Not a word about this, no mention of "privatization"
Why haven't I seen this mentioned anywhere?
Those Republicans, Conservatives, Libertarians who still believe in less government involvement and regulation need to be confronted with how stupid was their push for private Social Security Accounts. If that had happened, more than 55 million people would have lost, at a rough guess, 40% of their benefit payments or the entire Social Security Program would be at grave risk. This points out:
. That government programs, like Social Security, are always badly administered as contrasted with private investment accounts or IRAs
. Investing in the stock market pays huge dividends in comparison to the stupid, badly-run government-administered social programs
. The enormous funds that investment houses, like Bear Stearns (remember them?), would have earned would have sustained them through the current crises
. The resultant revolution by those over 65 would not have serious social consequences in our country.
(Of course I'm being sarcastic by listing these points here.)
But the point is well-taken and no respectable Republican, Conservative or Libertarian would dare to mention privatization of Social Security today. At least until we've all forgotten the trauma that has been on-going as the stock market has tanked and continues to do so. Or, for that matter, letting investment companies alone as good ole Phil Gramm and Rush Limbaugh recommend, without any regulation or over-sight.
Those Republicans, Conservatives, Libertarians who still believe in less government involvement and regulation need to be confronted with how stupid was their push for private Social Security Accounts. If that had happened, more than 55 million people would have lost, at a rough guess, 40% of their benefit payments or the entire Social Security Program would be at grave risk. This points out:
. That government programs, like Social Security, are always badly administered as contrasted with private investment accounts or IRAs
. Investing in the stock market pays huge dividends in comparison to the stupid, badly-run government-administered social programs
. The enormous funds that investment houses, like Bear Stearns (remember them?), would have earned would have sustained them through the current crises
. The resultant revolution by those over 65 would not have serious social consequences in our country.
(Of course I'm being sarcastic by listing these points here.)
But the point is well-taken and no respectable Republican, Conservative or Libertarian would dare to mention privatization of Social Security today. At least until we've all forgotten the trauma that has been on-going as the stock market has tanked and continues to do so. Or, for that matter, letting investment companies alone as good ole Phil Gramm and Rush Limbaugh recommend, without any regulation or over-sight.
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OC makes the erroneous assumption that private accounts would be 100% invested in the equity markets. In fact, you could be 100% invested in municipal bonds and counting a 5% return the past 2 years -- which is MORE THAN DOUBLE what Social Security would pay.
Private accounts are going to happen -- sooner than later. Governments all over the world are moving in this direction (Sweden, Chile, Great Britain). They all have the same demographic problems. The issue is how to take the major risks out of the accounts, and there are many ways to do that. OC seems very ill-informed about this issue, about how poorly structured SS is for this century, and about what other countries are doing vs. what we are doing.
November 21, 2008 9:05 PM | Reply | Permalink
Your comment is partially correct. You seem to have ably predicted the existence of all sorts of private accounts have already happened, sooner rather than later. So now we have IRA, 401(k), 403(b), SEP (for us independents), etc.
SS is only one of several retirement plans in place right now. You write as if this were not already in place. So why continue to argue that SS should include "private accounts"? It has already happened.
I just hope that my lifetime of savings in our private retirement accounts won't be inflated out of existence, or taxed out of existence, or simply wither on the vine, starved by an economy that has de-emphasized real productivity for too long. My wife and I went 80% to fixed income/cash in January so we are only somewhat hurt in the current crisis.
But where do we invest the savings held in our private accounts? It's a struggle to find an asset whose value hasn't been manipulated so thoroughly that we cannot find an honest assessment of investment value with both hands and a flashlight. We are busy being reasonably well educated and practiced about our respective careers, but we are investing in a marketplace where information is extremely limited, essentially competing with capital managers who have managed both the information and their market-moving portfolios.
The thieves running the financial industry have wiped out many people's existing private accounts with their ABS, CDO, CDS tricks. And supported by the rating "agencies", who themselves succumbed to the temptations of intrinsic conflict of interest that pervade the financial industry.
People like you won the argument years ago and now too many people with 401(k) and IRA private accounts are paying the price.
SS is only one part of any retirement plan, and is the only form of account where the managers are not competing against their own investors for return on investment.
November 22, 2008 9:34 AM | Reply | Permalink
Proving yet again that Social Security functions exactly as Congress envisioned. It's funded for social insurance in retirement as a safety net, rather than an investment pool of money looking for the highest rate of return.
No quibbles there. Everyone is free to have their own private accounts funded by their own private pool of money, or not. What does that have to do with SS?
See lenski and WorkinJoe for more insight on the differences.
November 22, 2008 12:56 PM | Reply | Permalink
I have invested in 401(k)s and a Roth IRA, but I've always viewed Social Security, even with its 2 percent return, as the bedrock of my retirement planning. Should I be unfortunate enough to live to a ripe old age, years beyond my personal retirement accounts' payouts, I will have the social security money to buy a loaf of bread. I have far more trust in the American government and the American people to make good on the social security promise than I have trust in the Wall Street gangs that want my money not for my benefit but to make their money from my money.
November 22, 2008 11:50 AM | Reply | Permalink
SS is the standard hedge, an insurance policy instead of an investment. The red herring in the conservative privatization argument is the "return" on investment. Insurance policies are known to be poor return, but they still bought, because they are a contracted payout.
The very issue that privatization partisans warn against, the demographic bump, punishes markets and guarantees a poor payout if that bump begins liquidating en masse.
"Personal accounts" fell into the buzzword circular file along with "Islamofascism", "Death Taxes", and "Compassionate Conservatism".
But expect a resurgence of moaning, from the fringe, about "double taxation" and other misdirecting terms.
November 22, 2008 2:44 PM | Reply | Permalink
They have so debased language, it's positively Orwellian.
"Healthy forests initiative"
"Clear skies initiative"
"Nobody could have anticipated the levees would break" [...or that bin Laden was determined to attack the USA... or that the unregulated credit default swap market would implode...]
The places that rely only on personal investment accounts are in a world of hurt right now. Let's not copy things that have already proven not to work.
November 22, 2008 2:56 PM | Reply | Permalink