Thompson Talks About Social Security
Written by Sam on October 7th, 2007Former Sen. Fred Thompson promised fiscal conservatives Friday that he’d trim the cost of government by slowing the growth of Social Security benefits. Stepping squarely onto an issue long known as “the third rail of politics,” the Republican presidential candidate said, almost in passing, that changing the formula that adjusts Social Security benefits to keep pace with the cost of living would keep the program solvent over the long term.
While he wasn’t specific, numerous academic studies have concluded that the only way such a plan could work is if it slashes future Social Security benefits by one-fourth to one-half below what’s promised under current law.
“We could have the same level of Social Security benefits, for example, and adjust the cost of living increases to cover inflation,” Thompson told the Americans for Prosperity Foundation convention, and that “would solve the problem for probably 75 years.”
Something has to be done soon, that is certain. I don’t really know that reducing the current benefits is the right way to go, but it might be a start. Personally, I think they need to start making the case about privatizing Social Security again. It will lead to a far better return to our money and eventually do away with the current system which is a 1930s system trying to work in the 21st century. It simply can’t and it won’t. The Democrats flat out lied to the American people about what privatization would do and as usual the GOP spinelessly retreated on the issue with virtually no fighting back at all.
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It seems to me that privatization, while being a great idea, is a long-term solution that basically helps with forcing the government to put actual trust fund money into a trust fund rather than spending it. It may cause short-term problems!
Ultimately, you have three basic choices on Social Security: 1) decrease benefits, 2) raise the retirement age, 3) increase taxes.
The privatization would allow for decreasing benefits. I have not heard the retirement age being brought into the discussion. No one wants to talk about increasing taxes, but I believe Obama has floated that idea. Clinton has said that her solution would not include any of the three, which is not possible.
Fred is the only person I have heard that has taken a realistic stand on what has to be done to keep it solvent.
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Amen Sam. The Dems lied about SS privatization, and the republicans didnt do or say jack. The same problem we are having now.
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The privatization thing is a scam and a political ploy. If you think about the basic economics of it, it makes no sense.
People consume OUTPUT, not money. If I come up with a way to increase the nominal return on monetary assets but there is no improvement in the level of output, there will be no improvement in standard of living. What improves standard of living is to increase output in future generations. Shuffling money between public and private accounts doesn’t do this.
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Publius, how can you be wrong about so many things at one time? It is really impressive.
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Nice, substantive response as usual. When you explain to me how people can be better off if the level of output in the economy does not increase, then I’ll be happy to listen.
As a side-note, I agree that social security is unsustainable (obviously), and think that the whole thing should be scrapped and turned into a welfare program for old people. I don’t want starving old people, but people who don’t need it shouldn’t collect it.
Shuffling money between private and public accounts does absolutely zero.
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Publius, I think what you are missing is that Privatization means investing in economies outside our own. It is investing in those economies that ARE growing and having increasing OUTPUT as you say that makes the difference.
The SSTF is a captive investor that is limited to the Treasury IOUs as its investment vehicle. That isn’t an appropriate investment vehicle for people with longer time horizons that can stand more risk.
Not only should Private accounts be set up, but the Treasury should refinance those IOUs sitting in the SSTF by selling new tax-free 10 and 30-year bonds to people that want that safe investment. Use the proceeds to pay off the $2.2T in SSTF IOUs. Then the SSTF should be managed like any other pension fund — invested in the open markets and returning a 10% ROI instead of the 5.2% average of the IOUs it is holding. Ten years from now, when the surpluses disappear, the SSTF would be holding $6T liquid assets instead of the $4T in IOUs that the current system expects.
In combination with pegging benefit increases to cpi inflation instead of wage inflation, SS would be solvent literally forever.