Category Archives: Social Security

Another Myth about Social Security (Part 3) (Dan Mitchell of Cato Institute discusses Social Security Myth)

May 11, 2011 – 3:21 pm

 

Author Biography

Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.

In his article “5 Social Security Myths That Have to Go, ” Schurenberg notes:

Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.

A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:

Myth: Social Security is funded until 2037

 

The Social Security trust fund–the ledger on which Uncle Sam records the surplus taxes that the program has accumulated over the years–is large enough that the program need not ask for extra money to pay benefits until 2037, the year that the trust fund “runs dry” if nothing changes. But that’s not the same as being funded-at least not in a way that has any economic meaning.

As you may know, the trust fund is, for accounting purposes, assumed to be invested in IOUs from the U.S. Treasury. When Social Security needs money beyond what it expects to collect in payroll taxes, it can redeem some of these IOUs. But it’s not as if the trust fund is a giant 401(k). It’s more like access to a rich but cash-strapped daddy’s credit card.

What that means is that Social Security can get what it needs from Treasury without having to ask permission from Congress. But when it redeems one of these IOUs, the Treasury (just like Daddy) has to come up with the money the old-fashioned way, by raising taxes or, more likely, borrowing more.

Dolly Madison at Daily Kos seems to think that Social Security’s need for cash can be met from the interest credited to the trust fund-that is, with more IOUs. Allan Sloan disagrees:

You know, of course, why this wouldn’t work — at least, I hope you know. It’s because the U.S. government ultimately has to pay its bills with cash, not with its own IOUs. In the long run, you need cash — real money — not funny money.

“Fully funded” suggests that the money to maintain today’s benefits until 2035 is already locked up. It isn’t. Redeeming IOUs from the trust fund (and the income imputed to those IOUs) will only put another burden on taxpayers who are simultaneously paying for Medicare, interest on the debt, and all the other purposes of government. At some point, the total burden will be too much.

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Saving Social Security with Personal Retirement Accounts

There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely thanks to demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform. http://www.freedomandprosperity.org

By Everette Hatcher III | Comments (0)

Another Myth about Social Security (Part 2) (Walter Williams discusses Social Security Myth)

May 10, 2011 – 6:48 am

 

Author Biography

Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.

In his article “5 Social Security Myths That Have to Go, ” Schurenberg notes:

Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.

A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:

Myth: Social Security benefits are earned; reducing them amounts to confiscation

It’s not hard to see why this illusion exists, since Social Security’s own website refers to “earned credits” and sometimes refers to payroll taxes as contributions. But despite Social Security’s fetish for language that echoes private pensions, no one ever vests in Social Security. You don’t own your benefits until you cash the check.

It’s more accurate to say your benefits are an entitlement granted by act of Congress and subject to change at any time by another act of Congress. As long as voters consider benefits inviolate, they will be. When voters decide fiscal responsibility is more important, then Social Security benefits- “earned” or not-will be up for review.

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Professor Williams explains what’s ahead for Social Security

By Everette Hatcher III | Comments (0)

Another Myth about Social Security (Part 1) (Milton Friedman discusses Social Security Myth)

May 9, 2011 – 10:17 am

 

Author Biography

Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.

In his article “5 Social Security Myths That Have to Go, ” Schurenberg notes:

Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.

A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:

Myth: Social Security didn’t create the deficit and shouldn’t be cut to fix it

 

This is a much loved progressive slogan. “Blaming Social Security for the deficit is like blaming Iraq for 9/11,” writes Dave Johnson of OurFuture.org in one of the cleverer examples of the genre.

Technically, the first part of the myth is true-or rather, used to be true. From 1983 until last year, Social Security revenues actually lowered the Treasury’s need to borrow in the public markets, as excess payroll taxes collected under Social Security’s flag helped fund other government programs.

The surplus years are over, however. The Social Security trustees’ report estimates that last year payroll taxes fell short of the sums paid out to beneficiaries. Small surpluses will return for a few years; then the red ink will return for good in 2015. To make up the annual shortfall, Social Security will have to draw on revenues from the general budget. In other words, from here on out, year after year, Social Security only makes the deficit larger.

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Milton Friedman

Milton_friedman_1

Using Social Security as his prime example, Professor Friedman explodes the myth that the major expansions in government resulted from popular demand. In a speech delivered more than 30 years ago, he directly relates this dynamic to today’s health care debate.

By Everette Hatcher III | Also posted in Milton Friedman | Comments (0)

Brummett: Social Security is fine (part 3)

April 5, 2011 – 6:57 am

My sons Wilson and Hunter (on left) visited Yosemite National Park with Sherwood Haisty Jr.  (on right) March 21 to March 27th.

 

In his article “Harry let us down,” (Arkansas News Bureau, April 4, 2011) John Brummett observes:

The liberal is correct when he says Social Security is a separate insurance program that is solvent. Alas, Senate Majority Leader Harry Reid let us down in this regard the other day.

He spoke the truth that Social Security is fine. Then he declared with the liberal’s harmfully stubborn polarization that he wanted Social Security left alone in the ongoing debt and deficit discussions and that he would worry about it in a couple of decades (when he would be in his 90s.)

Is the Social Security System fine? The most glaring problem I see with that statement is that most young people in this country do not see a good future for their investments in this program. Take a look at the observations made by Congressman Paul Ryan:

I’m 40 years old. I’ll get about a one percent return on my payroll taxes. If Social Security could pay me my benefit, which of course it can’t, my children who are five, seven and eight years old will get a negative one percent rate of return on their money. And I would argue that Social Security is probably one of the most successful programs ever created, and it’s popular because multiple generations value it. If my kids are going to get a negative one percent rate of return on 13 percent of their payroll taxes basically, do you think they’re going to continue to support the program?We should provide future seniors with the choice of having a personal account, like I have as a Federal employee, as a Member of Congress. It’s not privatized. It’s managed by the government in safe index funds. It harnesses the power of compound interest so they grow their money at five or six percent a year instead of negative one percent a year. They get better benefits. It’s a nest egg they own and control. It is their property.

My dad died when I was a kid. My mom got his Social Security benefits. She had to forego all those taxes she paid when she worked as a lab technician in Milwaukee. She lost that because it went back to the government. So there are inequities in the system right now and I think that can be fixed with personal accounts. If you don’t like them and you don’t want them, then don’t have it. I just think it ought to be an additional voluntary option, but it is not necessary to actuarially solve this problem. I personally think it’s preferential for younger people to have the option so they get a better deal, so they get a better benefit, so that we don’t consign them to a miserable rate of return.



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Free-lance columnist Rex Nelson is the president of Arkansas’ Independent Colleges and Universities. He’s also the author of the Southern Fried blog at rexnelsonsouthernfried. com.

Rex Nelson wrote in the Arkansas Democrat-Gazette on April 2, 2011 a great article called “Arkansas Bucket List.” The readers of his blog http://www.rexnelsonsouthernfried.com came up with a list of things you must do at least once in your life to be considered a well-rounded Arkansan. Nelson asked others to add their suggestions at his website. I am going through the list slowly.

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1.  Sit in a deer stand on a frosty November morning in the middle of the pine woods of Dallas County. Afterward, go to lunch at Klappenbach Bakery in Fordyce.

2.Try to eat a full tamale spread at McClard’s in Hot Springs. (I love the BBQ at McClard’s but I have heard a lot about their tamales and will try them next time.)

My sons Wilson and Hunter visited Yosemite National Park with Sherwood Haisty Jr. March 21 to March 27th.

This is the inside of a tree below. Wilson on left. 

By Everette Hatcher III | Comments (0)

Paul Ryan on Social Security Reform (Part 1)

April 5, 2011 – 6:34 am

 

My sons Wilson  and Hunter  (on left) went to California and visited Yosemite National Park with our friend Sherwood Haisty Jr. (Sherwood on right) They were there from March 21 to March 27. Here you can see all the snow they had to deal with.

In his article “Harry let us down,” (Arkansas News Bureau, April 4, 2011) John Brummett observes:

The liberal is correct when he says Social Security is a separate insurance program that is solvent.

How can Brummett make that statement in light of the facts below?

Below are some details about Congressman Ryan’s views on Social Security Reform:

Congressman Paul Ryan continues his efforts to advance an adult conversation on the urgent need to protect Social Security for current and future generations. Ryan’s efforts were met — again — with false attacks earlier today on CNN’s Situation Room in a spirited exchange with Rep. Debbie Wasserman Schultz. By pushing desperate demagoguery and no solutions, leading Democrats threaten to shred the critical social safety net as our crushing burden of debt explodes and our critical health and retirement security programs collapse.

Facts on Social Security and Ryan’s Roadmap

Should politicians continue to cling to the unsustainable status quo, Social Security will not be able to meet its promise to our seniors, imposing painful benefit cuts on those most reliant on this critical program. The Social Security Administration continues to warn of across-the-board 22% benefit cuts for seniors in the heart of their retirement when the Trust Fund is exhausted. Social Security continues to run annual cash deficits, with over $5 trillion in unfunded liabilities.

To meet this challenge, Congressman Paul Ryan offered an invitation for solutions — putting forward a specific plan the Congressional Budget Office and the Social Security Administration’s Chief Actuaries confirmed would save Social Security, making it sustainably solvent for current and future generations. Ryan’s legislative proposal — H.R. 4529, A Roadmap for America’s Future — makes no changes to Social Security for those 55 and older, while offering future seniors the same health and retirement security options enjoyed by Members of Congress.

– Ryan’s reforms make no changes in the program for Americans 55 and older, while strengthening Social Security so it will be there for future generations.
– Ryan’s Roadmap secures the social safety net where it is most needed — providing an increased benefit for low-income individuals, while making modest adjustments in the continued growth of benefits for wealthier seniors.
– At the center of the false attacks are Ryan’s proposal to offer future seniors (those now 54 and younger) the option of guaranteed, personal accounts to help fulfill the mission of retirement security.
– Under Ryan’s Roadmap, future beneficiaries would remain in the traditional government-run system, unless they choose to direct a portion of their payroll taxes to guaranteed personal accounts, owned by the individual, managed by the Social Security Administration, and guaranteed by the Federal government. Neither the traditional system or optional accounts system would be privatized.
– In the personal-accounts system, the accounts are managed and overseen by Social Security Administration – not a stockbroker or private investment firm. Those choosing the personal-accounts option would select from a handful of low-risk, government-regulated options — just as Members of Congress and Federal employees do with the Thrift Savings Plan.
– Ryan’s Roadmap includes a fully-financed, government-backed guarantee so that individuals would get back, at minimum, every dime contributed to the optional, Social Security-managed accounts offered to those now 54 and younger.

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Free-lance columnist Rex Nelson is the president of Arkansas’ Independent Colleges and Universities. He’s also the author of the Southern Fried blog at rexnelsonsouthernfried. com.

Rex Nelson wrote in the Arkansas Democrat-Gazette on April 2, 2011 a great article called “Arkansas Bucket List.” The readers of his blog http://www.rexnelsonsouthernfried.com came up with a list of things you must do at least once in your life to be considered a well-rounded Arkansan. Nelson asked others to add their suggestions at his website. I am going through the list slowly.

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1. Wait in line for a seat at the Venesian Inn in Tontitown following a Razorback football game.
2. Visit the Lakeport Plantation near Lake Village and then have supper at the Cow Pen just before driving over the new Mississippi River bridge. (I have always been amazed at the structure of the bridges going over the lower Mississippi River. Did you know that the first bridge built over the lower Mississippi River is still in use in Memphis. It was built in 1892 and at the time it was used for horse and buggy and pedestrians and when a train would come by then the people and the horses would get off and make way for the train to go over. )
3. Head to Wye Mountain west of Little Rock when the jonquils are in bloom. (One of the prettiest sites I have ever seen.)

 

Japanese authorities have established a temporary radiation cleaning shelter in Nihonmatsu, Fukushima Prefecture. Japan’s Emperor Akihito has delivereda rare address to a jittery nation in dread of nuclear catastrophe as millions struggled in desperate conditions after quake and tsunami disasters.

Japanese emperor addresses nation

My sons Wilson  and Hunter  (on right) went to California and visited Yosemite National Park with our friend Sherwood Haisty Jr. (Sherwood on left) They were there from March 21 to March 27. 

By Everette Hatcher III | Comments (1)

Brummett:Social Security is solvent (part 2)

April 4, 2011 – 1:57 pm

Senator John Boozman campaigning at Grady Fish Fry in August of 201o. Here seen with Sherwood Haisty Jr.

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My sons Wilson (on right) and Hunter   went to California and visited Yosemite National Park with our friend Sherwood Haisty Jr. (Sherwood on left) They were there from March 21 to March 27.

In his article “Harry let us down,” (Arkansas News Bureau, April 4, 2011) John Brummett observes:

If you want to start an argument between a liberal and a conservative, you need only open for discussion the question of whether Social Security is part of our federal deficit and debt.

I have been in the median on this issue and can tell you there is danger there from flying debris.

The heck of it is that both sides are absolutely right. Social Security is not part of our debt and deficit problem. And it is.

The liberal is correct when he says Social Security is a separate insurance program that is solvent. Alas, Senate Majority Leader Harry Reid let us down in this regard the other day.

He spoke the truth that Social Security is fine. Then he declared with the liberal’s harmfully stubborn polarization that he wanted Social Security left alone in the ongoing debt and deficit discussions and that he would worry about it in a couple of decades (when he would be in his 90s.)

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I have to differ with Brummett concerning the condition of Social Security right now. Everything is not “fine.”

David John of the Heritage Foundation in his article “Guaranteed 22 Percent Benefit Cuts If Social Security is Taken off the Table,” clarifies the real world situation that Social Security is in:

Groups such as Social Security Works and MoveOn.org claim that Social Security is “fully funded.” But MoveOn.org then notes that “after 2037, it’ll still be able to pay out 75% of scheduled benefits—and again without any changes”[3] without noting the real implications of its argument. Moreover, their numbers are wrong—the Social Security Administration says that after 2037, the program will be able to pay 78 percent of promised benefits. Social Security Works makes the same argument[4] (and also uses the wrong numbers). However, the truth is that, while Social Security may have a legal claim on assets in the trust fund to pay full benefits until 2037, after that come the inevitable across-the-board benefit cuts.

And “fully funded” is an interesting phrase. For instance, MoveOn.org claims that “the Social Security Trust Fund isn’t full of IOUs, it’s full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.”[5]

Technically, that is correct, but as Bill Clinton’s Office of Management and Budget noted back in 2000, “These balances are available to finance future benefit payments … only in a bookkeeping sense. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits, or other expenditures.”[6]

In short, the excess Social Security money was spent years ago on everything from schools to aircraft carriers to bureaucrats’ salaries, and it is now gone.[7] There is no huge warehouse full of dollar bills just waiting for Social Security to start sending out bundles of cash to future retirees. Those bonds will be paid back, but as Bill Clinton’s OMB noted, the money will come from raising taxes, cutting spending of some sort, or borrowing yet more money.

This repayment mechanism also shows that MoveOn.org’s contention that “by law, Social Security funds are separate from the budget, and it must pay its own way … [meaning] that Social Security can’t add one penny to the deficit”[8] is less than fully accurate. It is true that Social Security has its own funding (at least until 2037), but that funding relies on the government repaying the bonds in the trust fund—an action that will require hundreds of billions of dollars of additional taxes or borrowing each year.

If those bonds are repaid by borrowing, that action would increase the deficit. Unfortunately, those payments have already started: Social Security is expected to run a $41 billion deficit in 2010, a smaller deficit next year, and permanent annual deficits starting in 2015.

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Grady Fish Fry

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Free-lance columnist Rex Nelson is the president of Arkansas’ Independent Colleges and Universities. He’s also the author of the Southern Fried blog at rexnelsonsouthernfried. com.

Rex Nelson wrote in the Arkansas Democrat-Gazette on April 2, 2011 a great article called “Arkansas Bucket List.” The readers of his blog http://www.rexnelsonsouthernfried.com came up with a list of things you must do at least once in your life to be considered a well-rounded Arkansan. Nelson asked others to add their suggestions at his website. I am going through the list slowly.

1. Make it a point to be in the Hardin pecan grove on the third Thursday in August for the Grady Fish Fry. Dance to the prison band.

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I had the opportunity for the first time in my life to attend the Grady Fish Fry for the first time. I saw Rex Nelson there and introduced him to my good friend Sherwood Haisty. The article below was written as a result.

Mr. Haisty’s son Sherwood Jr. has known our family since 1984 when he moved from Grady, Arkansas to Little Rock after graduating from high school. In 1996 Sherwood moved to Memphis to finish his college education and to get a degree from Mid-America Baptist Theological Seminary. Currently he is working on his Masters Degree at the Masters Seminary in the LA area.(Below you can see Sherwood during the Question and Answer time with a former muslim who is now an atheist.)

Sherwood joined the First Baptist Church in Little Rock and we have been good friends ever since. Now Sherwood is street preaching at the Santa Monica Promenade every week.

Back to Grady (and other Arkansas favorites)

At the first of every year, I mark the annual Grady Lions Club Catfish Supper on my calendar.

It’s always the third Thursday in August. Always.

It’s always in the Ned Hardin pecan grove.

And it’s almost always hot.

Commonly known as the Grady Fish Fry, it’s among my favorite annual events. I’ve written about it before.

In an election year, the politicians flock to Grady. Among congressional and statewide officeholders and candidates, I saw Sen. Blanche Lincoln, Sen. Mark Pryor, Rep. John Boozman, Jim Keet, Shane Broadway, Mark Darr and Beth Anne Rankin there last night.

There likely were others who left before I arrived or maybe I just just missed seeing them. The event begins at 4 p.m. and ends at 8 p.m. As I said in a post at this time last year, the Grady Fish Fry marks the unofficial end of summer for me. Bring on football season.

I also mentioned last year (but must mention again) what is perhaps the most fascinating contraption in the state — the famed Grady hushpuppy machine, constructed decades ago from pieces of equipment found on area farms. One after another, the huspuppies come out of the machine and are put into the hot grease. If they ever stop using it, it should be donated to the Smithsonian as an example of American ingenuity.

I had a great visit last night with Sherwood Haisty, 85, a Lions Club member who has been a part of 40 of the 55 fish fries. He told me how the members of the Lions Club once worked for days in the hot sun setting up tables, bringing in the products, etc.

Then somebody had the bright idea of asking the Arkansas Department of Correction for help. For years now, it has been a mutually beneficial relationship.

For the Lions Club members, there’s a captive workforce, if you will.

For those who work at the nearby state prisons, there’s a carrot they can dangle in front of inmates – in exchange for good behavior, you can get out for one night and receive a great meal in the process.

Those men from around Arkansas in their white prison garb who are handing out slices of watermelon, filling glasses of iced tea and cleaning off the tables are now just as much a part of the event as the giant pecan trees in the Hardin grove. And the prison band sounded better than ever last night. The lead vocalist has true talent.

Think about it. There are politicians shaking hands. Inmates wearing white and guards wearing blue. A pecan orchard. People cooling themselves with the funeral home-style fans handed out by the politicians. Catfish. Hushpuppies. Watermelon. It just doesn’t get more Southern. It’s like something out of a movie.

Sadly, as the population of rural southeast Arkansas grows older and smaller, we lose members of the Lions Club each year. Rev. Clyde Venable passed away in 2009. Earlier this year, charter members Bill Blankenship and R.C. Johnson died.

Hopefully, there’s some young blood in the area to keep this landmark event going.

A lot of people help out. Hardin Farms supplies the watermelons. Simmons First supplies the plates. St. Michaels Farms supplies catfish. I could go on and on.

Money raised from this annual event (it’s $12 each for all you can eat) allows the Grady Lions Club to provide college scholarships, pay for eye exams and pay for glasses for those who could not otherwise afford them.

The fact that I’ve attended the Grady Fish Fry for almost 20 consecutive years got me to thinking about favorite places and activities in our state, many of which I’ve written about on this blog before.

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Grady Fish Fry August 2010

I got a chance this year to eat with Mark Darr who had lost about 80 lbs before the Fish Fry this year. I commented to him about all that weight he lost and he said he did it in order to enjoy this fish!!

All the politicans come by your table while you are eating and they tell you that they hate to stop you while you are enjoying that good meal but they wanted to just say hi.

It is always a good time.

My sons Wilson (on left) and Hunter   (on right) went to California and visited Yosemite National Park with our friend Sherwood Haisty Jr.  They were there from March 21 to March 27.

By Everette Hatcher III | Comments (0)

Brummett:Answer on Social Security is to tax the rich more!!!! (Part 1)

April 4, 2011 – 8:08 am

My sons Wilson (on right) and Hunter (on left) went to California and visited Yosemite National Park with our friend Sherwood Haisty Jr. March 21-27. Here they are standing in front of the tallest waterfall in North America

President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate and envy is fundamentally misguided. For more information please visit our web page: www.freedomandprosperity.org.

In his article “Harry let us down,” (Arkansas News Bureau, April 4, 2011) John Brummett asserts:

If you want to start an argument between a liberal and a conservative, you need only open for discussion the question of whether Social Security is part of our federal deficit and debt.

I have been in the median on this issue and can tell you there is danger there from flying debris.

The heck of it is that both sides are absolutely right. Social Security is not part of our debt and deficit problem. And it is…

That is to say you reduce the budget deficit on its own terms with spending reductions and tax increases. And it is to say you concurrently make adjustments now to attend responsibly to Social Security’s longer-term sufficiency. The first simple fix: You tax income in excess of $106,000 for Social Security.

In the article “Can the rich save Social Security,” (USA Today, May 31, 2005) the concluding paragraphs make these observations concerning the same solution that Brummett suggests:

David John, a Social Security expert for the conservative Heritage Foundation in Washington  says denying the affluent benefits for added contributions would be a mistake. “That makes it a welfare program,” he says. “It requires abandoning the idea that Social Security benefits are tied to the contributions,” he says.

Liberals take an even harder line at denying benefits to the rich, saying the system should be considered a pension program. “It’s a breach of faith to make the wealthy pay and get nothing in return,” says Michael Ettlinger, director of economic analysis at the liberal Economic Policy Institute.

The idea that rich and poor are treated alike in retirement programs is so central that Kennedy tried to block the Medicare prescription drug benefit in 2003 because it charged the rich more than the poor. “Hold on to your hat,” he declared. “Today, Medicare. Tomorrow, Social Security.”

 “It’s the strangest thing,” says Bruce Josten, chief lobbyist for the American Chamber of Commerce and a supporter of cutting benefits for the affluent. “I (mention) cutting benefits for the wealthy everywhere I go, and I can’t find anyone willing to buy the argument — not politicians or even well-off people themselves.”

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Free-lance columnist Rex Nelson is the president of Arkansas’ Independent Colleges and Universities. He’s also the author of the Southern Fried blog at rexnelsonsouthernfried. com.

Rex Nelson wrote in the Arkansas Democrat-Gazette on April 2, 2011 a great article called “Arkansas Bucket List.” The readers of his blog http://www.rexnelsonsouthernfried.com came up with a list of things you must do at least once in your life to be considered a well-rounded Arkansan. Nelson asked others to add their suggestions at his website. I am going through the list slowly.

1. Attend the Gillett Coon Supper and actually eat the coon. (I have been thinking about going to this. I hear that all the politicans show up and I wonder if they eat the coon.)

2.  If you’re a man, attend the Slovak Oyster Supper. No women allowed. Buy some raffle tickets while there.

 

By Everette Hatcher III | Comments (0)

Will Senator Pryor be re-elected or not? (Part 3)

March 9, 2011 – 8:00 am

Michael Tanner, a senior fellow at the CATO institute, explains that the rate of return on social security will be much lower for todays youth.

Steve Brawner wrote in his article “Tiptoeing toward the third rail,” (Arkansas News Bureau, Jan 9,):

Social Security has long been considered the “third rail” for American politicians, meaning it’s like the electrified third rail that powers a train and lies alongside the tracks: touch it, and you die.

Tuesday, Sen. Mark Pryor tiptoed toward it.

Pryor was speaking to the Little Rock Rotary Club when, according to a report by Arkansas News Bureau writer John Lyon, he said this: “We have to take a hard look at entitlement programs, including the sacred cows of Medicare and Social Security, and admit that we cannot bring our spending into balance without changes in these programs.”

He went on to say, “The (deficit) problem is real. The solution will be painful. There is no easy way out. Everything must be on the table.”

Thinking people in Washington, and I like to think that’s most of them, know that what Pryor said is true, but they also are afraid that telling that truth is the equivalent of stepping on that third rail. That’s because Medicare and Social Security are popular programs that directly benefit seniors, the age cohort that most often votes. And of course, most of the rest of us expect to be seniors someday.

But you can’t balance the budget without doing something about Social Security and Medicare because those programs are becoming so big and are growing so fast. Along with Medicaid, they already take up more than 40 percent of the federal budget. That percentage will grow much, much higher as the baby boomers age. According to the recently released report of the bipartisan National Commission on Fiscal Responsibility and Reform, by 2025 — that’s 15 years from now — projected government revenues will be sufficient only for Medicare, Social Security, Medicaid and interest payments on the national debt.

That means if we want to have a military, or a border patrol, or interstate highways, we’ll have to pay much higher taxes and continue borrowing, probably extensively from China…

Pryor knows he is fortunate not to have been on the ballot this year. Were that so, he might very well have lost despite his pragmatic record, general likability, and last name. And he knows that what he said to the Little Rock Rotary Club will be used against him when he runs for re-election in 2014.

I have already pointed out reasons that Pryor’s re-election bid may be in trouble:

1. He has been hypocritical about the appointment of Federal Judges.

2. Southern states have almost completely moved away from Democrats. (Jason Tolbert actually made this observation concerning a poll in Arkansas showing that voters for the first time in history were “inclined to vote for the Republican versus the Democrat in a race when considering only party identification.”)

3. Pryor’s statement that it must take 10 to 20 years to balance the budget is not the reality we must face. We can do it in 5 years just by freezing our current level of spending.

4. Pryor has not listened to the people of Arkansas and the polls that indicate that they opposed Obamacare, and he teamed up with the liberal Democrats to force it through the Senate even after Scott Brown was elected.

Now Brawner praises Pryor for saying that Social Security is on the table. I am encouraged by that too. However, we must move to privatize Social Security or it will fail. There is no way around this economic reality. Thirty countries have moved in this direction and the results have been outstanding. Chile did this in 1980 and now they are reaping the benefits.

Will Mark Pryor get re-elected? I don’t think he will unless he thinks outside his Democratic box on issues like Social Security Reform. Brawner is right to bring up the issue of the baby boomers. The current system we have will only get worse as the baby boomers born in 1946 to 1964 continnue to apply for Social Security benefits.

It is ironic that Max Brantley and John Brummett think the reddening of Pryor is a bad thing (“The reddening of Mark Pryor,” Arkansas Times Blog, Nov 30, 2010), but I think it will be the only way he will save his job in a state like Arkansas.

By Everette Hatcher III | Also posted in Jason Tolbert | Comments (0)

Brantley: Proponents of Social Security Privatization know they are dooming system (Social Security Part 6)

January 31, 2011 – 7:53 am

HALT:HaltingArkansasLiberalswithTruth.com

In 2003 José Piñera, President of the International Center for Pension Reform and Distinguished Senior Fellow of the Cato Institute, gave this conference warning the upcoming crisis of the west. For more information about José Piñera’s ideas and Pension Reform visit http://www.josepinera.com or http://www.pensionreform.org

Social Security Series Part 6

Max Brantley on his Arkansas Times blog on Sept 3, 2010 wrote concerning Social Security privatization efforts, “Allowing such individual investment decisions would be the doom of the system as we know it and those who favor the approach know it full well.”

I would counter Mr. Brantley with two pieces of information. First, the path we are on is unsustainable. The video clip rightly points out that the unfunded liabilities of “pay as you go state run pension systems are enormous” and they are “a time bomb” as  José Piñera notes in the above video in 2003. He said of Europe: “I am astonished that the political leadership of Europe does not understand the seriousness of this threat. It is a time bomb. The unfunded liabilities of the pay as you go state run pension systems are enormous.”

Basically the USA will be where PIIGGS is today. Portugal, Ireland, Italy, Greece, Great Britain, and Spain are guilty of following down the path of socialism that we are going down. The only difference is that we are about 10 years behind them. Similar results can be expected in the USA that they have now. This forecast of José Piñera was given in 2003.

Second, Proponents of Social Security privatization can cite examples of other countries all over the world privatizing their social security systems and can report much success.

Dan Mitchell of the Cato Institute has observed:

Australia began to implement personal accounts back in the mid-1980s, and the results have been remarkable. The government’s finances are stronger. National saving has increased. But most important, people now can look forward to a safer and more secure retirement. Another great example is Chile, which set up personal accounts in the early 1980s. This interview with Jose Pinera, who designed the Chilean system, is a great summary of why personal accounts are necessary. All told, about 30 nations around the world have set up some form of personal accounts. Even  Sweden, which the left usually wants to mimic,  has partially privatized its Social Security system.

José Piñera in 2003 part 2


By Everette Hatcher III | Also posted in Taxes | Comments (0)

Brummett: Social Security Privatization “very ruination of this vital contract.”(Social Security Series Part 5)

January 28, 2011 – 11:51 am

HALT:HaltingArkansasLiberalswithTruth.com

George Bush discusses his plans to privatize Social Security.

Social Security Series Part 5

John Brummett in his article “Boozman: Superman or Superficial?” (Arkansas Times, Sept 30, 2010) asserted, “that to take money out of Social Security and let individuals risk blowing it with bad investments would invite the very ruination of this vital contract.”

Personal accounts are safer than the current system.

What is the solution to the Social Security problem for young people? Ron Paul addresses this in his Dec 27, 2010 radio address:

Notice that neither political party proposes letting people opt out of Social Security, which exposes the lie that your contributions are set aside and saved. After all, if your contributions are really set aside for your retirement, the money is there earning interest, right? If your money is in your account, what difference would it make if your neighbor chooses not to participate in the program?

The truth of course is that your contributions are not put aside. Social Security is a simple tax. Like all taxes, the money collected is spent immediately as general revenue to fund the federal government. But no administration will admit that Social Security is nothing more than an accounting ledger with no money. You will collect benefits only if future tax revenues remain high. The money you paid into the system is long gone.

My hope is that at least some members of the new Congress will cut through the distortions to see Social Security as it really is. The best way to fix the impending Social Security crisis is also the simplest: Allow younger individuals to opt out of the program and use their tax savings to invest privately as they see fit. This is the true private solution. Your money has never been safe in the government’s hands and it never will be.

Ron Paul has rightly noted that basically Social Security needs to be seen for what it really is. Dan Mitchell of the Cato Institute has rightly noted that Social Security is a “tax and transfer entitlement scheme.”

Below are some figures from a 1995 article by William Shipman of the Cato Institute:

Monthly Benefit Comparison of Social Security and the Capital Markets by Date of Birth, Income, and Age of Retirement (1995 Dollars)

[Bar graph omitted. Tabular presentation given.]

Year of Birth:  1930

               Retirement Age 62           Normal Retirement Age
            Low Wage      High Wage        Low Wage     High Wage
___________________________________________________________________

Social
 Security     $439          $929             $551         $1,200

Bonds         $380        $1,341             $574         $2,072

Stocks        $864        $2,614           $1,301         $3,999

Year of Birth:  1950

               Retirement Age 62           Normal Retirement Age
            Low Wage      High Wage        Low Wage     High Wage
___________________________________________________________________

Social
 Security     $468        $1,144              $631        $1,562 

Bonds         $749        $3,194            $1,069        $4,585

Stocks      $1,599        $6,380            $2,490        $9,972

Year of Birth:  1970

               Retirement Age 62           Normal Retirement Age
            Low Wage      High Wage        Low Wage     High Wage
___________________________________________________________________

Social
 Security      $529       $1,315              $769        $1,908

Bonds          $676       $3,268            $1,085        $5,243

Stocks       $1,363       $6,610            $2,419       $11,729

Source: Author’s calculations based on figures in Social Security Administration, Social Security Bulletin, Annual Statistical Supplement, 1994 (Washington: Government Printing Office, 1994); Stocks, Bonds, Bills and Inflation (Chicago: Ibbotson Associates, 1995); and “IFC Investible Index,” International Finance Corporation, Washington, 1995.

By Everette Hatcher III | Also posted in Cato Institute, Taxes | Comments (0)