89 replies to this topic

[Lord GVChamp]

Until taxes are adjusted to reflect the fact that the top 1% control a greater share of the cash pie then they did 30 years ago, structural deficits will be a recurring problem. Simple as that.

This doesn't make sense to me. The US federal tax system is progressive. The more unequal society is, the more money government makes.

Bush's main problem with his SS proposal was that he had no way of filling up the shortfall to current beneficiaries once he diverted new funds into private accounts. Maybe thrawn's proposal would address that, and i'm much more open to that idea than to the ideas that just raise the eligibility age. Of course, since stocks have been overall a pretty bad investment over the last 15 years compared to treasury bonds.. plus the fact that treasury bonds can never default (exempting the stupidity of a debt ceiling debacle - platinum coin ftw) while stocks can go bust at any time. Are you seriously arguing that progressives don't want an economic stimulus? You realize that it's your party that has spent the last 3 years blocking any meaningful stimulus or jobs programs, including the entirety of the American Jobs Act? You also realize that 'Obamacare' made savings/cuts to the Medicare program you so revile, and spent a good part of it giving subsidies to - wait for it - young people? But yeah, the government hasn't given a !@#$ about the public interest for about 31 years, so it'll take a real reckoning for that to change.

My main interest in retirement security is just making sure people save some money. I don't like the way Social Security is presently set up because it funnels more money into government coffers, and I would prefer some of that money funneled into capital goods in the private sector. I don't think people should be given free reign to invest in whatever the hell they want: options should be restricted. I also don't think it's necessary to take the entirety of the employee contribution and make people personally responsible for investing it all.

It can still be a rather paternalistic program of conservative investments with some aggressive growth investments and a guaranteed minimum. I wouldn't mind if my social security tax rose by 2% and my employer side also increased by 2% if I was allowed to invest it myself...and well, I kept my 401k, too, because it's basically free 401k money

Bush's plan was incomplete, but, IMO, still a step in the right direction.

Now, my question is, why are you concerned about parties instead of government as a single entity? I was talking about government as a single entity. If you want to talk about parties specifically, the Democrats still pushed hard for universal health coverage, which is a goal I straight-up do not agree with compared to other goals (economic stimulus, public infrastructure, education reform, etc). The House version of the bill also relied more heavily on "rich people" taxes.

So, just making the government entirely Democratic isn't exactly going to fix the problem of "not great" policy choices.

But facts are facts are facts! There are no "interpretations"! Can Kain or GV or someone explain to me - if you allow individuals to have greater control over their SS account, does it hurt the integrity of the system as a whole? I'm thinking about healthcare and the importance of everyone having insurance in order to curb emergency costs, that kind of thing.

Depends on what you mean by "greater" control. If you give people free reign over their money, yeah, it can be an absolute disaster. there is going to be some minimum income that's guaranteed, which reduces risk, which means some people are going to dump all their money into risky gambles.'

You can offer a restricted menu of conservative choices, though. Most companies do not offer the "full range" of investment options on their 401ks, for instance, you can only select from certain plans. Some are extremely aggressive and risky, but you don't have to offer those as part of SS reform.

The other problem would be "market timing," which can start eroding savings REALLY fast. Lose half of your money on stocks and decide to sell, well, you just lost half your money because of a temporary aberration. You could restrict people from selling like that, BUT that would probably cause a political outrage.

There's also a macroeconomic problem of chasing returns if you want to use individual stocks. Which can be bad, basically like the entire stock market consisting of lemmings...

I mean, $200 billion over 10 years, add in returns, and you start getting some HUGE pension funds.

This is very appealing to conservatives, though, as they create an "ownership" society. Essentially everyone becomes a mini-capitalist! Yay!




More broadly speaking, I think Republicans should re-think their strategy a little bit. Bush was on to something with his "ownership society," and the party has abandoned that in the wake of the financial crisis and recession. But it delivered our ONLY popular vote victory since the friggin' 80s. The Republican Party is the party of people who have their !@#$ together, NOT the party of tax cuts. Structuring increased taxes on the rich to put more people into homes and stabilizing their lives is good for the party and good for the country.

Or we can keep letting the country fall apart and let the Democrats continue to blow a giant hole in the country as they pretend to be conservative (but absolutely suck at it).

[juslen]

This doesn't make sense to me. The US federal tax system is progressive. The more unequal society is, the more money government makes.


My main interest in retirement security is just making sure people save some money. I don't like the way Social Security is presently set up because it funnels more money into government coffers, and I would prefer some of that money funneled into capital goods in the private sector. I don't think people should be given free reign to invest in whatever the hell they want: options should be restricted. I also don't think it's necessary to take the entirety of the employee contribution and make people personally responsible for investing it all.

It can still be a rather paternalistic program of conservative investments with some aggressive growth investments and a guaranteed minimum. I wouldn't mind if my social security tax rose by 2% and my employer side also increased by 2% if I was allowed to invest it myself...and well, I kept my 401k, too, because it's basically free 401k money

Bush's plan was incomplete, but, IMO, still a step in the right direction.

Now, my question is, why are you concerned about parties instead of government as a single entity? I was talking about government as a single entity. If you want to talk about parties specifically, the Democrats still pushed hard for universal health coverage, which is a goal I straight-up do not agree with compared to other goals (economic stimulus, public infrastructure, education reform, etc). The House version of the bill also relied more heavily on "rich people" taxes.

So, just making the government entirely Democratic isn't exactly going to fix the problem of "not great" policy choices.



Depends on what you mean by "greater" control. If you give people free reign over their money, yeah, it can be an absolute disaster. there is going to be some minimum income that's guaranteed, which reduces risk, which means some people are going to dump all their money into risky gambles.'

You can offer a restricted menu of conservative choices, though. Most companies do not offer the "full range" of investment options on their 401ks, for instance, you can only select from certain plans. Some are extremely aggressive and risky, but you don't have to offer those as part of SS reform.

The other problem would be "market timing," which can start eroding savings REALLY fast. Lose half of your money on stocks and decide to sell, well, you just lost half your money because of a temporary aberration. You could restrict people from selling like that, BUT that would probably cause a political outrage.

There's also a macroeconomic problem of chasing returns if you want to use individual stocks. Which can be bad, basically like the entire stock market consisting of lemmings...

I mean, $200 billion over 10 years, add in returns, and you start getting some HUGE pension funds.

This is very appealing to conservatives, though, as they create an "ownership" society. Essentially everyone becomes a mini-capitalist! Yay!




More broadly speaking, I think Republicans should re-think their strategy a little bit. Bush was on to something with his "ownership society," and the party has abandoned that in the wake of the financial crisis and recession. But it delivered our ONLY popular vote victory since the friggin' 80s. The Republican Party is the party of people who have their !@#$ together, NOT the party of tax cuts. Structuring increased taxes on the rich to put more people into homes and stabilizing their lives is good for the party and good for the country.

Or we can keep letting the country fall apart and let the Democrats continue to blow a giant hole in the country as they pretend to be conservative (but absolutely suck at it).

It doesn't surprise me that you go to great length to describe what could or should be done and at the same time completely miss the fact that what you say could or should be done is a direct result of the government interfering in the markets. More specifically interfering in the supply and demand for money. You are doing precisely what governments bureaucrats and politicians do, you attempt to come up with clever, efficient, and "make sense" solutions to problems that were created by the government. You are on the outside looking in, not realizing that if you were on the inside you would not see the forest for the trees.

"My main interest in retirement security is just making sure people save some money."

And why would people save money if interest rates are at all time record lows?

"I don't like the way Social Security is presently set up because it funnels more money into government coffers, and I would prefer some of that money funneled into capital goods in the private sector."

So you want to funnel money into the private sector by taking it out of the private sector. (which is what taxes necessarily do)

"I wouldn't mind if my social security tax rose by 2% and my employer side also increased by 2% if I was allowed to invest it myself...and well, I kept my 401k, too, because it's basically free 401k money"

So you would want to see your wages reduced by 2% (which is what the employer side tax essentially does) and your taxes increased by 2% (so you have 2% less money) so you can invest it yourself. Wait what? Remove the employer tax and you can demand higher wages, remove the employee tax and you can earn higher wages and invest that money yourself. Or here is a shocker.. SAVE IT.

"Depends on what you mean by "greater" control. If you give people free reign over their money, yeah, it can be an absolute disaster. there is going to be some minimum income that's guaranteed, which reduces risk, which means some people are going to dump all their money into risky gambles.'"

Which is precisely why I don't want to give the government my money, because it can be an absolute disaster. Risky gambles.. yes.. like mortgage back securities, treasury bonds or any number of assets that could lose value or go to zero which is precisely what the Federal Reserve is doing right now. Accept the Federal Reserve doesn't need to tax you, they just devalue your savings and wages and screw you via a thousand tiny cuts (price inflation)

"The other problem would be "market timing," which can start eroding savings REALLY fast. Lose half of your money on stocks and decide to sell, well, you just lost half your money because of a temporary aberration. You could restrict people from selling like that, BUT that would probably cause a political outrage."

You don't have to time the markets to invest money in relatively save investments. Haven't you heard of mutual funds and index funds? "Oh but the stock market could crash" Yup, thanks to credit bubbles inflated by fed monetary policy. Basic Austrian Business Cycle Theory.

Even if you refuse to learn it, the very least you could do is make a sincere effort to learn about monetary policy. Savings rates are low because there is no incentive to save with record low interest rates. Investing long term doesn't require a 401k nor does it require expansive skills and experience. You don't have to trade individual stocks to invest. When a 1 year Certificate of Deposit pays out less than the rate of inflation and money sitting in the bank losing at least 2% of it's purchasing power per year.. there may be other alternatives out there that don't require huge gambles. And if you think that the stock market is too risky, have you ever thought about how negative real interest rates may in fact encourage more risky behavior in the stock market? Don't worry though, the government is going to target your 401k once tax revenue dries up and monetary expansion destroys the purchasing power of the dollar.

[Lord GVChamp]

Juslen, dude, realize that at the same time you express an interesting point, you can also be extremely condescending, incredibly thick, and missing the point entirely.

You’re basically lecturing me about monetary policy and “knowing nothing about it,” and giving me some different ideas on how to save for retirement. Dude. I may not be THAT advanced in the fields, but I DID graduate with highest honors in BOTH finance and economics, and in my spare time I research both, because I like to talk about them and I like to study them.

So telling me that you don’t have to invest money in stocks and can invest money in mutual funds instead…this really does not help your point at all. I already know what mutual funds are. I still think we should have this system. Calling me stupid and telling me to learn the basics is not going to help you, because I already know what they are.

Now, on the other hand, your average person is not someone who graduated with the highest honors in finance at a mid-level state university. Your average person has not graduated college at all. Your average person does not understand inflation well, and has little experience with money management let ALONE retirement planning, and has next to no ability to understand Time Value of Money or Net Present Value or Diversification.

Even your average COLLEGE student is not going to understand these concepts. I’ll even go further and say your average BUSINESS student isn’t REALLY going to understand these topics in depth.

Your average person is going to adhere to some hard and fast rules because they don’t understand everything. The problem about hard and fast rules is that sometimes your “hard and fast” rules can be really, really dumb.

Example: GFChamp needed to buy a car. GFChamp has had it drilled into her head that she shouldn’t have debt if she can help it. Hard and Fast rule. Because of this rule, she wanted to schedule her car payment to be paid off as quickly as possible so it would be offer her plate.

This is totally reasonable to GFChamp.

GVChamp and GFChamp’s father pointed out that she was getting zero percent interest on her first year, and 1.9% interest on years following that, while her much larger student loans cost her 6%. She should pay off her college loans first, because they are higher interest.

That’s OUR hard and fast rule. GFChamp didn’t think about that. That’s because GFChamp is not Homo Economicus, she has a lot of other things to do with her time. So she came up with one Hard and Fast Rule, so she can spend more time doing stuff that SHE likes to do.

All people operate by these Rules, and society as a whole operates on the basis of these Rules and Organizations interacting with each other. People aren’t perfectly flexible, therefore there are going to be inefficiencies.

Your entire ideology is blaming all these inefficiencies on government and assuming government can never fix any of them. We’re talking about saving enough for retirement and retirement investment strategies, which everyone ELSE in this thread knows people struggle with, simply because it is tough. And then you come in and drop the Anarchy-Bomb and say that all these problems are the government’s fault and we would all be better off if there were just no government intervention.

That just offends common sense. Right now, I have absolutely no idea how much money I am going to need saved up for retirement. I have absolutely no idea how much money exactly I am going to need in a few years, for a house or a wedding or any of that crap. And this is from a guy who actually knows something about finance. The idea that government intervention is to blame for all of our problems is preposterous.

Let’s just start from that, okay?

So we have problems. How is government in this particular case making problems WORSE? You’re just giving me some vague platitude about not seeing the forest for the trees and not giving me macro-level analysis. Then you say something about “taking money out of the private sector to put it back into the private sector,” without understanding that “private sector” is a catch-all term that doesn’t differentiate between capital and consumption spending, which is what I am concerned about. And when I say “private sector,” I mean I want more funds transferred into capital goods vs. the current standard of all funds going into general government spending.

So I don’t even know what your point is, besides “government does everything wrong.”

Interest rates are low. So people won’t save. Okay. That right there makes no sense to me. You would expect interest rates to be lower even in the absence of government policy because we are in a recession. Well, you would if you were a Keynesian: people are trying to save more money and people are simultaneously investing less, which results in a lower interest rate. AFAIK, this jives up with our current experience exactly. Savings rates of houses are up and interest rates are low.

Don’t see how that’s a government problem, unless you are of the opinion that all recessions are automatically government created problems. Which I know is what your entire worldview is based on, but the rest of us do not have that world view.

So is that your entire explanation of how government screwed everything up? Because that’s the only thing I see in your post about government causing the problem. The rest of it is chastisement and trying to explain how to invest for retirement, which I already have an idea of how to do….and doesn’t mean anyone else does.

And those specific chastisements don’t even make sense.

Let’s start with the increased SS tax, shall we?

Yes, I am willing to accept the “pay cut” to have the money invested instead.

Let’s say I currently make $50,000. The SS tax in this case is 2% on my stuff, 2% on employer side, so we’ll call it 4% and say I eat the whole thing. So that’s $2,000…my new wage is 48,000, and 2,000 was “taxed,” but I control it, it is going to come back to me, it is going to grow tax free, all it is is a mandatory savings program and it isn’t taxed at all until I retire.

Instead, you are telling me that I would be better off if I got the $2,000, which I WOULD be taxed on, and then save that. So I am really only getting $1600 after I pay taxes, and then I pay taxes again on all the capital income I make.

So I am LOSING $400, RIGHT from the get-go, and paying MORE taxes on whatever capital gains I make.

So MY proposal, relative to current policy, is a LOT better for me. It might be better for most people, too.

If you aren’t getting the details of my plan and how the math breaks out, why are you attacking it?

[commander thrawn]

The unfortunate thing about your example GV is that people don't typically get more out of social security (in present value terms) than they contribute. In-fact because social security is a pay as you go system (rather than a fully funded one) and we have increasing populations and higher numbers of retirees, social security acts as an indirect tax increase on each subsequent generation paying in.

[juslen]

Juslen, dude, realize that at the same time you express an interesting point, you can also be extremely condescending, incredibly thick, and missing the point entirely.

You’re basically lecturing me about monetary policy and “knowing nothing about it,” and giving me some different ideas on how to save for retirement. Dude. I may not be THAT advanced in the fields, but I DID graduate with highest honors in BOTH finance and economics, and in my spare time I research both, because I like to talk about them and I like to study them.

So telling me that you don’t have to invest money in stocks and can invest money in mutual funds instead…this really does not help your point at all. I already know what mutual funds are. I still think we should have this system. Calling me stupid and telling me to learn the basics is not going to help you, because I already know what they are.

Now, on the other hand, your average person is not someone who graduated with the highest honors in finance at a mid-level state university. Your average person has not graduated college at all. Your average person does not understand inflation well, and has little experience with money management let ALONE retirement planning, and has next to no ability to understand Time Value of Money or Net Present Value or Diversification.

Even your average COLLEGE student is not going to understand these concepts. I’ll even go further and say your average BUSINESS student isn’t REALLY going to understand these topics in depth.

Your average person is going to adhere to some hard and fast rules because they don’t understand everything. The problem about hard and fast rules is that sometimes your “hard and fast” rules can be really, really dumb.

Example: GFChamp needed to buy a car. GFChamp has had it drilled into her head that she shouldn’t have debt if she can help it. Hard and Fast rule. Because of this rule, she wanted to schedule her car payment to be paid off as quickly as possible so it would be offer her plate.

This is totally reasonable to GFChamp.

GVChamp and GFChamp’s father pointed out that she was getting zero percent interest on her first year, and 1.9% interest on years following that, while her much larger student loans cost her 6%. She should pay off her college loans first, because they are higher interest.

That’s OUR hard and fast rule. GFChamp didn’t think about that. That’s because GFChamp is not Homo Economicus, she has a lot of other things to do with her time. So she came up with one Hard and Fast Rule, so she can spend more time doing stuff that SHE likes to do.

All people operate by these Rules, and society as a whole operates on the basis of these Rules and Organizations interacting with each other. People aren’t perfectly flexible, therefore there are going to be inefficiencies.

Your entire ideology is blaming all these inefficiencies on government and assuming government can never fix any of them. We’re talking about saving enough for retirement and retirement investment strategies, which everyone ELSE in this thread knows people struggle with, simply because it is tough. And then you come in and drop the Anarchy-Bomb and say that all these problems are the government’s fault and we would all be better off if there were just no government intervention.

That just offends common sense. Right now, I have absolutely no idea how much money I am going to need saved up for retirement. I have absolutely no idea how much money exactly I am going to need in a few years, for a house or a wedding or any of that crap. And this is from a guy who actually knows something about finance. The idea that government intervention is to blame for all of our problems is preposterous.

Let’s just start from that, okay?

So we have problems. How is government in this particular case making problems WORSE? You’re just giving me some vague platitude about not seeing the forest for the trees and not giving me macro-level analysis. Then you say something about “taking money out of the private sector to put it back into the private sector,” without understanding that “private sector” is a catch-all term that doesn’t differentiate between capital and consumption spending, which is what I am concerned about. And when I say “private sector,” I mean I want more funds transferred into capital goods vs. the current standard of all funds going into general government spending.

So I don’t even know what your point is, besides “government does everything wrong.”

Interest rates are low. So people won’t save. Okay. That right there makes no sense to me. You would expect interest rates to be lower even in the absence of government policy because we are in a recession. Well, you would if you were a Keynesian: people are trying to save more money and people are simultaneously investing less, which results in a lower interest rate. AFAIK, this jives up with our current experience exactly. Savings rates of houses are up and interest rates are low.

Don’t see how that’s a government problem, unless you are of the opinion that all recessions are automatically government created problems. Which I know is what your entire worldview is based on, but the rest of us do not have that world view.

So is that your entire explanation of how government screwed everything up? Because that’s the only thing I see in your post about government causing the problem. The rest of it is chastisement and trying to explain how to invest for retirement, which I already have an idea of how to do….and doesn’t mean anyone else does.

And those specific chastisements don’t even make sense.

Let’s start with the increased SS tax, shall we?

Yes, I am willing to accept the “pay cut” to have the money invested instead.

Let’s say I currently make $50,000. The SS tax in this case is 2% on my stuff, 2% on employer side, so we’ll call it 4% and say I eat the whole thing. So that’s $2,000…my new wage is 48,000, and 2,000 was “taxed,” but I control it, it is going to come back to me, it is going to grow tax free, all it is is a mandatory savings program and it isn’t taxed at all until I retire.

Instead, you are telling me that I would be better off if I got the $2,000, which I WOULD be taxed on, and then save that. So I am really only getting $1600 after I pay taxes, and then I pay taxes again on all the capital income I make.

So I am LOSING $400, RIGHT from the get-go, and paying MORE taxes on whatever capital gains I make.

So MY proposal, relative to current policy, is a LOT better for me. It might be better for most people, too.

If you aren’t getting the details of my plan and how the math breaks out, why are you attacking it?

Fix your text please.

[Lord GVChamp]

Do you mean make it bigger?

I copy-pasted it from somewhere else, I don't know if it is showing up on your computer or not

[KainIIIC]

the small text was actually refreshing for such a big WoT.

oh yeah, @ thrawn: of course tsy bonds today aren't a great investment. But just compare how 10, 15, 30 year bonds would have been at any point from the 90s to early-mid 2000s. Imagine if you had put your money in a NASDAQ index instead of a 30-year bond in 1999

you'd be eating your hat up right now.

[commander thrawn]

the small text was actually refreshing for such a big WoT.

oh yeah, @ thrawn: of course tsy bonds today aren't a great investment. But just compare how 10, 15, 30 year bonds would have been at any point from the 90s to early-mid 2000s. Imagine if you had put your money in a NASDAQ index instead of a 30-year bond in 1999

you'd be eating your hat up right now.

That's why you should never put all your money in one investment.

Even so, 30 year bonds were getting 5-6% return in 1999. But you would need to sell the bonds to receive any return. Which would then be discounted to present value. So you are talking a return equal to the holding cost of the bond for the period you held it.

Treasuries are not a good investment if your goal is growth, or income. They are only a good investment if you are looking to have a safe-bet and only lose some to inflation. Also, if rates increase from when you purchase treasuries then you will end up selling them at a discount to offload them before maturity.

I would not tie up $1000 in bonds for 5% return or less for any maturity over 2 years, and even that is a stretch. I would possibly use bonds as a hedge against inflation or to supplement something very high risk.

Edited by commander thrawn, 16 December 2012 - 11:03 PM.

[KainIIIC]

That's why you should never put all your money in one investment.

Even so, 30 year bonds were getting 5-6% return in 1999. But you would need to sell the bonds to receive any return. Which would then be discounted to present value. So you are talking a return equal to the holding cost of the bond for the period you held it.

Treasuries are not a good investment if your goal is growth, or income. They are only a good investment if you are looking to have a safe-bet and only lose some to inflation. Also, if rates increase from when you purchase treasuries then you will end up selling them at a discount to offload them before maturity.

I would not tie up $1000 in bonds for 5% return or less for any maturity over 2 years, and even that is a stretch. I would possibly use bonds as a hedge against inflation or to supplement something very high risk.

closer to 7%, for the record. And that's the point with putting your money in treasury bonds: you know they can never default barring a major political crisis (in which case, payment on your bonds will be the least of your worries). Security versus gambling over asset values. And remember, like casinos, the house (the investment firms and banks) win the vast preponderance of the time - how else would they make money?

Personally, it would've been awesome if I were alive to buy some 30-year bonds in 1981 at 15.3%

[commander thrawn]

closer to 7%, for the record. And that's the point with putting your money in treasury bonds: you know they can never default barring a major political crisis (in which case, payment on your bonds will be the least of your worries). Security versus gambling over asset values. And remember, like casinos, the house (the investment firms and banks) win the vast preponderance of the time - how else would they make money?

Personally, it would've been awesome if I were alive to buy some 30-year bonds in 1981 at 15.3%

Yeah, but then you would have also been paying 20+% on a mortgage so it is all relative.