So, why wouldn't privatizing SS work in the US? Works in Chile.

[boomerang]

So wait, we're suposed to look to Chile for our SS program, but we're not suposed to look at any of a number of first world countries for our healthcare?

Our programs should be modeled and based on best practices. What works the best. Instead, to cite your health-care example, we've modeled ours on systems that are now being revamped. Revamped because time has shown them to be too expensive, wait times are too long, care is being rationed, etc. We have looked at other first world countries and have adopted their failing model. We call it Obamacare.

 

[Jhhnn]

People could get guaranteed returns on their money better than what SS is offering today.

That's your faith based assertion.

 

[Craig234]

Tell that to a Finance professor and prepare to be laughed out of the room.

Except you're wrong. For example - besides a Nobel Laureate like Paul Krugman:

SOCIAL SECURITY IS NOT IN “CRISIS”

by Richard B. Du Boff, Professor Emeritus of Economics, Bryn Mawr College

(November 2005)

By any standard, Social Security is the most successful social program ever enacted in

the United States, guaranteeing a measure of basic security for nearly all workers and

their families. For nearly two-thirds of the elderly, Social Security provides at least half

their total income; for 22 percent of them, it is the only source of income. Without it, the

poverty rate for the elderly would jump from 10 to 48 percent. Social Security is not just

for retirees: it also provides monthly benefits for disabled workers and their dependents,

and for the dependents of deceased workers. Together, these two groups comprise 31

percent of all Social Security recipients.

http://docs.google.com/viewer?a=v&q...mDlAGw&sig=AHIEtbRvDcjeurh8Q9OND6FRTsAChj_qCQ

 

[ConstipatedVigilante]

That's your faith based assertion.

And that's your assertion without any knowledge of Finance. Many relatively low-risk bonds offer much higher returns than SS. Investing in indexes with a stop limit on the investment would work, too. CDs give fairly high, low-risk returns as well.

Social Security was not invented by Jesus. And it was not intended to become the bloated worm it is today.

Edit: For Craig. http://mercatus.org/publication/social-security-cash-flow-deficit

We can argue about which economist/finance mathematician is right all day. The facts are there. The problem is that baby boomers will retire at a rate that will make SS unsustainable. Also, the thing you quoted simply proves my point. It is not sustainable to support half of the population (47% of Americans do not pay income tax, for one) based on a tax from the rest.

 

[PokerGuy]

That's your faith based assertion.

Uh, I can get a GUARANTEED RETURN FUND that gives me higher return than what SS gives me. In fact, I can even do that in an investment that is government insured.

 

[Hayabusa Rider]

I compared managing finances to healthcare. People retorted saying Medical care is too complicated and takes skill. Implying that these private institution that would manage SS must not take skill or dedication therefore nothing could go wrong with privatizing it like chile... You don't see the stupidity in that? What am I supposed to say besides a gag after that?

You don't seem to understand how any of this works. Health care is a far more complex system and requires far more people to make it happen. When you get health care you go as an individual, not a corporation. There are an infinite number of possibilities in health care depending on the individual, the disease and the potential treatments. With funds you get to pick from a handful and none of them are managed for an individual. It's an inherently simple task. That does not mean properly managing one is, but because it applies to whole host of people the permutations and number of managers are far fewer. In terms of the complexity of the two systems there is no comparison. In terms of what a very few have to do there is much to look at with funds. The other thing to keep in mind that if one goofs in managing money you loose cash. In medicine that can wind up with a death.

Very different things.

 

[Throckmorton]

See, I think this kind of thinking is our downfall. We just assume everyone is too stupid, when in reality, the vast majority would probably be just fine.

Are you kidding? 35% of Americans think Barack Obama was born in another country.

50% of Americans think you stimulate an economy by cutting government spending.

45% of Americans are creationists.

 

[Throckmorton]

Tell that to a Finance professor and prepare to be laughed out of the room.

A finance professor?

Didn't the finance "industry" just decimate the world economy?

 

[Craig234]

And that's your assertion without any knowledge of Finance. Many relatively low-risk bonds offer much higher returns than SS. Investing in indexes with a stop limit on the investment would work, too. CDs give fairly high, low-risk returns as well.

Social Security was not invented by Jesus. And it was not intended to become the bloated worm it is today.

If you only look at rate of return, yes.

When you take into account risk, or the large increase in overhead from 0.7% for Social Security to a far higher rate for privatized, that changes.

This is about one thing: a Republican-Wall Street partnership to destroy a program good for the people and to take more of their money.

 

[Hayabusa Rider]

This is about one thing: a Republican-Wall Street partnership to destroy a program good for the people and to take more of their money.

This is not about one thing, well perhaps it is for you. Alternative systems could work, but the current structure of SS is a sacred cow. Nothing could possibly be better. That's crap.

 

[Craig234]

This is not about one thing, well perhaps it is for you. Alternative systems could work, but the current structure of SS is a sacred cow. Nothing could possibly be better. That's crap.

I'm talking about the move being pushed by Republicans and Wall Street and their propagandists, which is the only push that has a chance of passing.

Whatever great idea you have for how to improve SS has nothing to do with what will get passed.

 

[ShawnD1]

Are you kidding? 35% of Americans think Barack Obama was born in another country.

50% of Americans think you stimulate an economy by cutting government spending.

45% of Americans are creationists.

lol. This.

Also, ask people what stocks are. I swear to god I'm the only person in the entire world who actually knows. (hint: you are literally buying a small percentage of a company)
While you're out asking basic elementary school questions, ask someone if they can explain what a bond is. What are you actually buying when you buy a bond. What do those ratings mean. Why would you buy a bond instead of a stock. You'll be lucky to find 1 in 10 people who can answer any of those questions.

 

[Hayabusa Rider]

I'm talking about the move being pushed by Republicans and Wall Street and their propagandists, which is the only push that has a chance of passing.

Whatever great idea you have for how to improve SS has nothing to do with what will get passed.

Why isn't there a counter proposal?

 

[Fern]

It works for Chile because they're a small player in world markets. If the US adopted that plan, the first thing that would have to happen is borrowing nearly $3T to pay off the trust funds & pass them into private hands. I'm sure that wouldn't be a shock to capital markets, at all, right? No bubble potential there, either, I'm sure...

Yes. That would be a big problem. The fed/treasury would have to refinance a lot of debt and it may well be at a higher rate of interest thus increasing our federal debt.

So, uhh, what happens to people in Chile who outlive their money? Do their fund managers send them a cyanide pill with the last payment, or would that cut into the profit margin too much?

Not a problem, they're taking LIFETIME annuities.

-----------------

IMO, this is very important:

Chilean workers must pay in 10% of their wages (they can send up to 20%) to one of several conservatively managed and regulated pension funds.

and

Over the last three decades these accounts have averaged annual returns of 9.23% above inflation. By contrast, U.S. Social Security pays a 1% to 2% (theoretical) return, and even less for new workers.

1. The real difference here is the rate of return Chile's SS system versus ours. If our SS system generated these kinds of returns people would be in love with it.

2. Under Chile's system it looks like peoples' investment options are highly restricted. This is a good thing (as long as the options perform well as they have been). In the US if we have people choosing their investments we're going to end up with big problems. The gains will be privatized and the losses socialized, meaning those who have had investment problems will still have to be helped. Face it, as a nation we're just not going to let elderly people go homeless or straving.

3. I suspect the US system would literally drawf that of Chile. I don't know that our huge amount of money can be invested as successfully as that of Chile. Another huge question - who the heck gets the priviledge of managing these funds and investing them? Given the trillions of $'s involved does anyone else see the potential for fraud and other such abuses?

Fern

 

[Hayabusa Rider]

lol. This.

Also, ask people what stocks are. I swear to god I'm the only person in the entire world who actually knows. (hint: you are literally buying a small percentage of a company)
While you're out asking basic elementary school questions, ask someone if they can explain what a bond is. What are you actually buying when you buy a bond. What do those ratings mean. Why would you buy a bond instead of a stock. You'll be lucky to find 1 in 10 people who can answer any of those questions.

Having unlimited choices in retirement isn't a good idea because many people have no clue. That doesn't mean there couldn't be plans to choose from which were highly regulated and under substantial scrutiny. The problem is there isn't any money to manage. The feds spent it all already.

 

[ConstipatedVigilante]

A finance professor?

Didn't the finance "industry" just decimate the world economy?

Some very unscrupulous hedge managers and money lenders destroyed the world economy. The study of finance is sound, but there are those who fuck the system to benefit themselves. That does not invalidate the field as a whole.

 

[sandorski]

SS is Fully Funded(100% Recipient Payouts as currently defined) until 2038(ish). After that it is only 80%(just under) Funded until the end of Time.

 

[Anarchist420]

If we did this the "managers" of the funds would squander all of the money then ask the government for a bailout.

Which is why cutting benefits (and taxes) is the only way out of this shit.

"Privatizing" it isn't going to a damn bit of good, and it's basically fascism.

Also, once it's "privatized", then it's even more perpetuated because Wall Street would never give up being able to play with money stolen from people.

 

[Acanthus]

Right, and what would have happened to peoples retirements in 2008 if they were close to retiring?

Investing and retiring should be separate for this reason alone.

 

[ElFenix]

you mean something like the TSP?

Right, and what would have happened to peoples retirements in 2008 if they were close to retiring?

Investing and retiring should be separate for this reason alone.

you do understand that you don't just cash out everything all at once, right?

you'd have moved into a less risky asset mix if you were that close to retirement. so you'd have been selling off bonds the last few years and making a killing.

 

[PokerGuy]

who the heck gets the priviledge of managing these funds and investing them? Given the trillions of $'s involved does anyone else see the potential for fraud and other such abuses?

Fern

Who gets the privilege of managing the trillions in 401(k) plans? How about 529 plans? How about 457 plans? Any/everyone. Use whatever broker/service provider you like in the financial services market, but have the government limit what investments are eligible for the new retirement savings accounts. It can't be that hard rate investments on risk potential and put limits on portfolios as a whole so that if you take all the (weighted) investments in such a retirement portfolio together, you can't have a combined risk rating more than x. Those are just parameters that need worked out.

 

[Hayabusa Rider]

you mean something like the TSP?





you do understand that you don't just cash out everything all at once, right?

you'd have moved into a less risky asset mix if you were that close to retirement. so you'd have been selling off bonds the last few years and making a killing.

I'd still like to know how people would invest money that doesn't exist.

 

[shira]

You're answering a question which wasn't asked. A privatized SS system could still be mandatory (and probably should be, given the choices people make). In a privatized system, the money would actually be YOURS, and COULDN'T be taken for some pet project, no more than Fidelity can take your IRA, blow it on an epic Vegas weekend, and send you a letter saying "Tough luck, but we had a blast!!", which is what the gov't is doing now with your SS contributions. Well, except the govt's epic weekend bender is taking place in Iraq and Afghanistan, not Vegas, but still...

If SS contributions would belong to the worker, where would the funding come from to pay existing retirees and not-yet-retired people who have already paid substantial amounts into SS? Somehow, this little detail is never addressed by those who think privatizing SS is a great idea.

 

[Hayabusa Rider]

If SS contributions would belong to the worker, where would the funding come from to pay existing retirees and not-yet-retired people who have already paid substantial amounts into SS? Somehow, this little detail is never addressed by those who think privatizing SS is a great idea.

Just pay us what we paid in. Oh wait, the government spent that on everything else.

 

[Acanthus]

you mean something like the TSP?





you do understand that you don't just cash out everything all at once, right?

you'd have moved into a less risky asset mix if you were that close to retirement. so you'd have been selling off bonds the last few years and making a killing.

Finance seemed safe until Bear Stearns.

People could have lost a very large chunk of their only retirement overnight...

SS needs to be stable, sustained growth for the masses. There is nothing wrong with socking away extra funds elsewhere, but SS needs to be free from exposure to fraud and incompetent hands (this includes the federal govt)