Privatize Social Security?

[Antilles]

Rather than turn this into another “Bush is the devil/Kerry is a D-bag” thread, I was hoping to get some insight into the conservative viewpoint on what I think should be one of the more pressing issues: the privatization of social security.

Disclaimer: What I know about the social security issue is almost exclusively limited to what I was taught in tax law by a fairly liberal tax professor.

Social security, as it has been characterized to me, is the world’s biggest pyramid scheme (which in the real world, of course, is illegal). In a nutshell, SS works by borrowing from the current workforce to pay to support the past workforce, with the promise that when we retire we will be paid back with interest. Believe it or not, if you live to your life expectancy you will get back between 2.5 and 4 times what you pay in to the system (more if you live past your expectancy). Of course, in order to pay back this amount, you need to borrow more from the next generation… and so on.

This system works well enough if you have an expanding work force, but like all industrial countries our population rate is flat (it may even be in decline. Not sure.). Moreover, we have you damn baby-boomers about to retire and we need to support that generation with a smaller workforce. My Prof’s problem with privatization at this time, is that if the current workforce is allowed to take money out of the system and invest, then how do we pay for the baby-boomers? After all, even without taking money out of the system, our current workforce will struggle to payback the boomers. If we privatize, most likely we will have to raise taxes to generate the additional funds. After all, the gov’t is obligated to pay all the boomers their 2.5 to 4 times what they paid in.

As I understand his argument, he believes that if we can get past the baby-boomer bubble, the population demographics smoothes out and a multi-stage privatization may be possible. Thus, to reduce the strain of the boomers, he suggests pushing back the retirement age and reducing benefits, particularly to seniors who earned higher incomes during their lifetime. Of course, given the voting trends of seniors, these options are not politically popular (and probably not even viable). He also suggests allowing increased immigration to increase the size of the workforce. Again, this also presupposes that jobs will be available when they get here.

Despite their relative lack of political viability, these arguments are intuitively attractive to me. If his characterization of SS is correct, it makes sense to do whatever possible to get past the boomers before we can privatize.

So what I want to know is, what is the logic behind wanting to privatize right away? Is there something wrong with my understanding of the SS system? Does Bush hope to privatize in stages?

[Garcia Bronco]

First of all...social security should have never been implemented. As far as a generation getting their fair do...I think the governemt should stiff them and not pay them a dime. :)

Sorry I tried to be serious.

[Captain_Poncho]

Social security will be good and gone by the time I and most of my colleagues retire.

Plan accordingly.

[bendog]

I dunno if I'm conservative; I think the gop has left me behind. But, back before BushII when we actually, if briefly, took in more than we spent in total fed taxes, I thought maybe we could make some broad based fund - based on stock indexes, foreign too, and real estate and bonds to make some conservative mix htat would be pretty much risk free over the long term, but of course would still have cyclical flux, but even that could be minimized with a broad enough mix - and start investing in for the children born to the millinium generation, with the hope soc sec could be downsized when they retired.

The Gop nixed any idea of broad based govt mandated investment mix because it had govt making investment decisions. But, if the idea is to make sure there's some of the pie for everybody, it's the only way to do it. BushII's 2000 idea, which he apparantly never intended to implement, was a non-starter for me because some of the folks who put their fica in privatized accounts would end up bust. So, then they're on welfare, and those of us who'd done better with their ivenstment/careers would STILL end up paying for them.

As for the prognosis of social security, imo the doubters are overly pessimistic. The millinium generation is larger than the boomers. Assuming we were reducing ALL of the outstanding federal debt as measured by a % of gnp, as opposed to raising it as we are under BushII, I'd think that with raising taxes on the top 5-10% of retiree benefits and fiddling with the cap on fica taxes and issuing more debt during the lean years before the millimium kids enter the workforce, we coudl limp by.

However, the stated goal of BushII's advisors is to create a fiscal crunch that will necessitate at a minimum ending programs aimed at the poor, like sec 8 and medicaid for working poor kids, just to maintain social security in some form.

Medicare, I think, has some real problems that go beyond just actuarial statistics. How much is some of this stuff -stem cell / genetic - gonna cost? Drugs?

[Antilles]

First of all...social security should have never been implemented. As far as a generation getting their fair do...I think the governemt should stiff them and not pay them a dime. :)

Sorry I tried to be serious.

Yeah my inital reaction was the same. Unfortunately, if the gov't tries to stiff anyone you can bet there will be a landslide of lawsuits that will probably end up costing the gov't even more (not to mention all the seniors who have relied on SS being there and will now be eating dog food).

[Falconer]

I'm happy to say that I do not pay into Social Security. I work for the state of Illinois and we do not pay into it. Instead we are mandated to either pay into a pension fund, or pay into a self-managed account. I decided to do the latter of the two, as I used to be an investment representative for Edward Jones. The only way that this concept could come back to haunt me, is if the whole market would crash. However, if that happened I wouldn't feel real good about anything in this country. Even if I can only manage a 3% rate of return, I will still be better off than if I was paying into SS.

[RaiderH8r]

I'm happy to say that I do not pay into Social Security. I work for the state of Illinois and we do not pay into it. Instead we are mandated to either pay into a pension fund, or pay into a self-managed account. I decided to do the latter of the two, as I used to be an investment representative for Edward Jones. The only way that this concept could come back to haunt me, is if the whole market would crash. However, if that happened I wouldn't feel real good about anything in this country. Even if I can only manage a 3% rate of return, I will still be better off than if I was paying into SS.
Federal employees have a samilar plan.

SS is a crock. When the idea was hatched there were 44 workers paying for every 1 retiree. That ratio is now 3-1, which means higher SS tax or lower benefits. SS is just robbery because most who pay now will never see a plug nickle of it. So much for the "Greatest Generation" giving a rip about their grand kids, and soon their own kids. On the upside, when the baby boomers hit retirement age and thus become the largest voting demographic, marijuana will probably be decriminalized...I say within the next 20 years.

[W*GS]

My wife was self-employed - if you think the 7.65% you're paying into SS and Medicare is bad, trying paying both halves - that's 15.3% off the top, as she did.

What bothers me most about SS isn't the fact that what I've already been forced to pay is as good as gone. It's that my kids and grandkids, unless it's radically changed, will be burdened with ridiculous debts.