An actual new idea

From today’s New York Times, an op-ed by two academics – a law professor and an economics professor – offers a unique proposal. Their column is titled Paying for Old Age. They propose government-issued annuities which could be as attractive as those issued by insurance companies are not (AIG anyone?).

This new product wouldn’t cost the government a penny. In fact, the Treasury would benefit. It is only an incremental move beyond issuing inflation-adjusted bonds, which the Treasury already does. By allowing the government to tap a new class of investors, the cost of government borrowing over all would probably drop.

22 responses to “An actual new idea

  1. Now if George Bush had only thought of that…anyone using the word “privatizing”? Only this idea looks good at first pass.

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  2. The Center Square

    In terms of a good plan by which today’s 20- and 30-somethings fund their golden years, this looks good. But it suffers from the same dilemma as does every solution to America’s graying. Today’s 20- and 30-somethings are ALSO in the midst of funding the golden years of Americans already at or past retirement age. In effect we are asking that group to fund Social Security and Medicare for current retirees, plus set aside enough additional money to purchase annuities sufficient for their own future retirement. And this is the group that has seen stagnant income and wealth increases over the past 30 years, and has little to no disposable cash flow for such long term investments in the first place.
    There’s no free lunch. It’s hard. And it’s going to be harder.

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    • I sure don’t know the answer to that Dave, but I will repeat myself when I say that SS will work fine if we make the necessary adjustments; it’s proved itself and even with the upside down worker/retiree ratio we’re facing with the baby boomers, that will actually pass in one generation and the ratio will readjust itself. Medcare on the other hand? Today’s 20-30 somethings could contribute 100% of their earnings and it still woudn’t be enough. Health care needs a serious solution.

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  3. Ms. Holland,

    Question, is this post an acknowledgment that I have been right about Social Security not being able to fulfill it’s promises ? Just askin .

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    • Alan – nope. SS is okay – it needs some reforms and to get past the baby boom. But after 75 years, we know the model works and is stable.

      I just like a new idea when I see one. It’s interesting.

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  4. Did any of us baby-boomers (ok I’m just a little older than that) believe they could live on social security? Did we not sock away money (thank you IRA’s and 401(k)’s. If we were interested in finance, yes I am, we had diversified portfolios and paid attention to the markets and made (hopefully) smart moves. Not too many of us were interested in finance and although it pains me, many of my friends have retirement money sitting in saving accounts, CD’s and not too much else because they don’t feel they know enough to invest and most investment advisers … won’t go there right now…I have too little regard for them. So what’s wrong with a safe investment that will supplement SS. I think it’s a good start and no, I don’t believe in privatizing. Just another gimmick to make the Wall Street crooks even richer.

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  5. Pingback: An actual new idea…Whatever Works… - Politicaldog101.Com

  6. Great idea! It could even be part of a financial Public Option – including a Federal Retail Bank that would provide basic banking services like checking, savings, loans, and a credit card to individuals, minus the exorbitant fees and interest rates.

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    • And let’s not forget the obscene costs of marketing and advertising, market research and PR ojmo. . . same with health care and insurance and especially drugs.

      (When I was a kid, it was illegal for doctors and lawyers to advertise. Imagine that.)

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  7. I like this extremely. Back in ’07, when I was trying to trust an “investment advisor,” I was sold two variable rate annuities. When I asked what would happen when the insurance companies issuing these vehicles went belly up, I was all but laughed out of the room. And then, the belly-upage commenced.

    I’m sitting on what’s left of my retirement after the Rape of America’s Middle Class Retirees, taking zero in the way of income from those funds, losing ground to invisible inflation, terrified to commit those funds to anything that calls itself an investment. Government-issued annuities? Sign me up.

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    • Sorry you got stung Nance – I think, however, we’ll have to wait till hell freezes over before we see any of those who caused this do a ‘perp walk’.

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  8. Nance,

    You are responsible for your retirement. You are responsible for educating yourself about investments. You are responsible in choosing investment advisors. When you make that decision your life will go on. I am sorry also that you were given bad advice by people who should have known better.

    What is done is gone. You have to be hard headed about what money you have left to invest and how many years it will have to last. You obviously have good instincts, in that you thought to question the stability of the insurance companies.

    Again read everything you can about investing and then go with your gut. Staying frozen with fear after your loses won’t help you. You will have to take on some risk to make any money.

    Ms. Holland,

    ” Alan – nope. SS is okay – it needs some reforms and to get past the baby boom. But after 75 years, we know the model works and is stable. ”

    I continue to disagree. The younger workers paying in right now are the suckers and they know it . All of these bandaids you propose will not save SS for those who follow the boomers. The Democrats in Washington are lying . AARP is lying. Like the politicians who promised government workers big pensions, they will all be gone when the house of cards falls.

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    • Just wondering Alan, when you tell Nance she is responsible for her retirement and “You are responsible for educating yourself about investments” I assume that means we no longer need plumbers or electiricians – or doctors or car mechanics? Because if we’re expected to know enough to determine if they know enough, why would we need them at all?

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  9. Moe, I will tell you a big problem with Social Security.

    People drawing Supplemental Income. That is what is killing it. People on SSI.

    I used to be so poor that I barely had a roof over my head, if not for my boyfriend I would still be in that spot. I have had to receive help for food, and have been around all kinds of people, Moe. I am not proud to admit this.

    But as such, I know what I am talking about here. I have seen people on disability whose only problem was laziness. I have seen people drawing SI who would brag about pulling a fast one over the government…there was nothing wrong with them. And the government pays them back pay when they do get approved. I am talking thousands. Street people have caught on and are doing this by the thousands, and the government is still not privy to it. I have seen it with my own eyes. Driving past the homeless area after the 1st of the month, it is desolate. By the 15th it is full again…and it is like that everywhere.

    And it is not just street people, but lot’s of people are drawing disability that do not need it. Or SSI. This is your money, Moe!!! It is what you put in your whole life!!!

    And here is the saddest part of it all…It all goes on drugs. This is what they spend it on. I have seen it myself. I have been on drugs, myself…I know many…

    Just thought you might want to know…

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  10. If they want to help people like that, then fine. Help them. But do not take it out of Social Security. And I would definitely suggest drug testing to everyone who receives benefits.

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  11. Now as to Government-issued annuities. Not a bad idea, but it would not be needed if they would just reform Social Security.

    Social Security is a good system as long as it functions as intended.

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  12. The UnRepublican,

    I know people who had to go through hoops to get on SSI. These are people with brain tumors and other legitimate disabilities. They have to hire lawyers to get it . If you want to talk about waste, talk about the cut the lawyers take . Then I know others such as you describe who are on it . Alcohol is their drug of choice.

    These are people who should still be paying in, but will help drain the system for the rest of us .

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    • Yes! I have also known people that have to hire lawyers to get it – mainly people with messed up backs. The lawyers do get a big chunk.

      Disability and supplemental income are two different things, however. Backpay for supplemental income is limited in how much one can receive in one payment – not over 2,048$ per month.

      Disability comes in one fat payoff, and it could be in the tens of thousands. It is a business in and of itself for lawyers, and it is exploited as such.

      Smart man you are.

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  13. The UnRepublican,

    I believe you have caught me in an error. I did confuse supplemental with disability. What are the criteria for getting the supplemental ? I get confused by the whole governmental maze . I have friend on disability and before he recently became really bad I tried to encourage him to earn money on his own . I looked it up for him and I believe in his case he would have been able to earn $ 600 or $700 per month with out jeopardising his benefits . Unfortunately he did not do that and now he is no longer capable .

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    • I was not being facetious, I actually agree with you.

      Now on to the difference between disability and SI…

      Disability is based on how much you earned when you were working and if I am not mistaken, it also is based on how much you paid in. I seen and heard of disability checks as low as 100 bucks a month or as high as 1500 bucks a month. If I had to guess, I would say the average is around 900 bucks. Far the most part, the people receiving disability are those physically disabled.

      SI, on the other hand, is for the most part for those that have mental disabilities (not retardation – which is considered regular disability – but severe psychological issues that would prevent one from working and sustaining employment). This is both Fed and State funded, and the monthly amount is set at 674 dollars.

      A lot of people get the 2 confused, as it is easy to do. The only reason I know about it is because of the people I have known…and there have been many.

      The lawyers are killing us on the disability, and the homeless drug addicts/alcoholics and con artists are killing us on the SI. Together, they are bankrupting our future.

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  14. Ms. Holland,

    ” Just wondering Alan, when you tell Nance she is responsible for her retirement and “You are responsible for educating yourself about investments” I assume that means we no longer need plumbers or electiricians – or doctors or car mechanics? Because if we’re expected to know enough to determine if they know enough, why would we need them at all? ”

    I know I sounded heartless. Believe it or not I was trying to be constructive . Nance now has to deal with what happened . Learning the basics of investing so that you are less likely to be victimized again, I believe, is easier than leaning to do your own plumbing, electrical, and car repair. As someone who pays others to do those, I know .

    Nobody cares as much about you as you do . Many financial advisors are merely salesmen or worse . If you have a basic understanding of investments, it is easier to weed them out and find real advisors who can give you good options to choose from. Again, Nance has good instincts. She just needs more knowledge to go with them .

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  15. Alan, I disagree with you when you say: Learning the basics of investing so that you are less likely to be victimized again, I believe, is easier than leaning to do your own plumbing, electrical, and car repair.

    I think we all have different kinds of intelligence – some people can look at an electrical grid and inuit what it’s all about. Some people can do the same thing with a balance sheet or an annual report. We each have skills in certaina areas and lack them in other areas. If I were knowledgeable about investing and confident in my judgement, I’d be doing it on my own. If I am neither knowledgeable nor confident, I do the best I can – the smart and prudent thing. I turn to someone who does know. And, like everyone else, I can get stung.

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