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Privatizing Social Security
Townhall.com ^ | September 28, 2004 | Thomas Sowell

Posted on 09/28/2004 7:27:13 AM PDT by The Great Yazoo

Would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make any changes of your own? Probably not. Yet that is exactly what happens when you pay money into Social Security.

No matter what you were promised or at what age you were supposed to get it, the government can always pass a new law that changes all of that. But you still have to pay into the system.

A private annuity plan run by an insurance company is legally required to pay you what was promised, when it was promised, and to maintain assets sufficient to redeem its promises.

One of the few issues on which Senator John Kerry has taken a stand and not changed it (yet) is Social Security. He has said: "I will not privatize Social Security."

This has long been the position of liberal Democrats, and John Kerry's voting record in the Senate makes him one of the very few Senators more liberal than Ted Kennedy. That is the ranking given by Americans for Democratic Action, a leading liberal organization that ought to know.

Why are liberals against letting people put part of their Social Security payments into private investments?

Risk is one of their arguments. Al Gore incessantly repeated the phrase "a risky scheme" during the 2000 election campaign and risk still seems to be the big objection to letting people put their own money where they want.

Some liberals may actually believe that politicians know what is best for you better than you know yourself. That is, after all, the philosophy behind many other government programs.

Another reason for liberal opposition to private investment of Social Security payments is that it deprives them of control of billions of dollars that they have been spending from the Social Security trust fund for years. They can buy a lot of votes with all sorts of giveaway programs, financed by money taken from Social Security.

As for the risk of making private investments, that might be a real concern if people were putting their money into commodity speculation or other volatile markets. Most people have better sense and privatization could limit where Social Security premiums could be invested.

Although the stock market bounces up and down from day to day, people are not investing today in order to retire next week. They begin paying Social Security premiums when they first get a job and they retire decades later.

Stocks are far less risky in the long run than they are in the short run because the ups and downs balance out over a long period of time. It is virtually impossible to find any 40-year period in which the stock market has not paid a higher rate of return on your money than you get from Social Security.

There are some mutual funds that simply buy a mixture of the stocks that make up the Dow Jones average (or Standard & Poor's), so that their clients will have the kind of return on their investments that the stock market as a whole has. They don't make a killing but they don't get killed either.

How did Social Security get into its present mess in the first place? Because politicians made it the "risky scheme" that they now claim privatization would be.

The same political expediency which caused Social Security to be called "insurance," in order to get public support, guaranteed that it would be nothing of the sort. Unlike an insurance company, Social Security has never had enough money to pay for all the pensions it promised.

Instead, Social Security has been run like a pyramid scheme, where the first people to pay in get money back from the second wave of people who pay in, and the second wave get money back from the third wave, etc. This is so risky that pyramid schemes are illegal -- except when the government does it.

They have gotten away with this thus far because the first generation covered by Social Security was an unusually small generation that was followed by the unusually large "baby boomer" generation. But when the baby boomers retire, the pyramid scheme will no longer bring in enough money to pay for their pensions.

Nothing is more risky than depending on politicians.


TOPICS: Editorial; News/Current Events
KEYWORDS: fica; genx; privatize; socialsecurity; thomassowell; townhall
Nothing is more risky than depending on politicians.

Can you say Ponzi? The federal government would jail any private enterprise that remotely tried to apply today's social security principles in its own business. If it's illegal for private citizens, it ought to be illegal for the federal government.
1 posted on 09/28/2004 7:27:13 AM PDT by The Great Yazoo
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To: The Great Yazoo; Mo1; Howlin; Peach; BeforeISleep; kimmie7; 4integrity; BigSkyFreeper; ...

Thomas Sowell ping..........


2 posted on 09/28/2004 7:27:46 AM PDT by OXENinFLA
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To: The Great Yazoo

At the very least I should be able to put just a portion of the money I pay in to be put into government bonds. What is wrong with that? How can the Libs argue with investing in the governemnt?


3 posted on 09/28/2004 7:31:14 AM PDT by frog_jerk_2004
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To: The Great Yazoo

We should have the option of what Galveston TX did.


How Galveston Opted Out of Social Security

http://www.libertyhaven.com/politicsandcurrentevents/healthcarewelfareorsocialsecurity/galveston.shtml


4 posted on 09/28/2004 7:34:07 AM PDT by frog_jerk_2004
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To: The Great Yazoo
The argument that Americans would risk their retirements through speculative stock investments is silly. If they were really worried about that, they could invest in Treasury securities, just like the "trust fund" does now. The difference is, the citizen would OWN title to the bonds. He could pass them to his heirs. He could spend them on a trip to Tahiti. The point is, that if he were to die prematurely, the would not be forfeited as they are now.

The Republicans need to alter Social Security, but it has to be done incrementally. The best first step would be to give title to the underlying assets to each American. Each person should have ownership of the "investments" made on his behalf, at least after death.

5 posted on 09/28/2004 7:35:04 AM PDT by Sgt_Schultze
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To: The Great Yazoo
The argument that Americans would risk their retirements through speculative stock investments is silly. If they were really worried about that, they could invest in Treasury securities, just like the "trust fund" does now. The difference is, the citizen would OWN title to the bonds. He could pass them to his heirs. He could spend them on a trip to Tahiti. The point is, that if he were to die prematurely, the would not be forfeited as they are now.

The Republicans need to alter Social Security, but it has to be done incrementally. The best first step would be to give title to the underlying assets to each American. Each person should have ownership of the "investments" made on his behalf, at least after death.

6 posted on 09/28/2004 7:35:18 AM PDT by Sgt_Schultze
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To: Sgt_Schultze

Press once Schultze.


7 posted on 09/28/2004 7:35:47 AM PDT by Sgt_Schultze
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To: The Great Yazoo

People sign up for marriage contracts all the time, even though the government can and does change the terms without the consent of EITHER of the parties to the marriage. Time to rebel against ALL these contracts with the government.


8 posted on 09/28/2004 7:43:11 AM PDT by GovernmentShrinker (Donate to the Swift Vets -- www.swiftvets.com)
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To: The Great Yazoo
Privatization won't happen in my lifetime - the senior lobby won't allow it.

That said, being that politicians pander to the large senior voting bloc, I expect to be living under a bridge someday just to subsidize the maintanance fees on their condos.

9 posted on 09/28/2004 7:44:00 AM PDT by A Ruckus of Dogs
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To: Sgt_Schultze
The Republicans need to alter Social Security, but it has to be done incrementally.

Agreed. A slow but steady movement to a new hybrid system.

10 posted on 09/28/2004 7:52:56 AM PDT by JPJones ("We'll cross all our tee's and dot all our.....lower case j's")
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To: The Great Yazoo

I'd get a better return on my investment buying baseball
cards.


11 posted on 09/28/2004 7:53:15 AM PDT by Rakkasan1 (Justice of the Piece)
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To: GovernmentShrinker

Good point about marriage contracts being altered or amended by the government from time-to-time without consent. But at least with marriage contracts, the parties themselves can alter the consequences of governmental mettling through the use of pre- and post-nuptial agreements. That is an option not afforded we subjects to the federal social security system nanny.


12 posted on 09/28/2004 8:41:23 AM PDT by The Great Yazoo (JFK: He's a real nowhere man, Sitting in his nowhereland, Making all his nowhere plans For nobody)
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To: The Great Yazoo
Another reason for liberal opposition to private investment of Social Security payments is that it deprives them of control of billions of dollars that they have been spending from the Social Security trust fund for years. They can buy a lot of votes with all sorts of giveaway programs, financed by money taken from Social Security.

Correction: The real reason...

13 posted on 09/28/2004 8:50:07 AM PDT by TaxRelief (Kerry lied and good men died, and Moms worried, and heroes were spit on, and children were ostraci..)
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To: The Great Yazoo
Would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make any changes of your own?

Or...would you invest your retirement savings in a plan that showed a -1% long-term return?

14 posted on 09/28/2004 9:47:56 AM PDT by Fredgoblu
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To: The Great Yazoo

Federal Employees have the option of investing a portion of their income in the Thrift Savings Program( http://www.tsp.gov ). If they can do something like this, why not the rest of the population?


15 posted on 09/28/2004 9:50:13 AM PDT by Paradox (Occam was probably right.)
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To: qam1; ItsOurTimeNow; PresbyRev; tortoise; Fraulein; StoneColdGOP; Clemenza; malakhi; m18436572; ...
Xer Ping

Ping list for the discussion of the politics and social aspects that directly effects Gen-Reagan/Generation-X (Those born from 1965-1981) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.

Freep mail me to be added or dropped. See my home page for details and previous articles.

16 posted on 09/28/2004 10:13:43 AM PDT by qam1 (McGreevy likes his butts his way, I like mine my way - so NO SMOKING BANS in New Jersey)
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To: Sgt_Schultze

Measure twice, cut once, or something.


17 posted on 09/28/2004 12:07:00 PM PDT by Xenalyte (Anything is possible when you don't understand how anything happens.)
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To: The Great Yazoo

What about when a couple with a dependent spouse (usually the wife) moves from one state to another, from a "community property" state to one that isn't? The marriage already occurred, and given the laws of the state where the couple married, they didn't feel a pre-nup was necessary. But now, say with the husband having finished medical which the wife worked to put him through, the national residency matching system is forcing them to move to a non-community property state. And the husband secretly isn't so sure any more that the marriage is forever, and throws cold water on the idea of doing a financial agreement (or more likely doesn't even have to, since probably neither of them is even aware of the different laws in the state they're heading to) -- so the wife is totally screwed, when hubby finds a cute young nurse a couple of years down the road, long after residency in the new state has been established.

This sort of thing really does happen to people, and it's high time that government be booted out of the marriage business. The traditional legal concept of marriage dates to an era when women were legally chattel, and were not able to enter into any kind of contract. That's how the government got to be a party to the marriage contract -- to protect the poor helpless females who weren't full fledged citizens. It just doesn't have any applicability to modern society.


18 posted on 09/28/2004 12:11:06 PM PDT by GovernmentShrinker (Donate to the Swift Vets -- www.swiftvets.com)
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To: The Great Yazoo; All

" If it's illegal for private citizens, it ought to be illegal for the federal government."

Yes, but the government employees don't have to depend on Social Security, they have a much more lucrative disability, medical, retirement scheme. Think of it...the people who approve or refuse to approve your claim, never have to depend on that same system. That alone makes it intolerable.


Privitize SS. The recent totalization agreement with Mexico by the State Dept. and the SSA will give Social Security to ILLEGALS, who will only need 6 work credits to qualify. You and I need 40.

At least the government could put some equity in this scheme.
Don't hold your breath.


19 posted on 09/28/2004 12:21:07 PM PDT by AuntB ("Go count your blessings, and then complain to me"...MY Grandma!)
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To: Sgt_Schultze
The Republicans need to alter Social Security, but it has to be done incrementally.

Social Security is a ponzi/pyramid scheme. It's about time liberals faced up to it.

20 posted on 09/28/2004 12:22:25 PM PDT by Tamar1973 ("He who is compassionate to the cruel, ends up being cruel to the compassionate." Chazal)
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To: qam1

Put me on your X-er ping.


21 posted on 09/28/2004 12:23:03 PM PDT by 12 Gauge Mossberg (I Approved This Posting - Paid For By Mossberg, Inc.)
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To: GovernmentShrinker

Community property laws may still apply. Get a legal opinion from a competent lawyer in the state where the parties reside.


22 posted on 09/28/2004 12:59:19 PM PDT by The Great Yazoo (JFK: He's a real nowhere man, Sitting in his nowhereland, Making all his nowhere plans For nobody)
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To: A Ruckus of Dogs
Privatization won't happen in my lifetime - the senior lobby won't allow it

If you were anywhere in physical proximity to me, we would have a bet on this. This is going to occur within six years; probably within three. The Demodogs are losing the ability to scare the seniors about this issue.

23 posted on 09/28/2004 1:09:06 PM PDT by AFPhys ((.Praying for President Bush, our troops, their families, and all my American neighbors..))
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To: AFPhys

The seniors aren't the same seniors they've scared in the past. What used to be seniors are now us. I'm not clear on how that'll play though.


24 posted on 09/28/2004 1:13:19 PM PDT by The Great Yazoo (JFK: He's a real nowhere man, Sitting in his nowhereland, Making all his nowhere plans For nobody)
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To: AFPhys

You may get some partial privatization but as long as most of my SS tax goes into the Ponzi scam, it's a loser for us younger folk. I'll grant that the Demodogs don't have much to stand on now that Alan Greenspan has delivered two dire warnings.


25 posted on 09/28/2004 1:17:15 PM PDT by A Ruckus of Dogs
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To: A Ruckus of Dogs

I will predict with some confidence that the Demodogs will succumb to President Bush's efforts to allow everyone to deposit some of their SS funds into a private account. They need to do so to get some pressure off before too many more elections. The younger voters are getting more and more adament about this, and older ones like me are too.


26 posted on 09/28/2004 1:29:11 PM PDT by AFPhys ((.Praying for President Bush, our troops, their families, and all my American neighbors..))
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To: The Great Yazoo

It's not my story -- it's just an example of how government management of personal relationships stinks. The biggest problem is that most people have no idea what the inheritance and divorce laws are when they get married, and the state sees no need to inform them before they sign the "contract", nor when the laws change.


27 posted on 09/29/2004 7:40:12 AM PDT by GovernmentShrinker (Donate to the Swift Vets -- www.swiftvets.com)
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To: The Great Yazoo

For a peek at what a good privatized system would look like go to Cato website. They have been leading the charge for 20 years.


28 posted on 09/29/2004 7:53:43 AM PDT by Protagoras (Putting government in charge of morality is like putting pedophiles in charge of children.)
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To: GovernmentShrinker

That's what lawyers are for! (Sorry, but I gotta feed my kids somehow!)


29 posted on 09/29/2004 8:54:43 AM PDT by The Great Yazoo (JFK: He's a real nowhere man, Sitting in his nowhereland, Making all his nowhere plans For nobody)
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To: All

I just posted Part II


30 posted on 09/29/2004 9:17:22 AM PDT by The Great Yazoo (JFK: He's a real nowhere man, Sitting in his nowhereland, Making all his nowhere plans For nobody)
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To: The Great Yazoo

Anyone who is against private accounts and wants to stay with the current system is completely insane. The money should completely be kept in private accounts with the government not seeing a penny of it.


31 posted on 02/03/2005 4:44:56 PM PST by CaptainAwesome2
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To: The Great Yazoo

I will need to save my money if Bush continues to waste it abroad. He needs to focus on social security reform, cutting taxes, cutting the size of government and stop wasting time on Iraq. I absolutely couldnt care less about Iraq except as a potential oil source and military base. You dont need to pay hundreds of billions for that.


32 posted on 02/03/2005 4:56:20 PM PST by CaptainAwesome2
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Comment #33 Removed by Moderator

To: Plinket
Not true. You can visit This location and the Social Security Administration will tell you exactly how much has been credited to your SSN since you began working. The administrative infrastructure is already in place to track individual accounts.

My point is only that there will be no massive, sudden change. This is a first step to allocating the "trust funds."

34 posted on 02/07/2005 9:13:00 PM PST by Sgt_Schultze
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To: The Great Yazoo

Exactly.

And in all the talk of "privitization" and the numbers being crunched and the rhetorical volume being raised, I NEVER hear the fundamental truth that Social Security is direct affront on our most sacred value: individual freedom.

Being forced to pay into an unaccountable system for decades of my life is not, in my opinion, constitutional.

If I don't save for my future when that's my business. I can always work until I die. Or I'll starve and live on the street. Regardless, it's not anyone else's concern. I shouldn't have to be forced by law because some liberal idiot wants to be compassionate.


35 posted on 02/07/2005 9:21:23 PM PST by Fledermaus (I Googled "Democrat+Sane" and got no hits.)
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To: CaptainAwesome2

So fighting a war on terrorist scum that want to murder us isn't a priority for you?

Sorry, you won't need Social Security or worry about taxes or the size of government when it's more than likely, given your statement, that you'll be killed by our enemies.

And no need to post back with all the "Iraq didn't attack us" or "Iraq has nothing to do with the War on Terror" BS rhetoric. I'll never buy it and anyone that does, in my opinion, is an idiot.


36 posted on 02/07/2005 9:27:11 PM PST by Fledermaus (I Googled "Democrat+Sane" and got no hits.)
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To: Plinket

The Social Security Administration's operating budget is over $8 billion. That's pretty expensive alreay.

And they won't be doing the tracking. The "private" money will go into equivalents of your 401K, or the same ones you already own, and those are simply tracked by these strange boxes on our desk we call computers.


37 posted on 02/07/2005 9:29:48 PM PST by Fledermaus (I Googled "Democrat+Sane" and got no hits.)
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To: Fledermaus

Fighting a war against muslims is a priority. Spending hundreds of billions and thousands of lives in building up a nation of terrorists is not a priority. Dont try to lump the building of Iraq and the War on Islam together. They are two separate things and one is a waste of our resources and the other is something that must be done.


38 posted on 02/08/2005 9:53:29 AM PST by CaptainAwesome2
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To: CaptainAwesome2

I even told you in advance that I wouldn't buy that theory and in no way could I be persuaded. But you went ahead and did it anyway.

And I still think you are 100% incorrect. Regards.


39 posted on 02/08/2005 12:54:44 PM PST by Fledermaus (I Googled "Democrat+Sane" and got no hits.)
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To: Fledermaus

"And no need to post back with all the "Iraq didn't attack us" or "Iraq has nothing to do with the War on Terror" BS rhetoric. I'll never buy it and anyone that does, in my opinion, is an idiot."

If you read my post you will see I am not saying that Iraq didnt attack us or that Iraq has nothing to do with the war on terror. I am completely in favor of the war against Iraq. I am against the building up of Iraq and spending hundreds of billions on their government, military, police, infrastructure, etc. So I didnt "went and did it anyway."


40 posted on 02/08/2005 3:35:18 PM PST by CaptainAwesome2
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To: CaptainAwesome2

Thanks...big difference.

I don't mind spending the money on rebuilding (Saddam let the place go, literally, and used infrastructure as another political tool) but at this point I'd rather it be a long term loan for Iraq to pay back.


41 posted on 02/08/2005 3:39:13 PM PST by Fledermaus (I Googled "Democrat+Sane" and got no hits.)
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To: Fledermaus

It would be nice if we got a piece of the oil revenue for the purpose of paying back our expenses. The UN got paid about $500 million openly for adminstering that plus all the illicit money they collected from that program. It doesnt seem like much for us to ask for us to get paid for what we are doing to help them.


42 posted on 02/10/2005 5:45:30 AM PST by CaptainAwesome2
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