Privatizing Social Security

[JacKDynne]

Would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make any changes of your own? Probably not. Yet that is exactly what happens when you pay money into Social Security.

No matter what you were promised or at what age you were supposed to get it, the government can always pass a new law that changes all of that. But you still have to pay into the system.

A private annuity plan run by an insurance company is legally required to pay you what was promised, when it was promised, and to maintain assets sufficient to redeem its promises.

One of the few issues on which Senator John Kerry has taken a stand and not changed it (yet) is Social Security. He has said: "I will not privatize Social Security."

This has long been the position of liberal Democrats, and John Kerry's voting record in the Senate makes him one of the very few Senators more liberal than Ted Kennedy. That is the ranking given by Americans for Democratic Action, a leading liberal organization that ought to know.

Why are liberals against letting people put part of their Social Security payments into private investments?

Risk is one of their arguments. Al Gore incessantly repeated the phrase "a risky scheme" during the 2000 election campaign and risk still seems to be the big objection to letting people put their own money where they want.

Some liberals may actually believe that politicians know what is best for you better than you know yourself. That is, after all, the philosophy behind many other government programs.

Another reason for liberal opposition to private investment of Social Security payments is that it deprives them of control of billions of dollars that they have been spending from the Social Security trust fund for years. They can buy a lot of votes with all sorts of giveaway programs, financed by money taken from Social Security.

As for the risk of making private investments, that might be a real concern if people were putting their money into commodity speculation or other volatile markets. Most people have better sense and privatization could limit where Social Security premiums could be invested.

Although the stock market bounces up and down from day to day, people are not investing today in order to retire next week. They begin paying Social Security premiums when they first get a job and they retire decades later.

Stocks are far less risky in the long run than they are in the short run because the ups and downs balance out over a long period of time. It is virtually impossible to find any 40-year period in which the stock market has not paid a higher rate of return on your money than you get from Social Security.

There are some mutual funds that simply buy a mixture of the stocks that make up the Dow Jones average (or Standard & Poor's), so that their clients will have the kind of return on their investments that the stock market as a whole has. They don't make a killing but they don't get killed either.

How did Social Security get into its present mess in the first place? Because politicians made it the "risky scheme" that they now claim privatization would be.

The same political expediency which caused Social Security to be called "insurance," in order to get public support, guaranteed that it would be nothing of the sort. Unlike an insurance company, Social Security has never had enough money to pay for all the pensions it promised.

Instead, Social Security has been run like a pyramid scheme, where the first people to pay in get money back from the second wave of people who pay in, and the second wave get money back from the third wave, etc. This is so risky that pyramid schemes are illegal -- except when the government does it.

They have gotten away with this thus far because the first generation covered by Social Security was an unusually small generation that was followed by the unusually large "baby boomer" generation. But when the baby boomers retire, the pyramid scheme will no longer bring in enough money to pay for their pensions.

Nothing is more risky than depending on politicians.

[rikytik]

One of the most wonderful things the Democrats did for Americans was create the Social Security System. Thanks to the years I worked in the US I can still buy more than just dog food for dinner. Corporate America would like to tear down the old system. (after all, they are running the White House and Congress). Don't let them do it, voters. It's a bad bargain for most people, especially the sheep who mortgaged their homes in 2000 assured by financial advisors they would win big. No, guys, keep your system, it ain't bad.

[JacKDynne]

Yes rikytik you are right - but what of future generations?

What happens when the well runs dry? I for one would like more control over what happens to what I pay in - I wonder if I or my children will even have any when the time to collect is ours.....

/JD

[rikytik]

The "well" is "us". We contribute a part of what we earn to a fund. The fund is invested in "us" the prosperity of the country. It's collective. I guess you could call it socialism. But the idea is to share in the wealth. The well never runs dry in such situation.

I worked 16 years for a US company and 17 years for a French company and part of my pension comes from France, a country I like, believe it or not. Their social system is functioning pretty well, even tho it is bankrupt. The thing is that 1 of every 4 French university graduates will never have a job in his lifetime. How do you cope with that statistic? And what does it mean?

Heard of Walmart? That's part of it. Sort of a disease. Like the second coming of the Industrial Revolution.

Lot of things going on in the politcal area that I do not comprehend. Esecially in the USA. This guy Dick Cheney is a former CEO of a corporation that is one of the biggest winners of $18 billion in contracts for reconstruction in Iraq. Meanwhile, the US taxpayers are paying $200 billion of their tax dollars for this folly. Why? Well, seems pretty obviious to me. Now, how do you reconcile examples like this with domestic concerns about health care and retirment benfits?

Exxon is another phenomenon behind the Iraq thing. It's a patchwork of all kinds of twisted financial interests.

If you look back at US Political activities during the past 50-100 years, things begin to be obvious. Pitty they don't teach history anymore in shcool. Well, real history.

[JacKDynne]

How I Stopped Worrying And Learned To Love WalMart
By Thomas Lindaman (11/20/03)

America is a land of opportunity. If people with no discernable talent like Al Sharpton, Carrot Top, Billy Ray Cyrus, and Tom Arnold can succeed, anybody can! (Well, except maybe for Dennis Kucinich.) But lately, a dark force has decended upon America, a force so diabolical that a conglomerate of Darth Vader, Satan, Bill Gates, and Mickey Mouse couldn't out-evil it. This mother of all evil has a name.

WalMart.

According to people on the left and the right, the nice elderly gentleman named Bob who greets you at the door is a part of a global plan to flood American markets with a wide selection of cheap foreign goods! Oh horror of horrors! How can we fight the evil that Bob represents?

Lately WalMart has been getting it from all sides more than a fat kid playing dodge ball. Liberals say WalMart hurts the working man because they don't have a labor union. Conservatives say WalMart takes jobs from American workers because they buy cheap products from overseas and sell them cheaply.

And I say they're both full of it.

The complaints about WalMart have more ulterior motives than characters in a Brian DePalma movie. Neither liberals nor conservatives hold the moral high ground on this and both are showing incredible amounts of stupidity when it comes to basic economic theories.

We'll start with the liberals' argument that the lack of a union at WalMart hurts the American worker. This is sheer absurdity because when you have a labor union, the employer will have to spend more money to keep the workers from striking. This cost gets passed on to consumers in the form of...higher prices!

I'm convinced that one of the reasons prices are so low at WalMart is because they don't have to spend money to try to quell a labor dispute. Instead, they keep the workers happy by giving them benefits and advancement opportunities. And whatever these measures cost gets made up for with volume. If anything, the fact WalMart does so much for the American worker at both sides of the transaction, be it internally or through product pricing, winds up helping the workers more than liberals want you to believe.

Now, don't think you conservatives have it any better. You guys are guilty of the same bad economic thinking that the liberals are. Your claim that American jobs are taken away because WalMart buys from overseas is silly because the alternative you propose, that being forcing WalMart to buy American products, will ultimately hurt American workers more than Cheese Doodles made in Taiwan.

The major problem with the conservative "solution" for WalMart is the fact that we don't make some of the products WalMart sells here. Ever try to find a DVD player made entirely in America? You're more likely to see David Gest and Liza Minelli have a baby together after a night of wild, passionate monkey sex. With this restriction, WalMart loses one of its selling points: a wide selection. Without selection, people will eventually stop going to WalMart, which means the company loses money, resulting in job loss. Funny how that works, isn't it? And in the end, you do nothing to help the workers on either side of the WalMart fence. Brilliant, and all wrapped up in a red, white, and blue flag to make you ignore the uncomfortable truth of the logical conclusion of the "solution" you propose.

I have a better idea. Instead of bashing Walmart for low prices, high selection, and great customer service, try to work with them to bring in more American-made products. And make sure that you're talking to the companies sending WalMart the stuff to sell. Let them know that you would prefer them to seek out more American alternatives. They may cost a bit more, but if you're wlling to pay a higher price for them, the companies would be fools to say, "No, we don't want more of your money. We'll just sit tight on what we have."

But the ultimate solution is so dirt simple even Al Gore on five bottles of NyQil could get it. If you don't like WalMart, don't shop there! But realize that with that choice, you're at the mercy of those whose selection pales in comparison. For example, I went to Target the other day to try to find transmission fluid. After looking all over for one and being ignored by the floor help as though I were selling white chocolate candy bars to raise money for Klan for Kids, nothing could be found.

Except for a full row of cell phone accessories in the automotive section. I'm still trying to figure that one out, folks. Then, I went to WalMart, found the transmission fluid in the automotive section (with no trace of cell phone accessories, I might add), and managed to get out of there fairly quickly. This impressed me so much that I've decided to stop going to Target unless they're the only place they have the item I'm looking for, and more often than not they aren't the only ones. It's that little extra touch that turns WalMart from ogre into hero.

I don't agree with all of WalMart's business practices because they represet a short-sightedness that could backfire on them. However, it cannot be denied that Sam Walton's dream has grown beyond the mere selling of off-brand potato chips to a multi-million dollar company that sells off-brand potato chips. And just like the SUVs and "Friends," WalMart will keep coming back not because of a lack of will, but because of a lack of brains on the ones trying to set price and product sale controls into an economy.

The former Soviet Union used to do something similar. Look how they turned out.



/JD

[rikytik]

Yep. Big subject. I"m no expert on it and only know what little I see from time to time, or read.

My daughter is an asst. mgr. at a Walmart in Dallas. She's been there a year. She doesn't get overtime as an asst. mgr and hasn't worked less than 60 hour weeks for the past year, yet gets paid for 48 hours of work. The turnover in her store is roughly 120% and has gone as high as 150%. My daughter is in charge of hiring, firing, training and other matters, plus works the registers when needed. It's basically a sweat shop.

In many small towns Walmart is the ONLY game in town. I often visit my uncle in a WV town of 15,000 people. The new Walmart store, 5 miles outside the town has drawn ALL the trade there and the main street in town looks like one of the Western mining Ghost towns. The people who work there are happy to do so because there isn't much of an alternative, but they get paid less.

Not much of a life for my daughter. Her husband hasn't worked in 3 years, so she feels trapped. Hopefully she'll be able to break away and get a life if her husband ever finds a job. He's a EDP guy, one of thousands got laid off down there.

[sigmazeta314]

JacKDyne, my applause for well written commentary utilizing excellent economic theory, arguing a great point, and demonstrating full command of the english language. So many cannot fully articulate what you just have and for that I thank you.

I think Rikytik should read the following article about outsourcing which will show irrefutable evidence that outsourcing is actually good for the American economy, the American consumer and even the American worker. The Outsourcing Bogeyman

In fact, I believe every American should read this article to see the real truth behind it all.

JacKDyne, as far as right wing politics are concerned, I have rarely heard a conservative oppose offshoring of work in today's globalized economy... but you never know these days what might be spewing from those mouths.

Finally (and I will try to keep it short) I shop at Wal Mart, Target, Costco, etc. and I love paying less there because good companies have made smart decisions to send their manufacturing overseas where direct labor cost efficiencies allow them to focus on better sales, marketing, and customer service - all of which require American workers who might be without jobs had it not been for foreign labor. This does not even count the myriad of other AMERICAN WORKERS like steamship line operators, dock workers, coloaders, freight forwarders, logistics companies, customs house agents, tug boat operators, truckers, warehouse laborers, container and pallet manufacturers, and lets not forget the importing companies and their employees who process paperwork, their administrative assistants, UPS drivers, landlords ... the list goes on for quite a long time if you get my drift... who play a crucial role in getting is these products that you see in Wal Mart...and all of this money is reinjected in the US ECONOMY in the form of redistributed wages...oh and lets not forget the WalMart workers and their stockholders who get paid. But oh no, it doesn't even stop there - each of us gets to keep more money in our pockets and spend it where we deem necessary because we don't have to spend it on overpriced American goods. And its not like we still don't see the benefits of it all when Wal Mart and all the other people listed above pay their income taxes (and unfortunately Social(ist) (in)Security) so the government can build us roads and telecommunications, improve our schools, and so on. This all boils down to "trickle down economics". Read about it!

PS - If you think you are being worked like a slave then find another job that suits you better. One year isn't that long. Unemployment might cover the down time...hopefully not for 3 years though.

Thanks for listening.

[JacKDynne]

Thanks for the kind words m8 but I did not pen the above - the author's name is at the top of the post - I cannot take credit for someone elses work

I do however agree with the points - why reinvent the wheel



/JD