Privatizing Social Security??

As I was driving home from work today, I listened to WORD talk radio out of Spartanburg/Greenville, SC. The regular host, Bob McClain was on vacation so Tony Dale did the show in Bob’s place. Since Tony has a financial show on Saturdays, most of today’s show was on financial matters as is wont to happen when Tony subs for Bob.

Today, the subject was the privatization of Social Security. It’s always interesting to hear the “call-ins”, what they have to say and how the host responds to the callers. For instance, one caller “told” me something I didn’t know before; That Jim DeMint is for the privatization of Social Security. I can imagine why I didn’t already know that as I’m sure that DeMint has kept his views on privatization of Social Security pretty close to his chest, it being the “third rail” of American politics and all.

Another caller got in a heated discussion with Tony Dale about how he wants the government to give him back all the money he’s “invested with Soc. Sec., all the while, tony’s trying to tell the caller that there’s no money there. Tony went into how today, there’s only three people putting in for every person who’s taking out and how that is unsustainable. Tony even gave the caller a very good and understandable analogy about how it works. Lets see if I can remember it. He also explained to the caller about how even though he’d been putting money in all these years, it didn’t go into a separate account with his name on it, but went to pay current beneficiaries. I still don’t think the caller got the gist of what Tony was trying to tell him.

” Lets say you live in a neighborhood with 200 hundred other households. In  one of the households, lives an older couple who are struggling and can’t make ends meet. Everyone in the neighborhood gets together and decides to help the older couple. So they each give a certain amount of money to the old folks. As time goes on, people move on and no one else moves into the neighborhood. As the population of the neighborhood shrinks, each household’s outlay to the older couple grows and grows as the population gets smaller. Pretty soon, there’s only two other households left to take care of the older folks. Them old folks come to their neighbors and tell them they need more money. Well, those people have given all they have to give without going belly up themselves. It’s the same thing with Social Security; pretty soon, we’re going to run out of money to throw at the problem as the working force shrinks and the number of beneficiaries grows.”

Another caller made an interesting point about how working Black families are really hurt by Social Security. And it doesn’t have anything to do with racism. It has to do with statistics. Statistically, Black men die at younger age than other races, so they really don’t benefit from the money they’ve put in all those years. If Social Security was privatized and they invested their money or even just put it into a savings account, they would get a return on their investment and also would be able to pass it along to their heirs, whereas the money they’ve put into Soc. Sec. is gone…poof!…when they die. As an aside, Social Security isn’t the only government program that hurts Black folks, but that’s for another day.

I hadn’t really thought much about it before except to ruminate on how it didn’t matter anyway because Soc. Sec. would be broke before I could start collecting. So I did a little poking around and found some “for and against” articles. Here’s one by Peter Fererra of the Cato Institute;

In this study, Peter Ferrara offers a proposal based on the following key elements:

  • Current workers could be free to choose either the private option or Social Security. For those who choose the private plan, workers and employers will each pay 5 percent of wages, instead of the current Social Security payroll tax of 6.2 percent for each, into private investment accounts, resulting in an eventual payroll tax cut of 20 percent. Besides supporting retirement benefits, the accounts would finance private life and disability insurance, thus replacing Social Security survivors and disability benefits.
  • Workers who opt out of the current Social Security system would receive recognition bonds from the federal government that would pay them a proportion of future Social Security benefits equal to the proportion of lifetime taxes they had already paid.
  • Benefits promised to current retirees would be paid in full, with no reduction of any kind.”

And more a little deeper in his report;

” Politics is the art of the possible, the saying goes. In regard to Social Security, what was once impossible is now probably inevitable.

What was unthinkable in mainstream politics just a few years ago—the privatization of Social Security—is now highly popular at the grass roots. Every day brings more establishment and institutional support for the idea as well. Moreover, this mushrooming support is coming from across the political spectrum.

Those who have not followed the issue in recent years should consider the following:

Public opinion is shifting. While Social Security was once the “third rail” of American politics, Americans are increasingly willing to consider reform of the system, including privatization. A 1994 Gallup Poll found that 54 percent of Americans thought that participation in the Social Security system should be made voluntary, which is actually a more radical change than privatization.[1] Another Gallup Poll, this one in January 1995, found that by 47 to 32 percent, Americans thought that Social Security was not “a good program for today’s younger workers.” The same poll found that by 53 to 23 percent, those interviewed believed that “most people could make more money by investing their retirement funds in the private sector than they could with Social Security.”[2]

Likewise, a poll by GrassRoots Research in November of 1995 found that 38 percent of today’s workers would withdraw from Social Security if offered the option, even if they received nothing in return for the taxes they have already paid. Among workers ages 30 to 39, 48 percent would choose to leave the current system.[3] Last year, Public Opinion Strategies conducted a nationwide poll for the Cato Institute which found the public favoring the idea by 68 to 11 percent.[4] “

The monetary benefits to privatizing Soc.Sec. are astounding if they are to be believed;

” In this country, economic and political leaders are beginning to advocate privatization. In a May 1996 address to the American Economics Association, Professor Martin Feldstein of Harvard estimated that the present value of the future benefits to the United States of privatizing Social Security would be an astounding $10–$20 trillion.[7] Privatization of Social Security has also been endorsed by Nobel Prize-winning economists Gary Becker, James Buchanan, and Milton Friedman, as well as the current president of the American Economics Association, Arnold Harberger. ”

Some more numbers thrown about by people “in the know” ;

” Up until now, the biggest objection to privatizing Social Security has been the fiscal impact of the transition to a privatized system. During that transition, benefits to today’s retirees must continue to be paid. Yet workers will be paying their funds into private retirement investments. This will leave a transitional shortfall in the financing for outstanding benefit obligations.

But the projections of the fiscal impact of the reform plan offered in this study show that

  • The transition can be financed without new taxes and without cutting benefits for today‘s recipients. Indeed, the transition can be financed while also providing for a 20 percent payroll tax cut after 10 years.
  • Apart from the tax cut, the net transition deficit would be eliminated in only 14 years.
  • Before that point, the transition deficits can be financed in part by issuing new government bonds, or selling existing Social Security trust fund bonds, totaling no more than $500 billion (in 1996 dollars). However, privatization would produce sufficient net surpluses by the 22nd year after it begins to completely pay off and retire all the bonds previously sold to finance the transition.
  • The remaining net transition deficits in the early years can be offset by reductions in government spending totaling approximately $60 billion per year, or approximately 4 percent of total federal spending.
  • Perhaps most remarkably, once the bonds issued to finance the transition are paid off, privatization would actually start producing large surpluses that would reduce the federal budget deficit. “

The article goes on at length about the benefits of privatizing Social Security. Hit the link above to read the whole article.

Now for the against argument.

Here’s an article…Twelve reasons Why Privatizing Social Security is a Bad Idea by Greg Anrig and Bernard Wasow. You can hit the links below to read the whole thing. They’ve even got pictures and everything.

Not being a financial guru or even a guru in training, I can’t refute or prove the claims of either author in their respective articles. All I know is something’s gotta give…and I’m tired of giving with little or no hope of any return. So my gut feeling is to go with Mr. Ferrera’s assertions about the big potential upside to privatizing Social Security.

8 thoughts on “Privatizing Social Security??

  1. Pingback: Privatizing Social Security?? (via Thatmrgguy’s Blog) | Smash Mouth Politics

  2. My reactions to reading this: 1st, Great stuff Mike. Then, hey, wait, this is just too many facts and too much TRUTH, liberals will never listen. Finally, third rail is right–don’t touch it. It’s more toxic than RAAAAACISM.

  3. Actually, when I started reading this, it inspired me to go back and write “The Myth of Retirement.”

    I didn’t even realize the subliminal message until I started reading it again. LOL

  4. Pingback: Privatizing Social Security?? (via Thatmrgguy’s Blog) | Citizen Tom

  5. Here’s a link; http://campaign.r20.constantcontact.com/render?llr=gnqlzxdab&v=001B7Ca3ME3LkJnKv4Qzqb7z5QAXoEeo0rk1FsWOs9FyAcGtMtJ0bxQ5hoyCA7L7NgcySjHmZ57Qm1KeXl_5WB1NUIvexfTneUdPKYq5RRZAyWJN7S26Gb-Whu7qRD5eDWeg6Yl4aa2LGo=

    I saw this on http://www.timebomb2000.com/vb/showthread.php?t=371149

    Don’t know if this has any basis in fact or not, so take it with a grain of salt.

    By: Sorcha Faal, and as reported to her Western Subscribers

    A grim report prepared for Prime Minister Putin by Russian Ministry of Finance experts warns today that the United States is expected to be ordered by its G-20 counterparts at its October 21-23 meeting in South Korea to devalue the US Dollar by no less than 50% in order to stave off what is widely believed to be an imminent collapse of the World’s economic system.

    The G20 was established in 1999, in the wake of the 1997 Asian Financial Crisis, to bring together major advanced and emerging economies to stabilize the Global financial market that by 1998 had catastrophically devastated the Russian economy causing a two-thirds devaluation of the Ruble that plunged millions of middle-class Russian citizens into instant poverty.

    As the most important “cog”, so to speak, in the internal mechanisms that governs our every growing, and complex, Global economy, the “sands of time” have run out for the American Dollar being our World’s sole reserve currency, and which without its immediate devaluation threatens to spark an International currency war the likes of which have not been seen since the 1930’s, and as we can read as reported by London’s Telegraph News Service:

    “States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.”

    To the grim task facing the G20 at their upcoming South Korean meet we can further read as reported by the Reuters News Service:

    “Careful calibration of a U.S. dollar devaluation looks to be the only way to avert the sort of currency war flagged by Brazil and others, leaving G20 powers the unenviable task of agreeing some control of the process.

    The top world economies, shaken by three years of financial turmoil, are scrambling to cap or weaken their currencies in a fight over fragile global demand for exports — prompting retaliatory capital curbs and damaging trade rows.”

    Prompting the G20’s urgency for a quick devaluation of the US Dollar before an all-out Global economic collapse are the growing retaliatory actions of its members against the American’s for the wholesale printing of money with nothing to back it up, and as we can, also, read as reported by the Reuters News Service:

    “A drive by many of the world’s economies to cap the strength of their currencies is gaining momentum, with Brazil firing the latest shot just days before world finance leaders meet in Washington.

    Ultra-low interest rates in Europe and Japan and concerns that the U.S. Federal Reserve is about to embark on another round of money printing that could weaken the dollar have pushed currencies to the top of the agenda for the gathering of finance chiefs from the Group of Seven rich nations Friday.”

    Not just to the United States, either, are the fears of a Global economic collapse rising as reports from the United Kingdom are warning that their currency is, likewise, nearing collapse, and when coupled by the warning that Ireland is about to have its credit rating downgraded has prompted the International Monetary Fund (IMF) to acknowledge for the first time that the West is caught in a “near depression”.

    Not being told to the American people about their coming Great Economic Collapse is that it is due to their Nation being effectively bankrupt with this years deficit adding $1.3 Trillion to a National debt of $13.5 Trillion, not to mention the unfunded liabilities for their Social Security and Medicare systems that are warned exceed $100 Trillion.

    Though the average American citizen is being deceived by their propaganda media and government masters so as not to terrify them about what is about to happen, the same cannot be said of their elite classes who, according to another recent Reuters News Service report, are buying gold by the ton in such a frenzy to protect their obscene wealth they have raised the price of this precious metal to record highs with it gaining nearly $100.00 in the past month alone, and over $300.00 in the past year as it nears $1,400.00 an ounce, and according to Kenneth Rogoff, a Professor of Economics and Public Policy at Harvard University, could very well reach $10,000.00 before all is “said and done”.

    To the actions of America’s leader, President Barack Obama, as millions of his citizens face economic oblivion it is beyond our understanding as new reports state that he has accelerated the timeline of what will be his longest overseas trip to his leaving 2 days after what is expected to be a crushing defeat of his Democratic Party in the November Mid-Term election, and which shortly after his government will announce the catastrophic devaluation of the US Dollar wiping out the savings of an entire generation of his people.

    The respected Christian Science Monitor, however, in their article titled “Obama as Roman emperor — the rise and fall of the propaganda master” chilling portrays the American leader in terms that does make his actions understandable, and as we can, in part, read:

    “To understand Obama’s fall, we must understand his rise; and to do that, we must look to ancient history. It was neither for his resume nor his policies that America fell in love with him. In fact, Obama’s policy priorities have turned out to be quite unpopular.

    It was instead by following the lead of Rome’s greatest emperors that Obama won (temporarily) America’s awe and devotion. This sort of ruler cult begins to crumble, of course, when the ruler is required to make decisions and take positions under unprecedented media scrutiny.

    In the art of self-promotion through images, Obama’s closest parallels lived long before the age of YouTube and the 24-hour news cycle. Rome’s first emperor, Augustus (63 BC – AD 14), was a master of manipulating what “mass media” there was. Through the propagation of carefully crafted, semi-divine portrait types, vague but appealing buzzwords, and abstract association with heroes of the past, Augustus and his successors won the public’s support.

  6. Pingback: The Myth Of Retirement « Thatmrgguy's Blog

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