Posted on 09/30/2011 1:30:25 PM PDT by SeekAndFind
After hearing Herman Cain crowing about the success of privatization of Chile’s version of Social Security, I feel some truth should be brought to the subject. At first, Chile’s returns appear respectable, but not after factoring in management fees of 16 to 20 percent. In 1994, more than half of their programs incurred losses. Financing of this program required cutting public programs, raising taxes, reducing lifetime benefits, eliminating pensions, selling government assets and issuing government debt/bonds.
Workers must contribute 10 percent of wages for retirement and another 3 percent to cover life and disability insurance. Workers were promised benefits replacing 70 percent of their wages, but received closer to 20 percent. A market downturn in 1998 left officials urging workers to defer retirement indefinitely.
According to U.S. Social Security Trustees projections, our system is fully funded until 2037. If economic growth continues at the rate it has for the past 50 years, it will be funded indefinitely and with minor changes funded past 2075. So why are conservatives pushing for privatization?
From 1998 to 2010 private managers in Chile received about $240 billion for management and administrative fees, commissions and profits. The real lesson from Chile: Buyer beware.
See here for additional problems with the Chilean Model:
http://economistsview.typepad.com/economistsview/2006/01/chile_confronts.html
TITLE : Chile Confronts Problems Caused by Social Security Privatization
We can privatize without using the Chilean model.
I’d like to listen to some ideas.
This is a bald-faced evil lie. Our system is already essentially bankrupt.
Our children and grandchildren have been sold into a form of slavery to underwrite this monstrous deceit.
We already have banks, savings accounts and there is no reason why management fees would have to be any more than a normal savings account IMO.
Create a law that lets any bank savings account become a DTI Account (Don’t Touch It) that receives the 12% or so normally going to SS. Any other activity before the person is, say 50, becomes a taxable event (just a little incentive to leave it alone) except for major medical expenses.
Just an idea.
The more articles I see from folks attacking Cain’s model, the more I believe that he has something. The folks that attack Cain’s plan offer NOTHING of their own which suggets, to me, that they prefer the status quo.
The status quo is unworkable and we need a dramatically different taxing plan that drastically alters the way and rates that taxes are currently collected.
Cain has a plan. Romney, Perry, Newt, Paul, Bachmann, et al, what have YOU got??
(crickets)
When you source lies to you like this, you have to wonder, just what is their source for their claims abut Chile?
If they are willing to lie about our SS security system like this, how much you want to bet all their claims in this article are lies or, at best, half true?
The Empire Strikes Back....
How much does government overhead cost us right now?
bfl
The article is nothing but agitprop. When someone writes that SS is fully funded until 2037 you should know that you are dealing with a lying liberal. SS is cash negative now and will only get worse. The 2037 date only applies if you believe the “trust fund” fairy tale.
Liberals are desperate to try to discredit any successful alternative to SS, whether it is the Chilean model or the Galveston model. You can expect a lot of misleading articles on this subject from here on out in an effort to “save” our Ponzi schemes (SS and Medicare).
RE: This is a bald-faced evil lie. Our system is already essentially bankrupt.
Social Security to See Payout Exceed Pay-In This Year
http://www.nytimes.com/2010/03/25/business/economy/25social.html
Yes he has a plan but is it a good one? It might be but we need to invesitgate and compare it to other ideas. We can’t just say its a good one because its the only plan on the table.
That being said, you only have to look at Galveston, Matagorda and Brazoria Counties to know it can work here. They opted out of Social Security and have done well. Look to the Chilean model to see where the problems are and learn from their mistakes. The mistakes do not have to be repeated and should not be the basis for giving up on privatizing the system. I think Cain points to Chile instead of Texas so as not to boost Perry even though he didn't come up with the system there.
I’m sorry, must have missed him saying we should copy anybody exactly... the spirit of his comments were obvious to me.
This is a bald-faced evil lie. Our system is already essentially bankrupt. Your right he's lying. Why did Obama need to borrow more money so social security checks can go out if its fully funded until 2037? That's the question to ask any liberal when they state those lies.
There have been several ideas touted. I thought the idea Bush had was a reasonable start.
Gee, you think therein might lie some of the problem? Do you suppose those management fees were put in place sometime after Pinochet's party was voted out of power and the socialists were put in charge?
Do you suppose the only competent managers the socialist government could find were crony capitalist allies who couldn't help but help themselves to a goodly portion of the returns? I'm not saying that that is the case, I'm just saying that if I'm near a fire hydrant with the smell of dog urine, I might suspect that a dog peed on it without actually catching the dog in the act.
Just for reference, what management fees are involved with the biggest and best professionally managed private retirement plans in the United States? I don't know the answer, but I know that our particular group won't even look at proposals with management fees over 2%.
Final question: What return are Chileans getting compared to their neighbors in Argentina who had a complete government takeover of their private pension plans?
I don’t think anyone should “manage the funds”, there should be many banks and companies competing to get YOUR business; instead sounds like we are simply handing off a government monopoly to a “private” monopoly that will be heavily regulated.
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