Social Security privatization

In the AJC Vent today:

The only thing that could have made Bush more unpopular than he is now is if he’d prevailed in investing Social Security funds in the stock market.

This and comments like it have been common lately, and always they miss the point. They seem to assume that all Social Security money would have been in the stock market and all would be lost now.

This is of course wrong. The Bush plan called for a transition to a combination of a government-funded program and personal accounts through partial privatization of the system. A portion (about 1/4) of the mandated "contribution" or "premium" would have gone not into the Government's big pot-o-money with a promise that you'll get something back (probably, maybe if you're lucky) but rather into an account in your name. You'd have gotten a modicum of control over that money, as that portion could have been invested in various managed investment funds similar to the government employees' retirement plan in which the investor can choose between Treasury bills, public and private (corporate) bonds, and stock market funds. The rest of the normal SS taxes would continue to go into Government hands as normal.

The risk-averse could have simply had the money go into T-Bills and been just as "safe" as if there were no accounts. Younger, more savvy, and less risk-averse could place their monies in the stock market, just like anyone can when they fund an IRA or a 401(k). Yes, they could lose money; and yes, they could retire during a downturn where their account might be worth less that it had previously. These are risks that each indivual should be able to chose for themselves.

Wikipedia link says that the Heritage Foundation calculates that a 40-year-old male with an income just under $60,000, will contribute $284,360 in payroll taxes to the Social Security trust fund over his working life, and can expect to receive $2,208 per month in return under the current program and claims that the same 40-year-old male, investing the same $284,360 equally weighted into treasuries and high-grade corporate bonds over his working life, would own a PRA at retirement worth $904,982 which would pay an annuity of up to $7,372 per month (stocks could produce even larger returns, but with commensurate risks).

Aside from the high likelihood of increased rate of return, one big difference would be that the account is your money, not some IOUs the government's file cabinets. If you die, you could leave that money to your heirs. This could have a marked impact in the black community, since currently Social Security essentially transfers money from working black men and women (who die earlier) to older white women who live the longest.

Finally, consider this link explaining how three counties in Texas that provide private Social Security to its employees. USAToday also weighs in on this.

Of course, the SSA has a different view, one that stretches hard to discredit the Galveston plan, especially since they seem to base many of the negatives on what might happen in 2045 and what happens after you've been drawing on your retirement for more than 20 years (in earlier years benefits are higher, often much higher than SSA).

Perhaps most damning "[The Galveston plan does not] provide any redistribution from higher earners to lower earners."

Obama's Language

The left, as exemplified by Obama's own website use words to mean things very different from what I think they mean. Here's a quote:

Obama will ask the wealthiest 2% of families to give back a portion of the tax cuts they have received over the past eight years to ensure we are restoring fairness and returning to fiscal responsibility.

Let's consider that this single sentence uses at least three words differently from what I think they mean.

Let's first consider the phrase "Obama will ask..." This is odd in two different ways. First, assuming this sentence implies a change in the tax code, no one will be asked to do anything. They will comply or face fines and/or imprisonment. Second, if there is to be a change in the tax code, President Obama will not be rendering the bill--his role in legislation of this nature is to sign or veto bills (understanding of course that Harry Reid and Nancy Pelosi will be Obama's puppets in Congress, and that Obama's staff may very well draft the bill; the incestuous nature of executive and legislative branches being controlled by the same party is exposed here as evil, whether it be Democrats or Republicans in charge).

Next, the phrase "give back". This is a favorite phrase among the so-called progressives. When I donate to charity, I am giving. I am not giving back. Giving back implies that I was previously given the thing in question. A fiance' may give back an engagement ring, but my income was earned through hours of hard work and so having a portion of my income forcibly taken from me is definitely not the same as giving something back. Now, I'm not trying to discount someone who feels that they have truly received something, say from their community, and feel that giving something to that community for them represents "giving back". Indeed, I feel that my donations to Clemson University are in a way "giving back", since I attended Clemson on a full scholarship (Alumni Frank J. Jervey Scholarship). But paying taxes is in no way giving back, unless you believe that the government gave me my income in the first place [* more on that later].

Finally, we are told that raising taxes will "restore fairness". All I can say is that I have commented before on the very twisted meaning of the word fair that liberals seem to have when it comes to paying taxes. See Because they can afford it parts I and II. The top 1% pays 39.89% of income taxes collected and 41% of the US population will be outside the federal income tax system, essentially free-loading on on other half becuase they have zero or negative tax liability or do not even file a return.

* Federal budget law defines "tax expenditures" as "revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability." Thus it seems that any income that the government lets you keep, the government considers to be a tax expenditure--they start with assuming they have 100% of your income, then count what they let you keep as something they "spent" (gave to you!).

Fast-food ad ban called for

An article in the AJC this week prompted me to write a letter to the editor. Here's the gist of the article:

A little less “I’m Lovin’ It” could put a significant dent in the problem of childhood obesity, suggests a new study that attempts to measure the effect of TV fast-food ads. A ban on such ads would reduce the number of obese young children by 18 percent and obese older kids by 14 percent, researchers found.

My response was:

Kids are not obese because of fast-food ads. There are zero calories in a TV or radio ad, and unless you eat the paper it's printed on, there are no calories in a newspaper or magazine ad. The calories come from actually eating fast food, and we all understand that young children (who have no money or transportation) are being fed fast food by their parents. The fault, therefore lies entirely on the parents who choose to feed their kids obesity-inducing amounts of fast food and chips, cookies, and unhealthy food at home.

Update: got a call today from AJC verifying permission to run my letter. Looks like I'm published again!

And the pigs come back to the trough, again

House Speaker Nancy Pelosi was meeting with the chief executives of Detroit’s automakers to hear their expected plea for an additional $25 billion in federal loans for future health care payments for retirees.

Those who forget history...doomed

In light of all the largesse being doled out to financial and automotive industries--the bailouts--here's an oldie for you.

Remember the bailout of Chrysler and how that worked out for us? Read this paper. Brief summary:

• Chrysler used the federal government to go bankrupt without actually declaring bankruptcy. They reorganized debt, wrote off debt at 30 cents on the dollar because the Act forced their creditors to do so.
• The bailout simply allowed Chrysler to continue bad management practices. To a degree, the rest of Detroit also continued down the same path thinking that they could get a bailout too if it came to it. If Chrysler had failed, maybe Ford & GM would have realized they had a stinking mess on their hands.
• Chrysler repeated tried to renege on their obligations. When the warrants they issued actually became quite valuable, they protested that paying off the warrants amounted to usury. The asked the government to reduce their interest rate from 1% to 0.5%.
• Salaries for top management were adjusted downward as a part of the deal. But as soon as the 2 year term was over, top executives got retroactive raises, despite the $0.5B loss that year.
• Losses accrued during the Act's period were carried forward, meaning Chrysler's tax bill was basically zero for several more years (during which they had record profits).
• Union's forced concessions were nearly totally restored by 1982.

The Conclusions section speaks for itself:

When the loan guarantee program was being considered by Congress, Chrysler's unions and top management constituted the "visible" constituency, pleading its case in Washington and begging to be pulled back from the jaws of bankruptcy. Unrepresented and unheard was a huge "invisible" constituency. They included:

• Current and future laid-off Ford and General Motors workers, who never understood that their tax dollars were being used to destroy their own jobs in order to save jobs at Chrysler

• Small businessmen and private individuals, who never understood that the Chrysler bail-out would squeeze $1.2 billion out of the credit market, making it difficult and more costly for them to raise business capital or finance a mortgage on a new house, all of which would have created new jobs

• Over 60,000 now laid-off Chrysler workers, who expected the bailout to save their jobs

• American car buyers, who never understood that Ford and General Motors would have taken over much of a bankrupt Chrysler's market and produced cars more efficiently, reducing the cost of domestic automobiles.

The problem with the Chrysler bail-out—in fact, the problem with all "industrial policy"—is that it is necessarily political in nature; the loudest interest groups get the greatest reward, while the scattered and fragmented "invisible constituency" is largely ignored. But a free market is a tangled web of infinite and subtle interaction, in which the full impact of intervention is not always recognized until too late. In the case of the Chrysler bail-out, a big chunk of taxpayer money was committed to a shaky and inappropriate venture. Every American became an involuntary and uncompensated partner in a company whose future is still in doubt. The precedent established is extremely dangerous. On top of this, the bail-out even failed in its purpose.

Police not interested in drunk driver

A personal experience Halloween night.

At about 3AM, we were awakened by some loud noise outside our house. As I wandered around the house to see if there was a break-in attempt or something, I heard a very loud grinding sound in the street. Worried that the noise we heard had been someone trying to steal our utility trailer I ran out the front door and around the side of the house where the trailer was parked. It was still there but I could hear the grinding noise headed up the street. I quickly checked some other things like the gas grill on the back deck, etc. All still present, and I could still hear the noise so I went out to the street.

I could see grooves in the road at the entrance to our neighborhood, where clearly a car dragging something heavy had turned around. I realized that there had to have been some sort of accident and that they had driven away. I figured drunk driver, and was worried as to whether there may be anyone hurt. So I got some pants on and got in my car and drove up the road. I never saw any other evidence, just the grooves in the road. So I decided to follow them in case this idiot did some more stupid things.

The grooves weaved all over the road, in a very circuitous route through neighborhoods and even out onto Roswell Rd (120) for a short stint. Eventually I tracked the grooves all the way to Bonnie Glenn apartments on Power's Ferry Rd where I found a dark 4-door Honda on two tires--the passenger side tires were gone and the rims where ground down to the axle. I took down the license plate number and came home, not wanting to get in any sort of confrontation.

Mrs. Percy dialed the non-emergency number for the police and we described what we had seen, heard and discovered. The police operator repeatedly said that there's nothing to be done since there was no damage to our property (or any property that I had seen) and the car was now parked. I at least made sure to give them the license number and location in case this car might have been involved in a hit-and-run before they drove up in our our neighborhood.

After golf Saturday morning (played horribly again), I decided to go back up the road to see if I could find out how all this started. I walked about 3/4 mile up Old Canton following the grooves backwards hoping to find the origin. What I discovered was that the car had apparently been going north on Old Canton, had tried to turn left into a neighborhood about 100 yds north of Robinson, missed the turn, drove up onto the sidewalk, took out a bush and probably hit a phone pole but not hard enough to do any significant front-end damage.

They backed out of that mess, got back on Old Canton southbound, and quickly managed to run up onto the sidewalk again. The twin rubber stripes on the curb indicated to me that this was where they lost their tires. Now up on the sidewalk, they stay up there for a bit, narrowly avoid a mailbox, then swerved back onto Old Canton Rd using a driveway as a launching point. About 100 more yds south on Old Canton, their tires must have gone down entirely because there's some indicatation that they pulled off the road again. It looks like that's where they got out to check the damage. They had to back-and-forth to get out of the grass and back on the road. Shortly thereafter they tried to do a U-turn using the extra width our neighbohood entrance provided. Of course, they missed, tore up the curb and did more damage to their front rim and narrowly missed hitting a sign pole.

They back off the curb, completed their U-turn and drove off north again, where I tracked them as I described above.

I was glad to find that no other vehicles, people, or even animals seemed to have been involved. But I was disappointed that the police were not more interested, but I guess that there's no way to prove who was actually driving the car and unless there had been someone else involved then there's nothing much to be done. And the idiot has done about $1000 damage to his car and I doubt the insurance company will be paying anything.

Other bailouts continue

Non-banks like GMAC are trying to requalify their organization as a true bank so that they can get in line for the "free money".

Also a plan for credit-card companies to get taxpayer money to cover credit card balances of people in default.

Automakers want their $25B handout to be sweetened by having taxpayers cover bad car loans.

Student loans had already been targeted for bailout. But that got expanded.