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Albert Speer
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Puerile Polemic
Mar 1999
time: 00:34
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instead of taxing only the first $68,400 of income at 12.4%, why not keep taxing beyond this relatively low 68K?
wouldn't that generate enough revenue to at least partially fund soc. security?
(not the mention the fact that the present situation makes soc. security taxes an unfair burden on the poor)
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Spiffor
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CPA - Evil Clone brigade
Nov 2001
time: 06:34
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quote:
Originally posted by Dauphin
I would prefer the government force you to pay the money into private pension schemes. |
Private pension schemes (whether forced or not) have exactly the same fundamental problem as public pension schemes.
The fundamental problem is that many old people live off the economy while not working.
When you give to a public pension (the money immediately benefits the current retirees), you obtain the right to claim this money in the future.
But guess what happens with private schemes / banks etc...
It is exactly the same.
When you give money to a bank or a stockbroker, this money is immediately invested back in the system. The banker doesn't put the bills in a safe, but he uses it immediately. The money you just gave disappeared, you'll have a hard time finding where it went. Same with stock: when you buy a stock, the money you just spent will be used by the one who recieved it.
What you otained, however, is the right to get a certain amount of money. Just like with public schemes.
There's a reason banks only have 8% of their capital in liquidities (meaning that 92% of the money a bank is supposedly having, it doesn't have for real).
If you invest in a private scheme today, you are contibuting to 2004's economy. But it doesn't mean that in 2040, the economy will be strong enough to sustain you and every other person who had the same idea. Public or private.
The only way to sustain our old people is either to have a population increase, to have them work much later, or to use our productivity increases to sustain them. Public or private redistribution makes little to no difference... Except that with private ones, the poor will never be forced to die at work.
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Dauphin
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Caught in a tuna net
Jan 1970
time: 05:34
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quote:
Originally posted by Spiffor
Private pension schemes (whether forced or not) have exactly the same fundamental problem as public pension schemes.
The fundamental problem is that many old people live off the economy while not working.
When you give to a public pension (the money immediately benefits the current retirees), you obtain the right to claim this money in the future.
But guess what happens with private schemes / banks etc...
It is exactly the same.
When you give money to a bank or a stockbroker, this money is immediately invested back in the system. The banker doesn't put the bills in a safe, but he uses it immediately. The money you just gave disappeared, you'll have a hard time finding where it went. Same with stock: when you buy a stock, the money you just spent will be used by the one who recieved it.
What you otained, however, is the right to get a certain amount of money. Just like with public schemes.
There's a reason banks only have 8% of their capital in liquidities (meaning that 92% of the money a bank is supposedly having, it doesn't have for real).
If you invest in a private scheme today, you are contibuting to 2004's economy. But it doesn't mean that in 2040, the economy will be strong enough to sustain you and every other person who had the same idea. Public or private.
The only way to sustain our old people is either to have a population increase, to have them work much later, or to use our productivity increases to sustain them. Public or private redistribution makes little to no difference... Except that with private ones, the poor will never be forced to die at work. |
I don't know how it works in France or Germany but my understanding of the system in the UK is this:
When you pay National Insurance taxes the money just gets lumped together with all other taxes pretty much. The government then allocates its spending budgets, a portion of which is to pay for health, transport, defence etc. including pensions. There is no investment of moneys in funds that will grow the pension pot, moneys paid to pensioners comes from moneys paid in by people currently working. It goes in and out immediately. There is no matching between money paid in by person A during their working life and money withdrawn by person A on retirement.
When you pay private schemes the money gets invested in stocks, shares, funds or other capital investments that get a return on investment. The value of the fund increases with fund growth and contributions. When you retire the value of the fund determines the amount of your pension payout. There is a direct correlation between what money was invested by person A and what was paid out to person A.
I see a clear difference between the two schemes. The former sees the children pay for the parents living, the latter sees the retiree live off the assets they built up over their working life.
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Spiffor
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CPA - Evil Clone brigade
Nov 2001
time: 06:34
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quote:
Originally posted by Dauphin
I don't know how it works in France or Germany but my understanding of the system in the UK is this:
When you pay National Insurance taxes the money just gets lumped together with all other taxes pretty much. The government then allocates its spending budgets, a portion of which is to pay for health, transport, defence etc. including pensions. There is no investment of moneys in funds that will grow the pension pot, moneys paid to pensioners comes from moneys paid in by people currently working. It goes in and out immediately. There is no matching between money paid in by person A during their working life and money withdrawn by person A on retirement. |
Pretty much the same in France (I'm not really sure for Germany), except that the welfare budget is entirely separate from the State's, and that rich people get a somehow higher retirement than poor people. Far, very far from being purely proportional though.
Contributors are supposedly guaranteed to get a retirement, in turn, when they reach the age.
quote:
When you pay private schemes the money gets invested in stocks, shares, funds or other capital investments that get a return on investment. The value of the fund increases with fund growth and contributions. When you retire the value of the fund determines the amount of your pension payout. There is a direct correlation between what money was invested by person A and what was paid out to person A. |
And it is the same mechanism as with public schemes:
When you pay your SS tax, you obtain the right to get a pension in your old age. The money you have the right to claim isn't proportional to what you paid, but that's another matter.
When you invest money in a retirement fund, you get a right to claim this money back, when you're of age. This money will be proportional to what you contributed, but the proportionality issue is not the thing I'm caring of right now.
I'm caring about the long term viability of both systems. In both cases, the money you pay will be immediately used, and in both cases, you get the right to claim (some of) it later.
- Say there are too many old people in a public system. The system either reduces pensions (=withdraws its promise of retribution), or taxes the economy like hell to sustain it.
- Now, say there are too many old people in a private system. The pension funds will either have to reduce pensions (=withdraw its promise of retribution, which will be a breach of contract), or demand more and more ridiculous dividends from the companies they own and draw money from.
- Same with the banks: when too many old people demand their money back, the only way the banks can give this money will be to raise loan interest rates, to have sufficient income to pay all those old people, like they rightfully claim.
The belief a private system is more long-term viable than a public one is false. In both cases, you have more and more people getting paid by doing nothing (the retirees), more and more people getting paid by not producing wealth. And thus, in both cases, you have more and more people leeching off the economy.
Whether the redistribution of money -from those who work to those who don't- is made publicly or privately doesn't change anything wrt viability: one day, the economy isn't able to sustain all those old people.
quote:
I see a clear difference between the two schemes. The former sees the children pay for the parents living, the latter sees the retiree live off the assets they built up over their working life. |
This is a misconception. This kind of misconception is very common, and I have to explain it often. This misconception comes from the idea that banks / stocks etc... manage YOUR money, and that it remains YOURS from the beginning to the end.
They don't. They invest that money in various things that are more or less risky. Your money basically disappears immediately, as it is used in some investment made by the fincancial institute, or as it is used to pay wages, or dividens for other people, etc.
What these institutions give you is a right to claim a certain amount of money later. When you demand money, you get it. Assuming the financial institution is healthy. If there was a major economic crisis, if the institution you ivested in becomes bankrupt, you lost everything. Just like those people in the Enron debacle. Because the pieces of paper, or electronic notices they sent you, aren't worth jack if the system is bankrupt.
Just like with public schemes.
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25-08-2004 20:08
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