The current return on investments from many mutual funds will make selling privatization much harder than it was during the late 90’s boom. Today, my 401K, in conservative investments, is worth less than it was 3 years ago, and that’s counting my continuing contributions into it.
Can you imagine what would have happened if a large chunk of privatized social security funds were tied up in Enron, Worldcom, and Tyco? Many mutual funds were heavily vested in these stocks and lost a large chunk of their value. Now imagine if you are 65 years old and you just watched a large part of your retirement account go up in smoke.
Economists and Democrats would have a field day if this was used as a compaign point.
they’ve already used this point to debunk theories of SS privatization.
I’m sure you’ll hear it agin in the coming 17 months.
We should be allowed to keep our money in the first place and not be forced to hand it over to congress. Social security is just an income tax with a different name to give the masses some comfort.
Yes, switching to a system that results in people starving when their investments go bad is a great idea.
It’s just a risk-sharing program. Everyone pays in and that guarentees they’ll have a respectable retirement, no matter what else happens.
first of all there’s no guarantee. Second, it’s not a respectable amount. Third, it’s forced coersion, not risk sharing. Why didn’t they make social security a bond program? That would make me feel safer than some arbitrary payout. If I got a note for my money with some numbers on it that said “backed by the full faith and credit uf the US government”. Then the Politicians couldn’t use it as campaign fodder.
Because most of the people on Social Security would be better off if they could just keep that money and invest it themselves.
And technically, SS money used “for other purposes” tends to result in lower income taxes to offset - spending the SS surplus is actually how Bush managed to get the first tax cut through.
So you approve of this manner of voodoo accounting? Because I sure as hell don’t.
And if “SS income doesn’t cover SS outlays” = bankruptcy, then the income tax system has been “bankrupt” since the 1930s. We ran an income tax surplus in exactly one year (1998, I think); the rest of the
“surplus” years were because we took excess SS taxes and rolled them over into making up for income tax deficits.
Yeah. So won’t it be great when SS can’t even cover its own costs? Where will the money come from then?
I didn’t ask what we should remove; I asked what possibly is unpopular enough to get rid of. No one’s suggested anything.
And I said that cutting budgetary items does not require the popular support of the general public, which is apparently where you drew the conclusion that I think our system of government is broken. Politicians do unpopular things all the time. If those things turn out to be good in the long run (or at least not bad), then they generally don’t have much trouble getting re-elected. In fact, many politicians have no trouble getting re-elected even if their choices turn out badly. So I’m not sure why popular support is a necessary prerequisite for budgetary changes.
Their investments would have to do exceedlingly poorly to match the returns that they’d get out of Social Security.
So I’m not sure why popular support is a necessary prerequisite for budgetary changes.
It’s not necessary, but politicians like to stay in office, so its highly unlikely they’ll up and cut a program with broad support. It’s not like all the Democrats and Republicans in Washington secretly know the program is “broken” and just won’t cut it because they’re cowards, as you imply.
Anyway, this is the chief privitization fallacy:
Because most of the people on Social Security would be better off if they could just keep that money and invest it themselves.
Right now, that money pays for the retirement of your parents. If you keep that money, who’s going to pay for your parent’s retirement? The only way you get a better “rate of return” on privitized social security is by ignoring the roughly 3 trillion dollar outstanding generational debt.
If you want to shell out the 3 trillion to switch to a fully funded system, great. But you’re not going to get a better rate of return unless you pretend that transition cost doesn’t exist.
Krugman covers this in more depth here. It’s not an obvious point, and the privitization wags at Cato and the like have thrown up a ton of disinformation related to this.
Mulligan, I’m not sure what you mean by no guarentee. What, the government is going to vaporize? As long as there’s political support for the program, its not going anywhere.
And no, the program isn’t going to make you rich, but you won’t be on the street, regardless of how your investments turn out.
