Current (and presumably future) efforts to “fix” Social Security are mostly, if not entirely, empty gestures, because none of them do anything substantive to change the dynamics of the actual problem (that taxes in will be far less than payments out), and merely serve as band-aids, temporary band-aids at that, similar to Congress enacting one-year fixes to the Alternative Minimum Tax, year after year. A one-year “fix” is not a fix. It is a stop-gap measure.

And to fix Social Security means a complete overhaul.

Step 1: Eliminate Social Security.
This is the costliest of items, because the system cannot be simply eliminated, and must be phased out. And the transition cost is huge (in the trillions). The reason to eliminate the program is clear: the mathematical formula to pay for the benefits promised (today’s workers pay for today’s retirees) is broken, and will not ever be fixed in such an insurance-based-only system (unless benefits are drastically reduced, and in such a case, the Social Security program as we know it becomes seemingly worthless). The reason for the hefty cost to switch is also clear: all of the system’s obligations must be paid in full. I will make no exceptions.

So what would a phase-out look like? First, no new members. Anyone who is joining the workforce will have no idea what Social Security is (and they’ll thank us for it). Second, a mandatory buy-out of all members under the age of thirty or all members with less than ten years of work history. The buy-out would come by way of tax deductions or tax credits or lump sum payments (or a combination). These details need to be ironed out. Third, an optional buy-out with members under forty or with less than twenty years of work history. The enticement alone should whittle down close to a half of workers in this category, and to keep the transition costs as low as possible, the more people that opt out of the system at this preliminary phase, the better. Lastly, full payment of obligations promised to everyone else, to the last penny. (The survivor and disability payments may need to be revisited however, to make the phaseout work that much easier, that is, without bankrupting the nation.)

Step 2: Establish Federal Retirement System.
Also known as FedRets. Okay, that nickname will probably not stick; I wouldn’t want it to. I’m not sure what to call it exactly. The Federal Retirement System (FRS) will consist of tax-deferred investment accounts. Now, don’t shake your head. (This is a 401k system.) The investments will be partially insured by the federal government. That is the big difference. (Ok, you are at least sitting again. Let’s move forward. Take a breath.)

This is how it works. An investment portfolio will exist for each of the twelve federal banks: Boston, New York, Philadelphia, Richmond, Atlanta, Cleveland, Chicago, Minneapolis, Dallas, St. Louis, Kansas City and San Francisco.¹ Each portfolio will consist of a series of target-year funds in five-year increments matched for estimated retirement dates for workers (say, Philadelphia 2040 and Atlanta 2065), as well as a (conservative) bond fund and (higher-risk) stock fund.² In all, there will be dozens of funds to choose from. Individuals will not be limited in any way to invest in the individual funds (except for the stock funds capped at 20 percent), e.g., a Seattle worker’s FRS portfolio can consist of 50% Cleveland 2050, 40% Atlanta 2050, and 10% Chicago Bond. (The default choice, if none is chosen upon start of employment, would be your expected retirement year in the governing federal bank in the locality under which you live.) The FRS will not be employer-based. Employers will simply be required to incorporate the FRS into their accounting procedures. The FRS would remain if workers switch jobs. (There would be no roll-overs or lost 401k accounts. Your investment options would always remain consistent.)

Individuals would be required to invest ten percent of their income (pre-tax, no less, no more) into the FRS, up to $25k per year, with that value indexed for inflation. An additional ten percent (up to $25k, also indexed) can be separately invested in a 401k, IRA, etc. Defined benefit plans or pensions would also be treated separately (on top of the FRS), but every American will be required to partake in the FRS. The investment funds would be managed by brokerage houses under fixed contracts. New York, for example, could be run by Goldman Sachs, and San Francisco by Charles Schwab. The managers would change over time.³ For example, a worker in San Francisco would create an account with Schwab and be able to purchase whatever funds were available from any of the regions, fully administered and controlled by the worker, similar to a 401k. If Schwab’s contract with San Francisco was not renewed, and Vanguard resumed control, the worker would have the option to transfer the account to Vanguard or remain with Schwab, which is where they may also have an IRA and college savings plan. The fund managers would be responsible for the investments (with oversight by the Federal Reserve), and individuals would have limitless freedom to move their account. Employers would facilitate the account set-up with an investment firm (most likely coinciding with their 401k administrator).

The federal government would protect and insure retiree assets. The guaranteed rate of return for individuals would be on the order of 4 to 6 percent. Fortunately, the government would only need to insure benefit payments (i.e., retirement income) in down periods, not the entire investment portfolio nationwide continuously. A 1 percent tax on incomes over $250k, with no limit (and indexed for inflation), should provide this buffered form of insurance.

Even if individuals saved and invested ten percent of their income every year, their retirement could still be in jeopardy (not including market fluctuation, which would be covered by the aforementioned insurance), by way of disability, long life, etc.⁴ This is the insurance portion of today’s Social Security (which goes above and beyond what was expected when first enacted in the wake of the Great Depression), a welfare type of program, however it may be necessary. That being said, individuals should not be able to plunder their retirement accounts and then be covered by such welfare. A minimum and maximum deduction may need to be included as part of the FRS (with the numbers indexed for inflation). This should not disallow individuals from purchasing a boat if they can afford it, but likewise, it shouldn’t allow individuals to purchase a boat if they cannot. The FRS would complement other savings vehicles with lesser restrictions (401k, IRA, etc.), so those that can should still be able to. The FRS is meant to stabilize retirement for every individual. The welfare aspect of the FRS would be covered with a progressive tax on those making over $250k (indexed for inflation): 1% up to $1m, 2% up to $2.5m, 3% up to $5m, and 4% as the top rate, with no limit on income. (All of those figures would, of course, be indexed.) These tax monies would, in essence, be a rainy day fund for the nation’s retirees.

The benefits of a retirement program that I have just described sells itself. It allows individuals to save and invest up 20 percent of their income tax-deferred: ten percent would be mandatory as part of the FRS; the second ten percent would be optional and outside of the FRS (and pensions, presumably less-costly than now, would be on top of that, as applicable). Retirement age would be set at 65 (why not, it’s not the government’s money), and indexed based on life expectancy. There would be minimum (and maximum) deductions from the FRS, starting at retirement, but all assets are owned, and may be transferred upon death. Unlike Social Security, where individuals are paying into a system they may never use and others are barely paying in and reaping huge rewards, the FRS will allow those to fully own their investments. Investors would be covered in lean years (with the insurance tax, providing for a minimum return), and a welfare aspect is covered with a secondary tax on the wealthy.

The idea of ten percent of the nation’s income being invested continuously back into the economy is akin to a monthly stimulus bill the world cannot fathom on its own. The FRS eliminates the nation’s costliest expenditure (Social Security coupled with Medicare) and removes it from the balance book altogether. The FRS is a social program (at heart, at least) and a capitalistic approach (with the associated benefits). It is a win-win. It is the Federal Retirement System. It is my child. I now release it for the world to see, and it will make a name of itself if it is indeed worthy.⁵

1. You know, the cities stamped on the dollar bills we use everyday.
2. Ownership of stock funds will be limited to 20 percent of an individual’s portfolio at any time.
3. There would clearly be a lot of competition to run these individual funds, with companies sacrificing higher expense ratios for the gross fees of such large accounts.
4. Health costs would not be a concern following the implementation of my universal health care plan.
5. I’ll hold my breath, but you should release yours.

Republicans elect stars; democrats make them. Okay, you catch my drift.

I’ve always wondered why the democrats haven’t courted the famous liberals and drafted them to run for Congress (and beyond): George Clooney, Paul Newman, Jon Stewart, Al Franken (alright, that is not the best example anymore). Republicans look for stars, well-known individuals, and in a way, Sarah Palin is setting herself up perfectly.² On the other hand, the democrats have largely adopted lesser-known politicians and have made stars out of them.

Here are some examples: Ronald Reagan, Sonny Bono, Arnold Schwarzenegger, even George W. Bush, a son of a president; John F. Kennedy, Bill Clinton, and now, Barack Obama. An argument may be made that democrats elected Obama after he became a “star,” but what made Obama a star was strictly his appeal as a politician, whereas Reagan, the Governator and, yes, Dubya, were well known before they became politicians. Clinton and Kennedy were young up-and-comers before being crowned as the next great thing in politics from the party faithful.

The line is quite clear between the two. It must be psychological or physiological, Freudal or something; I don’t know. I’m not an expert, I only play one on the internet.

1. I started this post in 2005; it went nowhere. I picked it up again in 2007, changed some names, changed the order; it went nowhere. And now, with little time to spare, here we are.
2. Palin’s run would arguably not be well received by American voters, in general, but republican voters, sure. Maybe not in 2012, but 2016 or beyond, definitely. It’d be silly to write her off this early in her career as a known politician. The GOP will be looking to “draft” her for election cycles to come.

While busily writing this post in Schiphol airport however, I never found myself actively discussing my main argument, that software is intellectual property, and that stealing it is very wrong. I kept going off-tangent, which I can only ascribe to my state of being. I couldn’t focus my attention on my point, that I was also confused that even in today’s (hyper) web-focused business world, and those making plays in that world, that individuals would still find it appropriate (or make endless excuses that make it seem potentially appropriate, when you squint your eyes and the stars are all aligned, but even then, everyone should know that it is still wrong) to use cracked versions of software packages, or would actively seek stolen copies or access codes. That sort of stuff is, um, frowned upon.

It was my intention to elucidate these thoughts, beginning with my personal sordid history with stolen software as a basis for my opinion. Unfortunately, I was not able to illustrate my thoughts in a purposeful manner while sitting barely awake at AMS, and now, time has seemingly run out. Either way, I am pretty sure I am not qualified too take such a high road on the issue, but I’m pretty sure I’m right.

This is what I wrote on May 15…

I stole some software when I was young and stupid. A friend of mine burnt me a copy of a cracked version of Macromedia’s DreamWeaver and Flash. (Macromedia is now owned by Adobe.) I’ve never used Flash. Too time consuming. And I was all set to create a series of splash pages for my websites too. That was four years ago, and I still have no Flash-based splash pages on any of my websites. So there goes my determination. Dreamweaver, on the other hand, I got some pretty good use out of in the immediate short-term. And overall, it was a much better option for editing more complicated code than with, say, FrontPage. However, I never used it enough to say that I needed it. I have always edited my websites on the fly, with Notepad or any text editor. That is all that is really needed anyway. And when I started using blog publishing tools, the in-house editors sufficed for the most part. In the end, Flash and Dreamweaver became wasted space on my hard-drive, and as I purged my old computer a few weeks ago, in an effort to clean-up my files for a partition and dual-boot install of the latest Ubuntu release, so went Dreamweaver and Flash with the ubiquitous Add and Remove Programs utility.

That was the only software I have ever really stolen. My usual process when I think I want a piece of software, which almost always is based on temporal foolishness and not earnestness, is to find an open-source comparable. I prefer open-source (for the most part) for one reason: you know that someone is working to improve it. And that is true always. Unlike a purchase of a big-name product, say, Microsoft Office, which, purchased legitimately will set you back a few hundred dollars, there really is no reason or driving force for Microsoft to improve that product. You’ve already bought it. Open source software, on the other hand, is always being improved because that is the only reason people will use it. If the product is not always getting better, typically by way of sometimes-stubborn incremental updates (FileZilla is the best example), then the users will simply flee. There is no reason for them to stick with the product because they didn’t pay for it. If there is no comparable open source solution, I then looked at the trial period or limited free versions to see if those were good enough for what I needed this piece of software for — this ultra-important task that I had forced myself to think was immediately pressing. And most of the times, it is.

I have a long history of deleting programs — via Add and Remove — within a few hours or days of initial install, sometimes minutes.

I’ve never really spent a lot of money on software, until I purchased my MacBook. I had two incorrect perceptions of Apple products before I had finally drummed up the courage to buy one. First, I thought that the right-click was a no-show on Macs, and I was wrong. Although the built-in and Apple-branded mice do not have a right-click, the hardware (and software) recognize right-click. When I am away from my home, and I do not have my wireless mouse, I do need to use control-click on my MacBook because there is no right mouse button, but after a few weeks of use, I am entirely accustomed to the practice (whereas on a PC, I hardly ever use control-click, since I always had a right mouse button). Anyway. The second misconception was that there were no freeware or open-source software for the Mac, and I was entirely wrong.

reyonthehill: Holliday was traded.
reyonthehill: St. Louis for three players
reyonthehill: National Leaguers
co-worker: saw that this AM. It was in the works since opening day, as far as i’m concerned
reyonthehill: I didn’t realize the NL was still in business.
co-worker: yes, still in business
co-worker: apparently, letting pitchers flail the bat every 9th hitter is marginally profitable these days

@IRS you suck balls

@IRS where’s my money?

@IRS you just got fooled. thanks for the refund. #fail

Be sure to follow the White House and Social Security, you know, if you have the time.

In a brief summary, Syracuse beat Virginia Tech that season (in the snow; it was a great game; I watched it on my 19″ Zenith tv), and finished second in the Big East conference with a 6-1 in-conference record. Pitiful VaTech finished 4-3 and in third place. In one of the greatest slights in recent football history however, the executives of the Gator Bowl (the game usually slated for the second-place finisher of the Big East and ACC) opted for VaTech instead. Florida State humiliated the Hokies, while Syracuse easily prevailed over Kansas State in the (arguably inferior) Insight.com Bowl.

I don’t have the time to go into all the details anymore, that is quite obvious (to you, and me), but you get the point (or I hope you do, as I try to drive it home): This was a heist. Syracuse was the better football team. And VaTech sucks.

I told her that if — and when — I have my nervous breakdown, or mid-life crisis, or whatever, that this would be where she could find me… Amsterdam. It was honest in that I believe it actually would be true, if I were to have a midlife crisis of some sort, that I would pack a bag, get on a flight bound for Amsterdam, and hunker down (for as long as necessary). I realized almost instantly that telling her was also foolish, at least rather somewhat. It is not as though she objected to my statement — she mostly understood why I would choose Amsterdam — but I am now a bit worried that my future hiding place (if that is what you would call the place you run to in a crisis; a swimming hole) is not a secret anymore. It is known. Maybe that is for the best however. At least she’ll know where I am.

That is what I have to say about Amsterdam.

1. Confessions of an Economic Hit Man by John Perkins
2. See No Evil by Robert Baer
3. The Great Unraveling by Paul Krugman
4. Paris 1919 by Margaret MacMillan
5. 1491 by Charles Mann

At this point, it is unlikely that I’ll ever pick up Fowles again.

Will Obama be able to articulate specific policy proposals on health care that he’s for, or will we hear more of the same chatter on his principles? Repetition is always important to pushing a message, but one of the things that may be slowing down the process in Congress is that the president hasn’t come out publicly on the specifics. He won’t even say if he’s OK with the millionaires’ surtax or not; whether a co-op is enough to fulfill his “public option” promise; or what amount of “virtually” universal coverage is satisfactory.

And this morning…

Honest question: Is there a point when the president knows too much about an issue? He got into the weeds a number of times on a number of different aspects of health care, which is what his diehard supporters love, but might not grab the attention of the average viewer.

Chuck Todd is not Tim Russert.