Why are we opposed to partial-privitization of Soc. Security?

[bsm1970]

I understand the argument about the transitional costs. They are astronomical. But beyond that, why do we as Democrats oppose it...in principle I mean? Correct me if I'm mistaken on this. I'll admit, I've only recently started taking interest in this debate.

From what I gather, people are only able to take a portion of their Social Security taxes and invest them in these private accounts. The rest would continue to go into the system as it currently does. Also, these accounts, over time are likely to grow a lot faster than money in SS currently does, even in very conservative investments, making SS provide better than it currently does. And no one will be forced to switch to this kind of account if they don't want to.

So help me understand what (besides the transitional costs argument, which I agree is a big problem) is the reasoning behind opposing any effort to change SS as it currently exists to have any element of privatization.

[jpgray]

1. Because if those private accounts should fail utterly for a minority

What does that minority have to fall back on? Zip. This isn't about individual greed, this is about caring for all members of our society as they go into old age. That's it. I don't get how the right is allowed to legislate morality by telling folks what they can and can't read, hear or do whereas when the left tries to legislate morality by providing for the less fortunate, we get a shitstorm.

[Egalitariat]

4. What if you are not a minority

and it falls short. Does not being a minority make it easier to deal with?

[Salviati]

22. I do not think that the previous poster meant an ethnic minority...

I believe that they meant that if the system works as advertized, some people will do better than under the current SS system, but a minority (i.e. a smaller group) may end up doing a lot worse.

Of course that assumes that people will be doing better at all under this system. How did your 401k do in the market the last few years...

[jpgray]

23. A minority of the people who use private accounts, not a racial minority

In other words, if only a relatively modest percentage of people lose their shirt on the private accounts and having nothing to fall back on, it's hardly worth it.

[Mystified]

67. READ THE COLUMN AT THIS LINK

And see if you think privatization is still a good idea.

http://www.usnews.com/usnews/issue/050131/opinion/31edit.htm

edited to fix link

[pbartch]

66. FAIL FOR A "MINORITY" ---- ha! this will fail for the majority of people

My account is totally opposed to this also. The only people who will get rich are the stockbrokers.

[XNASA]

2. In the first place, the bond market outperforms the stock market...

..in the long run.

The only good thing I could see about the privitization of SS would be to keep the money out of the hands of crooks like the Bush Administration.

Other than that, there's really no upside to privitization.

[TXlib]

15. That runs counter to everything I've ever read.

The bond market outperforms the stock market in the long run? Where did you read that? Can you give me a source for that info? (I'm not challenging you; I'm really interested where that info came from...)

I'd recommend the book Stocks For the Long Run.

http://www.amazon.com/exec/obidos/ASIN/007137048X/qid=1106944897/sr=2-1/ref=pd_ka_b_2_1/104-9664336-4540763

[papau]

25. It's a P/E ratio thing - with stable P/E, Bonds and Stocks should be

equal.

The upward trend in P/E ratios has produced a better return in stocks - even when adjusted for risk.

[TXlib]

47. Perhaps in theory

but in practice, stocks have outperformed any other investment vehicle.

It also depends what you mean by "the long run"... there are short periods when stocks underperformed bonds, but over any period of time equivalent to a career lifetime (25-35 years) you can be sure, barring armageddon, that stocks will outperform.

[papau]

91. Sadly 15 years periods are common with lousy returns - so who gets

lucky.

A steady stream of deposits means the timing of the "lucky period" has a lot to do with whether or not you made a "wise" investment.

And for the record many investments have out performed stocks as an asset class if asset class means S&P 500 return.

Amazing how important start and end date are to any calculation! :-)

"over any period of time equivalent to a career lifetime " assumes the past is prologue -

and any investment is by law told to tell the truth - namely that past does not for tell future performance.

[Name removed]

95. Deleted message

Message removed by moderator. Click here to review the message board rules.

[papau]

97. Do the math - the "return" quoted is nonsense - only the benefit at the

end of the day matters in the math since that is what you are going to spend.

The pretend high rate of return - even in Bush's own illustrations - results in less benefits.

You say wait - I got a higher return - I must have more money ????
But you don't. :-(

And then you say "that damn Bush was a liar about that rate of return!"

Indeed when is the last time you borrowed monry and ended up with more assets than you would have if you had simply invested the monthly repayment rather then sending it off to the loan company. The loan company exists to make money - if it could invest and get a better return than you are paying it, it would.

They are going to borrow $2 trillion so as to give you an account balance - there is no free lunch - you and your kids are screwed under the Bush plan.

[XNASA]

50. I'm basing it on this....

http://www.csmonitor.com/2004/1227/p01s03-cogn.html

I shouldn't have generalized when I said "Bond Market", but then people shouldn't think that Stock Market only applies to blue-chip stocks either. And let's not forget about those 'hidden fees'.

[TXlib]

71. Actually, that's a really good article.

Gave me some food for thought.

Thanks, and you should have posted it initially!

[bsm1970]

Ditto

I saved that article to my bookmarks. Something to chew on.

[Harksaw]

3. I was just about to start a thread asking the same thing.

I realize we're absolutely not in the financial situation to implement it, but what is the theoretical problem with Social Security functions being ensured by requiring everyone to have their own retirement savings account, and invest part of each paycheck into it to ensure their retirement independence?

[Coastie for Truth]

44. Several Problems

1. Survivors Benefits - The actuarial value of "Survivors' Benefits is $400K -- figure a declining benefit $400K policy starting at, say, age 22 or 25.

2. Disability Insurance - Again, the actuarial value of disability is on the order of $400K.

Nobody has figured either Survivors Benefits or Disability Insurance into the pot.

3. Insurance on the Account - a form of "Depositor's Insurance" akin to FDIC or Federal Pension Benefit Guaranty Corp of FSLIC or NCAA insurance

Now, let's bottom line it. Figure you make $60K -- so you and your employer pay $9000/year into FICA.

The insurances - Survivors Benefits and Disability Insurance would be $900 per year -- level premium starting at age 20-25;

Depositor's Insurance -- on equities and not lower risk bonds or even lower risk bank deposits. Looking at what FABRIC charges for private pension plans -- figure about $500-$600/year for depositors insurance.

Figure at least $100 on the annual payment.

So, of your $9000 - at most $7500 goes into your "retirement estate."

Why not a refundable tax credit to motivate lower income taxpayers to buy into IRA's and 401(k)'s - that also "ownership" with giving up the "Security" of "Social Security" (which is social insurance and NOT an investment vehicle).

Don't forget - high income taxpayers get a 36% assist for their IRA's and 401(k)'s - why not some tax equity for 15% and 22% bracket folks?

[trotsky]

5. "We" oppose it because...

SS was never meant to be a retirement account - it was created to provide a minimum income to the elderly so they wouldn't have to die in poverty. It was, and is, a smashing success. It can be "saved" with minor tweaks, but because Wall Street sees those trillions of dollars and drools, we are being sold a bill of goods to "privatize" and put one of our best government programs in jeopardy.

[bsm1970]

But does it provide a minimum income...

...that anyone could really live on by itself? I mean, isn't that the problem? It doesn't provide as much as it should or could?

[trotsky]

10. Yes, it does.

Escalating health care costs have made it much harder, if not impossible (especially if you have expensive prescription drugs), but SS is tied to the index of inflation and is supposed to provide a base income to subsist on.

[bsm1970]

13. Does anyone know what the current level of yearly income is...

...on SS? Is it at the poverty line or what?

[papau]

28. It depends on past wage history - make more, pay more, get more

The low end is below the poverty line so some of those on Soc Sec are also on welfare.

Indeed that is the game - the rich want the non-rich to think of Social Security as welfare. Makes for better servants.

[roseBudd]

48. But it is also progressive, the lowest wage earners get more than they

would if there was not a progresssive element.

SS is also disability and survivors insurance.

[papau]

85. true - the benefit factor that would be applied to the earnings over 90K a

year would be the current high end 15% factor

For those who became eligible in 2003, benefits were based on the following formula:

90 percent of the first $606 of AIME, plus
32 percent of AIME over $606 through $3,653, plus
15 percent of AIME above $3,653.

AIME is the average wage after each year in the work history is adjusted by the wage index so as to be equivalent to the retirement year.

[trotsky]

Some information can be found on the SS site.

Like papau said, it is based on years of contribution, but they do have minimum levels.

http://www.ssa.gov/OACT/COLA/Benefits.html

[Zhade]

14. People certainly won't be able to live off SS when b*sh annihilates it!

You DO realize that's the whole plan, right? Republicans DESPISE Social Security (except when they or their loved ones receive it, of course).

[bsm1970]

21. Try to leave Bush out of it for now.

I'm really asking in principle why we should be opposed to it, not any plan in particular right now. I've heard several leading Democrats say they are categorically opposed to any privatizaton of SS whatsoever and I have to admit, I just don't understand that.

[Zhade]

32. What, there aren't ENOUGH threads spelling it out yet?

Fine, off the top of my head:

1) Transition costs will bankrupt the system.

2) Currently, SS uses something like 1% of intake to distribute funds. It's the most efficient government-run program we've had in 60 years.

3) SS is NOT for INVESTMENT. Period.

4) When the stock market tanks (and with the way the economy is going, it will at some point), any SS funds invested in the stock market will be lost.

5) It's a bedrock Democratic Party policy, most people in America like it, and it's really, really politically stupid to fuck with SS.

I'm horrible at economics, and this is just what I could throw out there at the drop of a hat. Keep reading DU, you'll understand why it's a terrible idea soon enough.

[bsm1970]

35. Well, excuse me

I did scan through looking for a few threads but didn't find ones that got into detail on it much. But then again, I didn't drill down that far. Sorry if this was a waste of your time.

Truth is, some folks would oppose it simply because it came from Bush. They don't trust him no matter what. I wanted to get beyond that and ask if there is any credence to SOME sort of privatization model...something that would give people a better return on the money and provide for them better when they are old. I'm just wondering if such a plan could be crafted that would contain some necessary safeguards to prevent people from losing everything.

[Zhade]

No, excuse me.

I'm a little short-tempered with all the trolls coming onto DU to "innocently" ask why we shouldn't corporatize SS, so you'll have to pardon my rudeness and chalk it up to battle fatigue.

One last note from this non-economist: we already have private accounts, such as the plethora of IRAs available. Absolutely zero need to add yet another at the expense of SS itself.

[bsm1970]

78. No worries

I'm a relative newbie here. I can understand the suspicion. But I'm just trying to think this through. I used to be a Republican and bought into the whole ideology. I'm not anymore, but I don't want to repeat the same mistakes with a different political party. I've resolved to take things issue by issue and where a compromise can be made that can assuage all the fears or issues of each side, I want to make it.

[Zhade]

92. Fair enough, and welcome to DU.

Congrats on recovering from The Illness!

[papau]

99. no - sorry - but no - see below:

sorry - but the answer is no

Meyers - who was an actuary there in 1934, pretty well explains it in his book SOCIAL SECURITY.

This system helps the economy the most, helps people the most, while costing the taxpayer the least.

Intergenerational insurance was and is a brilliant actuarial concept-
Free market changes by the Yale failure (see his grade record) would not help it.

Indeed they can not help it. Thatcher forced through her version and now the Brits are trying to recover from that disaster.

Chile did its thing and the recent NYT article gives you the report of that disaster.

Argentine is paying 25 cents on a dollar to the bond holders that financed its right wing schemes.

privatization is something you add to the process when folks motivation is needed and things will work better with greed. That is not the case for Social Security.

[roseBudd]

51. Take a page from Hilary Health and Newt Gingrich, as it may involve

strategic long term thinking.

[papau]

36. no - the "new" system would provide less!! - the gain would be in

the attitude of folks toward investment - a reduction of all this we care for one another thought that bothers the GOP - and everyone for themselves.

The economics are a disaster - for the retiree, for the economy

How can we say it is a bad idea....

I guess best is just to say all the reasons presented - living longer, fewer workers, etc - are true - but in the end are lies if they are presented as causing a problem.

The CBO and the actuaries at the Soc Sec do a financial projection - and there is no problem (contrary to Bush) - the only problem is that beginning in 2018 the Soc Sec Trust fund - projected to be about 6 to 7 Trillion at that point - will start selling bonds - less than 100 b in 2018. This is the same thing that is projected to happen in Japan as Japan begins to sell US bonds in order to get cash for their retirees.

But the Bush folks do not want to raise taxes on the rich at that time - and a tax increase would be neceassary to get the cash to retire the bonds. Indeed the rich have financed their tax cuts under Bush by stealing/borrowing the Soc Sec surplus - and in effect the 2018 tax increase would be them repaying what they stole.

[Swede]

6. $2 trillion sure generate a lot of fees for Citibank.

Kinda makes you wonder if Citibank donates to the Repulicans.

[electropop]

12. yes and it's Saudi owned.

What a coincidence.

[theorist]

7. Welcome to DU.

And no one will be forced to switch to this kind of account if they don't want to.

I think you're mistaken here, though. I don't believe we have a choice. I could be wrong. Then again, we haven't even seen the actual proposal, yet.

If you want my opinion, I'm opposed to any privatization of SS because of the possibility (and by this I mean inevitability) of abuse. We will not be given a wide range of choices for investment. At best we will be given the option of putting the money into a few dozen mutual funds. Who will choose the actual stocks to be invested in? That's right! The administration.

Social Security is about security. Any risk is unnecessary. No one has ever stolen from SS, since it's inception. This will all change when we see trillions of dollars being thrown around.

[electropop]

8. It's "corporatization" not "privatization."

The plan is to bleed SS dry, while lining the pockets of Wall Street billionaires. In no way can it be considered a plan to "save" SS, because the transition cost will bankrupt SS. The whole thing is just one more con.

[pbartch]

76. I think you're right on. We will be at the whim of traders, brokers

who just want to line their pockets like Bush's buddy Key Lay.

[bowens43]

9. The safty net will no longer be a safty net.

Your assumption that the private accounts would be likely to grow more quickly isn't based in reality.

[bsm1970]

11. Why?

If someone started putting money into one of these accounts in their 20s or 30s, by the time they reached the age where they could draw from it, you mean to tell me that the stock market doesn't have a long history of significant growth over that length of time...much better than the growth that SS currenty gets?

[electropop]

17. It also has a long history of scams, swindles, and cons.

And the associated fees are huge compared to the overhead of SS.

[trotsky]

41. What if there's a crash *just* when you're ready to retire?

Sure, the market will eventually recover... but how much longer will you have to delay your retirement?

SS is there, guaranteed, regardless of how the market is going on the day you retire.

[bsm1970]

46. What if...

...there was built in to the system a gradual shifting of the account assets to low or no-risk investments like gov't bonds as you get older? Maybe it starts 10 or 15 years out and by you're 3 or 4 years away, it all shifts to no-risk bonds?

[trotsky]

59. We can continue the "what if" game easily.

What if the day you start your "gradual shifting" is the day after a crash?

See, what you're doing is making SS into something it is not. It is an entitlement, it's not a retirement account.

[papau]

65. That is correct - the stock market DOES NOT have a record of growth

that exceeds the current Soc Sec system - that is why the net net benefits projected for the new 20 year old worker for his retirement 47 years from now at at Reagans'1983 law's 67 retirement age will be less than the benefit now in the law.

The GOP ignore the subtractions - the annual expense charges, the lower return likely from "safe" investments, and indeed the history of the market of going through long multi-year periods of low return.
Indeed the cost of annuitization - moving the lump sum to a monthly payout - will reflect a large slice removed for the insurance company you buy the annuity from.

[roseBudd]

79. Social Security is indexed to wages

As wages rise so to does Social Security.

If you honestly want to learn about Social Security, here is a good place to start.

http://www.bepress.com/cgi/viewcontent.cgi?article=1048&context=ev

Rates of Return on Private Accounts
Privatizers believe that privatization can improve the government’s long-term finances without requiring any sacrifice by anyone — no new taxes, no net benefit cuts (guaranteed benefits will be cut, but people will make it up with the returns on their accounts.) How is this possible?

The answer is that they assume that stocks, which will make up part of those private accounts, will yield a much higher return than bonds, with minimal longterm risk. Now it’s true that in the past stocks have yielded a very good return, around 7 percent in real terms — more than enough to compensate for additional risk. But a
weird thing has happened in the debate: proposals by erstwhile serious economists such as Martin Feldstein appear to be based on the assertion that it’s a sort of economic law that stocks will always yield a much higher rate of return than bonds. They seem to treat that 7 percent rate of return as if it were a natural constant, like the speed of light. What ordinary economics tells us is just the opposite: if there is a natural law here, it’s that easy returns get competed away, and there’s no such thing as a free lunch. If, as Jeremy Siegel tells us, stocks have yielded a high rate of return with
relatively little risk for long-run investors, that doesn’t tell us that they will always do so in the future. It tells us that in the past stocks were underpriced. And we can expect the market to correct that.

In fact, a major correction has already taken place. Historically, the priceearnings ratio averaged about 14. Now, it’s about 20. Siegel tells us that the real rate of return tends to be equal to the inverse of the price-earnings ratio, which makes a lot of sense More generally, if people are paying more for an asset, the rate of return is lower. So now that a typical price- earnings ratio is 20, a good
estimate of the real rate of return on stocks in the future is 5 percent, not 7 percent.


Here’s another way to arrive at the same result. Suppose that dividends are 3 percent of stock prices, and that the economy grows at 3 percent (enough, by the way, to make the trust fund more or less perpetual.) Not all of that 3 percent growth accrues to existing firms; the Dow of today is a very different set of firms than the Dow of 50 years ago. So at best, 3 percent economic growth is 2 percent
growth for the set of existing firms; add to dividend yield, and we’ve got 5 percent again.

[democracyindanger]

16. Because it doesn't work

Britain and Chile have partially privitized social security--and they're failures. People, thinking they were investment geniuses, are now screwed as they've reached retirement age. They will be a greater burden, as a whole, on the taxpayers, because welfare programs will need to be funded to help them out. So privatization means when you get screwed by the market, everyone else is going to have to chip in so you don't eat dog food. It's gambling on somebody else's dime.

And do you not remember Enron? The dot com bust? Privatizing social security is just like privatizing national security--too many grubby hands are just waiting for the opportunity to defraud the rest of us, and put us in danger.

[bsm1970]

29. I'm not an investment genius

But my 401(k) seems to grow fairly well, even with all the hits it took over the last few years, because I followed the advice of our plan administrator and diversified my investments over several levels of risk and sectors of the market. Could we not build a plan that had protections in it like this? Forced diversification?

[democracyindanger]

42. Make private accounts an ADDITION to SS

Why should I have to essentially co-sign for your adventures in investing? If people want to gamble on the market, they can do it with their own money. I have no problem doing my part for a national safety net, but I'm not going to allow others to mess with it because they THINK they MIGHT make more money.

[Coastie for Truth]

52. This is the "Add-On To "Social Security" instead

of a "Carve Out" from "Social INSecurity.

Pete Peterson, Norm Ornstein, Paul Krugman, Al Franken, and Ed Schultz hav been pushing this model.

[bsm1970]

54. Explain this

I thought we would be doing that with our own money. Isn't it just a portion of the overall money I'm paying into SS that would be eligible for this?

[roseBudd]

87. It's not your money, it is our shared responsibility as we are humans not

animals who take care of the weakest among us, quit thinking only of yourself.

That is unless you are prepared to also pay $50,000 a year out of your salary for your mom to be in a nursing home after all her money is gone.

[TXlib]

82. Well, we ALREADY have that -- they're called IRAs

And if you don't already have one open, I'd strongly recommend it!

Go with a Roth if you qualify.

[Qutzupalotl]

86. That's the real solution to all this.

Call Bush's bluff. You can have your private accounts if you show how you're going to pay for them. Keep SS as it is, but have these accounts as an add-on, funded separately. If he just wanted the accounts, he should have no problem with this.

Naturally, he's opposed to raising taxes to fund the private accounts. Which means his real goal is to funnel retiree cash into the stock market, or bankrupt SS altogether (or both). Certainly he's lied about the timing of the dire straits the program is facing.

[papau]

45. A savings plan via voluntary payroll deductions as an addon to the current

payroll deduction is the Democratic alternative.

Have private accounts - just do not destroy Soc Security's income flow in order to do so.

The 401k for everyone via payroll deduction was a Senator Monyihan/Bill Clinton idea in the 90's that the GOP hated as it gave a tax deduction to the middle class.

The 2001 commission suggested a 2 level account - the first $2000 or so going into a restricted selection of safe funds (indeed this is what Bush will propose in the State of the Union) plus a second level above that first 2000 where it is "you pick the investment". The Bush plan will not have the second level.

[Coastie for Truth]

60. You and I have patted ourselves on the back over this model

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=1541776&mesg_id=1541937

:pals:

[papau]

74. True :-)

:-)

[demigoddess]

18. these are some of the reasons

1. we already have that ability , it is called an IRA , a roth IRA , AND a stock market account.
2. an overhead (cost) of 1% versus 20-30% for privatization.
3. social security is the INSURANCE that one falls back on when your pension is stolen by the corporation, or when the stock market crashes, or when they send your job overseas, or any one of those other UNFORSEEN DISASTERS that happen in this world.
4. There are people who do not have the means or the smarts to save money. who gamble away or spend everything they earn. And because we do not want to see all these old people living and dieing on the streets in the future.

[Walt Starr]

19. Welcome to DU

Interesting that you're a proponent of the Casino Culture.

[bsm1970]

24. Huh?

I don't follow you.

[Walt Starr]

39. Privatization of Social Security

Place your bets, place your bets!

That's what you advocate. Social Security is just that, secure. Privatizing it is a gamble, so line up, pick your number and watch the wheel go 'round!

[bsm1970]

43. Exaggeration

We're not talking about day-trading. What about a system with some safeguards like several low risk options, including a no-risk bond market option like SS currently uses, caps on the percentage of the account that could go into the higher risk categories (stocks), caps on the percentage of any one stock or any one industry or market sector the stock portion can be invested in, etc. Hell, that would be more secure than my 401(k) or any IRA I could buy.

[Walt Starr]

64. If you buy into that really happening

don't blame me when the koolaid backfires.

[bsm1970]

72. No, I'm not saying that is the Bush plan now

I'm saying could we not come up with a plan that could do this...that would have these kinds of safeguards? Why must we also view things in such a polar opposite manner? Is there no middle ground here to be had?

[Wickerman]

75. Address the fact that SS is not a retirement program

but a safety net program and the discussion will find more middle ground. When you leave out the safety net factor I, for one find this conversation pointless.

[Walt Starr]

80. Because we're in the minority

Dreaming won't make that happen so long as the Republicans control it all. They will never compromise so all we can hope for is to obstruct.

[papau]

69. With safety comes a lower return meaning a lower monthly benefit

than is available now.

The British (Thatcher)result with letting more risk in the system is a large group of elderly who now must have a new welfare program from Blair as the results of their investments suck.

[roseBudd]

81. Casino Retirement illustrated here

Go to http://borgman.enquirer.com/weekly/daily_html/2005/01/012805borgman.html to send this image as a post card.

[Beaverhausen]

20. here is a good article

http://www.csmonitor.com/2005/0127/p09s01-coop.html

[Trailrider1951]

26. We already have "privitization accounts" in addition to

Social security! I myself have a 401k with my present employer, a self-directed IRA courtesy of my profit sharing plan with a previous employer, a pension in the form of an annuity from a third employer, and whatever additional savings I can put together before I retire. Right now I'm 53, and considering taking early retirement and starting my own part-time business. The point is: DON'T LET THEM SCREW WITH OUR SOCIAL SECURITY. If all my other plans go bust, at least I'll have that to fall back on. They just need another part of the treasury to loot!:mad:

[papau]

100. true :-)

:-)

[displacedtexan]

27. OK. Here's the deal...

You have $XXXX.XX in savings, earning a gov't.-guaranteed interest rate.

Would you pay a broker (out of YOUR savings account) for each and every trade s/he decides to make(Remember! You have no control over the actual investment choices or the number of trades), and risk a stock market correction or an actual possible lower rate of return than your guaranteed savings account?

Enron.

Worldcom.

Those of us who lost hundreds of thousands of dollars because our retirement systems were heavily invested in those 3 companies don't believe a single word coming from this administration.

There's a word for those who do believe...

And one of them is born every minute.

This Way To The Egress

[bsm1970]

31. Ok, but...

What if the system forced people to diversify their accounts, not allowing more than a certain percentage of the money to be invested in any one company, type of company, market sector or industry, etc.?

[papau]

70. Again safety yield a benefit less than the current system

:-)

[Solon]

101. Would you opt in to a system...

Where you may never see a 30-40 percent of it at all? SS currently has an overhead cost of 1%, meaning for every dollar you put in, you lose a cent in costs to maintain the system. Compared to a private SS account, where up to 40 cents of every dollar put in dissapears into smoke, never to appear again. Why would anyone even want to be in on this system at all. Bush, once he tries to pass it, will have to force people off the SS rolls, because they are not stupid, will see the cost, and know its not worth it. Make it optional, and they'll get less than 20% of the population to opt in, making it impractical from the get go.

[DireStrike]

104. delete

delete

[Zynx]

30. Social Security is a social insurance program. It is not a savings account

[NewYorkerfromMass]

33. No. 1: There is no crisis. No. 2 It is gambling

No. 3 Corporate America needs no additonal welfare programs.

[TXlib]

34. I think the central idea is a good one. However...

The devil is always in the details.

I think it's essentially a good idea, rather than having a vague pool that your money goes into to have the money you put into SS go into an individual account that is uniquely and undeniably yours. Similar to a 401(k), nobody else would have rights to that money. It would be more strictly run than a 401(k), in that you couldn't take loans out against it; it would have essentially the same restrictions as SS currently has.

I think the investment choices should be limited and very simple.

You should be able to allocate your money between:

* the risk-free bonds the government currently invests SS in, which carry an explicit guarantee (I feel this is a little crazy, because it effectively if the same as writing yourself an IOU)

* mortgage-backed securities, which carry an implied federal guarantee; they are essentially risk-free (if you trust the treasury), and have a higher rate of return, and are not like writing yourself an IOU.

* state and municipal bonds, although most people would prefer to invest in these in a non-tax-deferred account; perhaps you could treat any eventual income from these as disbursements from Roth IRAs are treated: tax-free.

I am not sure whether I'd include an option to invest in a broad index fund, but I'd cap the percentage that you could invest.

I don't see any reason why the Social Security Administration couldn't be charged with administering this program, if you're concerned about it being a "gimme" for the investment banks.

[bsm1970]

37. Finally someone with some ideas for how it could work.

I like this idea. Give several investment options. Cap the percentages that could go to the more risky investments. And figure out some way for the SS Admin to administer the program.

[TXlib]

53. I think a more productive solution to political differences

rather than flat disagreement, insofar as the issue doesn't concern fundamental principles, should be "can we mold their idea into something everybody can be happy with?"

[bettyellen]

56. And in what way is this Social Security anymore?... it ain't buddy-- it's

called an IRA account. Why don't you go open one and then go read up on what Social Security is and does.

[roseBudd]

83. and borrow trillions for the transition when other countries already

are turning to the euro and becoming less willing to finance our debt.

[bettyellen]

94. Wake the hell up, this is how they'll administer the program.....

......the Bush plan will replace correlating benefits to wages by correlating benefits to inflation, which could lead to nearly 20 percent cuts for the disabled, the widowed, and the orphaned, not to mention the benefits that would be lost if the deceased spouse or parent picked the wrong stocks. In effect, we would be condemning five million American children to poverty.

And remember, no social security taxes are paid on income earned above $87,900. So the same corporate thugs that will win the windfall of Bush’s proposal are the same American citizens who are not paying their part in saving social security. Bush is telling us he is saving social security, when in fact, he is simply defunding it and using the funds to stuff the already overflowing pockets of his corporate cronies. This is no way to save a crucial government program. This is a way to continue the neoconservative assault on the progress of the New Deal. The Bush plan cannot pass. If it does, Americans all over the country will suffer and the Bush administration will prove once again that they are not leading a government of the people, by the people, and for people.

Bush’s awful plan to privatize social security

By Andrew Hammond
http://maroon.uchicago.edu/viewpoints/articles/2005/01/11/bushs_awful_plan_to_.php

[bettyellen]

49. All attempts to change SS into personal savings accts, are merely

attempts to completely dismantle it.
Just becasue you'd keep the name Social Security, does not mean it would continue to exist. Nope, Social Security is not supposed to be your personal saving account. You can open an IRA any time you want. Nothing to stop you.
Stop confusing the two.

[TXlib]

61. How would this dismantle it?

Do you have a link that would explain it well?

On Edit:

http://www.csmonitor.com/2004/1227/p01s03-cogn.html

is a link provided by xnasa, and makes some very good points why this would be so disruptive.

It brought to my attention several things I had not considered, and I'm going to need to think about it before i post more on this topic.

If you have other related links, I'd appreciate seeing them!

[bettyellen]

90. A nice little article for you....

Bush’s awful plan to privitize social security

By Andrew Hammond
January 11, 2005

Two-term Republican president Dwight D. Eisenhower once wrote, “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again…There is a tiny splinter group, of course, that believes you can do these things. Their number is negligible and they are stupid.” Sadly, their number is no longer negligible, but they are certainly still stupid.

The President’s proposal to privatize social security is despicable and its consequences will be cataclysmic. Here are four simple facts about Bush’s plan to privatize and eventually dismantle social security.

First, Wall Street will be the only winner. Investigative reporters have found that investment companies are giving millions to political organizations and policy groups that advocate the privatization of social security. And why wouldn’t they? These companies could win $75 billion a year if Bush gets his way. A few million now for several billions every year is a mind-blowing return, even for the fat cats on Wall Street. Bush’s policy would urge ordinary Americans to invest their money in the stock market. We all know how that turned out in 1929. It is revolting that in a democracy, millionaires could take from the hard-earned incomes of ordinary citizens, and with Bush’s plan, that is precisely what will happen.

Second, Bush’s proposal will not increase national savings. Instead of gaining money from an initial investment, Americans would simply be transferring their taxes from the social security fund to an individual account, which would have no effect on aggregate savings. The plan will not generate more money; it will simply move the existing money around...
more....

http://maroon.uchicago.edu/viewpoints/articles/2005/01/11/bushs_awful_plan_to_.php

[On the Road]

38. We Oppose It Because it Worsens the Problem

It's true that the demographic bulge will create a problem in 40-50 years. It's manageable. And the problem will peak and the situation will improve eventually on its own, simply due to demographics. But to save Social Security, it's necessary to make sure it's properly funded for the long term and make some adjustments.

Bush's plan to "save" Social Security goes in the wrong direction. The money for the private accounts comes OUT OF the Social Security fund.

It is true that Social Security won't have to pay benefits on money that is diverted. But the timing is deadly: Most of the people opting for the private accounts will be younger workers who won't collect benefits from decades. So for the next forty years, contributions to Social Security will drop much more than payouts. That greatly increases the financial crunch.

Something has to give, and as long as Republicans are in power it won't be taxes. Benefits WILL be cut under Republicans. They're already floating the idea of giving much smaller increases, with the result that they will NOT keep up with wages.

[Alpharetta]

40. They're thwarting Roosevelt and human decency

Roosevelt intended it to be a financial safety net. Roosevelt wanted to keep people from starving and going on the street.

Bush and his ilk are sidestepping the purpose of Social Security. They're trying to pretend it's a retirement plan. It's not.

So instead of Bush showing the courage to halt Soc Sec funding of golf carts for country club retirees, he's revamping Social Security for every one.

The right thing to do is to trim benefits for higher incomes so Soc Sec becomes the safety net Roosevelt intended.

The wrong thing to do is to turn it over to the cheats who have acted without accountability on Wall Street. Until the real stock swindlers of our era are jailed (Worldcomm, Enron, other Bush contributors), then why should we trust them with our safety net?

[Wickerman]

55. Until the Right addresses the fact that this in NOT a retirement system

but a safetynet system discussion is moot. What of the disabled, the youth that have rights to those benefits under the current system yet haven't paid in fully?

[Coastie for Truth]

68. Self anointed compassionate conservatives

are neither compassionate nor conservative. They are hateful reactionaries.

[roseBudd]

57. A more important question may be, why are conservative idealogues

so opposed to SS?

[Coastie for Truth]

63. Because they viscerally hate FDR and the New Deal

[roseBudd]

109. and because they believe poverty is a symptom of bad behaviour...

They are for social darwinism.

[Bampa]

58. Look ar Chile's experience!

http://www.nytimes.com/2005/01/27/business/worldbusiness/27pension.html?oref=login&hp&ex=1106888400&en=82af08c4c479186f&ei=5094&partner=homepage

[China_cat]

62. There's too many signs that 'privatization' is a scam

First, there's the administration's insistance that they be called PERSONAL accounts, not private. Personal means it only has your name attached to it, private means you control it.

Talk has been that up to 1/3 of your account would be privatized...with another 1/3 up for grabs very soon.

There is absolutely NO assurance that -you- will be the one investing that money. In fact, most proposals seriously look like the government will be investing it for you. (Which makes sense if you look at how anal they're getting about what you call it.)

With Nixon we asked "Would buy a used car from this man?" With Bush, you better think very carefully about whether you'd want him and Dick Cheney investing your money.

Remember Enron.

[GOPBasher]

73. My main problem is, as you say, the transisitonal costs.

Outside of that, I wouldn't be terribly opposed to it, except that they'd have to convince me that what happened in Britain would not happen here -- their system is having major problems BECAUSE of Thatcher's partial privatization plan.

Other than that, though, it's really just the transistional costs that scare me. The biggest reason that SS is facing a problem is precisely because of Bush' s fiscal irreponsibilty. With the surplus that Clinton left us, we could've payed back the national debt and then there would be tons of money in the general treasure from which we couldn't shored up SS. However, Bush desroyed our fiscal situation, and has actually added $2 tillion to the national debt. NOW, because of THAT, we really are in trouble with SS.

[newportdadde]

77. Reduced Benefits for younger people for starters.

If you look at it once they have changed the calculation no longer be wage based growing.

Check it out:

http://www.businessweek.com/magazine/content/05_04/b3917001_mz001.htm

[3rdParty]

84. I used to be opposed to it until...

until I found out my private account portion could be handed down to my wife and children. Cancer runs in my family and so far no one has made it to the age to collect any payment from social security since it began.

[papau]

88. The survivor benefit - worth a great deal more - is cut under current

law if the retirement benefit is cut.

Switch to private accounts and your family is screwed.

[roseBudd]

89. Then buy life insurance

This is not about individual cases, it is about shared responsibility.

I do not want to live in a country with the poverty of countries like Brazil or India. The US is too cold in winter to have people living like wild dogs on the street.

[Solon]

103. That's blatantly false...

This quote from you: Cancer runs in my family and so far no one has made it to the age to collect any payment from social security since it began.

Not the first part, but the second is blatantly false, many people on DU have told their stories about how they recieve SS payments because Parent's have died or other reasons. People have and do need SS for more than anything else, I have a friend on SS disability, your saying he shouldn't have gotten it. My Grandmother recieves my Grandfather's SS right now, why would a private account, where you never see up to 40 percent of the money you put in better than SS as it is now, with only 1% cost?

[Dark]

107. It's a PERSONAL account, not a private account. That means

YOU don't control how it is invested. Bush does.

Remember Enron? Ken Lay?

Do you really want your SS invested into companies chosen by BUSH?

Don't plan on dying before you hit SS age. That's a foolish way to plan out your financial future.

[American Tragedy]

93. It completely defeats the purpose of Social Security

SS was created as a guaranteed safety net provided by current workers to retirees, independent of the fluctuations of the market. In addition to that, most people also have personal savings accounts, whose value varies depending on the individual's income and investments. I do not see the point of transforming SS into another private account. Advocates have also failed to explain how we are going to resolve the overwhelming, unprecedented public debt that we consequently face.

[retread]

96. The goal is the destruction of Social Security. These pirates

cannot stand an honest debate so they send up chaff to confuse your radar.

[txaslftist]

98. 'Cause its a damn bad idea.

Social security is a safety net, not a retirement system.

That's why.

[Lefty48197]

102. Made it to 25 posts without getting tombstoned eh bsm1970?

Apparently 26 is NOT your lucky number.

[DireStrike]

105. This all stems from one misconception: it's NOT YOUR money.

One view, the conservative view, is that SS pay-in is your money.

The liberal view is, and I hope I'm getting this right, that SS is a sort of side-tax. It's supposed to serve one purpose and one purpose only, although Bush the elder (I think it was him) started raiding the trust.

You pay in now, NOT because you will get that money back later, but to take care of those who paid in already. Although the money adds up and carries over, and different benefits are for different people who pay different amounts, it is still one pool of funds. This is where the social part of social security comes in - ensuring that the elderly retire and are held up into a social class at the very least deserving of what they paid in, in service to their country. Even if you face hardships or become a miserable failure, you are still guaranteed a certain place in society. Even if a person makes irresponsible or simply wrong choices, they are still entitled to live a life according to what they gave.

Allowing private accounts defeats the point - people should not be able to risk everything. Yes, it takes away some freedom, but it strengthens community. It increases overall quality of life - some people will always make bad choices. They still deserve a certain level of dignity and quality of life for what they did contribute to society.

Everything I see says that any privatization plans provide the same or less return, overall, along with hugely increased administrative costs, not to mention the immediate turnover costs.

Anyway, that's the way I see it.

[pinto]

106. in general, Soc Sec pools money from all working Americans to help provide

benefits to all Americans who are eligible. That includes rich retirees, middle class retirees, poor or part time workers who've retired, any of the above who have left the workforce due to disability, those who have never been able to work, children, the disabled and the children of the disabled. That was the defining role of Social Security....you know as in "security", across all segments of the American landscape.

specifically, the Bush plan is a transfer of American tax payer funds from the public sector (Social Security Trust Fund) to the private, corporate sector (a handful - I've read maybe as 3 - 5 investment firms).

Also, it provides a side effect tax break for corporations. Money not invested in Social Security by employees, which would need to be matched by the employer under the quid pro quo employee/employer formula, shaves the employers support of Social Security. If the employee puts some of his payroll deduction into an investment firm chosen by the government, the employer receives a cut on his Social Security investment responsibility.

That's wrong. Government is not a function of corporate interests.

I'm all for tax breaks to corporations that produce broad progress at home, but I am not in favor of asking the taxpayer to literally fund a handful of investment firms accounts.

[info being]

108. Because it jeopardizes personal security by trusting corporations

[Moderator]

110. I'm locking this thread

reason:

The original poster has been banned