He also told the Wall Street Journal this March (2008) that "as part of Social Security reform, I believe that private savings accounts are a part of it - along the lines of what President Bush proposed."
McCain hit the road with President Bush in 2005 to sell the failed and flawed plan. 2005: McCain Campaigned for Bush Social Security Plan. "McCain has been especially supportive of his onetime rival, appearing with Bush at three events over the past two days in trying to prod Democrats into negotiations to include private accounts in a plan to revamp Social Security." [Washington Post, 3/23/05]
TPJ: Just imagine what a mess many Americans would be in if the Congress had passed the privatization of social security benefits. There would have been many who would have invested that money in the stock market as the Bush/McCain people suggested.
If that reform had passed we'd be in a much bigger economic mess than we already face--which is bad enough!! We'd have people who have already lost huge amounts of money in the stock market with not even their social security as a safety net.
Yep. Privatization of social security. Yet another failed Bush/McCain policy. How can we afford another four more years with McCain the Bush clone?
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8 comments:
Ah...'private savings accounts', the enormous mandatory giveaway to the financial industry.
Private savings accounts?
Really.
Americans have the lowest LOWEST savings rate of any industrialized nation.
And John McCain is going to change that culture...how?
How will he encourage Americans to save money they have to spend on fuel, food and medical care?
He's a disgustingly wealthy man who has absolutely no idea of what the average American has to deal with.
With medical costs what they are, how in gawd's green teeth will the average (never mind poor) American save enough to cover medical costs?
It's all blather to get his anti-government idiots to vote for him.
Kvatch:
Yep. They won't pay their fair share in taxs but they'll gladly take your social security. It's fucked up.
Shaw:
Good points. I forgot about the savings rate.
You're right that most people wouldn't know the first thing on how to invest their social security money and would lose their shirts.
With the crash of the stock market recently there'd be a lot of people screwed right now. Even more than we have currently.
Yeah, private accounts is a scam for sure.
Are you people serious? The private savings accounts would be mandated, not optional. Who knows what McCain's
actual plan would look like but if its anything like Bob Ryan or Sen. Demint's Smart Act it would keep the system from going insolvent (Read the 2006 Social Security Trustees report for background). Private accounts in Demint's plan would be chosen from a menu of mutual fund options with S&P ratings above a certain threshold. There's very little thinking about it. You're paying for Social Security one way or another, why not allow returns and a smaller tax payer liability in the future. As for "they" paying their "fair share" I'm confused who you are talking about. The top 1% of American earners pay 37% of taxes.
They own about 19% of the wealth of the nation so are paying almost twice their proportion of income.
The top 25% of the nation pays 85%
percent of taxes in America. Perhaps the top 1% should pay 50-60% to pull their weight? Also, disregard the investment structure of capitalism and the failed tax policies of the 1970's that proved exactly what happens when you soak the rich and devastate venture financial markets. I'd suggest you read up on some of the boisterous claims you're making.
Shawman:
So tell me what you think would have happened if people had invested their social security in the market before it tanked? People would have lost their shirts.
Even if they invested in only S&P ratings above a certain threshold doesn't guarantee that you can't loose a bucket of money in the market. Even big companies are tanking. Did you see the Fannie Mae and Freddie Mac news today? Not to mention Baers Sterns.
Even the mega S&P stocks will take significant hits when the market drops triple digits nearly everyday.
At least with the government program I know that I can count on at least one part of my portfolio. The key is diversification.
Oh and I'd be fine with 50% taxes for those in the top 2%. Simply speaking they can afford it more than the average American.
Their quality of life doesn't change that much but those who would benefit; their lives would change drastically for the better.
So if you are loaded with money and because of having to pay higher taxes means that you can't afford that fifth car. I don't see the problem.
I'd be happy if we returned to the tax policies under Clinton. They helped our economy boom.
Bear Sterns I mean. I misspelled it in the original post.
I learned the concept of vertical equity in one of my economics courses while getting my degree in accounting and finance. I found it to be a compelling argument and agree with James on this one. I found this quote on Wikipedia, which I think is adequate to describe its basic premise:
"It is also argued that people with higher income tend to have a higher percentage of that in disposable income, and can thus afford a greater tax burden (this is the “vertical equity” argument). Some would claim that a person earning exactly enough money to pay for food and housing cannot afford to pay any taxes without it causing material damage, while someone earning twice as much can afford to pay up to half their income in taxes."
I'm happy you responded. Its good to keep deliberation going. I'll respond to your comments point by point to keep logically consistent. The options (as i said earlier) under any viable "private account" plan would allow the purchase of mutual funds which are meant to mitigate risk through diversification (a point you made yourself). The S&P system would only serve as an independent ratings
board showing confidence in returns. You speak of Fannie and Freddie (probably wondering how two
poorly managed and sliding companies can enjoy a AAA rating despite their fall). Fannie and Freddie are special cases because of the "implicit guarantee they were provided by the government. Since they were both government created, investors put their bonds at the same ratings as U.S. treasury bonds, believing that even in crisis the treasury would bail them out..(the "too big to fail" phenomenon). Fannie and Freddie's failure highlights the danger of a government mandated company that takes advantage of the special treatment they are given and who are insulated from capital loses in a way no private bank would be. They have their own regulator, own ratings system for mortgage bundles, better guaranteed interest rates from the Fed, and access directly to treasury funds (unlike their fully private counterparts). This created a phenomenal moral hazard as the companies started securitizing loans it had no business providing capital for. Not only this, but in attempt to garner private financing they began off hand hedge funds and bolstering
subprime house securities (so called "ninja loans" ie sheer speculative loans). When things were good, they were doing better than most other financial corps in the market, but when things went bad they became quickly responsible for billions of dollars of losses on loans and defaults. They rode too high and ignored the call for moderation and a standardized ratings system and now have created a trillion dollars of losses that either they (or in reality the tax payer) will have to eat. So your claim about Freddie and Fannie's failure highlights the much more pernicious nature of government mandated business, especially in loan structures. Back to the original point though. You claim "At least with the government program I know that I can count on at least one part of my portfolio"
but with Social Security going bankrupt and the program slated to be insolvent in 20-30 years this can't be further from the truth. There is no fiscal discipline in government and politicians have been spending Social Security money for years, establishing "IOU's" in the place of bonds. Recently, they've taken to furthering their spending habits through gratuitous (and reckless) borrowing which has quickened the decline of Social Security. Before 1983 (Greenspan commission)Social Security was a good deal for Americans; now it has become anything but a guarantee and is in serious financial trouble for younger generations starting to pay FICA. Back to the tax point,
you qualify your assessments of what rich people can afford based on the false pretense of a re-distributive wealth scheme. I could argue for hours about tax theory but to keep it simple "soak the rich" tax structures do not work in a investment economy. They crowd
out investment capital in favor of transitory and nominal government spending. This is empirically tried and true and been studied extensively since the 1940's and
again after the Carter stagflation
era. As much as you seem to dislike the lifestyles of rich Americans without their investment our economy loses traction. You speak of Clinton as creating the ideal model for taxes and yet ironically ignore that he realized exactly what i was arguing in terms of government crowd out and established tax policies that reflected this. His highest marginal (not total) tax rate for his presidency was 39% for Americans making roughly $290,000 dollars of more. Even if you argue (which you seem to) that a President is responsible for the economic welfare of a nation and capable of meaningfully shaping the macro economy, you'd see Clinton was very conscience of government crowding and cut and limited many of the programs his Democratic colleagues were begging him to expand. Regardless of whether or not richer people can afford higher taxes (which i can't believe lori had to learn in a finance class) the issue at hand is what effect do those higher taxes and undue government spending have on the macro economy. You seem indifferent to this, although i suspect re- distributive schemes of tax structure speak to your egalitarian
tendencies regardless of whether or
not we actually employ them in America (which currently we do not). If this is the case we are probably reaching a fundamental impasse in logic, one I doubt my commentary and study would challenge for you personally. However, consider the practical challenges of our current Social Security system, the macro structure of taxes, as well as the
plights of a moral hazard created by government establishment of capital markets (Fannie and Freddie) in examining our national economic future. Otherwise, I'm glad you at least responded.
Best,
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