JONATHAN CHAIT MAY 20, 2011
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In recent weeks, we've seen an entirely new issue where conservatives have persuaded themselves to believe a proposition which experts, as a matter of objective reality rather than normative values, consider bonkers. The new belief is that the United States doesn't really have to lift the debt ceiling -- the strong version being that it's completely unnecessary or even beneficial, and the weak version being that the authorities are merely scaremongering. Like climate change denial and supply-side economics, the basis for this belief is an inscrutable mix of narrow self-interest (in this case, strengthening the GOP's bargaining position by adopting the classic game theory "mad man" position) and genuine ideological fanaticism. When the two forces are unleashed within the hermetically sealed environment of conservative movement thought, it can quickly expand into a powerful hallucinogenic notion.
Here, for instance, is Veronique de Rugy arguing that failure to lift the debt ceiling won't lead to a default on the debt or even the massive disruption of halting entitlement checks:
There is absolutely no reason for the U.S. to default on its debt unless it would like to. The U.S. owns roughly $2 trillion in assets that it can use, in addition to $2.2 trillion in tax revenue.
Also, it is really shocking to read Secretary Geithner continue to make threats about not being able to send out Social Security checks, Medicare payments, or military paychecks. This year, this would only be the case if Geithner decided not to pay for these obligations. According to the GAO, the Treasury secretary has the authority to prioritize payments, which means that, considering the country’s assets and revenue, there is enough cash to pay for these priorities and Geithner can make these payments first — that is, if he wants to.
Noah Kristula-Green points out some math problems here:
The Mercatus paper that de Rugy authored states that after paying off the debt, Social Security, Medicare, and Medicaid, that there would be only $400 billion left over for “other priorities”
So how much does that leave for say, the Department of Defense? (A part of the government that maybe a libertarian like de Rugy has no special love for but which Hannity certainly does.) Well the Defense budget for FY 2010 was more than $660 billion, and the Heritage Foundation would like to see Congress provide the minimum of $548 billion to the defense budget in FY 2011. So $400 billion is certainly not going to cover that.
And that’s just the defense budget. We still have the rest of the government to pay for. Nearly $500 billion in non-defense discretionary spending was spent in FY 2010. There simply will not be enough tax revenue to keep funding all services.
de Rugy replies, emphasizing the possibility of selling off government assets to pay the bills. Kristula-Green points out that is a total fantasy:
Does de Rugy think that the Treasury can or should plan a massive garage sale within the next ten weeks of all it’s assets? What if we get to late July and there is still no deal on the debt ceiling, does she think that a sale can be done in a week?
de Rugy notes that her paper “only lists financial assets rather [than] all of the things that Treasury could sell (such as lands and building)” To give a few real world examples of the prolonged process that it takes to sell government land and buildings, it was announced in 2005 that the Walter Reed Army Medical Center would be closed and sold in five years. Six years later, in 2011, I see that they are still trying to settle zoning issues and the purchase price for the facility. From doing a quick google search, I find out that military housing privatization can take between 8 and 14 months. The Bureau of Land Management says that it can take “a year or longer” to sell land. And does de Rugy think that if the markets know that the US is in a crisis and selling off assets to avoid a default, that the government would get anywhere near the best possible price for what they selling?
So I suspect that selling our assets off on short notice will likely not occur with the turn around needed to have this be a viable option.
Some of the other items on her list either don’t make the cut to be large enough to fill the gap (it turns out TARP won’t pay for the military) or they are retirement funds and trust funds.
If there is one thing I’ve learned from listening to Paul Ryan, it’s that it is important to make sure that people near retirement who have planned their lives around receiving benefits are able to receive them. This is why his plan has a firewall to keep Medicare the same for anyone older than 55. (Cynics may suggest that this is because the GOP has an older electorate, but let’s take him at his word.)
I assume that most politicians would prefer to keep the Military Retirement Fund, which she lists, as off limits for what the Treasury can raid in 2011. Think of the campaigns ads that could be run (“Congressman X allowed the retirement funds of our nation’s heroes to be depleted…”).
Perhaps some of these retirement funds are more equal than others and she can list which ones should be targeted first? Or maybe we should have Pat Toomey and Tom McClintock make the list? Either way, even de Rugy has writen that raiding the retirements of our soldiers can only drag this out until September.
The biggest problem, of course, is that the debt ceiling scenario introduces massive uncertainty into the financial markets. Not just the phony "uncertainty" talking point which Republicans have used to mean "any policy change that we don't like," but real genuine uncertainty. It might be mildly painful, or it might be a genuine catastrophe.
de Rugy and the Republicans argue that it's worth taking this risk because we must face up to the real debt crisis. But of course, we'd have to lift the debt ceiling even if the Ryan budget were passed into law tomorrow. And the notion that it's worth precipitating a crisis now to prevent a possible crisis somewhere in the future is utterly daft, like burning down your house to get rid of hazardous electrical wiring. It's really not clear how much of this argument is Republicans talking crazy to increase their leverage or convincing themselves of their own crazy talk. But I do think the markets are underpricing the risk inherent in a system of government whose continued functioning requires the ascent of an out-party that both stands to gain from economic catastrophe and is increasingly retreating to a world of little fantasy bubbles.
35 comments
This article perfectly relates to Jacob Weisberg's post in Slate . Jacob covers alot of ground in the intellectually bizarre world today's Republican's reside in . From fiscal issues to social and environmental , no Republican that aspires to office can except main stream reasoning and established fact. This debt ceiling battle is going to get ugly. One side is willing to blow up the economy to get its way. The problem is that the President and his party will probably get more of the blame for whatever fallout there is .
- alanwilkov
May 21, 2011 at 12:36am
There are two strong cards for the dems in this fight. 1. Wallstreet will strongly pressure republicans. This alone is likely enough. 2. The president can choose where to route dwindling funds to make things as uncomfortable as possible for republicans. Maybe stop paying farm subsidies, then Medicare. I wonder if eunninf out of funds would qualify as a state of emergency.
- sokol8
May 21, 2011 at 1:31am
Auction off House gop members. That will raise at least a couple hundred bucks. My country is losing its mind. Seriously, I'm a student of history but by no means as educated as some on these boards... has it EVER been this bad? Even the Civil War didn't have the potential to turn the entire global economy upside down. We're rapidly reaching that everybody-out-of-the-pool moment. I fear for my country, for the fate of her citizens and for the world that counts on us and for my daughter's future. God help us all.
- Tristan
May 21, 2011 at 3:00am
The Democratic Party is beholden to cretins like Richard Trumka, head of the AFL-CIO who says that there is no financial crisis, and Nancy Pelosi, who says that Medicare is fine as it is. The Democrats need to throw to grow up and put the adults in the party in charge. Until that happens there is no hope of progress toward a solution.
- bulbman1066
May 21, 2011 at 3:28am
bulbmann, there would be no financial crisis if we were willing to pay the taxes to fund the services we demand. BTW, Wisconsin just reported it will take in over 600 million more than it anticipated when it declared that it needed to get rid of unions to balance it's budget.
- timteeter
May 21, 2011 at 8:13am
Isn't it obvious that the Republican base wants the economy to collapse? Their fantasy is to replay the 2008 election with a conservative hero/ine who passes all their ideological litmus as the new Obama.
- wnalpert
May 21, 2011 at 9:55am
- Nusholtz
May 21, 2011 at 10:28am
Chaitless -- pretty funny post. Do liberals have a memory?: Here are Obama’s thoughts on the debt limit in 2006, when he voted against increasing the ceiling: The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. In 2007 and in 2008, when the Senate voted to increase the limit by $850 billion and $800 billion respectively, Obama did not bother to vote.
- mr_rationale
May 21, 2011 at 10:28am
Also, Chaitless - given you have limied understanding of markets and private sector -- a quick point you ignore For financially distressed firm, household or any organization with too much debt --- reducing costs and paying off debt always a better strategy than assuming more debt. The problem for liberals is that the other 75% of the country that are not liberal parasites understand this very basic point. They also understand for the Gov to reduce costs requires something extraordinary.
- mr_rationale
May 21, 2011 at 10:40am
mr_r. The Bush debt limit problem was self imposed by Tax Cuts. It's one thing to complain about raising the debt limit after reckless tax cuts; it's another to seek an increase the debt limit after a severe recession.
- Nusholtz
May 21, 2011 at 10:43am
Rat - those comments by Obama were within the context of a debt ceiling debate in which there was absolutely ZERO chance of the ceiling not being raised. Grow the f up. As for your "always a better strategy than assuming more debt..." that is just asinine. Let's say, for example, that you have a family with a household income of $50k and aggregate expenses of just over $50k thanks to the addition of another child to the family, thus debt is slowly beginning to creep up. Now assume one of two spouses has a chance to go from $25k in annual income to $75k, but requires completing a degree in computer systems analysis to get there. Cost of finishing her degree is $15k for a one year course. Anyone with half a brain can fill in the rest, Rat man. Spending as an investment in the future can and does reap dividends that far outweigh short term costs. Are you really this stupid? Your posts border on parody.
- Tristan
May 21, 2011 at 11:14am
Rat., What theory of the private sector and the market allows for outright theft like you do for other people's writing? Please don't do your usual cowardly running away, but answer!
- MikeB.
May 21, 2011 at 11:32am
I still want an answer as well, Rat. Again with cutting of debt being always preferrable to assumption of same, you reicht wingers love for free market solutions (and 5th grade intellect analogies), how about corporations? Please explain how incurring more debt is always a bad thing given our nation's corporate history of buyouts to capture more market share. And infrastructure investment. And debt-financed expansion into foreign markets as part of a long term growth strategy. Echo Mike B, please grow a slightly larger set of balls and reply or leave this site altogether. I'm sure Drudge will welcome you with open arms. In the mean time, you've done me a favor, I'm compiling your posts over the last year or so and using them as a sort of political tackling dummy for my older daughter to craft moot-court-like responses to and for me to then review. She's dedicated to pursuing a career in government, and as she's just leaving 8th grade you guys are just about at the same level. So thanks, buddy.
- Tristan
May 21, 2011 at 12:12pm
Once you deny facts and refuse to do even the most basic research outside the nutjob cocoon it is easy to get to the formulations adopted by crazy people like rationale - Tristan that was a great analogy - another might be where this principle says that you let Mom die rather than incur more debt to cure her breast cancer - a choice still available to the 40M plus uninsured in this country. Forget that she might be able to earn a good income for the next 20 years - no more debt is no more debt...
- Zachsteph
May 21, 2011 at 12:16pm
The writer of the egregious Heritage program who is fretting about the debt doesn't seem to recall that there was a Republican president, name of George Walker Bush, who mightily ran up the deficit, initiating two wars and signing a drug-prescription bill into law, without setting aside a single penny to fund it.
- liberalref
May 21, 2011 at 12:23pm
I think I also recall that that we rumbled mr irrational in an act of unambiguous plagiarism last year. He lifted a comment in its entirety from the discussion thread in the NYT that day on one of Krugman's pieces. Most 8th graders know that that's a no-no. He disappeared for a while after that.
- ironyroad
May 21, 2011 at 3:27pm
They're nuts playing this game of chicken with the shadow banking system so dependent on "risk free" T-Bonds. Truly irresponsible. They're now an internal threat. Can't your homeland security detain the Republican congress?
- IggyPop
May 21, 2011 at 6:57pm
I love this line from Rat. since I have heard it or a variation of it from John Boehner, Michelle Bachman, and just about every GOP Congressperson even Obama has at least played along rhetorically once or twice: "For financially distressed firm, household or any organization with too much debt --- reducing costs and paying off debt always a better strategy than assuming more debt." You know you have all heard it..."Households are tightening their belts, we need too in Washington too." You see when a family has financial problems, they always immediately say that increased income is "off the table." Oh wait they don't? So why are taxes off the table if debt is such an existential crisis? The on
- MikeB.
May 21, 2011 at 7:58pm
MikeB I have heard that the Republican National Committee resolved its budget deficits by cutting back on contributions.
- Nusholtz
May 22, 2011 at 8:16am
Agree with Tristan - when have things been this bad? This strange? Maybe in the '30's. As to to wnalpert's assertion that the GOP wants the economy to collapse so they can regain power, it's the only thing that makes sense, unless they are all meshugah. On the other hand if you look at this in generational terms, this hasn't been a short-range plan but rather has unfolded over decades: dismantling the New Deal, repealing regulations, weakening workers, centralizing money and power in the hands of a few. The creation of our right wing SCOTUS, putting a non-winner into the White House, going to war and cutting taxes at the same time... Crashing the Real Estate market - it's kind of like red lining a neighborhood then buying it back cheap; only now the neighborhood is the whole USA. Of course I am wearing an aluminum hat right? Maybe folks aren't that devious, just that incompetent.
- Sophia
May 22, 2011 at 9:46am
The reality here is the people who elected these Republicans are the issue. They are a people who are no longer fit to rule. They and the leaders who they elect have been on the decline since Harry Truman succeeded FDR; and to the shock and horror of General of the Army George C. Marshall (then Truman’s Secretary of State), Truman in 1947 was, in concert and upon the political advisement of Presidential Counselor Clark Clifford, deciding to give full diplomatic recognition to Israel. Marshall was aghast, for Truman, a man who he knew very well, respected and admired, was in Marshall’s view, deciding a grave foreign policy issue (with tremendous long term foreign and national security policy implications for the United States), by framing and debating the decision almost totally from the standpoint of the domestic political pros and cons of gaining and sustaining support of American Jews generally, and in the Democratic Party’s fundraising base in particular, leading up to the 1948 Presidential election (the first that Truman would run in, in his own right). Now almost 70 years later our politics readily includes genuine “carnival barkers”, fake faith healing television evangelists, and various other right wing nuts. This is the new reality. This is what the people want. This is a democracy. Here the people rule. And they are not going to stop until they have destroyed their/our country. The debt ceiling is the first blow.
- 12alainu
May 22, 2011 at 11:33am
Nusholtz...lol Yes indeed. I would add there is another factor that I think explains much of this madness. People generally live in bubbles and go about their daily business and don't think things apply to them or they think they are a special case. I know a guy who is on SS disability, yet puts on farby tri-corn hats and goes to Tea Parties screaming about government spending. We all know the "Get the government out of my Medicare!" brigades. In a sense the New Deal/Great Society has shielded most of us from the ugly things an unregulated free market can do to people. So people tend to forget that they are living with the benefits of these things. In a way FDR and company succeeded too well. This has allowed them to engage in Ayn Randian fantasies and economic nonsense from Ron Paul about gold standards, etc. If Rand Paul's ideas ever were really implemented, you could be sure he would get like 2 percent of the vote in the next election. However, people feel safe because it won't happen, or they think someone else's Social Security will be taken away, not theirs.
- MikeB.
May 22, 2011 at 12:12pm
MikeB I feel strongly about two things. 1. when Republicans recklessly cut taxes, it pressures government to collect revenue more aggressively. Those civil liberties which conflict with the collection of revenue will be lost (and already have been lost) 2. The economy is dependent on the supply of money from consumers and all of what is pejoratively called "wealth transfers" is a necessary component of a long term healthy economy. Examples: (a) When a business goes under, it drags a local economy down faster and the damages are spread out farther without unemployment compensation. (b) Without social security, businesses must pay much more to all employees.
- Nusholtz
May 22, 2011 at 1:11pm
> For financially distressed firm, household or any organization with too much debt --- reducing costs and paying off debt always a better strategy than assuming more debt Funny how revenues aren't mentioned. A normal person trying to make ends meet might try to raise revenues by working longer hours or taking another job. A supply-side theorist in dire financial straits would presumably *reduce* his working hours in order to bring in more money...
- krlong014
May 22, 2011 at 9:54pm
Nusholts writes: "Without social security, businesses must pay much more to all employees" Yes, without SS we'd all be making 15% more each paycheck (for those earning up to $100K or so). And if you saved that every year in a local bank earning just a few %, you'd hit retirement with the same benefit that you get from SS. Except, if you die early, you can leave it to your kids. Or you could put it into the stock market in the early years and do quite a bit better than SS. At a measly 2% return, it'd take about 35 years to double your savings. In a world without SS.... A $100K earner (average) would save $15K per year and retire with $750M in the bank to do as he chooses. SS will pay him $23K/year at the age of 65. If he lives to be 97 years old, then SS is a better deal for him. The same is true for a guy making just $40K per year (average). He'd save $6K/year, and retire with $350K in the bank to do as he chooses. SS will pay him $12K per year at the age of 65. If he lives to be 94, then SS is the better deal. It would be much better to keep our 15%, and let the government provide long term disability insurance at a greatly reduced cost (since very few would need this)
- seattleeng
May 23, 2011 at 2:36am
Let me sharpen the math a bit... At a measly 2% return, a $100K earner would save about $1.1M if he saved his SS contribution himself. Much better deal than SS offers. At a measly 2% return, a $40K earner would save about $431K if he saved his SS contribution himself. Much better deal than SS offers. SS is a really bad deal for middle class and poor alike. At a 5% return, a $40K earner would retire a millionaire. it's a shame the government won't let folks control their own destiny. What greater freedom could a government grant????
- seattleeng
May 23, 2011 at 2:46am
How about the freedom to not spend your twilight years constantly worrying about how you're going to pay for your food, your medical care, and a roof over your head? Or the freedom to feel secure about your retirement benefits, regardless of what illegal craziness some idiot on Wall Street pulls this week? Students of history might recognize these as "freedom from want" and "freedom from fear." Whether or not they recognize them with those words, the vast majority of Americans hold those freedoms quite dearly. Also, just as an aside: seattle, after the recent crashes, do you really believe that people will bet MORE of their future on the stock market? People my age (late twenties) just watched people in their forties and fifties lose decades of retirement savings in weeks or months. If you think we're going to put all our eggs in that basket, you're nuts.
- janus
May 23, 2011 at 9:46am
Seattle writes - "Let me sharpen the math a bit... At a measly 2% return, a $100K earner would save about $1.1M if he saved his SS contribution himself. Much better deal than SS offers. At a measly 2% return, a $40K earner would save about $431K if he saved his SS contribution himself. Much better deal than SS offers. SS is a really bad deal for middle class and poor alike. At a 5% return, a $40K earner would retire a millionaire. it's a shame the government won't let folks control their own destiny. What greater freedom could a government grant????" Were that it were so. While I certainly don't disagree with you on the issue of the measly return on SS, I do disagree somewhat on the premise that SS serves no purpose other than to steal money from you and forcibly put it into some low return savings account. On the surface it appears that way. The folks grousing the most about the "confiscatory rate" of SS tend to be those who in all-likely-hood will not need it for retirement but as their pocket money. Studies have shown that for a majority of people, saving through choice or making it automatic, the rate of savings differs greatly. This also holds true for the psychology of how economic classes perceive and use money. Upper economic classes perceive & spend money differently than the middle class who perceive & spend money differently than the lower classes & poor. Regardless of whether or not you gave someone a class on money management. For the working poor, saving that extra 15% on their own, would in all likely hood be spent on immediate needs and wants and they will still have little to no savings. For the middle class that extra 15% would be a mix of saving some and using the rest to cover expenses, for the upper classes, that extra 15% would amount to increased investment and very little spent on daily needs. The idea of SS is that it is the 3rd leg of the financial stool, the final backstop before sliding into poverty. Yes the return on SS is paltry at best, but it's guaranteed for one and two it is 2% higher than most savings accounts these days in which some offer 0.5% to 1.5%! So your choices are betting on the market, investing in savings bonds, a low return savings account and/or SS. As someone who doesn't make $100k, the 15% would represent a good chunk of change, but with regards to my future retirement plans, I look at SS as supplemental, I would a portion to pay down debt and the remainder into savings. I try to put away 10-15% each month into IRAs and savings each month. What would help a vast majority of people who get their income from a paycheck and not investment incomes would be a lower payroll tax and not so much a reduction in SS payments.
- singlspeed
May 23, 2011 at 2:39pm
Good points, Janus and singlspeed. Seattle's theory sounds just peachy, but the reality is we need a solution that is immune from recession, depression, and ESPECIALLY stock market crashes. Yeah, it's lower risk for lower reward; but I much prefer 2% over complete obliteration of wealth in 1 day by a stock market crash. When the stock market no longer needs to "correct" itself every 5-7 years, maybe you will have a good point. It's kind of like Glass-Steagal, and forgetting the past, I think; SS was a response to the weaknesses identified in studying the causes and effects of the Great Depression. How about we go ahead and learn from history for once?
- GSpinks
May 23, 2011 at 6:07pm
Oy. More seattle crazy math and eocnomics. The market return on investment cannot outperform the economy as a whole. All social security and other consumption comes out of current output, not out of savings. There is no magic place to invest/save other than the US economy and the amount of investment is based on what is necessary to supply the consumption demanded, not the amount available to invest. Ergo, taking a cut of current output and handing it to seniors is just as good as a funded system, and much less prone to problems due to variations in value and a variety of other problems that plague a private, funded system. What we really need to get over is the whole idea that social security is a pension. It is retirement income security -- insurance.
- roidubouloi
May 23, 2011 at 8:47pm
seattleeng: "without SS we'd all be making 15% more each paycheck (for those earning up to $100K or so). And if you saved that every year in a local bank earning just a few %, you'd hit retirement with the same benefit that you get from SS." Come on, seattleeng, you know (because it's been pointed out explicitly in another thread) that that's not how SS works. Since present SS taxes fund present retirees, without all seniors right now would have no benefits at all. That was one of the biggest problems with Bush's proposal: the transition costs from the present system to the private one were huge, because some people will have to pay twice (once for present retirees, once for themselves). See how much political support you can get for that. If your wonderful savings hypothetical resulted in such great retirement security, then poverty among the elderly shouldn't have been such a problem. But it was, and it was extensive; otherwise, SS would never have been started in the first place and structured as it is. Many seniors didn't have enough to retire on because they could never save enough. Lots of jobs don't pay enough for people to save very much; lots of households make well under the median $50,000 level. (The fact that the program was designed to benefit all retirees benefit regardless of need was so that it wouldn't be caricaturized as a "welfare" program and so be more politically palatable.) Moreover, you assume that the SS tax which is paid half by the employee and half by the employer would go entirely to the employee. That wouldn't necessarily be the case--yet another unsupported claim from which you draw your unwarranted inference.
- dsimon
May 23, 2011 at 11:57pm
DSimon writes: "Come on, seattleeng, you know (because it's been pointed out explicitly in another thread) that that's not how SS works." I'm not commenting on how SS works. On commenting on saving 15%/year for your entire life. Do you doubt that without any SS we'd all be making 15% more? Roid writes: "More seattle crazy math and eocnomics." You think a 40 year average return of 2%/year is tough to get? it's exceedingly easy to get that. Through thick and thin. What I suspect you guys don't like is seeing just how poor the math is on SS. It's representative of overall poor efficiency of government in general. A guy earning $40K/year could retire a millionaire if he saved that 15% on his own. Instead, SS doles out a paltry $12K/year, for statistically, 12 years. The $40K earner SHOULD have a million dollars to his name at retirement, instead, statistically, he gets $140K from the government. In reality, the government STEALS more than $800K from this $40K earner. How sad.
- seattleeng
May 24, 2011 at 10:37am
GSpinks writes: "but the reality is we need a solution that is immune from recession, depression, and ESPECIALLY stock market crashes. " When you are young, you stick you money in the stock market . As you get older, it transitions to less volatile investments. At retirement, you buy an annuity. Large retirement plans (such as Calpers) believed they can hit 7.75%. Even if they are wildly wrong, 4% is very, very safe. GSpinks writes: "For the working poor, saving that extra 15% on their own, would in all likely hood be spent on immediate needs and wants and they will still have little to no savings. " Well then have it taken out like a 401K.
- seattleeng
May 24, 2011 at 10:44am
Seattle writes: "A guy earning $40K/year could retire a millionaire if he saved that 15% on his own. Instead, SS doles out a paltry $12K/year, for statistically, 12 years. The $40K earner SHOULD have a million dollars to his name at retirement, instead, statistically, he gets $140K from the government." The two biggest words in that paragraph are COULD and IF. Seattle as I said before, the working poor, by and large, will not save on their own. For automatic enrollment in a 401K, the savings rate is 80%, where as voluntary enrollment in a 401K is 40% among the young and working poor. Those aren't low numbers but you also assume that a majority of young and working poor have access to pre-tax 401Ks. So in order for us to realize your goal of a $40K earner, he would still have to be automatically enrolled in a 401K and save at the same rate for the next 30 years baring any unforeseen emergencies or life changes like marriage, divorce, death of a spouse, children, buying a home and using the IRA as the down payment. But the realities are for someone making $40K a year, adjusting for inflation, the purchasing power diminishes over time while cost of living increases meaning the same $40k buys less each year which in turn puts downward pressure on spending priorities. For many of the working stiffs out there, it isn't for lack of trying to save or wanting to save, it's lack of being able to because of a myriad of situations. Again, the idea behind SS isn't that it is is the sole source of retirement money, but the third leg of the stool. The other two being investments (401K) and savings. But you continue to wish or believe that simply stopping the mandatory "investing" into SS would suddenly mean the $40K a year earner COULD retire a millionaire IF he saves that 15%. But if that $40K/year earner is a working, single father of 2, the chances of him taking that $6K a year and simply banking it and not using it for immediate needs to raise his children you're delusional. I agree that the "return" rate of SS is paltry but it's also not nor should it be one's only source of retirement, it's the fail-safe against living on the street. I came to the conclusion a long time ago when I was still in high school that I would, in all likelihood, not see any SS benefits. So I've been saving and investing in IRAs but along the way I got divorced, say my salary depressed or reduced, had to stop saving to cover basic expenses, put myself through grad school, pay off debts, remarry, buy a house (using my IRA) and now I'm finally able to start squirreling away money again into IRAs, a401K, and savings. I certainly don't think of SS as my backup. I look at it is as whipped cream on my pie if I do retire. But I doubt I will ever be in a position to retire. Partially because I'm restarting my life again at 39, hoping to start a family, and I'd go crazy with boredom if I didn't work so I suspect I'll die practicing architecture. Can I do better investing that SS money than the government? Sure, can I guarantee I will invest that SS money every month for the rest of my live consistently? Probably not. Maybe we come up with an opt-out system whereby you are automatically enrolled in SS or you can opt-out IF you can show proof of savings investment in an IRA or 401K. If you fail to do so, you get re-enrolled. At least ensuring yourself, your family, and society that you'll have a modicum of financial security to buffer the pain of forking over $10 for a cup of coffee at the retirement home.
- singlspeed
May 24, 2011 at 1:55pm
Tristan You don't understand what financially distressed means do you. Look it up. And I am sorry to hear your daughter will be another parasite --- very sad indeed. No doubt following in your little insect-like marks on the world
- mr_rationale
May 26, 2011 at 8:20pm