The
Social Security debate is turning into the normal Wall Street sales pitch. They'll simply yell louder, call in the lawyers the threaten lawsuits to keep the truth suppressed.
Wall Street hopes to destroy the government-run social security plan so that Wall Street can get a cut of the profits.
Seems strange that the
Economist, based in the UK, would support such a scheme. The UK's private pension results are abysmal. The US should heed the
warnings.
Wall Street sells their trash for your cashSocial Security privatization is no different than any other investment trap Wall Street peddles. They're not providing reliable information, just marketing their trash in order to get your cash.
Wall Street simply labels the products with nice sounding names, but their trash does exactly the opposite what the reasonable public might believe: Lowers security, and increases risk. It moves the scheme from the government to the individual. It is no longer social, nor secure, nor private.
They have the trash. Tell Wall Street to dump their fuzzy ideas in their own offices. They'll classify it secret. It should be classified toxic waste.
Here's what we know:
The President has not issued a specific planThe biggest problem with the president's plan is that there isn't one. We have yet to receive one. Something in writing.
Makes one wonder how anyone in a think tank can credibly make a comment about something when there are no specifics.
Also, if there is no plan, yet these people continue to assert there are "grand benefits" to this to-be-presented plan, makes me wonder how much money they get paid to do nothing. Oh, wait, they work in a think tank. Question answered.
Not much thinking going on there when they embrace the President's proposal, but keep calling it a plan.
Weren't these the same shills that kept saying things were going fine in Iraq, but Rumsfeld now says, he doesn't trust the estimates? But we can't talk about facts as bad, unreliable information from shills in think tanks is still classified.
Invalid assumptionsThe President's plan could take up to 48% of the benefits. If nothing was done, the benefits may drop by 25%. I'm not clear why the President is calling is plan something to cheer about.
Further, there's been some talk that there have been some misrepresentations. I call on the
Republican National Committee to file a lawsuit against me. I'm simply repeating what has been publicly reported from the Social Security Administration.
Seeing no lawsuit, we should look at the allegations coming from the RNC as merely posturing. At worst, RNC is unable to make a credible argument and simply chooses to use threats and innuendo to shut off the debate.
Kind of like what the President does when he calls in JTTF to silence protestors around the RNC Convention. You look really stupid on scooters, especially when those you detain are innocent.
The President's proposals do nothing to solve the shortfallsFurther, the President admits that his proposals don't actually solve the problem. It simply shifts the money from the government to accounts controlled by Wall Street.
There is no widespread consensus that Social Security is going to run out of money. Rather, Social Security will between 2042 and 2052 simply do what the rest of the government does in 2005: Take in a fraction of what it pays out.
That's right. Social Security is not going to go bankrupt between 2042 and 2052. Rather, the problem is that Social Security will not take in enough to cover the expenses.
If George Bush wants to call that Bankruptcy, then the US is in real trouble. The US government regularly borrows to cover the shortfall between incomes and expenses.
US national borrowingWhich leads us to the other major problem with the Presidents proposal.
Bush's proposals require
increased borrowing required to cover the transfer. It's estimated that it will be
over $
4 Trillion [with a T] in increased borrowing in the first 20 years.
Who benefits? That's right: Wall Street. They're the ones that make money. If you win or lose, Wall Street always wins.
Imagine the money Wall Street hopes to get on $4 Trillion dollars worth of bonds. That assumes the US doesn't go bankrupt or the dollar doesn't get further devalued.
Wall Street is also betting the world will continue lending money to the United States. Perhaps, but at a higher cost. But Wall Street doesn't care. Higher costs mean higher fees.
Indeed, that's a lot of money that the bankers on Wall Street are going to get paid to manage those deals. The Wall Street investment bankers love the proposed plan. They get to manage the accounts, and they get to organize the deals to give the US government more debt.
The other misconception is that the Social Security funds are invested, but that private accounts could do a better job. False. The money is simply sitting there, used to offset current spending.
Uninsured means higher riskThe other problem with the proposal is that the funds are not insured. I'm not clear why the President is so quick to destroy something that is there and working as it should: To be a safety net when his friends like Ken Lay do much to destroy capital.
Money that is in the market can get wiped out. And the US government has no contingency plan to deal with this enormous financial disaster that is brewing.
The Wall Street investment-hackers stand to reap large profits managing the deals, all the while leaving those with uninsured accounts in need of a massive government bailout. They offer no guarantees.
We've seen this week how quickly the State Department under Rice will show up asking for more funding. Image orders of magnitude when future generations are wandering the streets, their private accounts wiped out in a stock market crash.
Wall Street doesn't care today. They aren't going to care in the future. Hello, another 1920s-style depression.
Emperor's New ClothesI can't help but recall the images of the emperor's new clothes. All the clothiers proclaiming how wonderful the Emperor looked. Meanwhile, it took the guts of someone noticing the obvious that things weren't what the clothiers were saying.
With Social Security, the clothiers getting paid a lot to deliver illusions are the hacks on Wall Street who stand to gain a lot if this money is shifted from the government to their accounts.
You don't really own it: You have to borrow against your accountThat's the rub of the entire Social Security debate. The illusion is that the public will have access to and control these accounts. Nothing could be further from the truth.
Private citizens will not be able to take money out of their account. Rather, the account can only be borrowed against.
Simply put if anyone were to actually use their account, they'd have to pay high fees.
Death and TaxesThey like to say that the public will get a death benefit with the private account. Well, those who have social security also have a survivor's benefit.
There's the trick with an annuity. If you give the money to a private bank with an annuity, the money is no longer yours. So what good is it to be able to pass down something to your heirs that you no longer control?
Besides, if you have a big wad of money that's going to show up, you still have to account for estate taxes.
High management fees in the US compared to UKAnother interesting piece of trivia about the proposed plan is that the management fees will actually consumer quiet a bit.
Some are quick to say that the United Kingdom and Chile are outdated models and there is no comparison. Yet, in practice the UK has lower management fees that the shills on Wall Street.
Wall Street doesn't like comparisons with the UK because their pension funds, as could happen in the US, were based on unreasonable assumptions and the markets have wiped out many funds.
Yes, that means people are sitting there without incomes. The British Government has to bail out firms. That is, if there was insurance. The young people are having second thoughts about pensions in the UK.
Untrained financial hacksThere's one big unknown with the new plan. Who is going to be the one to physically interact with the public to offer them the options?
Is this going to be some human resource person who knows nothing about financial assets; or a professionally educated [read = shill] from the investment bankers trained to repeat deceptive sales pitches. Oh, Elliot Spitzer, do you plan on cloning yourself when you are most needed?
No accountabilityIt remains to be understood whether these Wall Street-trained hacks are going to face any meaningful financial liability in 2052 should their forecasts not materialize.
Wait a minute, they'll probably be dead due to old age. So much for accountability if their arguments in 2005 prove to be unreliable. Then again, they're from Wall Street. And we know they will tell you anything to get your money.
Government is a poor source of financial adviceBut this time, they've convinced the government to tout the plan. When was the last time you went to city hall to get financial advice? Hay, we can't get them to do their job as it is. Why are we going to ask government workers for personal investment advice?
Think about itthey work in government. They can't get a real job. Who are they to offer anyone information on something that actually matters?
Race-based argumentsThere is another problem with the shills' argument. They keep saying things like African-Americans will get a benefit with the private accounts because they'll get more money and own the account, but will lose out because they have a lower life expectancy.
Unfortunately, this argument doesn't hold water, as the life expectancy is low not because they die at an earlier age, but the mortality rate among African-American children and youths is higher. Further African-Americans tend to earn less over their lifetime, so their net returns are actually higher relative to their net inputs.
SummarySocial Security is fine. We don't need Wall Street, government, or think tanks offering information when they have a vested interest in the wrong solution.
Wall Street is spewing out non-sense. The nation needs to have some informed discussion from independent people like academics who know the ins and outs of financial data.
What's needed:
Slight adjustments in the tax rates, retirement ages, and dates that individuals receive benefits.
Rational debate and discussion based on specific plans. Talk to Paul Krugman at the NYT and Princeton if you want something resembling reality.
The other plans don't exist. At best they are fuzzy proposals and just smoke and mirrors. We eagerly await something that resembles a written document.
Please give Congress time to read the report as opposed to what was done during the Patriot Act. God knows Wall Street will print garbage in those bills as they regularly do when submitting 10Ks and that rag called a prospectus.
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