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Special Report
McCotter Trailblazes Social Security Prosperity
A reform like none other for the 21st century.
(Page 2 of 3)
Ultimately, as workers retire in the future relying on the personal accounts to finance the majority of their retirement benefits instead of the government, that will create enormous surpluses in Social Security. Under current law, those surpluses would flow back into general revenues, providing enough funding itself to cover all future personal account contributions to Social Security.
No change would be made in any way for those already retired today, or those anywhere near retirement. Each worker would be perfectly free to choose to stay with Social Security as is and forego the personal accounts entirely. There would be no change in Social Security benefits under current law for those who make this choice. But the Chief Actuary concluded that McCotter’s accounts are so beneficial to workers that 100 percent of workers would choose the accounts.
The workers who do choose the personal accounts, however, would invest their funds by choosing from a range of privately managed investment funds, just as with the Federal Thrift Savings Plan for federal employees, or the Social Security personal account system adopted 30 years ago in Chile that has operated with such great success for the workers of that nation. Nearly 100 percent of workers chose the personal accounts in Chile, validating the Chief Actuary’s judgment regarding the McCotter accounts.
To the extent a worker chooses the personal account option over his career, the personal account would finance an equivalent percentage of the worker’s future Social Security retirement benefits. For a worker who exercises the account for his entire career, the account would finance the maximum of 50% of the worker’s retirement benefits. For those who exercise the account option for fewer years and later in their careers, the account would finance proportionally less under a statutory formula. But the personal accounts will pay more than the amount of Social Security benefits they replace, leaving the retiree with higher benefits overall on net. There would be no change in Social Security survivors or disability benefits due to the McCotter accounts.
Workers who choose the personal accounts are backed by a federal guarantee that they will receive at least as much as promised by Social Security under current law, maintaining the social safety net of the current program. That is similar to the guarantee backing the personal accounts in Chile. That is workable because standard, long-term, market investment returns are so much higher than what completely non-invested, purely redistributive Social Security promises, that it is extremely unlikely after a lifetime of investment that the personal accounts will not be able to pay at least that much.
The bill was officially scored by the Chief Actuary of Social Security, with his scoring memorandum available on the Social Security Administration website. The Chief Actuary scores the bill as eliminating all future deficits of Social Security, with no benefit cuts or tax increases, assuring that all Social Security benefits will be paid. That is because the personal accounts finance so much of the future benefits of Social Security that future deficits between continuing payroll tax revenues and continuing benefit obligations of the program are eliminated entirely. The accounts are so powerful that they eliminate the future deficits in the disability portion of Social Security as well, even though no changes are made to disability benefits.
As a result, McCotter’s bill involves no change in the Social Security retirement age, cuts in the Social Security COLA, or other benefit cuts promoted by other proposals. Workers with personal accounts choose their own retirement age themselves, rather than the government choosing for them, with the incentive to delay retirement to the extent feasible to allow further account accumulations. Some workers with mostly intellectual jobs may delay retirement well into their 70s, which could never be imposed politically otherwise. Other workers with more physically demanding jobs would still be perfectly free to retire in their early 60s.
Because long-term market investment returns are so much higher than what Social Security even promises, let alone what it can pay, future retirees will actually enjoy higher benefits with the personal accounts. With those returns accumulating over a lifetime, the personal accounts will finance higher benefits than the Social Security benefits they replace under McCotter’s bill.
The bill involves the greatest reduction in government spending in world history, as the personal accounts take over the responsibility for financing through private personal savings and investment $8.555 trillion in future Social Security benefits, as scored by the Chief Actuary of Social Security. As a result, the Chief Actuary’s score indicates that the bill eliminates entirely the unfunded liability of Social Security. Moreover, based on the Chief Actuary’s score, the spending reductions to finance the accounts will add up to a minimum of another $3.75 trillion in savings, bringing the total reduced spending under the bill at a minimum to over $12 trillion. But block granting all remaining federal, means-tested welfare programs back to the states would likely save far more in future years than the $3.75 trillion needed to finance the transition to the personal accounts.
With the transition to the accounts funded by reduced government spending, there would be no transition debt at all. That means all of the savings and investment in the accounts would flow directly into the economy in full, boosting jobs, wages and economic growth today.
Personal Accounts and the Financial Crisis
But didn’t the financial crisis prove that such personal savings and investment for retirement is a bad idea, as President Obama claims, mocking the idea of personal accounts? To counter that criticism, I performed a study with William G. Shipman, former principal with State Street Global Advisors, perhaps the largest private pension investment management firm in the world. Our results were published in the Wall Street Journal in October, 2010.
We examined the case of a hypothetical senior retiring at the end of 2009 at age 66, who had the freedom to choose personal accounts when he entered the work force back in 1965 at the age of 21. Paying what he and his employer would otherwise pay into Social Security into the personal account instead, he was fool enough to invest his entire portfolio in the stock market for his 45-year working career. How would he have fared in the financial crisis, as compared to Social Security?
Let’s call our hypothetical worker Joe the Plumber. While working, he earned the average income each year for full-time male workers. His wife Mary, same age, also earned the average income each year for full-time females. She invested in the same personal account with Joe, an indexed portfolio of 90 percent large-cap stocks and 10 percent small-cap stocks, earning the exact returns reported each year since 1965.
This average income couple would have reached retirement at the end of 2009 with accumulated account funds, after administrative costs, of $855,175, almost millionaires. Indeed, they were millionaires, but the financial crisis lost them 37 percent of their account funds the year before they retired. This can be considered effectively a worst-case scenario, as the couple retired just one year after the worst 10-year stock market performance in American history, from 1999 to 2008.
About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.
Letter to the Editor View all comments (58) | Leave a comment
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Michael Tomlinson| 10.12.11 @ 6:45AM
There is no lack of brilliance among conservatives in the Republican House. McCotter like Paul Ryan is thinking outside the box and offering sound solutions to deal with FDR’s failed Ponzi scheme we euphemistically call “Social Security.” Starting in 2013 the House is where some of the most important legislation will arise to solve our nation’s problems just as the Founding Fathers envisioned. Whichever Republican wins the Presidency they’d be wise to put away their tomes, new taxes and campaign spin to listen to those who have been doing the hard work of governing the country while they played politics.
Deborah D | 10.12.11 @ 6:57AM
Thanks for this encouraging news, Mr. Ferrara. Rep. McCotter is a weirdly wonderful man with great ideas and a great love for the country. Ideas such as this one give me hope (real hope, not the hopey-change-y kind) for the future of the country as it pertains to my daughter.
Jordan| 10.12.11 @ 7:17AM
In Charles Davis' book "In Our Hands" he uses an even worse "worst case scenario" than the one envisioned here: the 1887 Banking Crisis to 1932 (bottoming out of the Great Depression), literally the worst 45 year period you could enter into; rate of return was 4.3%, three to four times the amount that Social Security benificies will receive who are currently in their 40s.
Richard Baker| 10.12.11 @ 7:19AM
I've said for years that the post-Boomers will become mad as hell when they see what their parents and grandparents have done to them. I can see the day, if we don't get a handle on this problem, when these younger ones will just say NO and cut off the money when they take the reins of government and I wouldn't blame them if they do. As the youngers get older and become more aware of what has been done to them and their children they are going to make the word resentment seem a mild description of their response.
Maddox| 10.12.11 @ 9:38AM
It wasn't Mom & Dad and the Grandparents who did it, it was politicians who bought their own re-election with the scheme. I was given no choice in this whole debacle, were you?
idalily| 10.12.11 @ 8:51PM
Yeah, but the Grandparents pulled the lever for FDR four times. The parents pulled the lever for LBJ. They share the blame. Harsh? Yeah, but I feel particularly snarky about this issue. Moral (and message to Obamabots; own what you voted for).
Timothy L. Pennell| 10.12.11 @ 7:53AM
This entire article, is BALONEY, and I'll tell ya why.
Social Security is NOT broke, because their are so many baby Boomers, coming down the road.
Social Security is broke, because the guys running the TRUST FUND, could not be TRUSTED.
It's broke, because it's a PONZI SCHEME, which is quickly turning in to a PYRAMID, where the little Box, at the top of the Pyramid, will be expected to pay for all of the other boxes, underneath it. Social Security, like Ponzi, was envisioned to be an Upside Down Pyramid. With all of the boxes, at the bottom, paying for that one little box, at the top. So, what went wrong?
When you've got 20 people putting Money in the Pot, and only One, taking his share out? Well, that leaves a LOT OF MONEY lying around, looking very tempting. Like it WANTS someone to SPEND IT.
Power Corrupts. Absolute Power, Corrupts, Absolutely. And, MONEY is the root of all Evil.
Now, add in the fact that we have: POLITICIONS watching a Hen House, overflowing with CASH? Well......... you know the rest.
There is only one way, to fix these Entitlement Programs. And, one way, only.
Everybody has to pay. If 50% of the people in the Country, pay NOTHING? Then, it isn't Social Security, anymore. It's SOCIALISM.
And we all know how that works out, every time it's tried.
Wayne| 10.13.11 @ 6:14AM
We have had socialism for a long long time. If you want to eliminate socialism, start by eliminating public schools. Why should I have to pay for your kids education?
Intelligent Design| 10.12.11 @ 7:55AM
The best solution for Socialist Security is to dismantle the whole thing. First, shut it down to new participants as of a certain date, say 7/4/2013. Then give everyone the ability to opt out by receiving a lump sum payment consisting of all employee and employer "contributions", plus interest at a nominal rate (say 3%), less any retirement payments already received. Most people under about 55 years would take the money and invest it in stocks, bonds, real estate, savings accounts, etc. Allow anyone already retired to continue with the system for as long as they choose (or until death).
In about 20 years there would be no one left on Socialist Security. The federal government (taxpayers) would be off the hook with no unfunded liabilities. Where would the money come from to fund the lump sum payments? Well, from government debt, of course. But a stake would have been driven through the heart of the monster, and there would be a surge of capital invested in private enterprise which in turn generates jobs, profits, salaries, and tax revenues.
Social Security was originally designed as a minimal safety net, and as I recall even FDR said it was a "temporary" program. Instead, it has become a gigantic Ponzi scheme, a fraud in which the new suckers pay for the old suckers. The government even talks about the SS "trust fund", as if it existed. If corporate executives did the same thing with a private pension, they would be in jail.
Dai Alanye | 10.12.11 @ 12:09PM
The problem with "best solutions" is that they must get past the public, including the large group of retired who tend to vote Republican until becoming scared by threats of a Wall Street collapse. It's oh-so-easy for Dems and "Progressives" to demagogue this issue unless any change includes something that looks like a guarantee of future benefits. Conservatives and Libertarians might not like it, but these are the political realities.
So McCotter's approach is a pretty good one, although not good enough because it depends upon cutting the Federal budget in other areas in order to finance his proposed changes, always a doubtful proposition.
So here's my proposal: we increase the present SS "contribution" by 1 or 2%, with that portion going into elective private investments, preferably those which have been vetted by some independent board in order to assure the public isn't taken for a ride by the Gollywhiz Diamond Fund which promises returns of 25% per year. After a few years of operation show that private investments look safe, the political climate will improve for more fundamental changes in Social Security.
But any Republican move for abrupt fundamental changes in Social Security will surely fail, assuring leftwing domination of government, and NO meaningful improvements to SS retirement.
Chris| 10.12.11 @ 12:36PM
How about what the Unions do with their pension funds? RICO anyone?
Al Adab| 10.12.11 @ 1:49PM
RICO? Absolutely.
Erica Brigid| 10.12.11 @ 8:16AM
Who is stopping people from using current private retirement schemes -- 401k, IRA, Roth IRA, Keogh Plan, plus the many annuity plans offered by life insurance companies? Why do we need yet another scheme that is nothing more than another tax dodge?
Every one of these schemes is designed solely to make money for the companies promoting it. Every plan except Social Security has that fine print on the reverse side of the page, that says you may lose part or all of your investment. And the company makes sure you do. Social Security, on the other hand, guarantees that the benefits will be there for you when you're ready for them, even if the stock market goes through the floor.
And what will happen when guys like Soros crash the economy again? The CINOs (Conservatives In Name Only) will be pushing and shoving in the line for govt bailouts.
Indiana Alex| 10.12.11 @ 9:27AM
HA, HA HA HA HA HA HA HA. Thank you for the suggestion that SS is guaranteed, I almost spit my coffee out reading that. We all need a good laugh sometimes.
Old Soldier| 10.12.11 @ 10:02AM
You almost had the correct answer.
The correct answer is to stop taxing all forms of savings.
Get the government out of the savings and retirement industry.
Shamus| 10.12.11 @ 10:04AM
Lack of money stops people from participating in private retirement schemes. A person of modest means already pays 12% of earnings for Social Security. If they have families to care for and houses and cars to finance, they're not going to have a lot of extra money for retirement savings.
Social Security has all the problems you ascribe to private plans. Congress uses the money from the program to fund their pet projects. It's not set aside to pay benefits. Fine print in court decisions says that citizens have no economic interest in Social Security. Congress can end the plan any time it likes. This is not any kind of guarantee.
Dai Alanye | 10.12.11 @ 12:15PM
"Lack of money stops people from participating in private retirement schemes."
Lack of money to some extent, but even more a simplistic faith in government beneficence. There is almost no one in the US who can't afford a small savings plan by giving up a few luxuries. Let's keep in mind all those officially "poor" families with multiple TVs and game controllers.
Al Adab| 10.12.11 @ 3:59PM
Faith that government will provide...what have we been swallowing all these years. Yes that prevents people from planning ahead. When I was a stockbroker we used to say, "no one plans to fail, they just fail to plan." Taking 100.00 dollars per month from ones income for investment starting at say age 21 results in the person reaching 65 or so with near a million in liquid assets. Far better than anything SS ever promised.
Drunken Sailor| 10.12.11 @ 10:09AM
I especially loved the part of how you push for Social Security to stay the ponzi scheme it is and then claim everyone else is Conservative in name only. Priceless, whatever you liberal trolls are being paid, it isn't enough. You should write comedy.
Brian B| 10.12.11 @ 1:05PM
--Every plan except Social Security has that fine print on the reverse side of the page, that says you may lose part or all of your investment. --
I'm assuming you are unaware that the Supreme Court has issued an opinion stating that SS payments and terms have no implicit guarantee and may be abrogated at any time by Congress without warning.
How's that for fine print?
Joe The Economist | 10.12.11 @ 8:19AM
First, it is laughable for a country that is 14 trillion dollars in debt to say that it will cut unnamed programs. They aren't going to be cut. The government will take on debt planning for the returns to outstrip the cost of funds. This is exactly what Bear Stearns did.
Separately, it is dishonest to say you aren't raising taxes when you are cutting services and keeping the tax the same. How about cut the so-called services, and pay down the deficit.
The Bishop| 10.12.11 @ 8:24AM
There can be no argument that Social Security is a Ponzi scheme on steroids and that corruption has decimated whatever value it may have had. But, to be pragmatic (yes, I know, I hate that term also), Rep. McCotter's plan is not only workable but beneficial. We as a society have not been "savers" for over a century and those habits are not going to change within the remainder of my life. I say let's go with McCotter's plan and drive the stake through the monster's heart (hat tip to Intelligent Design) after calamity has been averted.
Of course, I'm not holding my breath for any political courage rising from either establishment party to do what needs to be done. It's just a little ice, Captain. Let the band play on.
idalily| 10.12.11 @ 9:49PM
It's a great idea, workable, beneficial and do-able. It will never pass Congress.
Joe The Economist | 10.12.11 @ 8:27AM
"The bill was officially scored by the Chief Actuary of Social Security, with his scoring memorandum available on the Social Security Administration website. "
The author says this knowing full well that no one will actually read the report. If you do, you will find that it says that this plan fixes Social Security. It does so by off-loading 50% of the benefits structure on the general fund. So it may well fix Social Security while it bankrupts the entire country.
The benefits in this plan are so absurdly generous that the Chief Actuary assumed that 100% of the participants would take the deal. I am 50, and I am ineligible for the deal. Why shouldn't I get this deal? It cuts my contribution in half, and guarantees my benefits - who isn't going to take that deal.
Intelligent Design| 10.12.11 @ 8:34AM
And let's fix Medicare too. Upon reaching the eligible age, exclude pre-existing conditions. So, you've spent the last 40 years smoking cigarettes, being 50 pounds overweight, drinking to excess, and not exercising? You've got spots on your lungs, have trouble breathing, have diabetes, and clogged arteries? Sorry buddy, the taxpayers are not going to pay your medical bills. Pay for your own irresponsible behavior.
Shamus| 10.12.11 @ 8:35AM
The US has a very poor old age savings program. Other countries do far better in providing vehicles for their citizens to save for future. Ideally, some program like McCotter's would be enacted, but from a practical standpoint this is unlikely. Bush tried and failed because there was not the slightest political support for any change.
Given that this is a political football, the best that can be done is some very simple fix. Any plan with the slightest complexity will be seized on in campaign ads showing grandma being pushed off a cliff. Ironically, the problem is not crafting a plan that is financially sound, but presenting it to the public in an acceptable manner.
How do you sell the public on any change when they don't trust politicians to do the right thing?
Capitalize on fear. Run a campaign where you go after each individual Democrat politician saying "Charles Schumer has stolen your Social Security," and accusing Congress of spending money that should have been set aside for the program. Then propose measures to make Social Security safe from politicians by creating an independent entity holding real assets such as drilling and mining rights, broadcast spectrum, and federal real estate. The pitch would be that we want to protect Social Security from the bad people in Congress who are trying to steal your money. It would be hard to object to this.
Joe The Economist | 10.12.11 @ 8:51AM
@Shamus, I work with FixSSNow.Org, we list all of the solutions for Social Security, including the McCotter plan. If you have a specific idea, send it to us.
I can tell you that we will have some doubts about what you are discussing. Who is going to set the price for broadcast rights and federal real estate. When the Trust invests in government bonds, the price is set low - but it is determined by the market. In your approach there will be some politician picking someone who will set the price at which the Trust Fund is buying assets.
Just our opinion - you need Washington out. Politicians live on 2 year cycles. Washington will never be able to deliver a system which has time horizons of 70 years. Social Security is simply not compatible with 2 year election cycles.
Shamus| 10.12.11 @ 10:25AM
Markets can set prices for real estate or spectrum just as they do for bonds. But assets could simply be assigned to the Trust for the purpose of providing benefits rather than being sold to it. If the Trust had other assets to use, then recourse to bond holdings should be delayed. This is not an idea that I came up with, but one that I read about on the Wall Street Journal editorial page, so I don't have specifics. It was proposed by an economist, but memory fails when I try to name them.
Getting Washington out may be best, but it's not clear that this is politically feasible.
Dai Alanye | 10.12.11 @ 12:22PM
You were right the first time, "...presenting it to the public in an acceptable manner."
Truer words have bever been spoken. Any scheme that fails to seriously consider human nature and the fear retirees feel when their funds seem to be threatened will never get off the floor.
Merlin| 10.12.11 @ 8:51AM
Shamus,
I like the idea of blaming politicians by name.
"Charles Shumer has spend the money that you put into the trust fund and when you need it, he is going put it back by borrowing more money or by taxing you for it. Again."
Richard Baker also makes a good point. And what if the younger tax payers are immigrants? "I'm taxed to the hilt to support some whitie's grandmother? I should be sending that money back home to my grandmother."
Old Soldier| 10.12.11 @ 10:03AM
Provide vehicles? Just stop taxing our savings (after taxing our income). That's all.
Shamus| 10.12.11 @ 10:30AM
It's worse than you think when it comes to taxing savings. You get taxed when you earn money.
Then the Fed taxes you again by creating inflation. A dollar earned in 1914 would be worth only four cents today due to the Fed printing money.
Then you get taxed on your inflationary gains.
And the government is surprised that no one saves.
Big Tony| 10.12.11 @ 9:28AM
The writter of this article omits a very real possibity. The federal goverment issues bonds to pay for SS benefits, the Federal Reserve buys the bonds by printing money and giving it to the federal government to pay benefits. This causes inflation (a hidden tax) but no actual "taxes" are raised and the general population in none the wiser.
Indiana Alex| 10.12.11 @ 9:34AM
The reason Libs cannot go for any sort of plan like this is that actually gives the "working class" an opportunity to own and transfer wealth generationally. Within 1.5 to 2 generations there would be no "working poor", as everyone actually working would be building up a significant amount of personal assets.
There are a lot of people right now that can't afford to contribute to a private retirement account, and few outside of government participate in pension plans. This plan would transfer tremendous weatlh and power from government to individuals, which is why the Libs will pee thier pants trying to distract people from the realization that control of their own lives is actually a good thing.
There is hardly room for class warfare in an economy where everyone is gradually getting "rich" accumulating their own personal wealth by simply getting up and going to work.
Walking Horse| 10.12.11 @ 10:11AM
You've hit the nail on the head. The politicos in DC will never, never, ever voluntarily cede power back to the people. These people are control freaks through and through, to the point of being mentally ill.
Should Have Impeached| 10.12.11 @ 10:03PM
"...an economy where everyone is gradually getting "rich" accumulating their own personal wealth by simply getting up and going to work."
A better definition of the American Dream I have never heard.
Jeremy Davis| 10.12.11 @ 10:03AM
I understand the article, but still have one fundamental question if someone can please answer it:
Where in our Constitution does it give the Federal Government the authority to manage a retirement safety net to begin with?
I agree the system is broke, but maybe part of its brokenness is the very fact it is in existence. Instead of looking to restructure it, maybe it needs to go away.
Walking Horse| 10.12.11 @ 10:09AM
The Constitutional authority was the hallucination of a Supreme Court cowed by FDR's threat to pack it withe more "progressives". Which is to say that no such authority exists in the real world, only in the fantasy land of Washington politics.
Stefan Stackhouse| 10.12.11 @ 10:27AM
The SS Trust Fund needed to be set up as a real sovereign wealth fund from the start, with the ability to invest in other things besides just US Treasury bonds. If this had been done, we would not be in the mess we find ourselves today.
Even at this late date, I don't see why we can't do this. It would certainly be preferable to continuing the status quo.
If you want individual accounts, then this would be a good intermediate step that would help us get there. There are state and local public pension plans that give participants several different options for the investment of their funds, similar to how most 401K plans operate. I could see a sovereign wealth fund for SS evolving in that direction.
markie| 10.12.11 @ 11:31AM
Raise the social security taxes to cover all earnings...and prevent US congress from using the SS kitty to pay for their pet projects....and tax the rich by repealing all special tax braks and loopholes then things will get to improve fiscally.
Dai Alanye | 10.12.11 @ 12:26PM
These are cloud nine solutions that will do more harm than good in the long run. You'll hurt the economy yet never raise enough money to satisfy expanding pubic greed.
Lizard King| 10.12.11 @ 11:36AM
Richard Baker, above poster has articulated the perfect storm of generational warfare that looms as the bottom of the pyramid, post boomers and their progeny, awken to the magnitude of the hoax they are victims of. Those of us getting long in the tooth who are not genuinely poverty stricken, better face up to a future of self sufficiency or embrace our "duty to die" making way for the next generation of disillusioned geriatric entitlement seekers! Self insure your "golden years" fellow greys, or shuffle out of the way.
Al Adab| 10.12.11 @ 11:41AM
Simply imagine what your personal net worth would be if those mandatory deductions were invested in personally held funds. A 401 or IRA or mutual funds investment would creat vast wealth for everyone and increase the capitalization of the national economy dramaticlly. People could use their money (yes, it would be their property) as they saw fit to pay off mortgages, to pay medical expenses, to provide personal retirement, anything they decided after whateve the actuarial age was met. A simple solution and one with benefits for every citizen not counting the increase in personal Liberty an end to the system of dependancy would create.
Dai Alanye | 10.12.11 @ 12:32PM
Agreed, with a couple provisos: cautious investments and wide diversification are necessary for safety.
Additionally, a mortgage in sound residential property is an excellent investment, particularly in an inflationary environment. (I refer to general inflation, independent of the housing market.)
Al Adab| 10.12.11 @ 1:52PM
DAI:
Good additions. Each person (investor) is of course able to make their choice. Most will be successful. Sadly, some will not.
Lizard King| 10.12.11 @ 12:03PM
True liberation is found in a profound acknowledgement by any cultures populace, especially the geezer class(which I'm one of), that NO government will EVER have the capacity to entitlement fund significant population segments, indefinitely. You want Liberty, you're in the right country! You want free-dom, die. Wakeup good citizens and earn your own damn keep, this aint Paradise on Earth.
shipley130| 10.12.11 @ 1:42PM
Ponzi, ponzi, ponzi.
Al Adab| 10.12.11 @ 1:53PM
If you refer to SS as currently structured, yes, you are correct. The money is spent and we rely on "full faith and credit".
tj| 10.12.11 @ 2:53PM
Posted before...good read. SUCCESS OF CHILE'S PRIVATIZED SOCIAL SECURITY
http://www.cato.org/pubs/polic.....ja-jp.html
Also sent to RNC.. funny they are now talking about it.
Jack London| 10.12.11 @ 3:11PM
So - the answer to all our problems is to trick people into the market to buy investments that invest in companies like Enron and Bank of America. Been there, done that, epic fail, as my son would say.
Al Adab| 10.12.11 @ 5:13PM
Jack:
No trick involved. Let them buy gold if they wish. The whole point is that it would be their choice because after all, the money they earn is their property. How they choose to invest it is their business, not the federal governments. Have we really opted to become a paternalistic society or is Liberty still of primary importance?
Jack London| 10.12.11 @ 5:48PM
If you're looking at turning social security into a real Ponzi scheme then shifting funds to the crooks on Wall Street is the fastest way to destroy a system that hasn't missed a beat for 70 years.
And Al, who said:
'Should any political party attempt to abolish social security … you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. … Their number is negligible and they are stupid.'
W| 10.12.11 @ 7:42PM
Jack
You do not have to invest in stocks if you don't want. It is your decision where to invest. If you wish to deposit your contributions in a savings account, you would still do better than SS.
But over the long term you will make more money by investing on a regular basis, dollar cost averaging, in an mutual fund such as an index fund. If you are in an employer pension fund, or a union pension fund, then your money is invested in the stock market. It is the only game in town.
People are not stupid as you think, they will do a better job investing their own money than the government will. But if you would rather trust the government and stat in SS then that is your decision. Others should have the choice.
Jerry Wells| 10.12.11 @ 4:26PM
This plan sounds like a winner for all. My question is why haven't the Republicans offered up such a plan? (We know the Democrats would not). I mean in specifics not generalities, not promises, but in action.
proreason| 10.12.11 @ 4:55PM
Backtesting is fine, but as you know, it doesn't predict the future. There is no worst case scenario, because that hasn't been encountered yet.
But I think there is an even bigger problem. Unless the private accounts are so tightly restricted that there is effectively no freedom, then it will be entirely possible for people investing with identical strategies to have dramatically different results, simply becuase they started one month apart. In the example cited int the article, a couple that "retired" Sept 1, 2008, might have 20% more than one that "retired" Oct 1, 2008. That's not a theoretical, it's an absolute certainty to happen, even if the data is off for that particular example. And when that happens the outcry will force the politicians to make the unlucky parties "whole". That is about a near certainty as well.
It's easy to look at it from afar and say that all will be known and understood. But in reality, it not only won't happen, it can't happen.
Maybe it's still the best alternative. But it isn't perfect.
axbucxdu| 10.12.11 @ 10:25PM
Ahem. Without pyramidal demographics, even the private investment alternatives to Social Security run smack into the same problem. 401K plans have been around long enough to illustrate what I mean.
We're about to see how the stock market weathers the gales of selling caused by demographic winter. As the Boomers attempt to liquidate these assets to support their retirement, tell me what larger cohort will be there to sop up these sales and at what price? Look out below: the Dow's headed for the pavement.
POST American| 10.13.11 @ 5:04AM
----------------------FINAL WORD----------------------
--Worried about retirement? --Want
to do smething about it?
Immediately close down our EUGENICS
designed, abortion generating, 'POP' culture.
Dump the 'Sex and the City' franchise slum
and EUGENICS lifestyle, and slam it wherever
you see it, and whenever you heaar about it.
Revive and promote a return to courtship
culture, marriage and childbearing.
Make the tainting or contamination of
water, foods, meds and/or vaccines a
capital criminal offense of the highest order
---punishable by life in prison,
and, in the more extreme cases
(such as the loading of POLIO shots
with live cancer viruses --a la SALK)
-----by DEATH.
You'll find things perk up for the better
in NO TIME.
------WE guarantee it--------
Wayne| 10.13.11 @ 6:09AM
The DOW is now 10 percent higher than it was 12 years ago. NASDAQ is much lower. The S&P is about even. So the 12 year, which is quite long term, is about 0 percent. So I am quite tired about hearing about LONG TERM growth. Only gold and silver have shown long term growth in the past 12 years. Thank goodness that is where I put my money.