Easier for politicians to promise more from Social Security than to increase the taxes to pay for it.

It's easier for politicians to promise benefits than it is to take away benefits. Even enough Republicans went along with this, in spite of worries about Social Security's long term solvency.

Since they did this, next step should be to raise the cap on income that is subject to the Social Security tax. This would return the Social Security fund to more solvency, but it's harder for politicians to propose any increase in taxes.

Passed in the Republican House and in the Senate. Biden will likely sign it.

The law of unintended consequences may force Republicans to cut Social Security benefits.

On the campaign trail, very few Republicans will say they wish to cut Social Security benefits, but they tend to oppose raising the cap on income subject to the Social Security tax. Without increased revenue, the benefits will, most likely, need to be cut due diminishing funds in the trust fund and demographic changes in the population. Cuts would have to happen anyway due to the law of unintended consequences.

Why the Bush plan to privatize part of Social Security was bad. It would add too much to the deficit

Glad the Bush Social Security plan is dead. It's really old news, but I did hear these ideas come up again on a radio talk show. Most people criticize it for other reasons, but my main problem with the Bush Social Security plan was the added deficit it would create.

The plan would have allowed young people to divert part of their Social Security taxes away from the Social Security trust fund and into private retirement accounts. This would mean that during a long transition period, money would have to be borrowed to pay full Social Security benefits to people over a certain age who would still be retiring under the old system. Borrowing, even just for the transition period, would be quite hefty.

I'm glad that plan is not really being discussed that often anymore. That plan came out before 2008 when it looked like America was such a "safe haven" for money that we could borrow for everything. Borrow for the wars, borrow for the Bush prescription drug benefit.

The crash of 2008 spooked people. Most folks were spooked about relying on private investments for retirement savings, but more importantly, in my book, the national debt started ballooning more after 2008. Many private investments have recovered (so far at least) while the debt is still mounting.

I'll admit part of the ballooning of the debt was Obama's stimulus package. With this much debt from so many sources, the added borrowing for "transitioning" Social Security looks real foolhardy today.

Privatizing Social Security. Borrowing to save

It doesn't really make sense to borrow money from a bank in order to deposit money in a savings account, but this is what Bush's plan for privatizing Social Security would have done.

Glad it's now dead in the water, but other similar ideas are floating about.

Back before the crash of 2008, former President Bush came up with a plan to allow young people to pay slightly lower Social Security taxes in order to divert that money into private savings accounts for supplementing their Social Security when they reach retirement age.

Problem is, with less tax revenue coming in, Social Security would have to borrow money in order to continue paying out the same benefits for older people who are currently retired.

This situation of "borrow to save" would take place during a long period of transition until enough of us, who are currently at, or near, retirement age have died off.

After that, according to the Bush planners, there would be a panacea where private savings could play a larger role in people's retirement again. Kind of like the days before there was Social Security, only this time, it would be kind of a hybrid situation with some Social Security still intact. Bush apologists might call this a more "balanced" approach with private savings and government both playing a role.

Problem is, it's a long transition of robbing Peter to pay Paul until enough of the current generation of older folks dies off.

With smoke and mirrors, it might look like an improvement in America's dismal savings rate, but when money is being borrowed, even if just over a period of 20 years, or so, it cancels out what's being saved.

Increasing America's private savings rate is a good idea, but there are better ways to do this than the "borrow and pretend to save" plan for Social Security.

Why don't people just save more of their own money, aside from Social Security?

Before the crash of 2008, our environment for savings was abysmal. Interest rates from bank savings were (and still are) very low. Who would have wanted to save?

Saving isn't likely in a climate of low interest rates. That's the problem. Maybe interest rates are too low.

How did Americans save back then?

Buying real estate. That was people's "savings." Thus fertile ground for the real estate bubble. People using property as their savings. Low interest rates encourage this. I even remember someone writing a book with the title "Spend Your Way to Wealth."

While I'll admit I haven't read the book, I have heard that one thing it stressed was the wealth-building potential of buying a home. That was, of course before 2008.

Problem with the low interest rate / real estate bubble is the fact that it seemed like buying a home was the only sound investment one could make. No "diversification of portfolio" when everything else is "in the tank," so to speak. With stocks dubious, money in the bank paying practically no interest, starting a business risky; people would say, "lets buy real estate."

The bubble situation also lead to unaffordable housing as prices kept rising. When folks start spending well over 1/3rd of income on rent or mortgage, what's left over for savings?

Now that the bubble has burst, bank savings rates have improved dramatically, but not because interest rates are higher.

Why are savings rates so much better?

It's because people are scared shit less. After the crash of 2008, rainy day funds and things like FDIC look pretty darn good. It's just about protecting the principle now.

To permanently improve savings rates, it looks like we need higher interest rates. Rather than trying a gimmick like privatizing Social Security, higher interest rates could do the trick.

Still, nothing is a panacea, higher interest rates could also threaten to slow the economy. We'd have to learn how to survive and even thrive in a slower economy. We'd have to learn how to distribute the jobs in better ways. Less people unemployed, but also less people working overtime.

A more laid back economy? If one could afford the cost of living, I think most would go for it in a heartbeat.