Posted on 03/10/2005 4:21:50 PM PST by HankReardon
Here is a definition of a pyramid scheme:
"An illegal investment scheme in which investors are promised impossibly high returns on their investments. These are scams in which money from later investors is used to pay earlier investors. The creators of the scheme get most of the profits while those who come later are left with nothing because there are eventually an insufficient number of new investors to pay the existing ones. These scams inevitably collapse because they require exponential growth in the number of participants at each step, which is impossible. Letters or emails that encourage the recipient to send money and then pass the message along to a certain number of new targets are a type of pyramid scheme."
Change pyramid to Social Security, and "impossibly high returns on investment" into guaranteed pension, and "creators of scheme" into the government and you can see the similarity.
Unfortunately, Social Security is considerably worse, as unlike a pyramid scheme, you can't get out of the scam once you realize you have been burned, your contributions are taken before you even see them, and new recruits are conscripted from their first paycheck. Add to that the possibility that the government can change the rules on a whim, and the payback isn't even good enough to dupe a five year old, and you are looking at indentured servitude to the government.
Galveston is a prime example of what should have been done 30 or 40 years ago. Nobody in that system is looking on the Social Security recipient with envy, and nobody is complaining, with the exception of one woman who is bitching about her reduced benefit without mentioning that she took out $40 grand for her husband's medical care (under the allowable rules of the system).
Here is the best part: the Galveston system was done with extremely conservative investments, and still yields several times the return that SS recipients get (average 6.5% vs. about 2%)! Yes, my reading of the system shows that they completely avoided the "risky" stock market in trade for security of the investment. If the managers of the system had used the stock market, even partially, the payouts would have been substantially larger.
Bottom line: if the government really gave a tinker's damn about the retirement welfare (sorry) of Americans, they would drop SS in a heartbeat and copy the Galveston system.
And the best indicator that the Galveston system works like a charm and blows every objection of the liberals out of the water? The fact that they NEVER bring it up. If it were a failure, you can bet they would be shouting it from the rooftops. But they are silent.
And Chile, a comparatively less advanced country than the U.S., can privatize, but we can't.
The President needs to hammer the Galveston plan home to the public, and the liberals have to stop lying about the "success" of the current system.
The first thing that will happen is that the surplus, the amount of $ that FICA brings in less the payout, will start to decrease. Since that money is being spent, and offsets some of the deficit, the deficit will balloon. Then, the surplus will vanish -- the good thing about that is we would finally find out how big the deficit really is. Once it vanishes, it will go negative, a net outflow, and add to the deficit.
See #40.
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The shame of all of this is that, if something along the lines of what is being proposed now had been undertaken say 20 or 25 years ago the transition would have been much, much smoother and the private Accounts would be very much ahead of the game.
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The fact that nothing was done 20 years ago is one of the reasons that I think current and soon-to-be recipients of Social Security should share in the burden of averting disaster. I do not think they should be able to march into the sunset leaving us (current workers) holding the bag. Anyone now receiving, or about to receive Social Security is part of that group that made it the third rail. They are part of that group that saw the problem but did little. They loved the beautiful music of easy money, and now the pipe wants to be paid.
Any costs to changing the system (I really don't want to "save" it) should be met by current benefit cuts and spending cuts in other welfare programs. There should be now new costs foisted on the current workers (after all they will be receiving far less, if any, benefits from it).
Ahem!
pipe = piper
now = no
In Chile, the average cost (commissions and fees) per active contributor was the equivalent of US$49.30 in 1995, a figure similar to the US$51.60 reported in 1991, indicating that costs per contributor have remained fairly constant since 1991.(17) The figure is also in line with the cost of many U.S. employer-sponsored pension plans.
That doesn't look too bad to me. But of course, we need not follow the Chilean system slavishly. We have plenty of experience here in the US (Galveston County, for example).
From the link:
Measured as a percentage of contributions, fees and commissions of the Chilean Pension system amounted to 55 percent in 1983 and 23.6 percent in 1995, or 5.5 percent and 2.4 percent of average wages.
Yep. The Congresscritters get most of the benefits from the laws they create. This is why none of the US Gov employees are in SS nor are the elected officials. They must know something we don't.
Furthermore, our parents knew in the 60's that this was coming. Just look at the demographics. Now that outsourcing is kicking into high gear, the more jobs sent overseas, the less tax revenue comes in for Government programs. Our problems are just beginning. Just wait another couple of years when the Fed deficit hits $1T per year.
I am writing a book on this, looking for a publisher and hope to be out with it before 2006 congressional elections. I do not see congress passing any social security bill this year, no matter what GWB does. I expect to see alot of talk, but no action.
Just how much money do you think he average Chilean makes in a year???
/confused
IMO The ones who should bear the burden this theft are our Pubic Officials who made certain their own nests were feathered and used the SS Funds to finance their reckless, irresponsible spending - Spending that most Americans applauded (Remember LBJ's Great Society?)
One thing you didn't mention is an additional strategy for covering future Social Security shortfalls -- and this is one that I've speculated will be the most successful simply because it will not be easily detected.
The Federal government will simply (if it hasn't already started) engage in a deliberate process of under-estimating the inflation rate, thereby reducing future SS liabilities to a growth rate that is somewhat less than the growth in overall wages, prices, etc. By the time 2042 rolls around, I suspect the average monthly Social Security check will be barely enough to cover three weeks' worth of dog food.
The simple explanation is - It isn't any 'Fix' at all. The 2+ Trillion that they estimate to 'Fund the transition to personal accounts' is actually their best estimate of the present value of the Unfunded benefits that will not be collected due to the redirection of funds into Private Accounts. It IS NOT a FIX, It is a cleverly hidden tax increase clothed in the form of additional Gov't Debt with the taxes required to service and retire the Debt tossed into the future (i.e, Out of sight and mind for now).
Unfortunately, this additional borrowing will weaken the Dollar further and cause interest rates to be higher than they otherwise would be had these idiots never embarked on this abomination in the first instance in the form they adopted during the 'New Deal'.
It was called the 6.5% solution, basicly if someone want in to the system they sign something saying they dont want any of their SS paymants, then the 6.5% of what they normally put in to SS goes into the new Acct. Then the matching part from the employer goes toward the transition costs.
Sound perfect for me, I would waive that $1500/month for a shot a $4000/mo at retirement.
There are two things that need to be "fixed".
One is philosophical. Do we continue with the "social economics" of generational wealth redistribution, which inlcudes a sludge factor that allows any "excess" from said plan to become part of general socialized wealth redistributions by congress. Or, do we move to an economically sound asset based system that each beneficiary owns their own part of and which no part is available to politicians for any other purpose.
The other thing that needs to be fixed is how to pay for huge looming deficits of the present system.
The 4% personal investment account is a step towards fixing the philosophical and economic error. What it will do as far as the looming deficits from the old system is referred to in these discussions as the transition cost. What it will do is that more of the total social security deficit will "come due" sooner, but the overall deficit will be phased out sooner.
That means more of the financial problem will be born by the older generations, sooner and less by the younger generations, later.
The question is whether or not our generation is willing to take on the project for our grandchildren.
I see. You are using a percent of contributions.
I agree that the fees seem high, but you had given the impression that Chilean fees were 20% of the value of the account each year. That isn't true, and you now admit it.
Fees on contributions do not eat into the accumulating value of the account, and measured as a percentage of the eventual value of the account, would be quite minimal.
As an alternative, we can have the 100% confiscatory fee currently charged by the the US governement. Is that what you favor?
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