Pimco's Gross Says Bush Social Security Plan May Fail (Bloomberg)

Pimco's Gross Says Bush Social Security Plan May Fail

Feb. 4 (Bloomberg) -- Bill Gross, who manages the world's largest bond fund, said President George W. Bush's proposals for cutting a shortfall in the Social Security trust fund won't work.

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Gross, chief investment officer at Pacific Investment Management Co. in Newport beach, California, suggested instead that the U.S. cut its budget deficit.

``There's your problem, and neither privatization nor any goodly number of government bonds deposited in the Social Security trust fund can solve it,'' Gross wrote in a report published on the firm's Web site yesterday. ``The value of Treasury bonds and even stocks will be valued down in price as they are sold to pay for future goods and services.''

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``By reducing budget deficits now, and especially the portion of the deficit owed to foreign governments, we would be able to keep more of our domestic production within our borders, and therefore available to senior citizens,'' wrote Gross. ``Keeping the size of our future IOUs low and out of foreign hands would minimize inflation pressures and the transfer of goods and services overseas in future decades.''

The U.S. budget deficit swelled to a record $412 billion in the year ended Sept. 30, after shortfalls of $377 billion in 2003 and $157 billion in 2002. The Bush administration last week predicted a fiscal 2005 shortfall of $427 billion, almost $100 billion more than it predicted last year.


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http://quote.bloomberg.com/apps/news?pid=10000103&sid=aLefysUDtIbo&refer=news_index

I believe Bill Gross before the "con man in the WH". Gross is saying that bonds/market will be "under pressure" starting in 2018 since Soc Sec would need to "sell" bonds since they would be receiving less contributions from workers. Therefore the returns cannot be counted on.

I'll believe Gross before Bush, but where does do you get 2018? I read the article but don't see it, though I did just get up.

they "pay out".

What this means is Soc Sec are owners of T-Bonds and now would have to "sell these bonds annually" to keep up with obligations.

Gross doesn't give the 2018 date. But that is what he is talking about when having "to sell bonds to keep up with obligations".

It's just the date jumped out at me because I've heard Bush use it. Thanks.

So this was the implicit bargain in the reforms recommended by Greenspan and signed into law by Reagan: From 1983 to 2018, low- and middle-income earners would pay excess payroll taxes. This allowed income taxes to be kept low, and primarily benefited high earners.

Then, beginning in 2018, instead of raising payroll taxes to pay for baby-boomer retirement benefits, Social Security would begin selling its bonds back to the government.

To pay for those bonds, income taxes would be raised - high earners would begin paying higher income taxes.

In other words, the fact that income taxes will eventually need to be increased in order to cover Social Security benefits was part of the Greenspan/Reagan plan from the start.


http://www.csmonitor.com/2005/0127/p09s01-coop.htm

is a very regressive system. It is basically the lower to middle classes taxing themselves to keep from being totally homeless during retirement.

It is also a way of penalizing all those who do not have the good fortune to live to retirement age for being unlucky either in terms of genetics or being accident-prone.

As I see it, in the last 25 years the GOP has succeeded in destroying the concept of being an American. Wealthy GOPers not only feel no responsibility toward their fellow citizens who are less fortunate; they see them as a nuisance to be stepped over in the streets. Next they'll be herded into euthanasia camps to be put out of their misery. We're living a Charles Dickens novel.

* once told someone while campaigning in 1999 or 2000 that he really couldn't relate to the poor or words to that effect. It was a rare moment of insight and honesty. He was speaking with some "faith-based" types who were pitching a proposal to help the prisoners find gainful employment after release. The change I see in him is that he is no longer even willing to "fake sincerity" as he did back then in terms of the issue of the swelling ranks of the, shall we say, "underprivileged" (i.e., not born with trust funds) in our society.

paid in perhaps because of early death or sickness.

It's not a 401k...was never meant to be. Priviatization does not SOLVE the funding shortfall.

having the wealthy pay their taxes would help the system tremendously