Social Security

We only agree on one issue regarding Social Security. There is a problem. From that starting point, we disagree. We can’t agree on the problem. We disagree on the magnitude of the problem. With so much disagreement, it is no wonder we can’t agree on the solution. The Social Security program has an enormous impact on all aspects of our lives. The politics of the social security promises to be with us for years to come.

Wednesday, February 09, 2005

Where’s the Beef?

He did not have a plan. At least not a plan to solve the problem he identified. The President stated that the social security trustee fund would go bankrupt without reform. His plan reduces the revenue of the trust fund. This leaves trust fund worse off than before privatization.

The real plan is brilliant. He just needs to rely on the voter’s short attention span. Cutting benefits is political suicide. No one in Congress is going to do that. However, privatization sounds so American. The themes of the ownership society and taking care of your children and grandchildren are American values to the core. Create a threat, sell it as Mom’s apple pie and push the problem off to another day.

Wednesday, January 26, 2005

The Bankruptcy Myth

The idea of Social Security going bankrupt is a fear tactic. The definition of bankruptcy is the inability to discharge all your debts as they come due. That cannot happen. For some, the word goes hand in hand with reform. The only reason is to scare you.

Tuesday, January 25, 2005

Congressman Bill Thomas(R-California)

Congressman Thomas is the chair of the Ways and Means Committee. Social Security falls under the Ways and Means committee’s jurisdiction.

Who is he?


Age – 63
Married – Wife: Sharon Lynn Hamilton Children: Christopher and Amelia


Associates – 1961, A.A. Santa Ana Community College
Undergraduate- 1963, B.A., San Francisco State University
Post Graduate – 1965, M.A., San Francisco State University



1965-1974 Professor, Bakersfield Community College


1975-79 California State Assembly
1978-Present House of Representatives, 22nd District, California

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Monday, January 24, 2005

News Summary

Republican Feedback

Washington Post reports on Congressional interviews.

NBC’s “Meet the Press”

Congressman Thomas discusses reform. He is chair of Ways and Means Committee. Represents 22nd district in California

CNN’s “Inside Politics Sunday”

Senator Snowe is concerned. She represents Maine. She is a member of Finance Committee.

Tuesday, January 18, 2005

Thinking Outside the Box

We should embrace President Bush’s proposal. Ownership is good. Government is inefficient. We need to privatize Social Security.

We need to get over our fear of privatization. The biggest fear is market-timing risk. Although the stock market generally always goes up, there are times when the market is even or goes down. An individual that retires during a period of flat or declining market is not going to do that well. The result is some unlucky people digging thru trash dumpsters in their 80s. What looks good to a 22 year old is not something a 65 year old likes. The other trouble with privatization is the economics of the market. Entering the market, we have to pay a broker. Whether the market goes up or down, the broker makes money. They have no incentive to make us rich, but rather to give us an average return. Privatization does not mean we have to live with these fears.

There is a simple solution. Let us become owners. Let us buy the companies, hire a CEO and appoint a board. We have $ 1.3 trillion in assets and an annual cash flow of $ 135 billion. When we retire, we can choose whether we want guaranteed benefits or an account. Let us be responsible owners. Give social security to the people that have put their money into it and let them live the American dream.

Monday, January 17, 2005

Weekend News

In the art of molding public opinion, weekend stories receive less public discussion. Over the weekend, we got stories about the administration’s publicity campaign to sell their social security reform. The administration intends to use the Social Security Administration to ram home their message. Political appointees, instead of career social security professional, will spearhead the campaign.

The history of the administration marketing of ideas makes this development troubling. In the first term, you may recall similar marketing tactics for the prescription drug campaign. Career professionals were intimidated to keep quiet on inaccurate cost estimates. Congressional investigations found improper use of taxpayer’s money to produce propaganda. Political appointees used the creditability of a government agency to give, at best, misleading information, to an unsuspecting public.

Also over the weekend, President Bush continued to use the crisis rhetoric of an appending bankruptcy of the social security system. By law, bankruptcy of social security is impossible. The worst scenario is scaled back benefits project in 2042.

Sunday, January 16, 2005

Godzilla versus Social Security

A new argument for not fixing social security is making the rounds. It goes like this. Japan’s national debt is 154 % of its GNP (Gross National Product). The US’s national debt is 62 % of GNP. Connecting the dots, this theory’s supporters argue that we just need to increase our debt to cover the social security short fall. The math would give us $ 10.1 trillion of additional debt capacity.

Before we start printing the money, there are a few differences between Japan and the US we should consider. Japan’s federal budget includes more capital expenditures than the US. In the US, state and local governments pay for infrastructure expenditures (e.g. streets). Japan is a more centralized economy than the US. The Japanese government has indirect control of virtually every business. Japanese citizens or companies hold most of the Japanese debt.

There is not a “right” answer on how much debt an economy can afford. Additional debt means additional interest. Increasing interest limits how flexible you can be in the future. The scary logic of this argument is letting Godzilla (i.e. Washington) know that it is ok to run up the debt another $ 10.1 trillion. Godzilla might beat Social Security, but how do we beat Godzilla?