Social Security & Godfather

In my last post, I said I would post something on the partial privatization of social security. However, I have been researching and gathering my thoughts, and so far I'm on page 3 in a Word document. HA! Needless to say, I won't be posting all of that, but if you're really interested, I'd be happy to email it to you if you'd like to engage in a discussion. I do not want to completely ignore it in my blog though, because my intent for this blog is to discuss some current events, politics, economics, religion, sports, or anything else on a meaningful level. So, I'll try to give a very brief synopsis of my thoughts, though it will be extremely difficult due to my excessively meticulous and verbose writing (curse). I also know that some very intelligent people will hopefully be reading this, so I’d really like to interact at any level with you regarding this topic. And Alyssa, you're a smart girl, so you don't have to play the blond card here. :)

If you halfway pay attention to the news, you know we have reached a point where our current social security system is being challenged by an increasing number of baby boomers reaching retirement age, and it has been brought to everyone’s attention that if we don’t make some fundamental changes to the system, we will run out of money, or at best, the benefits will significantly decrease. The least complicated way to change the system is to raise taxes, but we don't want to do that. (Well the democrats would love to, but they're fortunately in the minority right now.) However, if we don't raise taxes, the money has to come from somewhere. The government could issue treasury securities (T-bonds, bills, notes), but they're already issuing an oversupply of treasuries to try and fund the deficit, causing some inflationary pressures that the Fed is already trying to curb by raising rates. Issuing new treasuries to fund the social security system would not only add to our inflationary woes, but it would also dilute the value of treasuries, thus become less atractive to investors. On a more macro level, it would flatten the long end of the yield curve, and therefore position us for more recessionary times. No thank you. The Fed would raise rates so high that the cost of borrowing would be too expensive, so there would be less investment in our economy, so our growth would tailspin and we'd fall into a recession...again. There has to be another way!

What about privatizing social security? The government borrows from the social security “pool” and then repays it at best around 1%. So, we're essentially "growing" our SS assets at 1% - that is thievery! Imagine the difference in capital appreciation if the return on SS funds increased even just a conservative 2-3%!! Could it possibly produce a SS surplus?!? Well, it’s mathematically possible, but I’m very skeptical of that ever happening. Imagine the influx of social security money into our economy through the purchase of millions (billions?) of dollars worth of stock! That would be a HUGE economic stimulant, but would present more opportunities for dishonesty in the system. Another implication would be the sheer size of the SS funds and their impact on the market as the funds are transferred from sector to sector through various asset allocation or market timing transactions. If a billion dollars is transferred from the retail sector to another sector, it does not go unnoticed in the market. Is anyone still reading?

I don't think privatization in and of itself is the answer, but I think it's a component that should be considered in the overhaul. I'm still trying to research the details of what Bush is trying to propose, but what I can gather so far is that his proposed changes may not be focused on privatization as much as it is setting up personal accounts with an element of ownership. Your personal account could also be passed down to your spouse or children when you die. To no surprise, he does NOT want to raise payroll taxes. OK, I'll stop now. If there's more interest, I'd love to entertain some discussion on this subject.

Thanks Jeff for letting me borrow the Godfather, and don't worry about a thing. I'm treating it better than I treat my own kids, so I will return it in perfect condition! Jenn and I watched the first one last night, and it was awesome! I am partial to anything Italian, but the story was very good. I think the reason this movie is a favorite of many men is that it takes our essence to the extreme. Deep inside our core, we want to fight for something. As opposed to the movie, we don't go around killing people, but when a loved one is hurt, that is sometimes our initial reaction. Also in the movie, instead of fighting for the damsel in distress, they fight for their family. Then you add the power, ruthlessness, and gentlemanly approach - this is what every man must love about this movie. I found that most of the time, before a man was killed, he was treated with respect, kindness, and hospitality before he was murdered. It's business, not personal. I have to kill you, but I respect you, so I will make it easy on you and take you by surprise. I was amazed at my reaction to one part in particular. The very first time Michael Corleone killed someone was in the restaurant with the police chief and the narcotics man (Santiago maybe??). He asked permission to go to the bathroom (to retrieve a gun that had been planted) and when he returned he simply raised the gun and put a bullet through the head of both men. Leading up to this, knowing it was going to happen, my heart was racing. I even commented to Jenn that my heart was literally beating faster than normal and I could FEEL it beating in my chest. WOW! That was incredible. I look forward to watching the other two movies. What is the record for the longest blog?