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Privatization of Social Security
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| MisterOpus1 |
A blogger I read had brought this topic up and I thought it was an interesting idea. At one point in time, Bush had mentioned that he believes anyone can beat the current 2% rate given by the Federal Social Security Fund. Now this may not be entirely fair, but I think it's worth taking his approach to task on the current market over the last 4 years:
On January 22, 2000, the Dow Jones closed at 10,578.24. At present we see it at 10,011.92.
Let's take a look at the tech-heavy NASDAQ during Bush's 4 years: the first day he was in office it closed at 2,757.91 and today it closed at 1,952.18 -- a fairly precipitous drop, I'd say. I also don't think we can sit here and give anymore excuses -- we've had nearly four years to catch up after the "internet bubble" popped -- remember NASDAQ was up over 5,000 for a time and the bubble had long burst. I also agree that we can't continue to use 9-11 as an excuse, either -- within weeks the market had recovered most of the sudden losses, but then gradually lost ground.
How 'bout the S&P 500? Jan. 22, 2001 - closed at 1,342.90. Today it's currently at 1,117.93.
Funny, after all the job cuts the companies of the DJIA and NASDAQ have made in the name of shoring up their stock prices, you'd think they could have done better than two percent gains as well. And you'd think that this president's economic policies, with all the tax cuts and cost-shifting on to workers, we'd do better than two percent. It 's a fact -- the DJIA and NASDAQ have lost value during this president's tenure, at least so far.
So if there's a flaw in my argument, I welcome any economic-savy minded individual to point it out. But my central argument is this - would we really want an average joe, like myself, who knows only a tad bit on the economy and the trade market, to be putting my retirement money into such a volatile place as Wall Street, given what I've seen with the market with Bush in the office over the last 4 years? |
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| Yoepus |
Go to a bank, ask them how much interest they are willing to pay you if you close 10,000 for 10 years.
There is your flaw. |
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| Shakka |
The implications I see from your statements:
1) It's the president who has ultimate control over what the stock market does(Even though the stock market is ultimately controlled by the whims of millions of speculators acting in concert).
2) You really love government control over your life! You should easily be able to beat a 2% return with some consistency without too much research and effort on your part. Now beating 10% year after year may be a horse of a different color.
Social Security NEEDS to change. I don't think there's any question about it. Kerry has said he will do nothing to it. He also said that Bush's tax cuts would've funded social security until 2075--something I find to be one of the most absurd attempts at forecasting I've ever heard. How in the hell could anyone forecast out that far??? Kerry will be dead by 2040, yet he's forecasting another 35 years beyond that? It's laughable. There are clearly challenges in the near-term if anything is to be done about the situation, but in general, I belive that some privatization(not complete privatization, Opus) would probably be a good thing as it would eliminate some government inefficiencies, as well as put control and money back in the hands of those who actually earned and own it. |
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| occrider |
You don't save for retirement over the course of 3 or 4 years. You save for 40-50 years. Therefore you experience both the highs and lows of the business cycle and ride out the trend. Try this graph instead ;):
Nasdaq has a far shorter history, but you be the judge:
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| MisterOpus1 |
| quote: | Originally posted by occrider
You don't save for retirement over the course of 3 or 4 years. You save for 40-50 years. Therefore you experience both the highs and lows of the business cycle and ride out the trend. Try this graph instead ;):
Nasdaq has a far shorter history, but you be the judge:
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Okay, that's a little better. Now how 'bout a breakdown of a different sort - my contention was that under Bush's policies the market doesn't and will continue to not do well. I realized when I made my post that 4 years was a bit short of a time span, but is it not a worthy claim to state that under our current economic policies it would not be a viable plan under Bush? Let's just say that Rove keeps up his tricks and continues to enable a Republican leader and GOP Congress for the next 30 years or so (hold your excitement back, Shakka - I'm just making a theoretical here :D). And let's continue to say that we will continue under the same economic policies - after all this seems exactly what Bush is proposing. Would it be safe to conclude that the market may be a little too volatile to put my retirement social security savings in there, under these theoretical future conditions? |
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| NeoPhono |
As talked about earlier, forcing people to save for their retirement where the lone option is under government control is unacceptable to me. If you want to require people to save for their retirement I will begin to agree with you, but not when the only option available is run by Uncle Sam.
If you look at the entire history of programs run soley by our national government, I can really only think of one large, wide-scoped program that has been effective and that is our national highway system. Everything else is either a mess, worthless or doomed for failure (I'm sure some of you will point out instances where I am wrong, I urge you to do so). I see no reason that social security, a program doomed to failure by demographics alone, should be any different. Allow the educated individual to save for his own retirement in a manner he sees fit.
The government should not be aimed at catering to the lowest common denominator, in this case those unable to save for their retirement responsibly, and then force all to follow its decrees. |
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| MisterOpus1 |
| quote: | Originally posted by NeoPhono
As talked about earlier, forcing people to save for their retirement where the lone option is under government control is unacceptable to me. If you want to require people to save for their retirement I will begin to agree with you, but not when the only option available is run by Uncle Sam.
If you look at the entire history of programs run soley by our national government, I can really only think of one large, wide-scoped program that has been effective and that is our national highway system. Everything else is either a mess, worthless or doomed for failure (I'm sure some of you will point out instances where I am wrong, I urge you to do so). I see no reason that social security, a program doomed to failure by demographics alone, should be any different. |
I think other government programs would be worthy of discussing in other threads - I would like to keep this specifically on SS. Is SS really "doomed to failure"? I know Occ has discussed this in the past, so he can refresh my memory if he chooses - but what needs changing with SS?
| quote: | | Allow the educated individual to save for his own retirement in a manner he sees fit. |
That's just it, Neo - I don't doubt that the financially savy-minded, educated individuals will likely do pretty good with a new retirement savings plan like Bush proposes. But what about the rest of us? What about those, like myself, that pays only 1/2 of my attention span on the markets? Would I really want to listen to a broker tell me where to put my retirement money, given the trends over the last 4 years? Would I want to trust anyone with my money, should we continue with these trends with someone like Bush and his economic policies in office, as well as a GOP-led Congress?
| quote: | | The government should not be aimed at catering to the lowest common denominator, in this case those unable to save for their retirement responsibly, and then force all to follow its decrees. |
Excuse me? IOW, the government should not be concerned about the less financially, market savy minded folks like me, and should focus more on those who are more financially educated? Did I read your statement right? |
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| Shakka |
Am I reading you correctly? Are you saying that simply because some people might have better financial knowledge/comprehension than others, that the government should therefore not allow any individual control over a person's retirement simply because they may do a better job and make better decisions than someone else? That because the system isn't "fair" in that some may profit more than others due to their own decisions, so it is therefore a bad idea? Maybe the government should do a better job of making financial education a core element of public education. I disagree with the statement that a program is a bad idea simply because some people will achieve a better/worse rate of return than others based on their own decision.
Bush's plan only calls for a portion of retirement savings to go into the individual's control, not all of it. Simply because not everyone will be making an identical return as everyone else doesn't make it a bad idea. Exactly how much control should the government have over your life? Is it explicity the government's role to make sure you're a financially savvy person? Why not go to your public library and do some reading--it's free, and provided by your government. Only you can decide to learn the material.
A couple of no brainer strategies that would give you better than a 2% return...you could buy TIPS which are government bonds that are structured to compensate the holder for inflation so you know you'll never get a rate of return below inflation. Another thing to do would be to go to your bank and buy some CD's. You can get a 5-7 year right now that's paying well over 4%. In any event, the majority of a person's retirement would still get locked up in social security, but at least they'd have a portion that they could try to do a little better or worse with depending on their own opinions about the economy and such. You can go to www.bankrate.com to find some going rates for CD's and such. |
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| imokruok |
You also have to remember that even if the indices aren't up, it doesn't mean that people aren't making a return. Keep in mind that the market was very cyclical from the mid-1960's to the early-1980's. People can make a very good return on an income stock that has little adjustment in price.
Occrider posted the graphs with the best argument for long-term investment in the stock market. Over the long-term, everyone who plays the index does well. If I recall correctly, there is only one 5 year period in the history of the stock market where people actually lost money on an index. If you move the time frame out to 10 years, there is never any 10 year period in the history of the market where someone lost money on an index.
Now, we're looking at charts here that don't contain billions of dollars in American retirement income. If you give people control over their mandated government retirement, you're going to see huge amounts of cash dumped into the market, which will be good for companies, good for the economy, and good for the market as a whole. By privatizing even part of social security, you release billions - even trillions - of dollars from a stagnant government program. |
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| NeoPhono |
| quote: | Originally posted by MisterOpus1
That's just it, Neo - I don't doubt that the financially savy-minded, educated individuals will likely do pretty good with a new retirement savings plan like Bush proposes. But what about the rest of us? What about those, like myself, that pays only 1/2 of my attention span on the markets? Would I really want to listen to a broker tell me where to put my retirement money, given the trends over the last 4 years? Would I want to trust anyone with my money, should we continue with these trends with someone like Bush and his economic policies in office, as well as a GOP-led Congress? |
If you would like to have your money funneled into a government sponsered savings system, I have no problem with it. However, my main concern is that it should not be mandatory.
If you would like to take a hands-off approach to your retirement savings, then fine. There are those however who would much rather take their retirement planning into their own hands, and would quite frankly do a much better job at investing then Uncle Sam. I have no problem with keeping a government run retirement system, I don't even have a problem with people having to show they have something planned for their retirement. What I do have a problem with is the government not only telling me but requiring me, with no other options, how and where my retirement investments will go.
| quote: | | Excuse me? IOW, the government should not be concerned about the less financially, market savy minded folks like me, and should focus more on those who are more financially educated? Did I read your statement right? |
No, that's not what I'm saying. I'm saying that the government can establish as many programs it wants for the less financially and market savy individuals, however it should not force the entire population to comply with what it proposes. |
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| Shakka |
I guess the problem I have with the argument from the left is that it basically says that since it is highly probable that some people will benefit more than others(some people's choices will prove more prescient than others over the long term), that the system is inherently unfair--which is complete BS, IMO.
It goes on to say that since someone else is almost assured of doing better than me, the system is therefore unfair to all and we should all be stuck with a system that guarantees us all an equal(and lower) rate of return. Therefore we are all hurt because we want to insure that someone doesn't profit too much more than another. |
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| MisterOpus1 |
Thanks for your responses. I haven't had much time today to examine the arguments further, but on the whole I do tend to agree that there are some changes that should be made. I'm just personally not convinced that the day of change is now, at least not yet. I need to research this a little further, however, in order to say anything more.
There's also a particular criticism of Bush's SS proposal that I have yet to see answered very well - Bush has reassured seniors on the campaign stump that they'll continue to see their checks, and that their SS money will not be touched. Well let's say that over the next 4 years Bush's proposals come to fruition, and youngins' like us get to play the markets more with our SS. Well, all that money that we would have been normally been placed into the SS fund is now being placed elsewhere. So those folks who retire, say 10-15 yrs. from now - where will their money be? IOW, the shifting of our finances will have a direct impact on the money given to retirees down the road. So how will those retirees be subsidized at all then? |
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