Since this seems to be a likely move by the GOP within the next few years, how does everyone feel about this and why?
Privatization of Social Security
- Thread starter Train
- Start date
I like what someone else said. I don't think it's going to be privatized but if it is just get rid of it... but maybe it was just a code-word for getting rid of it anyway right?
I think that it might work if the republicans steer clear of allowing people to invest it in the stock market. If its a private account that is invested conservatively, then it may work quite well. Kind of like a mandatory 401k.
MoobyTheGoldenCalf
Golden Member
- Jul 26, 2001
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For removing the regressive payroll taxation. I think privatizing it will force the government to use progressive income tax revenue to pay for social security. The old people are gonna get their money either way, since they got the votes. I'd rather they get it from Income tax revenue that largely burdens the rich, instead of payroll tax revenue that largely burdens the middle class and working poor. So I am not against privatizing it, because I think it'll backfire on Republicans by shifting the tax burden up.
I was for it before I was against it! 
Seriously, when we had those fiscal surpluses at the start of the Bush administration, it made sense. Now that we have $400 - $600 billion deficits, chasing after privatizing SS is like chasing after fool's gold.
Seriously, when we had those fiscal surpluses at the start of the Bush administration, it made sense. Now that we have $400 - $600 billion deficits, chasing after privatizing SS is like chasing after fool's gold.
I'd like to invest the money I'm taxed for SS and manage it myself. It would be better for me and my family in the long run. I'd like ultimate control of the money, but a Thrift Savings Plan setup would be acceptable.
Red Dawn
Elite Member
- Jun 4, 2001
- 57,529
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As long as we get back all the money we put into it I'd be ok with it. I've been paying into it for 34 years and I would be pissed if that just went away. I would however like to be able to take that money I've out into it and invest it. I'm sure I could do a much better job at it than the Government, especially the one in power now!
I'm for it since I doubt I'll see any of the $$ I put into it. I'd gladly give up what I paid if I could stop paying into it now and pay into private investments.
I'm aware of that. I was reffering to the way the system works, not the primary investment option. The same system would work quite nicesly and would be very secure if it was restricted to more conservative investments.
I think with privatization, you can have your cake and eat it too. If you make money in the market, you are in good shape. If not, the federal government will still help you out, because they pander to seniors. So I am gonna get the riskiest investments I can get with my privatized account.
Engineer
Elite Member
- Oct 9, 1999
- 39,230
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I would definitely like to control MY own money, but wonder how to pay for the existing recipiants of SS? The estimated cost (saw on CNN after debates) would be between 2 and 4 Trillion dollars. Simply adding that amount to the deficit would be unacceptable. Cover it with some sort of slashed spending, then go for it!
Social Security is not an account that you pay into and then get back. If you die your hiers do not get the money you put into it. If you die before you get a dime of it you lose it. The Social Security tax is just that. It's not waiting for you in an account. It's already gone.
I am very much in favor of allowing the option of privatization.
I am very much in favor of allowing the option of privatization.
But who is going to decide what is "risky?"
Are we gonna have a goverment bureocracy evaluating people's "private" accounts to see how "risky" they are?
glenn1
Lifer
- Sep 6, 2000
- 25,383
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Actually, there's a fairly simple way to do it that will answer the concerns of both the right and the left. Instead of having this phantom "social security trust fund" stocked with phantom government bonds, make it a seperate fund (like what an annuity or mutual fund does). We take the cash flows out of the government budget and make it a seperately funded entity, albeit one with Treasury Bonds (and thus in some ways, the goverment itself as the entity's asset). Let me explain how it works.
The persons paying into SS payments get accumulation units (a tangible asset which they own) in return for their contribution. All the holders of SS accumulation units cumulatively and legally "own" the SS Trust Fund (think of a mutal fund). They can take their units and annuitize them, buy more, sell them to someone else and roll the proceeds into an IRA, whatever they want to do since it's their money. Now not all could or would cash out immediately, since if they tried that would put downward pressure on the value of the accumulation units and make it so they were worth less. Sure you could cash them out, but most folks aren't going to do so if they have to sell them at pennies on the dollar.
The second (and IMHO better) part is since the seperate fund would be invested in Treasury Bonds, the holders of those assets have a vested interest in monitoring the solvency of the Federal government and its budget. Those purchasing the accumulation units would be hoping for a capital gain on their investment (i.e. buying them below cost to sell them at par at maturity), so that'll put an automatic check on the government's income and outlays. Essentially, it puts Americans back into the mindset of being owners of the government rather than simply passive recipients of its largesse.
If we went this way, there are two problems. The first one would be that it's only monetizing the problem, while this is partly true the second part of my theory would help in that regard, and the strain being taken off the system by creating new S.S. recipients going forward would definitely be helpful. The second and probably harder part would be handling the immediate outlays required for people wanting to "cash out," I think Kerry's estimate during the debates of a $2 trillion hit over the next couple of years is probably accurate. If we decided to bite the bullet that wouldn't be an unreasonable cost to pay.
The persons paying into SS payments get accumulation units (a tangible asset which they own) in return for their contribution. All the holders of SS accumulation units cumulatively and legally "own" the SS Trust Fund (think of a mutal fund). They can take their units and annuitize them, buy more, sell them to someone else and roll the proceeds into an IRA, whatever they want to do since it's their money. Now not all could or would cash out immediately, since if they tried that would put downward pressure on the value of the accumulation units and make it so they were worth less. Sure you could cash them out, but most folks aren't going to do so if they have to sell them at pennies on the dollar.
The second (and IMHO better) part is since the seperate fund would be invested in Treasury Bonds, the holders of those assets have a vested interest in monitoring the solvency of the Federal government and its budget. Those purchasing the accumulation units would be hoping for a capital gain on their investment (i.e. buying them below cost to sell them at par at maturity), so that'll put an automatic check on the government's income and outlays. Essentially, it puts Americans back into the mindset of being owners of the government rather than simply passive recipients of its largesse.
If we went this way, there are two problems. The first one would be that it's only monetizing the problem, while this is partly true the second part of my theory would help in that regard, and the strain being taken off the system by creating new S.S. recipients going forward would definitely be helpful. The second and probably harder part would be handling the immediate outlays required for people wanting to "cash out," I think Kerry's estimate during the debates of a $2 trillion hit over the next couple of years is probably accurate. If we decided to bite the bullet that wouldn't be an unreasonable cost to pay.
No, every 401k plan in the world allready evaluates the risk of different investments and breaks them down to help people plan for their retirement. We don't need the government to make the decision. The private fund managers can.
For example, the federal government 410k is called the TSP program. They have 5 funds. 1 of them primarily invests in secure government bonds. It pulls between 4-6% per year. Better than social security and a good SAFE return. If you want to invest in riskier stock then you still have the option of opening your own 401k. But this would be a safe and financially viable way to provide for peoples retirement.
It'll be paid for by increasing taxes on top earners. People like govt spending more than they like rich people. Not that you could cut enough spending to cover medicare and SS for the baby boomers even if you wanted to.
I don't think there will be enough influx of foreign money to sustain borrowing 2-4T for SS. These other countries that buy our bonds are gonna have serious retirement cash needs of their own.
So it's definitely good if you want to shift the burden up.
I like the idea on the theory that I know what to do with my money better than the government does.
BUT, and this is a big but, our current Social Security tax goes to pay CURRENT retired people. If we set up a system where we stop paying into the fund and put it wherever we want, I think we'll do better, but the current generation of retired people is boned.
We need some kind of phased system, but I have trouble seeing how that will work with more money being taken out of the system than goes in to it. Any thoughts?
BUT, and this is a big but, our current Social Security tax goes to pay CURRENT retired people. If we set up a system where we stop paying into the fund and put it wherever we want, I think we'll do better, but the current generation of retired people is boned.
We need some kind of phased system, but I have trouble seeing how that will work with more money being taken out of the system than goes in to it. Any thoughts?
Bond market is not necessarily safe. You could get burned on inflation. Also, the fact that SS savings will be funneled into a select few investments will artificially distort the marketplace. Were people to start drawing money from their accounts to support their retirement, the fund will be forced to sell off stocks or bonds, causing them to decline. So the more people draw on these accounts the lower their value is.
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