SS Privatization

[carrowsboy]

I must admit I am completely clueless on SS and the dangers of privatization.

My friend says total privatization is "great" cause it is "our money" and we should "spend it how we want."

What is the danger in this?

[FreakinDJ]

1. Total rip off Privatization means we forgive their debt

President Bush took 40 billion

President Clinton used the surplus to pay down the nation debt Bush 1 and Reagen created

Congress has tapped the SSI piggy bank too many times to count any time the spending was out of control and they needed a fresh influx of cash

You want to privatize SSI

BACK BACK THE DEBT - WITH INTEREST FIRST!

It's our money they our talking about.

[blurp]

35. Social security money already invested in government bonds (debt).

You bring up a good point.

Social security money is invested in government bonds so a big portion of the national debt is owed to social security and should be paid back when the bonds mature.

The question I guess is:

do you have more faith in the government paying its debt, or do you have more faith in other kinds of investments?

[MercutioATC]

2. It comes with a reduction in guaranteed benefits.

there are two possibilities:

1) You invest the money wisely and get more money than you would have under SS.

2) You don't, and have less money...perhaps not enough to live on.

It's a no-brainer that at least a small percentage of society won't invest wisely (and even a small percentage is a LOT of individuals).

Then we have two possibilities:

1) We let our old people starve in the street.

2) We spend MORE on other social programs so old people don't starve in the street.

Either way, it's bad. We wind up with either more destitute senior citizens or more money into social programs to correct for their losses.

[FloridaPat]

5. small percent? Milliions have been busted thanks to the bubble

burst of the stock market. Then there is all that fraud. Pension plans are going under and more will follow. That is the history of the private sector. Where there is money, there is fraud and theft.

[MercutioATC]

6. I'm being conservative. It's a best-case scenario.

...and it's still bad.

[HawkerHurricane]

3. That the transfer of YOUR MONEY to the wealthy will be unopposed

Remember that big surplus the U.S. used to have? That was the social security fund.
Remember that big tax cut W gave out to his rich buddies? That was funded by the social security fund.

Here's the scam:
Social Security isn't anywhere near bankrupt.
You pay money in until your 65, then collect money out until you die. It's insurance. What the Republicans are saying is basically this:
We spent your trust fund, and we aren't going to pay you back. Tough luck, sucker.

Privatization (stupid word) would take part of the trust fund (plus a big chunk of deficit spending) and give it to stock brokers, who will pocket a percentage and invest the rest... the companies invested in will then turn around and declare dividends, giving the stockholders the money... and not doing a damn thing to improve the value of the stock.

Brokers do great. Stockholders in the chosen companies do great. You're SOL.

[blurp]

36. Social security in crisis if government debt is a crisis.

That's what it comes down to.

Is investing in government debt the way social security has better than other forms of investing?

That's the question.

[DaveinMD]

4. when the market crashes

you'll have nothing. Social security virtually eliminated poverty among the elderly. Without it, seniors will have to work until they die. That's not good for anyone.

[gtp1976]

7. would you have to invest it

in the stock market? Why couldn't you invest it in another way?

[DaveinMD]

9. yep

because its about getting more money in the hands of wall street. YOu could decide what type of fund, but you'd have to invest it.

[Yupster]

15. It would be like a 401(k)

Of course you wouldn't have to invest it in the stock market.

Just like other retirement plans there would be stock mutual funds, mixed stock and bond funds, bond funds and a fixed interest account.

Privatization is a bad idea, but trying to scare people with wrong information won't win arguments.

[gtp1976]

19. so it "could" be good or

it could be bad depending on how the individual invests the portion they are given to invest? If a person invests it wisely and has a bit of luck, they could benefit from it, but by and large the risk is too great?

I'm just curious.

[retread]

22. Well, yes, it "could" be good. And the sun "could" rise in the

west tomorrow. Mims wants to do for domestic policy this term what he has done for foreign policy in his last term. Count on it-- if these pirates are for something, it is not good for working people or for this country!!

By the way, I doubt you are just curious, I suspect a not-so hidden agenda.

[gtp1976]

25. no hidden agenda

i just know very little about SS and only know minimal about investing. Did I violate a "freeper code word" or something? :-)

[DaedelusNemo]

28. Under Bush's estimates, it'd mostly be bad

The piss-poor growth estimates necessary to put SS in trouble would also lead to piss-poor market returns.

The thing is, any risk is really too great. It's supposed to be the 'security' part of retirement. If you want to invest and speculate on top of that, have at it - but you have to have a nest egg you don't gamble with.

[DaedelusNemo]

27. Depends on which proposal you're talking about

The ones i've heard the most emphasis put on in discussion have generally centered around leaving people very little choice. Most of the proposals feature large-scale government controlled investment, which of course thoroughly violates any notion of a free market.

The original poster mentions people saying "my money" and so forth. These people have been deluded into thinking they would actually get to decide what is done with it. It's 'theirs' in name and risk only.

[greenohio]

8. shrub will make it the most dangerous.

There are models like Swedens where individual accounts are set up, preventing the raiding of the trust fund. But shrub will set it up to benefit the wealthy and wall street.

[pnorman]

10. "Our money"?

It's essentially money that the previous generation (eg: your mothers and fathers) had paid in to the SS Fund. They in turn, are receiving SS payments which were financed by the previous generation. Having been established in 1935, it doesn't go many generations further back than that.

To BREAK that chain of trust as well as concern for coming generations, and bribe the ultimate loser with a portion of the loot, is what the Bush plan is all about. He's not planning on "fixing it because it's broke", he wants to "fix" it because it's so SUCCESSFUL. It sets a bad example for us slobs, and drives Corporate America FURIOUS. (Full disclosure: I made my first SS payment in 1946, and I receive my first check in 2000).

John Kenneth Galbraith said it well: "The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness".

pnorman

[Been Fishing]

11. Bush would not negotiate with himself at his new conference.

Details have not been provided. Bushie is wait for congress to fight it out.

He will tell current retirees and near retirees not to worry. There will be no changes for them.

It only the younger workers who will be effected. At what age???

They will put $1000-$1300/year of their SSI in an IRA-type account.

With the account fees, how does * expect this system to save money? I'm not sure he does.

[zmdem]

12. My understanding is

that Bush's proposal is not for complete privatization. He would allow younger people to put a small percentage of their SS money into private accounts, such as mutual funds. Traditionally, such investments outperform Treasury bonds, hence SS payouts from the treasury would be reduced in years to come.

There is a big upfront cost to doing this, even tho' in the long run it would probably be beneficial. The argument for doing it is that if we wait until SS becomes insolvent, (about 30-40 years from now), it will be too late.

I'm undecided on this myself, it's a complicated issue.

[FloridaPat]

17. Several mutual funds have gone out of business over the last decade.

Lifetime pensions are going out of business. The federal pension guarantee is in big trouble. The thing about SS is that the only way it is really in trouble is if the US government is in trouble. Then everyone gets hurt. SS works. It's not much, but it's better than nothing. It also covers people on disability. There is no 100% safe investment out there. Otherwise, people wouldn't need SS because all their investments would make them rich today.

[zmdem]

26. SS is not guaranteed

It is a tax on workers. Whatever the current law is regarding payment to retirees, it is changeable. No one owns the money they pay in FICA taxes. The government could abolish the program tomorrow, if it chose to do so. We pay the FICA tax and hope that when we retire the government will send us a check.

[DaedelusNemo]

30. As guaranteed as any government matter can be

Which is rather more guaranteed than any business matter can be.

[DaedelusNemo]

29. my understanding

There's not just a big upfront cost, there's also a huge ongoing cost. The cost of maintaining millions of individual accounts, the brokerage and management costs - it typically costs 20% of a fund to set it up as an annuity, something you get from SS for free. The thing about SS is that it is in fact very efficient - all but .6% of the income is paid out as benefit.

If we wait until SS becomes insolvent (in 2043 according to the Bush commission, 2053 according to the CBO) then income will be only 80% of promised benefits. If we wait until then to fix it, it'll have to be by tax increase of 25% or benefit cut of 20%. But the Bush plan is cutting it by more like 50%! (It turns out to be real expensive to set up all those accounts.)

[Larkspur]

13. Social Security is social insurance not a retirement investment program

Social Secuiry is a retirement, disability, and survivorship insurance program.

When my father died in 1964 and left my mom with 3 kids under 18, SS provided a benefit that helped us stay out of poverty. Disabled people also get a benefit.

SS was originally designed as a SUPPLEMENT to personal savings and retirement accounts to help the elderly stay out of poverty. It was never intended to be a person's sole retirement plan.


SS is the MOST EFFICIENT government run program, with 99 % of proceeds going to beneficiaries. Privatization would lower benefits by that by 30-40% to cover the admin costs associated with manage private accounts and paying fees to brokers and investment companies.

For more on the debate about privatizing SS, read Paul Krugman's op eds. He had his first one on Jan. 4, 2005 and he says that he will be writing a series to explain why SS Privatization is a fraud.

[Generic Other]

14. Social security is a form of insurance

You do know if you are injured and can't work, social security provides you with a monthly check no matter what age. How far will your "private" account go toward providing for a major disability?

Social security also provides for your children if you should die.

These protections start the day you begin contributing to the system.

How many years would you have to invest in your "private" scheme in order to receive comparable benefits?

Many of us have been contributing to private pension funds throughout our working years. These "private" funds are not going to provide as much money as a monthly social security check. For one thing, they have not earned a single penny since Bush came into office. Four years of Bush and most Americans' pensions have flatlined.

And I have a good retirement pension plan. Plenty of folks in worse shape.

Remember what you toss aside so easily in the arrogance of youth, you will rue in your old age. But when you are eating cat food in your 70's, you will have the satisfaction of knowing that age leads to wisdom.

[baldguy]

16. SS "Privatization" is what the REPUBLICANS call it.

Therefore, the label is misleading. They want to end SS. Period. Here are some facts:

- At this time, there is no immediate "crisis" in Social Security. It is solvent for the foreseeable future, and there's no reason to believe that any new problems that arise wouldn't be able to be solved by slightly adjusting the formula of payments vs benefits. That's how its always been handled in the past.

- Even allowing younger people to directly invest a small portion of their SS benefits now will have an immediate cost to the Fed Gov't - meaning everyone - more than $1 trillion. In addition, that amount will be taken out of the system and not be available for benefit payments for retirees. Under the Bush "privatization" plan, benefits will HAVE to be cut.

- If Bush has his way, $1 trillion would just be the first payment. The ultimate goal is to get rid of it entirely. Since benefits are paid from the pool of current SS deductions, and if people are allowed (encouraged, forced) to invest those deductions rather than being disbursed as benefits, there will be a shortfall.

- There is no guaranteed return on ANY investment. That $1 trillion+ could just disappear. There are BAD INVESTMENTS in the world! People who are not experienced in choosing investment opportunities (like most of us) will make the least profitable investment choices. The result will be a large number of very poor, very old people. SOCIAL SECURITY WAS STARTED SPECIFICALLY TO PREVENT THAT SORT OF THING!

- Originally, the money from SS deductions was kept separate from the general Fed Budget. That changed about 35 years ago, because at the time the SS fund had a huge surplus. Every Pres and Congress since have used that surplus to help cover the Fed budget deficit. Clinton put some of that back, but he didn't separate them again. Right now the Fed gov't owes about $2 trillion to the SS fund. If he REALLY wanted to solve the SS "crisis" once and for all, Bush would take SS out of the general budget and pay back what is owed.

But again, their object isn't to save Social Security, but to eliminate it.

edit: Also, dollar for dollar, SS has a better return over the last 60 years than the stock market. The best place to put your "privatized" SS money is SS.

[DaedelusNemo]

31. Last point a killer - can you give me a link? /nt

[FreeStateDemocrat]

18. The backlash is beginning. NYT:Benefits Plan Costs President Key Democrat

Privatization is “the issue” the Democratic Party needs to use to reconnect with working class Americans. This could be the beginning of building momentum for 2006 if the party leadership gets out in front and exposes this inherent repuke disaster to the American public effectively. If we only had effective party leadership maybe Dean will take a persuasive lead on this question. The following story may only be the start of the potentially negative response to this politically damaging proposal by the *idiot* and his gang of ransackers:

Benefits Plan Costs President Key Democrat
By DAVID E. ROSENBAUM
Published: January 7, 2005

WASHINGTON, Jan. 6 - Senator Max Baucus of Montana, a Democrat whose support was essential to the enactment of President Bush's tax cuts in 2001 and his Medicare legislation in 2003, said on Thursday that he would oppose the president's Social Security plan this year.
Mr. Baucus's position will make it difficult for the White House to obtain the Democratic votes necessary for the measure to get through the Senate.
"I seriously doubt I'm going to be the linchpin this time," Mr. Baucus, the senior Democrat on the Finance Committee, said in an interview. (contd)

http://www.nytimes.com/2005/01/07/national/07social.html

[NYCGirl]

20. It's SS CORPORATIZION, not privatization.

Reframe, folks! Let's not use their language.

[webjamn]

33. Exactly

This is a scheme to help investment firms. How many people do you know that don't know the first thing about investing? Most people will make bad investments with this plan and the securities firms will rack up huge profits with their commissions and maintenance fees. I am a long term investor and I think it's a terrible idea.

[DaedelusNemo]

37. That's a meme i think we ought to go with. SS corporatization. /nt

[jpgray]

21. If the Democratic Party rolls over on this one, it's in mortal condition

This is the heritage and lasting achievement of the party, and they better go tooth and nail to defend it.

[retread]

23. I came close when they caved on the so called welfare reform bill.

If they cave on this one I'm done with them! By that I mean no more time or money.

[DinahMoeHum]

24. It's the breaking of a social contract between government

and its people.

:kick:

[JDPriestly]

32. For individuals, privatization is a gamble

In 1929, the stock market crashed. It did not regain its 1929 dollar value until about 1964. If you had invested retirement money in the stock market in 1929 at the age of 30 and withdrawn it at the age of 65 in 1964, you wouldn't have earned a penny. In fact, you would have lost money due to inflation. A person who retired at 65 in 1964 got much more value from Social Security payments than from stock market investments.



http://www.analyzeindices.com/dowhistory/

There is a lot of propaganda about how the stock market increases overall in value over 40 or 60 year periods. That does not mean that your accounts will increase. It means that the accounts of the lucky few increase overall over those periods. The stock market makes the rich richer. Those who have a lot of money to invest can get better information and make wiser investments. They can diversify their investments more effectively and even affect how other people invest by setting investment trends. If you are lucky you can ride the coattails of the rich, but it's far more likely that you will buy just as the rich man is about to sell and sell just when he is about to buy meaning you lose and end up poor.

There is absolutely no way to predict what the stock market will do, no way to guess how specific stocks will perform. Some investments are wiser than others, but there is no magic formula for winning in the stock market. Ask the mathematical geniuses at MIT and CalTech about this, and that is what they will tell you.

I just received a statement from a small 401(k) account in which my money is invested very "conservatively." Between 2000 and 2001, I lost about ten percent of the money that was in my account as of January 2000. Over the past three years, I regained about 9% of the January 2000 amount. Figure in inflation and the fall of the dollar, I've lost money. In contrast, Social Security benefits rise slightly every year. My "investment" or payments into Social Security will yield more than my private investment accounts. The Bush administration claims that the economy has grown each year. Assuming that to be true, my Social Security account reflects that growth better than that private account. Social Security is the better investment for me in pure money terms, as it is for most Americans.

The demographic problems that are likely to cause problems for the Social Security system will cause even worse ones for the stock market and the economy as a whole. To deal with the demographic problem, Bush should be creating incentives to keep healthy older people in the workforce -- such as enforcing age discrimination laws. Destroying Social Security is not the answer.

[orpupilofnature57]

34. Privatization, is a way for shrub and his pals to make a buck.

[pdxmom]

38. I believe this is the best argument for being against

the privatization plan. It was set up, in large part, against the backdrop of the Great Depression. In other words, Roosevelt set up Social Security BECAUSE of the vagaries of the stock market. From the Social Security Administration's own site:

"This law represents a cornerstone in a structure which is being built but is by no means completed--a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the Government against the necessity of going deeply into debt to furnish relief to the needy--a law to flatten out the peaks and valleys of deflation and of inflation--in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness." - Franklin D. Roosevelt, August 14, 1935