>>>>The point that I belive Cato is trying to get across is that preferencial treatment in a poor system is not necessarily a good deal. It's important to take a step back from all the formulas that make up the system and ask the fundamental questions about the opportunity costs associated with the current system.
>>>>In my mind, numbers don't lie. The numbers show that Social Security is a bad deal for nearly everyone. Even the targeted "risk" groups.
Well actually, the numbers don't show that at all. That's the problem. For many higher wage persons, the 'numbers' show a bad 'ROR'. But for the working poor, the numbers show a healthy 'ROR'. Indeed, look at the CATO's plan for reform.
When they talk about allowing people the option to remain in SS, they say things like:
>>>>A continued Social Security option raises the question of what future Social Security benefits will be promised to those who might choose that option. On the one hand, workers should not be offered the current benefits that are well in excess of what Social Security will be able to pay in the future. If workers are going to have the option to stay in Social Security, they should be offered only the future benefits that the system can finance in a steady state. The World Bank in its study advocating privatization in fact recommended bringing future Social Security benefits in line with revenues as the first step of reform.[23] These future Social Security spending reductions also would help to finance the transition to the private system, as discussed further below.
>>>> The reform proposed here would continue to delay the retirement age two months per year after that until it reaches 70.
Wait a minute. If the benefits of the CATO plan come from being a pre-paid system, instead of pay-as-you-go, why doesn't the gov't just change the financing of the remaining SS under the CATO plan to pre-paid. And the gov't could have private money managers invest the funds partially, just as they do for gov't workers TSP. That would be transparent to the recipients. Then we would not talk about raising retirement ages or cutting future benefits. Right? Because we 'know' the return would be 2 to 3 times the current system. Right?
Wrong. Those remaining in SS under their plan would be largely the working poor. And their SS benefits would go down. That is indeed what the CATO plan tells us, when we read between the lines. CATO knows this. If your annual salary is $15,000, the CATO reform is not a good deal, as it would be if you make $60,000. By the time the low wage worker pays for life and disability insurance, the amount left for investment will have a problem matching SS returns.
>>>>It actually wouldn't take cutting government spending to fund the transition costs. To understand what I mean by this, it is first helpful to discuss how the government views cutting spending.
>>>>Do you think it is too much to ask for the government to restrict spending to be less than the growth of revenues before it asks for more money to solve the problem?
You have a naive view of the Federal budget process. The non-defense discretionary spending amounts to about $300 billion out of the $1.8 trillion budget. To cut that part of the budget by $60 billion will have real effects on real people. Under Reagan, the rest of the budget, outside of Defense, Interest on the Debt, SS and Medicare, actually decreased 8% in real dollar terms, but the deficit exploded. There is no 'free money' in the budget.
Take another example: Medicare. The growth of Federal revenues or the CPI is irrelevant. The rate of inflation in medical costs and the growth in Medicare beneficiaries is what counts. Your talk of changing percentages on a fictional spreadsheet is irrelevant. If we want the current Medicare program, we have to pay the bill. If not, we need to decide what it is we do want. Arbitrarily cutting the program to match your arbitrary percentages is nonsensical. Putting the cost on somebody else is not 'saving money' in terms of the nation as a whole.
