My Home About Me

AP reports no progress on attempts to ignite bi-partisan talks on Social Security reform:

...Senate Budget Committee Chairman Kent Conrad, D-N.D., accused the White House of acting in bad faith at a panel hearing that turned acrimonious over White House Budget Director Rob Portman's unwillingness to acknowledge that tax increases should be part of any fix for the long-term problems of the huge federal benefit programs.

"We have an opportunity here to work together, but the only way I know in human relations for there to be resolution between parties who have different views is for both sides to compromise," Conrad said. "Unfortunately I see virtually none on your side..."

Yet again, the Dems talking point is that their own intransigent insistence on raising taxes is fine, but the GOP's willingness to at least discuss it -- while admitting they are opposed to it -- represents some kind of asymmetric inflexibility. But all that is just political posturing designed to throw red meat to Left-wing hatebloggers looking for any thin excuse to vilify Republicans. The real issue, that the Dems don't want to get to, is whether it's a good idea to raise taxes to reform Social Security. It's not.

First, who in Congress is actually for a plan that raises taxes but omits personal accounts? No plan has been offered that would do that. The plans that raise taxes (like Kolbe-Boyd) do so to fund personal accounts. And the Diamand/Orzag plan, which raised taxes with no personal accounts, was uniformly rejected by Dems in congress. And Social Security is running a cash surplus now. Why raise taxes now, when the money would just go to current government spending?

What's worse, a tax hike actually does very little to make Social Security sustainable. It just buys time. We'll just have to come back and raise taxes again at some point. The tax hike in the 1983 reform didn't create lasting solvency, did it? And we don't even need to raise taxes to rescue Social Security. We just have to wean ourselves from the wage-indexed benefit growth promised under current law. Benefits can grow at the rate of inflation without higher taxes -- but not at the rate of wage-gains.

By necessity, the implied rates of "return" in Social Security will decline no matter whether we increase taxes or slow benefit growth -- one means you put more in to get the same, the other means you put in the same to get less. So why not tie up less of future generations' income in a low-return investment reducing the out-of-control benefit increases promised under current law, rather that sucking up more income in a low-return investment?

Oh -- and there's the small matter that if you raise taxes you'll slow economic growth.

Did I leave anything out?

options   oil   technicals   stock   investor   charts   Short selling opportunities   Technical chart patterns   support/resistance levels   ETFs (exchange traded funds)   Deron Wagner   Basic Materials sector   IRS denies trader tax status   trader tax status   mark to market accounting   Patience in the markets   Dow Monthly Performance   Dow Performance since 1900   Amateur Investors   Nasdaq Composite chart pattern