Friday, February 04, 2005
A net gain of zero
Here is how the personal account system would work under the Bush plan:
If a worker set aside $1,000 a year for 43 years, and earned 4.6 percent annually on investments, the account would grow to $221,552 in today's dollars. That money would be the worker's upon retirement and would probably be paid out in increments of $15,952 a year, according to calculations by the Center for Budget and Policy Priorities, a liberal advocacy group. A White House calculation showed a smaller payout.
But guaranteed benefits over the worker's lifetime would be reduced by approximately $151,990 -- the amount the worker would have contributed to Social Security but instead contributed to his personal account, plus 3 percent interest above inflation. The remainder, $69,562, would be the increase in benefit the worker would receive over his lifetime above the level he would have received if he stayed in the traditional system. That sum -- expressed as an annual payout -- would total $5,008.
But that benefit gain could be substantially smaller. The Congressional Budget Office, Capitol Hill's official scorekeeper, factors out stock market risks to assume a 3.3 percent rate of return and then subtracts 0.3 percent for expected administrative costs on the account. Under that scenario, the full amount in a worker's account would be reduced dollar for dollar from his Social Security checks, for a net gain of zero.
If investments earned less than 3 percent a year above inflation, a worker would do worse in total benefits than he would have done in the traditional system.
More.
posted by chris at 11:54 AM
I guess things aren't so black and white
Documents obtained by CNN reveal the United States knew about, and even condoned, embargo-breaking oil sales by Saddam Hussein's regime, and did so to shore up alliances with Iraq's neighbors.
The oil trade with countries such as Turkey and Jordan appears to have been an open secret inside the U.S. government and the United Nations for years.
The unclassified State Department documents sent to congressional committees with oversight of U.S. foreign policy divulge that the United States deemed such sales to be in the "national interest," even though they generated billions of dollars in unmonitored revenue for Saddam's regime.
More. (thanks to Davin for the link.)
posted by chris at 9:46 AM
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Thursday, February 03, 2005
If I wanted to be lied to, I'd have kids
A variety of telling details went unspoken in the policy-thick [State of the Unioin] address, on jobs, Iraq, terrorism and more.
In a portion of his speech dealing with economic progress in the past four years, Bush trumpeted the addition of 2.3 million jobs "in the last year alone," as if he's delivered a succession of job gains.
His number was correct for the year in question, but he left out that there was an overall job loss in those four years. He remains about 300,000 jobs short of closing that jobs deficit.
Bush called Iraq "free and sovereign," an arguably premature definition in light of the continuing violence from insurgents and the overwhelming presence of U.S. troops.
The president touted global support for the Iraq war, saying 28 countries have troops on the ground. However, most troops come from the United States and Britain, 90 percent of coalition troop deaths have been American, and several nations have indicated they want to pull out because of costs, casualties and because the Iraqis completed their election Sunday.
Bush explained in detail how, under his proposal, younger workers would be able to divert some of their Social Security payroll taxes into private accounts "so you can build a nest egg for your own future."
Nowhere did he give the other side of the equation - that Social Security benefits for those workers would be reduced as a result. He stated "your account will provide money for retirement over and above the check you will receive from Social Security," without explaining that that check would be smaller.
Moreover, he seemed to issue a guaranteed return on investment for people putting some of their retirement money in the market, saying: "Your money will grow, over time, at a greater rate than anything the current system can deliver."
Although his plan promises checks and balances to ensure such money isn't frittered away on risky investments, it does not come with a guarantee of performance exceeding benefits of the current system. It does, however, come with that expectation.
Declaring Social Security will go broke if nothing is done, Bush said that by 2042, "the entire system would be exhausted and bankrupt."
The nonpartisan Congressional Budget Office forecasts Social Security as it is would be able to pay 73 percent of benefits in 2042 and stay solvent for 10 years beyond that.
Story. See also the Center for American Progress and Bob Harris.
posted by chris at 6:18 PM
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Tuesday, February 01, 2005
Judge rules against Bush tribunals
Guantanamo Bay terrorism suspects have the constitutional right to pursue lawsuits challenging their imprisonment, a federal judge ruled on Monday in a defeat for the Bush administration that struck down how the U.S. military reviewed their cases.
The prisoners at the U.S. military base at Guantanamo Bay in Cuba have the constitutional right not to be deprived of liberty without due process of law, U.S. District Judge Joyce Hens Green said.
She ruled that the special military tribunals to determine the status of each Guantanamo detainee as an "enemy combatant" violated the constitutional protection of a fair hearing. Such a designation allows the government to hold the suspects indefinitely.
Green said the procedures failed to give the detainees access to material evidence and failed to let lawyers help them when the government refused to disclose classified information.
Story.
posted by chris at 4:33 PM
Social Security Q&A
A Tiny Revolution answers some questions about Social Security.
What is Social Security?
Social Security, founded in 1935, is a government-guaranteed retirement program. (At least, this is what people usually mean when they talk about Social Security. It also provides disability and life insurance.)
45 million of us, or more than one in every seven Americans, receive Social Security benefits. It's the most successful and most popular government program in U.S. history. In fact, it may be the most successful and popular government program in the history of the world.
How does Social Security work?
It's very simple: the government takes 12.4% of every worker's paycheck in what are called "payroll taxes." Then the Social Security Administration sends the money off to current retirees and other beneficiaries. The amount each retiree gets varies. The more you paid in during your working life, the more you get when you're retired.
Today, an average retiree—I'm going to call her Mary, after my grandmother—gets about $15,000 per year in benefits. Mary is guaranteed to get this $15,000 every year as long as she lives. Her savings might run out, the stock market might crash, and her old company might go bankrupt and stop paying her pension. But she will still get Social Security. Just as important, her benefits are protected against inflation. So if prices double, her benefits will automatically double to $30,000.
Once set, a retiree's benefit stays the same but is guaranteed no matter how long he or she lives. That's a lot of the "Security" part of "Social Security." It's almost impossible to get that guarantee, and protection against inflation, from anywhere except Social Security.
There's much more here. I highly recommend reading the whole thing.
posted by chris at 2:42 PM
Catch-22
Which brings us to the privatizers' Catch-22.
They can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.
Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.
It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.
Here. A Tiny Revolution has even more.
posted by chris at 1:24 PM
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Monday, January 31, 2005
Privatize everthing!
Emboldened by their success at the polls, the Bush administration and Republican leaders in Congress believe they have a new opportunity to move the nation away from the system of employer-provided health insurance that has covered most working Americans for the last half-century.
In its place, they want to erect a system in which workers — instead of looking to employers for health insurance — would take personal responsibility for protecting themselves and their families: They would buy high-deductible "catastrophic" insurance policies to cover major medical needs, then pay routine costs with money set aside in tax-sheltered health savings accounts.
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Bush's health insurance agenda is far more developed than his Social Security plans and is advancing at a rapid clip through a combination of actions by government, insurers, employers and individuals.
Health savings accounts, known as HSAs, have already been approved. They were created as a little-noticed appendage to the 2003 Medicare prescription drug bill.
HSAs have had a strong start in the marketplace. Although regulations spelling out how they would work were not issued until mid-2004, as of Sept. 30, about 440,000 people had signed up. And more than one-quarter of employers say they are likely to offer them as an option.
The accounts are available only to people who buy high-deductible health insurance, either through an employer or individually. Consumers can set aside tax-free an amount equal to their deductible. Employers can contribute to workers' HSAs but do not have to. Unused balances can be rolled over from year to year, and employees take their HSAs with them when they switch jobs.
Consider yourself warned.
posted by chris at 7:22 PM
The Chilean program of private accounts
Under the Chilean program - which President Bush has cited as a model for his plans to overhaul Social Security - the promise was that such investments, by helping to spur economic growth and generating higher returns, would deliver monthly pension benefits larger than what the traditional system could offer.
But now that the first generation of workers to depend on the new system is beginning to retire, Chileans are finding that it is falling far short of what was originally advertised under the authoritarian government of Gen. Augusto Pinochet.
For all the program's success in economic terms, the government continues to direct billions of dollars to a safety net for those whose contributions were not large enough to ensure even a minimum pension approaching $140 a month. Many others - because they earned much of their income in the underground economy, are self-employed, or work only seasonally - remain outside the system altogether. Combined, those groups constitute roughly half the Chilean labor force. Only half of workers are captured by the system.
Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees that may have soaked up as much as a third of their original investment - are failing to deliver as much in benefits as they would have received if they had stayed in the old system.
Dagoberto Sáez, for example, is a 66-year-old laboratory technician here who plans, because of a recent heart attack, to retire in March. He earns just under $950 a month; his pension fund has told him that his nearly 24 years of contributions will finance a 20-year annuity paying only $315 a month.
"Colleagues and friends with the same pay grade who stayed in the old system, people who work right alongside me," he said, "are retiring with pensions of almost $700 a month - good until they die. I have a salary that allows me to live with dignity, and all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981."
It's an interesting article - it lays out some of the benefits of Chile's system, but also a number of problems that make the private account system decidedly less attractive.
posted by chris at 5:20 PM
Marketing to four-year-olds
In testimony at yesterday’s one-day food marketing hearing at the Institute of Medicine of the National Academies of Science, a McDonald’s Corp. executive said the company takes Ronald McDonald to elementary schools and is talking to children as young as 4 in its advertising.
Malena Peleo-Lazar, McDonald’s chief creative officer and vice president, portrayed Ronald McDonald’s school visits as an effort to teach children about healthy choices.
The hearing is the latest round of battles between government regulators and food marketing giants sparked by the childhood obesity crisis.
The young age of the marketing targets was detailed in response to a question from a panel member as officials of Kraft Foods, General Mills and PepsiCo all said their companies don’t run ads in media unless the majority of the audience is at least 6 years old. Ms. Peleo-Lazar said some of McDonald’s Happy Meals advertising is aimed at 4- to 7-year-olds, with the main target being 6. McDonald’s, however, highlighted its planned use of Ronald in Ms. Peleo-Lazar’s own testimony.
Get 'em while they're young.
posted by chris at 3:13 PM
Iraqis go to the polls
Millions of Iraqis flocked to vote in a historic election on Sunday, defying insurgents who killed 35 people in a bloody assault on the poll.
Voters, some ululating with joy, others hiding their faces in fear, cast ballots in higher-than-expected numbers in Iraq's first multi-party election in half a century
Good for them. I still don't think it justifies invading their country and killing civilians and soldiers. And I have deep reservations about imposing Western style democracy on another country. But I hope, for everyone's sake, that things in Iraq get better.
UPDATE: That damn ghost of Vietnam...
posted by chris at 9:41 AM
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