US gov't actually invest it is probably worse - can you imagine the potentials for problems with that?"
This aspect has also bothered me. I remember reading about or hearing the President answer a question about the nature of the investment vehicles in the privatized program and who would administer them. His answer described a mutual fund-like solution, with a few brokerage firms offering a limited number of packaged investment options. On the surface this looks like a good idea -- let the experts do the investing. But those firms don't provide this servce for free, and who determines which firms get to handle our investment dollars?
- Boon, you might want to inform Clinton, Obama, Edwards, and Richardson. They are all in agreement that there serious financial problems facing Social Security with the Boomer retirement.
Well, I disagree with them. If you look at the trustee's report you might notice a few things. First, the cash deficit is set to begin around 2017. This sounds bad but there is a Trust Fund in place to keep the program running without any problems until 2041. These are the trustee's dates, and they are based on projections, which can be funny things.
For example, the productivity rate of the US is set in stone by the trustees at 1.6%, even though our productivity has been far higher than that for years. They are also using extremely low immigration projections (the immigrants will save us), assuming essentially that the people who are here are the only ones who will ever pay into the system. Finally, I take issue with their death rates, but I'll save that for another time.
In short, Social Security does have structural problems, but they are not severe. Small adjustments in tax rates can account for most of the "shortfall" if it even exists when we get to 2041.
In fact, the only Democrat presidential candidate that believes "Social Security is fine" also believes he had an encounter with a UFO. You're in good company.
Yes, I am in good company. What we should be talking about is Medicare, which is already paying out more than it is taking in, and faces "insolvency" in 2020. One wonders what the candidate who wants to "take on the tough issues" has to say about that.
This sounds bad but there is a Trust Fund in place to keep the program running without any problems until 2041.
'Trust fund' - a big stack of T-bills. These are not CD's that the gov can just go to the bank and cash. I would hardly call such a massive shift in the gov't debt structure as "running without any problems".
akibare said, "So when the inevitable happens and some chunk of people choose NOT to insure themselves and invest in retirement, but instead to live large, and those people run out of money in their dotage and show up destitute in the street, what should the society do about them? Should we just look the other way and let them die?"
Yes.
Of course you all realize that most government workers, and we have a lot of them here in Champaign County, will never see a nickel of their social security payments. Covered by IMRF, or SURS, or SERS, the social security payments are reduced by the amount of state pension payments. State pension payments are usually bigger than the social security payments, so you get nothing, not even your own money you paid into social security.
another argument for private accounts
I'll believe that when I see it, prairie biker.
Not to say I'm not creeped out, but the main thing is I honestly don't believe the American public would actually go there. We'll pay, one way or the other, so better to do it in an organized fashion and save on the costs.
We currently guarantee even the most destitute treatment at emergency rooms. Should we save money by allowing hospitals to turn away those people who can't pay upfront or have insurance, while we're at it?
It's a serious question, I think, what the quality of life for the country in general would be if we followed ideology and truly decided to play without a safety net. Personally I don't think I would like to live in such a country, but of course YMMV. For one thing people don't just go off to starve and die quietly.
No matter what the Dems in Congress might say, Republicans (and even conservatives, D Boon) are not going to let people starve.
So, in other words, we'll have some sort of emergency bailout program that people can rely on for a minimum standard of living in their old age, financed by taxpayers. What shall we call it? Perhaps "Security" of some sort...
that's cute Narc.
I would call it Welfare, and it would not be a "savings program", it would be a gift from taxpayers to the destitute.
"...Covered by IMRF, or SURS, or SERS..."
I don't think state employees covered by these retirement programs have Social Security withheld.
Redstatewannebe said, "'Trust fund' - a big stack of T-bills. These are not CD's that the gov can just go to the bank and cash. I would hardly call such a massive shift in the gov't debt structure as "running without any problems".
Redstate, why are t-bills held by the Social Security trust fund any less valid than t-bills held by the Chinese government or any number of ordinary citizens who invest their money conservatively? The full faith and credit of the U.S. government is pledged to back them. We aren't some third world country that is going to default on its debt, at least not if we don't continue the spending sprees of Republicans like Reagan, Bush I and Bush II. But the Republicans who have sold us those deficits have told us not to worry; that the percentage of debt to the GNP is actually going down. This is as true of the debt owed to the Social Security trust fund as it is to the debt owed to the Chinese.
Redstate, why are t-bills held by the Social Security trust fund any less valid than t-bills held by the Chinese government or any number of ordinary citizens who invest their money conservatively?
They are no less valid. But if you knew that the Chinese planned on doing a systematic liquidation of their holdings over the next 20 years, wouldn't you wonder who was going to buy those bonds?
And the Chinese have a vested interest in a healthy US economy - they need us to buy their cheap exports. The SS Trust fund will likely be forced to cash in their bonds, regardless of its effect on the economy.
"...Covered by IMRF, or SURS, or SERS..."
I don't think state employees covered by these retirement programs have Social Security withheld.
Your right, we also have are SS cut in half when we retire no matter how much we may have paid into SS from other jobs. Our family members are also not eligible for disability if we die.
SURS may have that situation with SS, but IMRF and SERS do not. I think there was a time when SERS people were not in SS, but that has since passed. Those people also paid a larger share into their pension system. Anyway, the rules for SERS, SURS, and IMRF are all different. the unfunded liablities are greatly different as well.
"Your right, we also have are SS cut in half when we retire no matter how much we may have paid into SS from other jobs. Our family members are also not eligible for disability if we die."
Now you're just making stuff up.
Let's ay you work for 20 years in the private sector, then 20 years in the public sector. Bye bye social security, that's what I meant.
Bye bye social security, that's what I meant.
Thanks for the contribution. :-)
I lose my entire SS contribution cause of my pension. If I die before my wife, which as a CPS teacher is highly likely, she would not receive SS survivor benefits.
Since she's going to be a doctor, it probably won't matter, but it still doesn't make much sense.
Thanks, rswb, but I have an out. I'll cash out the state pension and then draw my social security payments when I hit geezerhood. Medicare, too.
I'm gonna take the state money and buy a couple of tickets on the QEII and sail around the world.
Anon 5:15 I don't think cashing out your pension will matter you will still lose your SS, Haven't you received a letter from SS telling you what you will receive from SS if you have a pension from a State agency it tells you that.
Xian. No it doesn't make sense until I started working at the Big U I was fully paid into SS and now I have lost half of that money.
Anon 2:26. Which of the following made think you should write ”Now you’re just making stuff up?"
A. Your obvious superior knowledge of SS.
B. That you know me so well that you know I always make things up.
C. Your just an arrogant jerk so you feel like you can say any stupid thing you want.
People who are covered under SURS and TRS do not pay into social security, and as such take a substantial hit when social security payments are calculated later in life. IMRF employees (city, county, non-teacher school employees) pay into IMRF and social security.
As I understand it, you basically build "service credit" in social security just like you do in SURS. Since you're building service credit with SURS instead of SS, your benefit is lowered. I think SURS does something like 2.2% * years of service = % of final salary given in pension. Not being very familar with the SS laws on this, I can't speak for certain, but I'm betting it's a similar thing.
Arvid- for SS you pay in to get 20 full quarters, which I had by the way before I started at the U of I, That's why state employees complain so much when the governor raids our pensions we make up the difference with our own pay subsidizing general state spending.
SURS is a little different and can be a little more complicated. While you are right they use 2.2% as a Multiplier per year to reach 80% around 30 year or 55 years of age you may reach 80%. Expected life span can also come into play if you are older and does money purchase to reach 80% of your current wage.
"People who are covered under SURS and TRS do not pay into social security..."
This is not entirely true. U of I Foundation employees are covered by SURS, but also have social security withheld.
Watch out for WEP: Check out at www.ssa.gov for more details on impact to your situation working under a state pension system.
The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a retirement or disability benefit.
For example, this provision affects Social Security benefits when any part of a person’s federal service after 1956 is covered under the Civil Service Retirement System (CSRS). However, federal service where Social Security taxes are withheld (Federal Employees’ Retirement System or CSRS Offset) will not reduce your Social Security benefit amounts.
The Windfall Elimination Provision may apply if:
The Editors at NRO today:
(That would be Fred, not Tommy, in case you were wondering Dan)
If people/media were looking at government services in funding trouble, the "Third Rail" would be Medicare not Social Security.
Thompson's senate record shows me he was as ineffective as the rest of the Senators and former Senators on SS, immigration and other issues. He appears to have been a better actor and lobbist than a Senator. Needless to say, I am not impressed with Fred or his campaign todate.