The Babe Theory Of Political Movements.
Mar. 21, 2005 11:50 AM
Iran's Sham Election In Houston.
June 20, 2005 5:36 AM
Yes, Kanye, Bush Does Care.
Oct. 31, 2005 12:41 AM
Health Care vs. Wealth Care.
Nov. 23, 2005 3:28 PM
Americans Voting With Their Feet.
Nov. 30, 2005 1:33 PM
Idea Majorities Matter.
May 12, 2006 6:15 PM
Twilight Zone Economics.
Oct. 17, 2006 12:30 AM
The "Shrinking" Middle Class.
Dec. 13, 2006 1:01 PM
From Ashes, GOP Opportunities.
Dec. 18, 2006 6:37 PM
Battle Between Entitlements & Pork.
Dec. 21, 2006 12:31 PM
Let Economic Freedom Reign.
Dec. 22, 2006 10:22 PM
Biggest Health Care Moment In Decades.
July 25, 2007 4:32 PM
Unions Antithetical to Liberty.
May 28, 2008 11:12 PM
Right To Work States Rock.
June 9, 2008 12:25 PM
Social Security Reform Thursday.
March 13, 2008
Caption Contest: Enter Today!
Due: July 29, 2008
The Carnival Of Classiness.
Mar. 14, 2006
Quotational Therapy: Obama.
Apr. 4, 2008
Mainstream Melee: Wolfowitz.
May 19, 2007
Pundit Roundtable: Leaks.
July 9, 2006
A WILLisms.com(ic), by Ken McCracken
July 14, 2006
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Reform Thursday: Week Eighteen.
Thursdays are good days for reform, because they fall between Wednesdays and Fridays.
That's why WILLisms.com offers a chart or graph, every Thursday, pertinent to Social Security reform. The graphics are mostly self-explanatory, but we include commentary on some of them where and when necessary.
This week's topic:
Debunking Common Misconceptions About Social Security Reform, Part 2.
The international experience with Social Security "privatization" in countries like Chile is disastrous, proof that personal accounts could never work.
Wrong. Social Security reform in Chile, nearly a quarter of a century later, has proven to be overwhelmingly successful.
Chile's architect of Social Security reform, Jose Piñera, explains that a system based on ownership, choice, and personal responsibility works best. He asserts the program has led to greater prosperity, with a more wise economic policy:
Since they have a personal stake in the economy, workers cheer the stock market's surges rather than resenting them, and know that bad economic policies will harm retirement benefits. When workers feel that they themselves own a part of their country's wealth, they became participants and supporters of a free market and a free society.
That's all well and good in theory, you may be saying to yourself, but show me the money. Did personal accounts work in Chile?
While columnists like John Tierney of The New York Times have offered some powerful anecdotal evidence of Chile's success with personal accounts, let's allow the numbers speak for themselves:
Not only have the personal accounts delivered far more meaningful returns for workers, but the pro-growth nature of Chile's 1981 Social Security reform has helped its economy, less encumbered by public sector pensions, to flourish.
Can we count on an inflation-adjusted annual rate of return of 10.3% for our Social Security personal accounts? No. Nor should any reformer make that kind of promise. But, if the Thrift Savings Plan (TSP), the retirement plan open to members of Congress and other federal employees, is any guide, returns would be solid and entirely worthwhile.
While our version of reform would clearly look different from Chile's, we could draw important lessons from the successes there, shaping our Social Security system to maximize America's competitiveness in an increasingly interconnected global economy.
We have plenty of time; there's no pressing need to reform Social Security right away. There are more pressing agenda items than Social Security reform.
Democrats have resisted President Bush's proposed changes to Social Security, arguing its problems are far off. The program's top analyst says they're flat wrong.
There are three key dates to keep in mind in the Social Security reform debate.
2009 - Excess payroll taxes (a.k.a. "the surplus") begin to decline.
Anyone claiming we can just wait until 2041 to start worrying about Social Security is either delusional and ignorant or unscrupulous and demagogic. The system is in a very real crunch, very soon.
Very rarely is Washington presented with such an opportunity to solve a crisis before it becomes a full-blown crisis.
Think about it.
We can see the avalanche coming, and if we act soon, we'll easily avoid it, but some in Washington believe they can wait until the last minute before darting away.
Now, consider just how powerful special interest groups representing older Americans have become in the legislative process. Right now, those over 65 make up roughly 20% of the American population. In ten years, that number will rise to 24%. In fifteen years, 28%. In twenty years, 32%:
By 2035, those over 65 will comprise 37% of America's population. Every single poll on Social Security reform shows that younger people overwhelmingly want reform, and they want it sooner rather than later, while older Americans are, dare I say, stubbornly against reform. [That characterization might not be fair. After all, older Americans are the group most susceptible to fear mongering by disingenuous lobbying groups on the issue.]
The point of noting the increasing proportions of older Americans is that, politically, as the American populace grays, it will become more and more difficult to pass a meaningful reform package.
Finally, consider the cost of inaction. When the 2005 Social Security Trustees Report came out, there was a frightening figure very few took note of. One year passed, and the 75-year unfunded liability of Social Security increased by 300 billion dollars. Social Security actuaries estimate that, soon, each year that passes without reform will add up to 600 billion dollars to the unfunded liability. Think about that. A decade later, and we'll have unnecessarily accumulated SIX TRILLION dollars in additional debt.
Put into perspective, repealing the Alternative Minimum Tax (AMT) would eliminate roughly 600 billion dollars from the federal revenue stream, over 10 years.
Some people dispute the 600 billion figure, but even Joe Lieberman, who does not even support personal accounts, fired off an agitated letter to The New York Times in response to Paul Krugman's erroneous assertion that the 600 billion number was some kind of Bush-manufactured lie. The inordinately high cost of inaction, unfortunately (because do-nothing obstructionists wield so much power in this debate), is very real.
Bottom line, whether it's one or several hundred billion in additional unfunded liabilities, each year that passes without reform is a wasted opportunity for younger workers to earn compound interest on a personal account in Social Security. Meanwhile, it makes no sense not to reform Social Security just because we might face other problems. Indeed, Social Security reform could serve as a launching pad for Medicare or other entitlement reforms.
These are just a few of the reasons why reform, sooner rather than later, is imperative.
A great read on Progressive Indexing.
-Week One (Costs Exceed Revenues).
Tune into WILLisms.com each Thursday for more important graphical data supporting Social Security reform. We'll address more myths in future installments.
Posted by Will Franklin · 2 June 2005 12:48 PM
I remember living in Chile in '99. Huge drought. Water rationing. No electricity or air conditioning in the afternoon. And check out that GDP growth! -- it's negative. And yet, the pension continued to grow. That's why the system is so popular.
Posted by: Robert Mayer at June 4, 2005 11:52 AM