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Posted on 10/03/2002 2:14:47 PM PDT by RJCogburn
The market is in another slump, and investors' savings have once again shrunk. So now is the perfect time to make the case for privatizing Social Security.
This is not the conventional view on the subject. In the run-up to next month's elections, Republican politicians have evaded all discussion of privatization — part of their shrewd campaign strategy of ceding all domestic issues to the Democrats.
It's a foolish policy, because there has never been a better time to argue for privatization. The main argument against replacing Social Security with private investment accounts has been the fear of what might happen when the market goes down. Well, now we know. The worst fears raised by critics have been realized, with Wall Street at the bottom of the longest and possibly deepest bear market in 60 years.
The grim result: money invested in the stock market five years ago has performed just as poorly as money paid in Social Security taxes.
One-eighth of your salary goes to Social Security taxes — a much higher percentage than most of us put into our retirement funds. Yet Social Security offers most taxpayers a poor return. The average worker can expect Social Security to pay back the equivalent of a 1 to 2 percent annual "real" — that is, inflation-adjusted — return on his tax money. To put that in perspective, money put into safe, high-quality corporate bonds earns a real return of 3 to 4 percent, while stocks historically average a 7.5 percent real annual return.
But what about bear markets? Money poured into an average stock market portfolio this time in 1997, before the recent boom and bust, would be worth almost exactly what it was worth five years ago, as measured by the Dow Jones Industrial Average.
This actually understates the recent performance of stocks. If you own shares in General Electric, for example, the fact that you lost money in the last two years is only half the story. The other half is that you still own a portion of a productive enterprise. When the economy rebounds and the firm's profits rise, you stand to make back your losses, and then some.
With Social Security, by contrast, you own nothing. Consider what happens if you die: your lifetime of Social Security taxes is not saved up in a personal fund that goes to your heirs. Survivors get only a percentage of your benefits — if you have young children. More important, all of your benefits are backed only by a promise, from today's politicians, that they will tax future workers to pay for your retirement. But Congress can always reduce your benefits, fail to raise them to match inflation or cancel your benefits altogether. And they will be forced to do one of these things, because by 2015, Social Security will start bringing in less money than it pays out — a gaping financial hole that Congress has made no plans to fill.
The conclusion is clear: Social Security is a much worse way to provide for your retirement than private stock-market investments — even during the worst bear market in half a century.
So why is everyone afraid to suggest privatization? Why won't Republicans take advantage of this golden opportunity?
The problem is that benefiting from stock market investment has some conditions. An investor has to make choices and acquire some elementary knowledge about how to manage his assets. He has to be careful, for example, to keep some of his savings in more stable securities, like bonds, rather than putting it all into the stock market. He has to make sure his investments are diversified — that he doesn't risk all of his money on speculative technology stocks or on a single company (like the workers who lost their entire life savings when Enron collapsed). In short, a stock-market investor must take responsibility for his own future.
This is what Republicans are afraid to say. They promote privatization, not as an alternative to government handouts, but as a substitute for them, as if private investment accounts are just a different means by which society can assure everyone a guaranteed minimum income, regardless of his choices. So they can't admit that the market sometimes goes down.
But the promise of a life free from thought, effort, risk or responsibility is an illusion — an illusion that will come crashing down, in the long term, when Social Security goes bankrupt. And the bursting of that bubble will be far more damaging than any bear market on Wall Street.
But don't worry, the good politicians will keep your <2% earnings safe from that big, bad 7% earnings and you can sleep well at night.
.....I see an opportunity for a politician to go to a CEO and say "..if you donate big to my re-election campaign I'll make sure Social Security invests heavily in your company"
Good luck to everybody!
Stonewalls
Are you proud of that? You prefer to have a bunch of corrupt fools in Washington DC take care of your money for you rather than take the little extra effort required to make a sensible investment? Does it mean enough to you to put a gun to my head and take my money to do it with? I guess Social Security must be pretty good nowadays if you can afford a computer, an internet connection and a Marxist opinion.
Done correctly, each of us would make the investment decision, not the pols.
Damn the image. You got no right to my money. I care not what happens to you when you're old. That's your problem. It's your life. Do with it as you please. Don't make your life my responsibility. If I starve when I'm old- tough sh!t! Freedom's a scary thing. You can't have it both ways. You want to be free? That means nobody else is responsible for you. You want other people to share in the responsibility for your outcome- you're not free. Take your pick.
Excellent point.
The worst fears raised by critics have been realized, with Wall Street at the bottom of the longest and possibly deepest bear market in 60 years.Fasten your seatbelts -- we're not at the bottom.
That would probably have to be the compromise initially. Hopefully the restrictions could be lessened over time.
A shift to private accounts would require a transition period and probably result in big deficits.
That's probably true. It's a choice between big deficits now and gigantic unmanageable deficits later. And since "later" in this case is past the time our elected officials plan to be in office, it's easy to see what their choice is.
If the current SS System = Enron, then Dubya's "privatization" plan = Arthur Anderson.
Both major political parties perpetuate The Big Lie regarding Social Security. The Big Lie has existed since Social Security's inception. The debate over "privatization" is only the latest version of The Big Lie.
The Big Lie is that Social Security is some kind of retirement savings plan.
It is NOT.
Social Security is a socialist income redistribution scheme, nothing else.
Those who are working are taxed to provide a "safety net" for those who are less fortunate.
Originally, this meant retirees and surviving dependents.
Congress has, of course, complicated it far beyond this over the last 65 years.
But one fact remains: it is NOT a "savings plan", it is an income redistribution scheme.
A major facet of The Big Lie is that "we have to do something so that Social Security remains solvent in the future.
Poppycock!
In today's age of modern computerization, the computation for operating an income redistribution scheme that remains perpetually solvent is quite simple:
The only change necessary to the current system is that monthly payments to eligible recipients would be a variable amount, not fixed.
THERE IS ABSOLUTELY NO NEED FOR A MULTI-TRILLION DOLLAR "TRUST" FUND!!!
Congress should NEVER have been permitted to confiscate so much money from the American People in the name of The Big Lie. This fund is nothing but a slush fund that Congress raids to pay for other government expenditures. If private sector employers did the same thing with their companies' pension funds, they'd be placed in prison. The "privatization" plan proposed by Bush is merely an attempt by Wall Street brokerage firms and financial institutions to get in on the scam: grab a portion of a constant revenue stream (guaranteed by taxation) from which they can skim their commissions.
Daschle's "concern" over the Social Security system is a lie.
Bush's plan to Enronize the system is worse.
The American People need to wake up and put these liars and thieves in prison.
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