There are no stupid questions, only stupid people
The fact that Social Security looks to be solvent for the next 45 years by no means makes it an optimal system.
Will Americans continue to be forced to subscribe to the current system, whose mediocrity is well documented, or will they have the choice to manage at least some of the money they unwillingly shell out to the system?
If Chile can have a privatized system of Social Security, why can't the United States?
John Grimes, St. Paul. (emphasis mine)
That one sort of answers itself, doesn't it?
They're losing this one. We can make the Republicans pay for proposing it (think "Hillarycare").
posted by Luke Francl @ 6:42 PM |
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7 Comments:
There's a difference. Hillerycare was a bad idea. Soc Sec reform is a good idea.
Hillery wouldn't offer a trial and allow you to keep your present insurance in case it sucked.
Soc Sec reform will offer the present system if you're dumb enough to want it.
And that will be the difference that will allow it to happen.
Social Security privatization is a horrible idea. It's a multi-trillion dollar "solution" to a problem that may or may not exist in 40 years.
Because of rising productivity, the "doom" date for Social Security is getting further and further in the future. Last year it was 2038. This year it's 2042. A decade ago it was even sooner. The system is getting more healthy, not less.
Furthermore, Social Security is insurance. It provides you a guaranteed benefit, something you can count on. It's not an investment. If you'd bothered to read the Chile link I posted, you'd see that replacing "insurance" with "investment" can be very detrimental for a lot of people. And you know what? The government ends up bailing them out, anyway. So we end up with two costs -- one to transition the current system to private investments, and another to bail out the people who can't earn enough money not to be poor in retirement.
Would you support privitizing social security? Specifically allowing a number of financial services companies to offer competing products? You could make them promise to meet the performance level of the baseline gov't run program as a minimum.
In essence, if it was "insured" would you withdraw your objection?
That's not possible because of the way Social Security is paid for. There's a $15 trillion transition cost to move to the privatized model. Where do we get the money for that?
My big objection to your plan is, lets say grandma's investment account doesn't do so good. She falls below the performance of the guaranteed benefit. Where does the money come from to pay for the difference? My taxes will be used to bail her out.
I'd rather save $15 trillion and keep the current system.
Please explain you $15 TT cost.
The answer to the second part is to institute and FDIC like program. The kind that keeps grandma's back account safe despite bank robbers.
The program provider pays the premium for the insurance. (like banks do now.)
I would be easily persuaded if you could explain the cost.
The cost comes from transition from a public to private system.
Today's workers pay for today's retirees. So unless we want to eliminate SS payments for current retirees (which we don't), there will be a cost when we are putting today's worker's money in private accounts, but still paying the benefits for current retirees (who clearly can't put their money in the stock market!).
That cost is usually quoted as $2 trillion. But that's just for the next decade after privatization. Until the older workers who are on the old-style social security program complete die out, there would still be a cost for paying their benefits. That's where the $15 trillion over the next 40 years comes from.
You can read the link I posted for more details. It's Paul Krugman, but don't worry, he won't bite. ;)
Your idea for FDIC-style insurance is intriguing. I don't know if it would work for retirement accounts invested in anything risky, though. Today, FDIC only applies to the lowest risk: savings accounts. If it applied to mutual funds and the stock market took a dive, the government would be out a lot of money!
How about if the premiums to payout the balance of the pyramid came out of the personal accounts? And then the excess was allowed to accrue to the individual?
Essentially, you got to save your present SS shakedown, and invest it. Out of the profits you realize, you then pay back to Soc Sec, but only net present value of you expected contribution necessary to pay off those who fail to opt out.
So many people will leave that the residual requirements will miniscule, the contribution burden can she shared by those beneficiaries of leaving the program.
No one will have to go, and in that way the "most vulnerable" can continue to rely on the meager assistance the original program offers while the rest of us will get at least something back.
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