Over the Top February 11, 2005February 28, 2017 HOW OVER THE TOP IS THIS? So this guy walks into the White House press room under a fake name (Jeff Gannon) and President Bush calls on him for a fake question, and . . . well, I imagine you’ve seen all this by now, perhaps here, in The Daily News (‘his real name was Jim Guckert and he owned various Web sites, including HotMilitaryStud.com, MilitaryEscorts.com and MilitaryEscortsM4M.com’) or here, in Salon. (‘. . . How can a reporter using a fake name and working for a fake news organization get press credentials from the White House, let alone curry enough favor with the notoriously disciplined Bush administration to get picked by the president in order to ask fake questions?’) HOW OVER THE TOP IS THIS? This flash video is offensive and over the top, but worth watching to decide where you think it goes too far and by how much. Some believe we are in, or at least approaching, the foothills of fascism. Others would be appalled at that notion. But for the same reason it is appalling – such a notion is unthinkable in America – they should watch this video, just to be sure it will always remain unthinkable. Have a great weekend. (Go, Green Bay!)
Dean LeBaron’s View February 10, 2005February 28, 2017 MORE Warren Spieker: ‘I must respond to Jon R. who writes in today’s column ‘…the system is taking in more money than it needs to pay benefits. End of story.’ This may be the end of the story for Jon, but, as a young worker, it isn’t for me. The CBO (neutral third party) has stated that without changes the system will be out of funds somewhere around 2042-2052.’ ☞ Yes! But at that point, with two workers for each retiree, the CBO estimates you will get 75% or so of the promised benefit. (More than the ‘two-thirds’ you might intuitively expect with two workers instead of three, but remember that with three we currently overshoot the needs by $200 billion a year.) So the system will be out of excess funds in 40 or 50 years, but even if we did nothing – and I do think some small tweaks should be made now to fix the eventual shortfall – you would still get 75% of what’s been promised. And many believe that 75% of this promised amount will likely be more than 100% of what retirees get today. If we do nothing! (The reason 75% of the promised amount may be more than what retirees get today – even after allowing for inflation-is that initial benefits are tied to wage inflation, which is commonly expected to outpace the cost of living – though I worry it may not.) No one should fall for the scare tactics. In my view, today’s young workers should demand fiscal responsibility from their government (no huge tax cuts for the rich in the midst of a war, when we’re running deficits and having to take cops off the street) . . . they should embrace the current system (slightly tweaked) both as their way of helping the parents and grandparents who raised them (it’s part of life’s bargain), but also as a bare bones safety net that they, too, will benefit from someday . . . they should rejoice that the retirement system in America is already largely privatized (IRAs, SEPs, SIMPLEs, Keogh Plans, 401Ks, 403Bs) . . . and they should absolutely contribute to those private accounts, because if they don’t, they’ll have only Social Security to retire on, and as any retiree will tell you, if that’s all you’ve got, it’s a tough life. DEAN LeBARON He’s not a dean, his name is Dean, and he was so successful growing the money under his management back in the old days that, if I remember right, he heated his New England driveway to avoid having to dig out from the snow. Click here for his important world view. (Thanks, James Karn.) It might persuade you to internationalize your portfolio a bit.
We Could Borrow Another $150 Trillion February 9, 2005January 19, 2017 I OVERSHOT Jon Frater: ‘According to Globalsecurity.org, the U.S. spends $466 billion per year on defense, compared with the $500 billion per year the rest of the world spends (combined). It’s not as dramatic as twice or ten times, but heck, ‘almost as must as the rest of the world combined’ is a helluva talking point just the same. ☞ I’m surprised and stand corrected. But as you say, that 5% of the world’s inhabitants spend about as much as the other 95% combined may still make a point. WHICH NESTS FOR THE EGGS Dennis Gallagher: ‘Assuming you are able to contribute to both 401Ks and the Roth IRA, is it not better to max out the 401K before simply investing in a mutual fund or other instrument? If one is in, for instance, the 28% tax bracket, is not the 28% tax savings on this marginal income greater than the expected tax in retirement?’ ☞ First the employer-matched portion of your 401K. (It’s free money!) Then the Roth IRA. (No taxes at withdrawal, ever!) And then – if I have it right – your question is which should come next: additional contributions to your 401K not matched by your employer . . . or unsheltered investments? I’d go for the non-sheltered because (a) you have more control over the money (don’t have to wait to age 59.5, can take tax losses to lower your income tax); (b) you avoid the 401K’s likely higher fees; (c) the capital gains and dividends tax rates may well be lower than your ordinary income rate at the time of withdrawal; (d) to the extent you invest for the long-term in tax-efficient funds, much of the appreciation would be sheltered from tax anyway; (e) in this example, you already have lots of dough tied up in untouchable 401Ks and Roth IRAs – so why not keep some funds accessible? Others might reasonably argue that (a) they WANT the discipline that the 401K’s inflexibility provides; (b) they have decades to go until retirement, so putting to work for them the 28% of their wages that would otherwise be immediately taxed is well worth the eventual ordinary income tax that will be paid on withdrawals. To each his own. The big picture here is that either choice is fine, because either one presumes you are saving a lot of money for retirement. That’s good for you and good for America. (We don’t save enough.) MORE OF YOUR THOUGHTS ON SOCIAL SECURITY Michael Cain: ‘In your response to Bruce Foerster, I was surprised that you didn’t point out that he would not be able to invest all of his Social Security taxes – first he would have to subtract out the premiums for a similar long-term disability insurance policy. Done through Social Security, the disability insurance is currently 0.94% of the 6.2% employee tax rate (same fraction for the employer), reducing the funds available for investment by 15%. He would probably still come out ahead on the investments, but not by nearly so much. On top of that, I’m not sure if you could even buy private disability insurance that looks like the SSDI benefit – a lifetime benefit if you are never able to return to work, indexed to inflation. I suspect that if you could find a comparable private policy, the premiums would amount to more than 1% of earnings.’ ☞ A lot of you found chinks in Bruce’s calculations. But the larger point is: the money we pay in is not, mainly, to be invested for our retirement, it is money for our grandmothers. Our bare-bones retirement safety net will be funded mainly by tomorrow’s workers. Only minor adjustments are required to make this work out okay. Jon R: ‘Call me crazy, but is it asking too much for the fourth estate (you know the famed ‘liberal media’) to challenge a president who continually repeats the mantra that Social Security is going to go ‘bankrupt’ or ‘broke?’ In my opinion, there are only two plausible explanations for such a blatant misrepresentation of the state of SS’s finances: (a) The president is lying. Or (b) the president doesn’t understand how Social Security works. If either case is correct, does this position the president as someone from whom we should be taking recommendations for fixing Social Security? What on Earth does the repeated nonsense about 16 workers per retiree in 1950 have to do with Social Security’s current situation? Right now we know that with a ratio of 3 workers to 1 retiree and the current SS tax rates, the system is taking in more money than it needs to pay benefits. End of story.’ Sal Castaneda: ‘There are no Social Security surpluses!!!!!! All of that money has already been spent!!! That money will have to come from somewhere, either raising taxes or borrowing. Any suggestions?’ ☞ If U.S. Treasury bonds are worthless, we’re in big trouble. That’s what the surplus is invested in – and in addition to the Trust Fund’s $1.8 trillion worth (if memory serves), Uncle Sam owes $6 trillion to others. I think we have to assume the U.S. will not default. It’s not unreasonable for a great nation to support a National Debt. Indeed, if our economy grew 5% a year for the next 75 years (half from inflation, half from real growth), our current nearly $8 trillion National Debt could go $300 trillion deeper into the hole and still be no larger, relative to our economy, than the 70% or so it is today. (I would prefer to see it at 35% or 40%, but even that would allow us to borrow another $150 trillion over 75 years under these assumptions.) The problem is that, with the $700 or $800 or $900 billion budget deficit we’re running – see yesterday’s column – we are growing the Debt much faster than the economy. To avoid default – or even just severe economic pain – we need to get back to much more nearly balanced budgets of the type Clinton/Gore were running. Instead, Bush seems to determined to keep cutting taxes on the rich – e.g., cutting the estate tax on billionaires from what was a 55% rate down to zero – and making the problem worse. Paul Kroger: ‘There are so many different reasons that W’s social security scam is flawed, but here is the best (if not the simplest) explanation of the real problem with social security (Bill Gross, of course).’
$900 Billion – for a CROWN? (And When a 401(k) Is Not So Great) February 8, 2005February 28, 2017 So the budget is in, being reported as a $427 billion deficit when it is really $627 billion (because we are not only spending $427 billion more than we are taking in, we are also borrowing this year’s $200 billion surplus from the Social Security Trust Fund) . . .and it is really more than $627 billion because the budget apparently does not fully include the cost of the war in Iraq. Nor does it include the hit we would take servicing our $8 trillion debt if interest rates rose. (An extra 1% may not seem like much to you, but on $8 trillion it costs $80 billion.) So maybe it’s a $700 billion deficit. Or $800 billion if we get unlucky. (Or $900 billion if we start borrowing to fund privatized Social Security accounts.) And that begins to be real money. Even so, it’s billed as a tough, $2.5 trillion budget. Standing firm, not one penny of the tax-cuts-for-the-rich will be rolled back. Tapping the rich is not an option. But 96% of the funding for Clinton’s 100,000 extra cops on the beat is being cut, along with funding for Head Start for the kids and Medicaid for the poor. It’s what Jesus would have done. Ultimately, of course, most of these 150 programs won’t be cut. And the cuts amount to only $20 billion in the context of a $627 billion deficit anyway – nothing. The real way to cut the deficit in half is to: Roll back the tax cut on that portion of your income (but only that portion) that exceeds some livable floor like $200,000 (admit it: in a pinch, in wartime, you could find a way to get by on $200,000 a year). Find a way to arrange our foreign policy so that our military budget need not exceed the military budgets of the entire rest of the world combined by a factor of . . . drum roll(I’m just guessing here and hope one of you will send in the accurate figure) . . . four. YOUR RETIREMENT DOLLARS Joel: “Kotlikoff and Burns (in The Coming Generational Storm, and in a recent Consumer Reports article) argue strongly against contributing to 401k or 403b accounts beyond the amount matched. Their main reason: increased taxation of Social Security benefits for middle-income folks due to their withdrawals from tax-deferred accounts. Assuming that one has the discipline, isn’t it wiser to contribute to tax-deferred accounts only up to the amount matched, and then put the remainder that one would have contributed (less income tax) into a broad stock index fund in a taxable account? Since most of the gains will be dividends and long-term capital gains, the rate of taxation will be lower than if one had used the tax-deferred account (all withdrawals taxed at full, ordinary income rates)?” ☞ Up to the match, it’s a no-brainer. Take your employer’s money! After that, it depends partly on tax-bracket assumptions and partly on your age (the deferral becomes more valuable the longer you have “the government’s” share of your money working for you). But once you’ve met the employer’s match, I would put the next $4,000 a year into a Roth IRA. BEFORE YOU CROWN YOUR TWO FRONT TEETH Mark the Tooth God (or so I gather from his screen name): “The restoration you received is certain to be great so please don’t read on expecting to have buyers remorse. But the CEREC process your dentist used is not exactly a panacea. I know it sounds great when you have a metal temporary and it takes four visits to get your crown, but here’s just a little bit more info: 1) It’s nice to be able to temporarily cement the crown to be sure the nerve is happy and healthy. With CEREC you can’t do this. The porcelain is too weak to be supported by temporary cement. This can lead to the new crown having to be destroyed if a root canal proves necessary. 2) The fit has improved with this new CEREC 3 model, but the margins (the gap where the restoration meets the tooth) are still only fair. 3) If any of the margins of the crown are below the gum line, the ability to ‘bond’ the CEREC on is greatly hampered: It is difficult to keep that area properly dry under the tissue while you bond it in. 4) While your crown is on Herbie, a tooth pretty far back in the mouth (out of what we call the esthetic zone), the esthetics of CEREC crowns are only fair compared to what a live lab tech can do. The CEREC mills from a monobloc of porcelain. This gives a single homogenous color. Most teeth have multiple shades. If it were a crown on a bicuspid, the CEREC crown is not terribly attractive for most applications. Unfortunately due to the investment made by the dentist, most will use it for nearly all crowns. [Mine said he generally uses it only for the teeth you don’t see. – A.T.] 5) The CAD CAM technology continues to improve. There is a system out there, I believe it is being completed in Israel, that will be on the market in a couple of years which has marginal integrity more like what a lab would make. The CEREC was churning out margins with gaps ranging from 80-100 microns. A really good lab gets it down to 25 microns. The Israeli machine I believe has it down to 10. Bacteria are 8 microns tall, so floss. “All that said, most of the CEREC crowns I see in my practice, even the ones made with the earliest unit, seem to be doing OK. So no buyer’s remorse.”
Ah, Brave New World of Dentistry (And with this ring . . . ) February 7, 2005February 28, 2017 How I cracked half my molar eating a slice of tomato will go down in The Annals of Dental Mystery as its own separate chapter. But when I settled into his chair, my dentist announced that I needed a new crown, which I always modestly accept, being the King of Patience. Because we dental patients know the drill: First visit is for preparing the tooth and making that delicious and oddly cold playdough impression to send to the lab, and for installing the awful ill-shapen and bad-tasting aluminum ‘temporary.’ The following week is for getting that awful biting-the-inside-of-your-cheek deal going. Second visit is for finding out that the lab didn’t make the crown quite right. Third visit is for – ta-da! – successfully fitting the crown and handing over $1,000, give or take, for your regality. No more. Without even bragging, my dentist (who – a little journalistic probing revealed once I was allowed to talk – is just one of 40 out of 7,000 in Florida to have this technology) wheeled over a cart with a control panel and computer screen, displaying the 3D image of my tooth and designing the crown right in front of me, like Leonardo Da Dentist. Then, when it was perfect – get this – he clicked GO and sent the instructions to a milling machine in the backroom, which set about sculpting a small porcelain block into the precise crown that had been specified. Anyone under 30 will know this as ‘CAD/CAM’ – computer-aided design / computer-aided manufacture. But instead of milling the prototype for a new carburetor, they were milling my tooth #14 (which I call Herbie). (As you probably know, your teeth are numbered. You start with the top right wisdom tooth way in the back, which is #1, and go all the way around to #16; then drop down to #17, the wisdom tooth right under #16, and back around to the right. Those of us whose wisdom teeth now hang on leather bands around our necks [to intimidate potential adversaries] count from #2 to #31, skipping #16 and #17. William ‘the Refrigerator’ Perry, who needs nothing around his neck to intimidate, and is available to appear at your next event, seems to be missing #6 thru #11 and #22 thru #27.) Within a second or two of my dentist’s clicking GO, the computer reported that milling would take 17 minutes – the way your browser estimates the length of a download – which gave me time to return some phone calls (‘I’m at the dentist, but I have 13 minutes and 12 seconds left to talk’) and my dentist time to go out for a beer, or whatever dentists do in these circumstances. (Call their brokers, more likely.) In he came 17 minutes later, bing, bang, boom . . . and then . . . after the ritual ‘bite down, chop-chop’ so many of us are familiar with (‘No, it’s still too high,’ you say, ten or twelve consecutive times, feeling increasingly embarrassed and guilty for being so difficult, when, really, what have you done wrong? But what if he keeps drilling deeper and deeper to make the fit and goes all the way through the crown to your nerve or – worse – breaks the crown and you have to start all over again? Could it be you are just being difficult? Or are setting your bite funny because of the Novocain?) . . . it was perfection. A crown in a single visit. To find a dentist near you who’s made the $100,000 investment and taken the training to master this system, click here. (The link’s in the box at lower right.) Despair not if you don’t find one; the listing is incomplete. Your own dentist may be off at CAD/CAM school as we speak. Thank you, Dr. Nassery. WITH THIS CUBIC ZIRCONIUM, I THEE WED ‘Similar to opposite-sex couples, same-sex couples are entitled to the same fundamental right to follow their hearts and publicly commit to a lifetime partnership with the person of their choosing. The recognition that this fundamental right applies equally to same-sex couples cannot legitimately be said to harm anyone.’ – New York State Supreme Court Justice Ling-Cohan, from a 62-page ruling Friday New York Supreme Court, as you may know, sits beneath New York’s Appellate Court (what part of ‘supreme,’ one wonders, did the Empire State founders not understand?), so this thing is just getting started. All of these decisions will ultimately come down to a decision, someday, of the U.S. Supreme Court (unless the Constitution can be amended to exclude gays and lesbians from the equal protection provision). Still, it may be that attitudes are slowly changing. No great harm seems to have befallen the citizenry since Vermont started issuing civil unions or Massachusetts began issuing marriage licenses. The Canadian dollar has actually strengthened against our own since Canada started down the gay-marriage path. So far as I know, the Dutch are doing fine also. It is in society’s interest to encourage loving, committed relationships, and to provide its citizens equal protection under the law. No one should take lightly the concerns of millions of people who, for religious reasons, cannot abide gay marriage. But this has nothing to do with religion. Religions have every right to condemn gay marriage; or, for that matter, to ban women (or men) from their priesthoods, to demand celibacy until marriage, even to advocate – though not to practice, unless it becomes legal – the stoning-to-death of non-virgin brides, as prescribed in the Bible. But church and state should be separate. Rights are not rites. Surely, if those who oppose gay unions on religious grounds prove correct, they will go to heaven. Shouldn’t that be consolation enough?
He Keeps Talking About It, So So Will I February 4, 2005February 28, 2017 But first . . . HOW FAR CAN A CARTOON BUNNY GO? Click here. In part: Just last week, as her first official act, Bush’s new education secretary, Margaret Spellings, an evangelical Christian, launched an attack on the PBS series Postcards From Buster, which stars an 8-year-old cartoon rabbit who travels the country visiting real kids in real-life settings. Spellings blasted ‘Sugartime,’ an episode in which Buster the rabbit visits a Vermont family and their 11-year-old daughter, Emma, to learn about making maple sugar. But Emma has two mommies – Karen Pike and Gillian Pieper, two 40ish women from Hinesburg, Vermont, who were united in a civil union in 2001. And that’s what created trouble. Although lesbianism and civil unions weren’t even mentioned in the episode – which focused entirely on getting sugar from maple trees – the images of a happy kid being raised by two loving parents who both happened to be women were too much for Secretary Spellings, who denounced the show … So what was PBS’s reaction to Spellings’ censorious rant? PBS president Pat Mitchell … capitulated and canceled the Buster episode. And now . . . 3 SIMPLE THINGS TO REMEMBER ABOUT SOCIAL SECURITY It is not in crisis. It would be a good idea to tweak it. Private accounts are not the right tweak. Yes, there were 41 workers for every Social Security recipient when the system was inaugurated compared with just three today . . . headed down to 2 as the baby boomers bulge the number of retirees. But at just three today – down from 41! – Social Security runs a large annual surplus. With just two workers instead of three, the system would be able easily to provide more than two-thirds the benefits it does today. How? Well, first, there would be the money pouring in from the two workers – two-thirds as much as if there were three. If three workers can handle the job with $200 billion to spare, surely two workers can come fairly close – especially with trillions of dollars in accumulated surpluses built up to help get the system past the demographic baby-boom bulge. I’m sure by now you’ve heard the estimates – that even if we do nothing, and even once the surpluses we’ve been accumulating are exhausted, sometime between 2042 and 2052 (depending on which estimates you believe), Social Security will be able to pay benefits equal to about 75% of what has been promised. But not only is 75% not nothing, it is – after allowing for inflation to put it in today’s dollars – actually more than 100% of the modest sums that retirees receive today. Yes, you read that right. This is because what has been promised is not ‘the same kind of Social Security checks people get today, adjusted for the cost of living’ (otherwise known as price inflation) but, rather, something better – starting benefits, at retirement, adjusted for wage inflation, which should be higher. There are good reasons for making that more generous promise, and it should not be lightly abandoned. But if we did nothing, retirees in 2050 and 2060 and 2070 and 2080 could expect to get more than 100% of what they get today, adjusted for inflation. For President Bush to call this a crisis is . . . well, don’t get me started. That said, it would be much better if today’s young workers could expect to receive 100% of what is currently promised rather than just 75%. To make that happen, there are three things we could do, all rotten: raise taxes, cut benefits, extend the retirement age. But by starting now rather than waiting four or five decades . . . and by doing just a tiny bit of all three . . . the pain would be barely noticeable. Here is the sort of thing that would be involved. Judge for yourself: Continue to allow early retirement at 62, but warn today’s kids that, 40 years from now, instead of retiring with full benefits at 67, as currently planned, it would be 68. Drop the 6.2% retirement payroll tax down not to zero on pay above $90,000, as we do now, but to 1%. Use the more generous ‘wage inflation’ formula on the first $30,000 or $40,000 of a worker’s income, but use the less generous ‘cost inflation’ calculation on the rest. If we did these three things, the ‘crisis’ – which is not a crisis – would be over. Or we could fail to do them, in which case today’s young workers would be more strongly advised than ever to save for their retirements, because – although they could expect to get from Social Security more than retirees get today (adjusted for price inflation) – they would get less than the current formula promises (because it promises to adjust their initial benefits for wage inflation). Should we privatize this nation’s retirement system? We already have! The Social Security safety net is already supplemented by trillions of dollars in IRAs, 401Ks, 403Bs, SEPs, SIMPLEs and Keogh Plans. If you don’t have one, set one up! Contribute to it! The irony is that, if we did siphon money out of Social Security for private accounts, as the President insists at every opportunity we must, we would not only weaken the safety net, by diverting money from the Trust Fund, and weaken America, by plunging us yet another trillion or two in debt – we might very well weaken the incentive to save through private accounts. Right? Why set up an IRA or contribute to a 401K, some would surely rationalize, now that I’m saving via this new, partially privatized Social Security system? And there are other reasons not to privatize Social Security, ranging from the administrative cost (setting up and maintaining 200 million new accounts) . . . to the problem of risk (what if the market should crash just as you are retiring?) . . . to the prospect of higher interest rates (if we don’t buy Treasury bonds with the Social Security surplus, the Treasury will need to pay higher interest rates to attract other buyers). Our country does face crises – Iraq . . . terrorism . . . looming Medicare insolvency . . . inadequate education to meet the challenge of foreign competition for our jobs . . . a giant budget deficit.* *The budget deficit, indeed, is not the $427 billion that is reported, but more than $600 billion when you include, as you must, the $200 billion we are borrowing each year from the Social Security surplus. If that is not clear to you – it seems not to be clear to the news media – think of it this way. You and your spouse take in $950 a week in pay plus another $50 a week in dues that your bowling club entrusts you with. You spend $1,000 a week. Uncle Sam would call that a balanced budget and NBC News would dutifully agree. But clearly, you are running a $50 weekly deficit, making up the difference with borrowings from the bowling club. Uncle Sam is running a $600 billion deficit, but calls it $427 billion by not counting the surplus entrusted to it by Social Security. The Social Security retirement system, by contrast to these other much more difficult problems, is neither a crisis nor all that hard to fix.
We Already HAVE Private Accounts February 3, 2005February 28, 2017 Coming soon: The State of the Portfolio ACLU Mike Lynott: ‘I was once invited to speak about the then Soviet Union to my daughter’s high school class. I took a number of books with me and passed them around. At random times during the hour, I asked who held a book (say, Doctor Zhivago, or Cancer Ward). I then explained to that student that if they owned a copy of that book in the USSR they would have been subject to arrest. It was a great lesson and really hit home to the kids.’ GOOGLE RULES It couldn’t have happened to nicer guys. I’m never thrilled losing money, and there’s still a month and some before my March googapuss (Google puts) expire. But with Google profits up eightfold and its shares at 205, my bet against the stock certainly looks like a wipeout. My apologies to any of you who may have taken the same flyer on my account. And yet it’s very hard not to cheer for Google, which has added real magic to our lives, and seems likely to add more. (Which does not mean the stock is a buy here. GOOG seems to be earning money at the rate of about $3 a share per year, so sells at about 70 times annualized earnings. Not cheap.) SOCIAL SECUIRTY Bruce Foerster: ‘I took my latest SS statement, looked up the SS tax rates (excluding Medicare taxes) since 1964, looked up S&P 500 returns since 1964 and deducted .18% for Vanguard expenses, and plugged it all into a spread sheet to see what my SS taxes paid would have grown to if I had invested them in the Vanguard 500 Index fund. Since I am only 58, I assumed I could earn 6% for the next four years until age 62, and would pay no more SS taxes since I am retired. I also assumed all funds were invested in a Roth IRA. The results: At age 62, I would have $607,851. My SS benefit statement says I will receive a projected $18,216 at age 62. With my $607K, I can, at today’s interest rates, buy a life annuity paying $45,048. If I then live on an amount equivalent to SS and increase that by 4% per year, and invest the difference at 5% and pay 15% tax on the earnings, in 30 years I will still have $602,841, and still be drawing $45,048 from the annuity. My SS payment in 30 years would be $56,809 but I would have plenty of investment income from my $602K to make up the difference. Clearly, I would come out well ahead by investing my social security taxes.’ ☞ Of course you would! But: What do you do about the 80 million (?) folks now retired or soon retiring who expect to receive benefits? If you divert worker contributions from retirees to private accounts, you either let lots of old folks starve or else have to come up with the same revenue some other way, such as by borrowing trillions of dollars. If we did shift the Social Security surplus from Treasuries into stocks, who would buy those Treasury securities? How high would we have to raise interest rates to attract investors to roll over our National Debt? What would that higher interest rate mean for the taxpayers who have to shoulder its cost? And for the consumers who would see otherinterest rates rise? What about the administrative cost of setting up and maintaining 200 million new retirement accounts? I totally agree with President Bush: people should invest at least 2% of their income in private retirement accounts. We call these IRAs, Roth IRAs, SEPs, SIMPLEs, Keogh Plans, 401Ks, and 403Bs. It’s nuts to divert cash away from Social Security if you’re worried it will run out of money. Instead, we just need to make some pretty tiny course corrections — see my December 21 column, for example — and we’ll be fine.
Jailing the Social Studies Class (But Just for the Weekend) February 2, 2005February 28, 2017 FREER STILL Robert: ‘How about Babble.net? Same calling features as Skype but with free ‘Skype-out’ to most US (including cell phones), Europe, and other major continents (but not all).’ ☞ Not sure how many other major continents there really are besides Europe and North America – five? six? – but this seems worth a look as well. Ah-looooooo? ACLU Bob Fyfe: ‘From your column yesterday: When told of the exact text of the First Amendment, more than one in three high school students said it goes “too far” in the rights it guarantees. And from the article you linked to: ‘Schools don’t do enough to teach the First Amendment. Students often don’t know the rights it protects,’ Linda Puntney, executive director of the Journalism Education Association, said. ‘So how about this for a learning experience? On a Friday afternoon during Social Studies (or whatever it’s called now), after presenting the full text of the First Amendment, the teacher asks the students to raise their hands if they think that it ‘goes too far.’ The teacher then tells the students to raise their hands really high and keep them up. ‘At that point, 20 or 30 armed police officers storm the room, handcuffing and arresting all students with raised hands for ‘publicly denouncing the rule of law of the United States of America’ (or some such). ‘The arrested students would then spend the weekend in jail and be released on Monday morning in time for school. That afternoon in Social Studies the teacher would give an essay test with the question, ‘How do you feel about the rights protected by the First Amendment?’ (Of course, you would need to require that parents sign permission slips for the ‘class trip’ to the jail….) ☞ Bob can’t be serious – but it is a terrific idea. Dan: ‘I used to be a proud member of the ACLU until a number of years ago when I learned that it was accepting large contributions from Philip Morris at the same time that it was supporting ‘commercial free speech rights’ for tobacco companies. I protested at the time that the ACLU should indeed stand up for a free marketplace of ideas and products. But, when the product is addictive, deadly, and illegal to sell to minors, it is perfectly legitimate to restrict the right to promote it. If the ACLU disagreed, I could have lived with that, but for them to disagree while taking large contributions from a tobacco company was more than I could accept. The last straw was when the local chapter declined to publish my letter in their ironically named journal, ‘Open Forum.’ I resigned.’ ☞ This was not the ACLU’s finest hour. I remember it well. But it’s time to sign back up. (And note that, since then, the torch has been passed on to a new executive director, Anthony Romero.) SOCIAL SECURITY Brianna Sollandry: ‘Look at Paul Krugman’s column in yesterday’s New York Times. He points out that the people who want to privatize Social Security use pessimistic projections to explain why it needs to be done, and optimistic projections to show why their scheme works. If the optimistic projections are correct, there is no need to privatize it. If the pessimistic projections are correct, privatization will fail.’ Jerry Turba: ‘Could someone calculate how much money I would now have if I started a private account with 2% of my social security tax since 1960?’ ☞ Exactly the same as if you had put 2% of your other income into a private account – and I hope you did or will. No one says you’re not allowed to save for the future; just that Social Security should be there as a bare-bones base to keep tens of millions of old folks out of abject poverty and give the rest of us a little extra to build on. Yes, it’s tough to set aside 2% of income for retirement. But it can be done. And if you fail to, at least you’ll have Social Security Insurance to fall back on. (If, that is, we don’t muck it up. The tweaks required to assure its solvency beyond 2042 are modest, as I suggested last month.)
His Grandpa INVENTED Social Security February 1, 2005February 28, 2017 AMEND THE FIRST AMENDMENT? [W]hen told of the exact text of the First Amendment, more than one in three high school students said it goes “too far” in the rights it guarantees. Only half of the students said newspapers should be allowed to publish freely without government approval of stories. – AP, January 31 Time to join the ACLU. APPLE We did very nicely on our Apple LEAPS last year, but boy, did we ever sell too soon. For a sense of why Apple has jumped from 20 to $76 and where it – and the virtual world – may be going, click here. I don’t pretend to understand much of it, but enough to get the gist. JOLLY GOOD! Steven Coultas: ‘I’ve been reading your comments about cheap phone calls recently. As a sign of things to come, a phone company in England, 1899.com, has just started offering phone calls to America or Canada from England for 0p per minute, with just a 3p connection charge. That’s from a telephone to a telephone. They’ve been offering a similar service for UK to UK calls for a while, for the same price. All billing is via the Internet, to keep costs down.’ EVERBANK Bob Novick: ‘I spoke with them over the phone and was told that only when they do currency CONVERSION is there a charge. If you rollover your 3 month to another you are NOT converting your currency. So there is no .75% charge.’ ☞ They charge that fee on the way into the foreign currency and then again on the way out. (Click here.) But, you’re right: rolling over a CD does not require conversion. (And on $100,000 or more, it’s .50%.) (Thanks, Peter Ludemann.) THAT BBC DOCUMENTARY Matthew Armistead: ‘I encourage you to download The Power of Nightmares from the Internet where it’s widely available. It’s the best piece of television that I have seen. Opened up my eyes to valid perspectives that you just don’t get in the US.’ Roy Streit: ‘It is EXTREMELY powerful. You can watch the stream here: Part 1, Part 2, and Part 3. HE’S LEARNED Bruce Foerster: ‘I read your investment guide many years ago, and I still recommend it often and I gave copies to my two kids. I just read the latest iteration, and figured that I must have learned something, since I got it from the library instead of buying it. It taught me a lot (and I was able to retire at 55).’ JIM ROOSEVELT ON SOCIAL SECURITY Click here. In part: . . . Today, thanks in large part to Social Security, the number of older Americans below the poverty line has dropped from almost 50 percent to only 8 percent. FDR believed that Social Security should be simple, guaranteed, fair, earned, and available to all Americans. President Roosevelt was adamant that Social Security was an insurance program to provide basic needs in retirement. As a former Wall Street lawyer, my grandfather fully supported the opportunity of every American to have fair investment opportunities. But Social Security was — and is — something different. It was — and is — the guaranteed basis of a secure retirement. . . Those who are seeking immediate, drastic change should recognize that even the Social Security trustees appointed by the president agree that Social Security with no changes could pay full benefits until 2042, even under pessimistic assumptions about economic growth. They should recognize that the Congressional Budget Office says that Social Security with no changes could pay full benefits until 2052. They should recognize that even then benefits would be cut only about 25 percent if there were no changes, not nearly as drastically as most private account proposals would cut them. The lies and half-truths from the proponents of privatization must stop. Most of all, the creation of fear by the unjustified use of words like “crisis” and “bankruptcy” is destructive of a reasonable debate about what adjustments to Social Security will ensure the payment of full benefits throughout the 21st century. Every honest person knows that there is no crisis, there is no threat of bankruptcy, and that what is needed are adjustments, not drastic measures like privatization. . . James Roosevelt Jr. is a lawyer and former associate commissioner of Social Security. © Copyright 2005 The New York Times Company