My first long-term Oracle DBA position after leaving academia in a recession (my last gig was a temporary visiting professor position at Illinois State) was with a marketing research private firm in the southwest Chicago suburbs. We had a number of University of Chicago-educated statistical analysts who did modeling using a utility to access customer data stored in Oracle tables for a variety of projects like customer segmentation and retention analyses; we had customers in different industries, including a prominent regional Bell, but had a specialization with credit card issuers.
I basically designed and loaded customer data (often monthly feeds) into various tables, including time series. We had a proprietary utility which could parse various mainframe file formats into flat files for Oracle loading. Sometimes I wrote some custom code to do some intermediary data transformations.
MK was our executive VP, and KL was our CEO. (I don't identify people without their knowledge and consent. Needless to say, no past employers, clients (including the USG), or colleagues necessarily share my opinions.) I did work on certain projects for the CEO, but for the most part I worked for MK. He was trying to get our exploding disk and other costs under control and put me in charge; he also had me give training for other tech personnel and had me mentor other DBA's.
I loved working for the company and would probably still be working for them until KL and his minor partners sold to Equifax. I have mixed feelings about the acquisition. They took a company that was growing about 30% a year to flat revenues. The bureaucracy was so bad I used to joke we had to order our pencils out of Atlanta. I remember HR told me I was at the top of their salary range for DBA's and the most I could expect was a 2% increase over the coming year while in fact I was making below-market and getting unsolicited calls from consulting company recruiters. I think almost all of our core employees left within 2 years. I think MK was a minor partner and like other management probably had to move on in a year or two; there were no-compete clauses in place. For the most part after leaving the company, I was only in touch with RR, my best friend and former project manager on an onsite project in Brazil
At some point, I think I heard from RR that MK was running for Congress as a Republican. He must have attached a clipping (pdf?), unindexed in my archives. I'm thinking it was probably for Henry Hydes' district (IL-6) when he retired, but I haven't got a hit for him on Google or in Ballotpedia. Maybe he dropped out before the primary. But I recall his signature issue was saving social security, an unusual platform for either party. Perhaps it was motivated by Bush's failed attempt to reform social security in his early second term, including partial privatization. MK is not alone; my own maternal grandfather, a rare MA Republican, a former mom and pop grocery owner, used to brag about getting the maximum distribution payment. I have NEVER heard any registered Republican or Republican legislator call for ending social security or cutting benefits for existing beneficiaries, a common accusation Dems have made for decades against the Republicans for messing with the third rail of politics, [See below a clipping for Reagan's address on behalf of GOP nominee Goldwater, where Reagan explicitly recognized social security as a political fact of life.] FDR shrewdly had refused to make social security a dole and by requiring all workers to contribute to it, including high earners, all workers were vested in its permanence.
I don't know the politics of my extended family but we 7 siblings grew up in a fairly conservative household, 3 of us have ourselves served in the military and I think at least 3 or 4 in-laws came from military families like us. In fact, unlike me, most of my Boomer siblings, like my parents did, want to file for the early retirement option. I don't think the program has influenced their politics, but I think it's safe to say all of us feel entitled to pension and healthcare benefits after decades of up to 15.3% payroll taxes. We don't necessarily think the spendaholic Dems can be trusted with securing entitlements; in fact, the last 1983 "fix" was under Reagan, who philosophically opposed the system but pragmatically accepted it. See this excerpt firms his 1964 Goldwater speech:
Now, we're for a provision that destitution should not follow unemployment by reason of old age, and to that end we've accepted Social Security as a step toward meeting the problem.
But we're against those entrusted with this program when they practice deception regarding its fiscal shortcomings, when they charge that any criticism of the program means that we want to end payments to those people who depend on them for a livelihood. They've called it "insurance" to us in a hundred million pieces of literature. But then they appeared before the Supreme Court and they testified it was a welfare program. They only use the term "insurance" to sell it to the people. And they said Social Security dues are a tax for the general use of the government, and the government has used that tax. There is no fund, because Robert Byers, the actuarial head, appeared before a congressional committee and admitted that Social Security as of this moment is 298 billion dollars in the hole. But he said there should be no cause for worry because as long as they have the power to tax, they could always take away from the people whatever they needed to bail them out of trouble. And they're doing just that.
A young man, 21 years of age, working at an average salary - his Social Security contribution would, in the open market, buy him an insurance policy that would guarantee 220 dollars a month at age 65. The government promises 127. He could live it up until he's 31 and then take out a policy that would pay more than Social Security. Now are we so lacking in business sense that we can't put this program on a sound basis, so that people who do require those payments will find they can get them when they're due, that the cupboard isn't bare?
Barry Goldwater thinks we can.
[Just an aside: in the 1950's the government mandated the trust reserve to be "invested" in government debt instead of higher growing/yielding stocks.] So, part of the current crisis here is the fact we aren't collecting enough payroll taxes to fund current beneficiaries and we are burning through the reserves which are drawn down to make up the difference. The problem is the reserve will be exhausted in about 10 years, earlier for Medicare. If and when the reserve is exhausted, there will be commensurate reductions in benefits of 20% or more. There are some alternative models:
Pension funds do it. Insurance companies do it. Canada does it, and so does Japan. So, why doesn't our Social Security system invest in the stock market--and should it?...The question here is whether Social Security should invest a portion of its reserve funds in equities to help the program's long-term solvency.
The Ball/Altman plan included a proposal to authorize Social Security to invest a portion of the SSTF in broadly diversified index funds. In order to safeguard against government interference in the markets, a Federal Reserve-type board with staggered terms would have been appointed to select the funds and to hire fund managers through a competitive bidding process.
Ball/Altman proposed gradual investment in equities, starting with one percent of SSTF assets in 2006, adding an additional percentage point annually with a cap of 20% of SSTF assets.
How much would equities help? Burtless is the co-author of a recent research study for the Center on Retirement Research at Boston College that attempts to answer the question. The report looks at the question in two ways. First, it uses historical market data to determine how the SSTF would have been impacted had it been invested partially in equities beginning in 1984; then it considers investments in equities beginning this year as part of a broader package of reforms, using Monte Carlo analysis to project a range of possible outcomes over the next 75 years.
The historical analysis follows the recommendation of the mid-1990s Social Security commission--it increases the percentage of trust fund reserves invested in equities by 2.67 percentage points each year up to a ceiling equity allocation of 40%.
The results are expressed using the trust fund ratio--the ratio of assets to benefits (a ratio of 1.0 is the Social Security trustees' benchmark for short-term financial adequacy). If equity investment had started in 1984, the trust fund ratio in 2016 would have been 4.2 compared with an actual ratio of 3.0.
There are other more diversified approaches including sovereign wealth funds and pension funds:
[A] group of bipartisan lawmakers may have come up with a compromise in the form of a sovereign wealth fund (SWF) — something that the United States does not currently have at the federal level. SWFs are typically investment funds owned by the government, according to the Federal Reserve. In this case, such investments would be used to fund Social Security payments.
That's according to Semafor's Joseph Zeballos-Roig, who reported this week that a group of senators led by Sen. Angus King, an Independent from Maine, and Sen. Bill Cassidy, a Republican from Louisiana, is considering a SWF to fund Social Security. That's in addition to reports that the group wants to eventually raise the retirement age to 70 years — or close to it — as well, which could effectively lead to benefit cuts for future retirees.
How government retirement funds use equities
1. Cassidy’s plan takes inspiration from other countries, including Canada:
The Canada Pension Plan, with about $570 billion in Canadian dollars, changed its investment approach in 1997 in response to the need for higher payroll contributions due to longer life expectancies, lower birth rates and lower real wage growth, according to the Center for Retirement Research. The plan raised payroll contributions and began investing some funds in equities. Now its portfolio includes a variety of investments, including stocks, bonds, real estate, infrastructure projects and private equity. The fund, which invests in Canada and globally, has had a 10% annualized net return over the past 10 years.
2. Certain U.S. programs have also implemented investments that incorporate stocks:
In the 1990s, the U.S. Railroad Retirement System moved to invest in equities after its trust fund grew to four times annual spending, according to the Center for Retirement Research. The portfolio, now with around $27 billion in net assets, includes stocks, real estate, private equity and private debt.
The Federal Thrift Savings Plan, with about $800 billion in assets, was created in 1986 and includes passive investments through index funds. Congress must approve the investments it can offer.
I don't have a company or government pension to fall back on or children/relatives with whom to live with in my final years, no permanent home equity. I have contributed to 401K/403B and/or IRA's since I was a 30-year-old professor. So, I'll have some DIY retirement funding to supplement my expected social security income, just a fraction of my work income. I knew years ago in the blog, at least as early as 2010 when Baby Boomers started to retire, it was a bigger generation expected to live longer in retirement. In the meantime, the ratio of active payroll tax workers supporting current beneficiaries continued to decline. Social security actuaries began warning about projections of an emptying reserve and ever-growing unfunded entitlements. I've been doing my part, delaying retirement, willing to accept compromises on both the revenue and benefit sides as well as reconfigure the trust fund to shore up the program. I don't want another last-minute compromise like we saw in 1983, since I'll likely retire before the SSF empties. I think the Congress would be tempted to make up the difference out of general revenue than face the wrath of retiree voters. But one thing is for sure: the current funding is inadequate and the sooner the fix, the better, but we are already seeing debt service becoming the biggest line in the budget, and God knows what fiscal issues we'll be facing then. I'm willing to pay my fair share before I file to retire.
Democrats routinely have accused Republicans of trying to cancel social security or cut benefits. I think part of it is to fear-monger current beneficiaries by implying cuts in pension checks or cutting medical services they are using. No, nobody is really talking about that. Really the GOP legislators are focusing on stretching existing funding by things like deferring and/or means-testing eligibility, which are likely to be phased in, or adjusting COLA. The Republicans have made tax cuts vs increases their signature policy, so they are resisting tax increases in terms of increasing payroll taxes and/or lifting the relevant wage ceiling or expanding the tax to other types of income, e.g., investment (or even wealth!). The Dems themselves bristle at delaying eligibility for lower living blue collar/manual labor and dislike regressive tax systems and thus focus on so-called progressive/"fair share" schemes as just discussed.
Here are likely elements of a final compromise:
- Raising the Social Security payroll tax cap
- Means-testing benefits for wealthier/higher income beneficiaries
- Gradually raising the retirement age
- Increasing the payroll tax by up to 25%
- Raising the minimum benefit *
- Reducing cost-of-living adjustments
- Increasing benefits for beneficiaries over age 80 *
Finally, I would accept a balanced reform as a pragmatic matter, but I oppose the program in a manner similar to Reagan above. I personally would fully privatize social security based on first principles. I don't think there's constitutional support for positive rights, i.e., government has an obligation to fund my retirement. I think that private providers could do it better, faster, cheaper and even if it's done through government, it could be outsourced in a manner analogous to the Ball/Altman plan. What I don't like is the current system where politicians eagerly expand benefits without financing them and we have to bridge a financial crisis every couple of generations. This system was never designed for longer retirements and an aging labor force. We need changes that raise visibility of unfunded entitlements
