Monday, January 31, 2005
The Bottom Line
Financial security does not require extraordinary income or investment "home runs." It requires, first and foremost, that you start saving and investing early, and add to your investments consistently.
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That is a very limited view and begs the question: nothing can be saved without stability. Then investment is a sure thing.
Put away a bottle of wine for 30 years and it will be worth a lot of money. But you depend on having a place where that bottle cannot be broken.
You have noticed, yes, the rise of gated communities?
What we take as a given, stability, is the single mose important factor that makes long term investment possible: short term doesn't need that and the big boys can play.
If and when there is a big pot, that will be a serious temptation to destroy stability... shake the tree and get the apples.
Save? sure. And there are lots of people out there who are still smoking.
Save? long term at 6%? Hey, I know a guy that can get you 10%! I'm going to do that and I'm going to be really really rich, and you're still gonna be a slob.
(That's just an interation away from "you're gonna rely on old style social security while I'm gonna have a private (being renamed to "personal"... these guys are very very very careful with the words they use) account.
Here's a snarf of some premium content from Joe Klein in Time, with Lindsay Graham as the hero...
But intangibles are, well, intangible, and liberals have grown very conservative when it comes to social policy. They prefer certainty over choice. The "ifs" involved in the partial privatization of Social Security are titanic, especially when one considers the wanton fiscal irresponsibility of the latter-day Republican Party. Any attempt to move toward private accounts will be costly, given Social Security's current obligations--and any proposal to make the change without paying for it would be economically dangerous, given the country's enormous budget and trade deficits. Also, if we're going to be serious about this, there has to be some controlling legal authority over the private accounts. Chileans choose among seven very conservative, government-approved funds. "You have to be careful," agrees Senator Lindsey Graham, Republican of South Carolina. "You can't have people day trading."
It is a flagrant violation of the Secret Protocols of Political Columnists to mention the same politician favorably two weeks in a row, but Graham has forced it upon me. He excoriated the Attorney General--designate Alberto Gonzales last week for allowing the White House to loosen the rules on torture. This week, praise goes to his Social Security reform plan. Graham actually approaches fiscal sanity. He would offer individuals a chance to invest up to $1,300 of their payroll taxes per year in any of five government-approved funds, ranging from stock indexes to private bonds to government paper--or to stay in the current system. He would pay for this by raising the cap on the Social Security payroll tax from $90,000 to $200,000, and by changing the benefits formula to reflect changes in consumer prices rather than wages, an option sanctioned by the Moynihan-Parsons Commission in 2002. Graham blanched when I called it a tax increase, so let's call it a shockingly supple revenue emolument. It is unlikely to attract support from the cowboy wing of the G.O.P.
Which is why Democrats--especially those who understand that the industrial-age social safety net can be improved for the information age--should not dismiss this simply because it involves Bushian private accounts. Graham is not without powerful Republican allies; he is close to Charles Grassley, the Senate Finance Committee chair whose support is crucial to any reform. In fact, if the President is serious about personal investment accounts, he should take a close look at Graham's plan too
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