King_Lacho

Today morning I was reading the newspaper and I found out that Pres. Bush was supporting the privatization of the American Social Security services. And well, I wanted to know what you think...

I'm from Guatemala and we had the same problem a few months ago, but it wasn't even discussed because we don't have the enough resources (as a country) to pay a private organization for the services that should be public.

what do YOU think?

eramnes

Social Security privatization is a good idea, simply because it's people's money to do what they want with. Your paycheck does not belong to the government. The potentials for return are much higher in a privatized system. The Dow Jones averages a 13% yearly return. Social Security cannot match this.

Also, Social Security will be collapsing under its own weight before long. The ratio of retired people to working people is getting out of hand, and the government will be forced into deficit spending to pay off the people that are collecting. Social Security is a crude form of pyramid scheme, specifically a Ponzi scheme. This sort of thing is illegal when citizens do it, yet a benefit when the government does it? I don't think so.

Save the American populace the money and trouble of a Social Security system by privatizing it.

King_Lacho

No, I'm not saying it's illegal, I'm just saying that if Social Security was privatized, it would be a lot harder for poor people to be able to pay for it...

Besides, wouln't it be better if they (the government) took the money that is used to pay for war and used it to pay for the Social Security costs? wouldn't that be a lot easier to do than a privatization? isn't health more important than foreign problems with other countries?

and believe me, you would have to live in a "third world country" like me to understand how different Social Security and private health are

eramnes

IIRC, not all of Social Security is going to be private, just a percentage of it. The percentage that isn't still kept by the government would be yours to do what you want with, like invest in the stock market, buy gold, etc. The illegal comment was simply to make a point, that taking people's money is wrong whether it's the government or a mugger.

Also, if the government wasn't taking the money out of poor people's checks, then the poor people would have that money to invest with. So it wouldn't be any harder for them to save for retirement, since the amount of money would be the same.
No. We might have screwed up going into Iraq, but now that we are there we can't just up and leave, taking our money to pay for Social Security. Also, the money from this war is not even a drop in the bucket for the trillon or so dollars we would need to patch it up for 50 more years. Even if we did that, we still would have the same problem later on down the line. The system is collapsing under its own weight.
No. We have created problems in Iraq and Afghanistan that we need to fix. We can't just pull out and leave. There are a number of consequences to simply leaving, not the least of which is Iraq in ruins. We can't abandon them because our Social Security program is going to be in the tank. Like I said before, the amount of money we would save is insignificant compared to the Social Security debt.
Depends. If you are preventing an attack on your people, then it is more important to keep them safe, because it prevents health problems in the future. I don't get the connection between health and Social Security though. Two different problems.

King_Lacho

And who's money would they take?

You're absolutely right on that one.

I don't know about you, but here in my country, Social Security means the whole system of doctors and health specialists that are paid for by the government. They don't ask you for insurance before they attend you, they're there because they want to give you exactly that, Social Security. Security for your health, nutrition, and also other medical services. They don't ask you for an insurance policy because in Guatemala, salaries include a percentage that goes directly to Social Security (somewhat like a tax, but not exactly), allowing you to receive medical attention which is provided by law.

if you have a different approach to what social security is, then, how about you tell me?

King_Lacho

Alright, you're right about the whole up-and-go from Iraq thing. I won't argue that.

but, who's money would they be taking in order to establish an investment-on-health system?

eramnes

In America, Social Security is somewhat like a government-sponsored retirement savings. Every check, the government takes out a portion of your wages and it is supposedly saved in a giant account somewhere. When you turn 65, you can start collecting your Social Security, and it will help suppliment your retirement savings, because it isn't enough to live on.

The problem is that right now, there are more retired people than there are working people. So, the workers have to pay Social Security tax, but their money isn't being saved for them, because we need it to pay off the people that are collecting Social Security now. When the current workforce retires, there isn't going to be any money left for them, because the drain on the fund is so high. We are basically spending more Social Security money than we are taking in.

Bush's plan would allow the current workforce to keep a portion of their Social Security money to invest in a private retirement account, the stock market, or things like that. The problem with this plan is that under it, the benefits of people currently collecting will not be reduced, therefore, we are spending at an even higher rate; since we are collecting less tax. But the upside is that once the current collectors die, the drain on the system will be much less, as the people who got to invest some of their money privately will need much less Social Security money because the returns on private investment are much higher than the interest on Social Security. Therefore, the private savings accumulate more money.

Bush's plan is attempting to fix Social Security completely, instead of just throwing more money at it. It's a long-term solution, but one that is in the best interest of the program, because it stops the deficit spending over the long haul. I personally don't care for Social Security, because I feel it's taking your hard-earned money, but Bush's plan is a step in the right direction.

King_Lacho

Wow, I'm glad we feel the same way about something, except for the supporting Bush thing... alright, this thread may be closed... I was wrong... I don't care anymore... L8ER y'all

Nelson...

I agree that Social Security is in need of reform, and that we shouldn't wait until it runs out to do someting about it, but I don't think this particular privitization plan is a good idea.

http://www.socsec.org/publications.asp?pubid=503 (the article in it's entirety is a good read, I just took a small excerpt from it)

Quote:

REASON #5: The odds are against individuals investing successfully. Privatization advocates like to stress the appeal of "individual choice" and "personal control," while assuming in their forecasts that everyone's accounts will match the overall performance of the stock market. But studies by Yale economist Robert J. Shiller and others have demonstrated that individual investors are far more likely to do worse than the market generally, even excluding the cost of commissions and administrative expenses. Indeed, research by Princeton University economist Burton Malkiel found that even professional money managers over time significantly underperformed indexes of the entire market. Moreover, a number of surveys show that most people lack the knowledge to make even basic decisions about investing. For example, a Securities and Exchange Commission report synthesizing surveys of investors found that only 14 percent knew the difference between a growth stock and an income stock, and just 38 percent understood that when interest rates rise, bond prices go down. Almost half of all investors believed incorrectly that diversification guarantees that their portfolio won't suffer if the market drops and 40 percent thought that a mutual fund's operating costs have no impact on the returns they receive. While predictions vary significantly about how investment markets will perform in the decades ahead, it's safe to say that any growth in individual accounts under privatization will be significantly lower than what the overall markets achieve. REASON #6: What you get will depend on whether you retire when the market is up or down. In the twentieth century, when stocks generally grew significantly, there were three twenty-year periods over which the market either declined or did not rise. The volatility of investment markets means that it matters a great deal whether you retire during an upswing or downturn. For example, a worker who invested his or her retirement fund in a stock portfolio that matched the Standard & Poor's 500 index and cashed out upon retirement in March 2000 would have a nest egg almost a third larger than someone who retired just a year later using exactly the same investment strategy. Of course, that is because the stock market plunged over those twelve months. Gary Burtless of the Brookings Institution demonstrated how much timing matters under privatization by examining what would have happened to workers with forty-year careers who retired in each year from 1911 until 2002. Following Burtless's method, the figure below assumes that each worker put 7 percent of his or her earnings in the stock market every year (reinvesting dividends) and earned the actual historical return, year by year. It shows the wide variation in the retirement income workers would have received. Clearly, some workers would do much better than others based simply on when they happened to retire-that would be a major change from today's system.

I don't like the idea of Social Security money being "investment money" at all. For many people that will have to depend on SS after retirement or due to disability, that's not optional money. It will be "last chance money". The stock market is no guarantee. If you win, you win. If you lose, you LOSE. And that's the point. If some people will lose money out of this, then you haven't solved the prolem at all, you just made a new one.

What do you prefer? Chicken, or chicken-flavored cat food?

eramnes

There's nothing in the plan mandating that you would have to put your money in the stock market. You could, for example, buy Treasury bonds, or something with a guaranteed rate of return. Those who want to gamble, or think they are good at playing the market, could put their privatized money in the stock market.

Actually, there's nothing in the plan stating that you would even have to take any privatized money. The private money is strictly voluntary. If you didn't like the plan, you could choose to continue recieving benefits just like before the plan was changed. Bush's plan counts on the draw of greater return potential to ease the drain.