Thoughts on 'Social Security Reform'

[eeldip]

the WSJ, that liberal rag published these findings today

-- Sweden turned to private accounts in 1991 after projections showed the system in place would eventually require a payroll tax of a staggering 36 percent. The country chose to maximize choice, but over time Swedish workers fled from so much freedom. At the start, two-thirds of Swedes patched together their own private accounts from a vast array of choices. But many got clobbered by an errant stock market, and by 2003, only eight percent of young Swedes were choosing to design their own portfolios. The government "wanted people to take control of their retirement, but people don't seem to be interested," says Annika Sunden, a Swedish pension expert.

-- In Bolivia, which adopted private accounts eight years ago, crippling transition costs have led to a doubling of the government's budget deficit, and the system has not been able to pay promised benefits.

-- In Singapore, an extremely discretionary program allows workers to disperse their contributions among three accounts, an "ordinary" account, used for housing and education; a medical account for hospital costs, and a third account for old age and disabilities. As a result, fully ninety percent of Singapore citizens own their own homes -- but payroll taxes eat up 33 percent of paychecks. In addition, many of the elderly contributed so much of their withheld pay to housing and medical accounts that they find themselves with little money in their retirement accounts -- "asset-rich but cash-poor" at retirement.

-- In Britain, a social security overhaul in the late 1980s was so thoroughly botched that today "a lot of people look longingly at [America's] Social Security system," says Stephen Yeo, a pension consultant. Late last year, the Association of British Insurers mailed six million copies of a brochure with a photo of a smiling young woman on the cover -- and an advisory inside informing older people it had become "very unlikely" that the personal pensions they had chosen would match the modest payouts from a basic state pension.

-- In Chile, assets in private pension accounts amount to $54 billion, equal to almost two-thirds of annual gross domestic product. Plus, since the system was imposed "at the point of a bayonet" by dictator Gen. Augusto Pinochet in 1981, investors have benefited from high interest rates and a robust stock market. From 1981 through 1995, funds returned an average of nearly 13 percent a year. But since then, annual returns have dwindled to about 6.5 percent, and investment management fees of as much as 20 percent have "taken some of the glitter" off the rose. Furthermore, despite the program's relative success, there's widespread evasion; only 60 percent of workers contribute, and many who do underreport wages to avoid taxes.

[wrenhunter]

Nice stuff, eeldip.

But many got clobbered by an errant stock market, and by 2003, only eight percent of young Swedes were choosing to design their own portfolios.

The reality is there is no way most people are going to do better than SS does now. This is a country where the average savings rate is like 1%, and most people cannot be bothered to fill out a ten-line form to register for their 401(k) at work. Most don't give a shit

My take is: do a benefit cut and spread it around a little. I've heard a 20% cut would fix things. So I lose 1.2% of the salary I've paid in over the years (6.2% x 20%), but we save the system? Can do.

Regarding private accounts (which have nothing to do with the shortfall, of course), make them voluntary and make the default the same as it is now, i.e. boring bonds. That way, the goo-goo libertarians (who can't believe someone else is touching their money) will be happy and the rest of us can go back to watching Maude.

I think people in the private sector are accountable to market forces, and that is a real kind of accountability.

Haw, haw <wipes away tear>. Thanks the for the laugh, old boy!

[Mr PC]

Glad to give you a chuckle, wren. However, Of course, while elected officials are held to account by elections, I'm thinking about the bureaucrats. They tend to be well protected and removed from having a personal interest in how things work.

Private sector higher-ups have stockholders to answer to, and have a financial interest in their companies, and can be fired.

A cynic would point to corporate abuses and golden parachutes that do indeed exist, but that stuff doesn't prove that there is not accountability in the private sector. Look what happened to Kenny-boy.(and Martha Stewart!)

PC

[eeldip]

the private sector and the public sector are very different, it is silly to think that one is better than the other in general, or that one is more or less accountable then the other in general.

they are different, and do different things better.

what we are talking about here specifically is social security.

if you can point to an example of the private sector handling SS like systems better than the public sector, then lets see it!

the evidence shows that the public sector is better. see above.

[Mr PC]

I think your general point is a really good one. I also see a need for SS. (If I were a real rightie, I would see the need for THE SS).

Keep in mind, it is only a small portion of ones SS contribution that would be invested, and since the investments would be subject to many guidelines to make them safe and such, it is not all that "private sector" in the end.

The thing I like the most about Bush's idea is that people actually own a portion of their retirement. If some guy works all of his life and dies at age 64, his contributions aren't for nothing. His family would have that part of his benefits that he owns.

PC

[eeldip]

well, currently we dont know how much you actually "own" yet.

looks like its gonna be some sort of annuity. which is a very strange financial transaction that is very easily abused. the govt will keep the vast majority of your invested money, and there will be very strict rules about taking your money out etc...

an IRA is a WAY better idea.

[comfortstarr]

Glad to give you a chuckle, wren. However, Of course, while elected officials are held to account by elections, I'm thinking about the bureaucrats. They tend to be well protected and removed from having a personal interest in how things work.

Private sector higher-ups have stockholders to answer to, and have a financial interest in their companies, and can be fired.

A cynic would point to corporate abuses and golden parachutes that do indeed exist, but that stuff doesn't prove that there is not accountability in the private sector. Look what happened to Kenny-boy.(and Martha Stewart!)

PC

Aside from the DMV and the cops, what bureaucrats have you met? Have you ever met someone who works for the GAO or the state department or, say, the department of ed? etc?

These vague/ominous references to "bureaucrats" are kind of useless and mis-leading.

[Zoltar]

Mr PC, I have been thinking about what you were saying. I fear that you are being a mite bit idealistic. Even the dudes from Enron, perhaps the worst embezzlers in recent history (in that they got caught) never went to jail. Martha Stewart is a self made entrepreneur, nowhere near the money that we are talking about here. She took the fall for a large and upset public.

It?s in the details. You aren't supposed to like the government. You go out there and vote and feel you make a difference, but the big business never changes.

Mr PC, I understand your point, but I would like you to consider that your attention has been manipulated. Read the SS Reform, you don't even really get the money, they do. It's all theirs to play with until you retire, and then it's all theirs again.

I hope this gives you something to think about. If I could offer some advice, p2p a Noam Chomsky speech, and listen to it in your car. he explains it better then I do.

[Mr PC]

Let me just say that my opinions about public vs. private sector stuff is a general one about how such entities succeed in accomplishing things. I'm sure there is much evidence in support of either camp.

And, there really isn't a SS reform plan that means anything at this time. There are a zillion options on the table, and the big debate hasn't really started yet.

[ottokbre]

I work in insurance. We arent accoountable to shit!

[MASSIVE Mastering]

but your problem here is your set of assumptions are wrong. everyone supports fixing the system. bush's proposals (very little info on these) and the proposals in congress are the things that the dems are opposing. not "fixing ss".

never has anyone proposed that you will be able to invest your SS on your own by the way. bush doesnt support that. he supports funnelling your money into approved annuitity accounts. basically forcing you to invest in the private interest of the govt choosing.

very strange proposal. very unRepublican really.

I beg to differ, I'm not making assumptions - These people proposed exactly what Bush is setting out to do now - Private (yet govt. controlled in some manner) investment accounts for a portion of your SS. Clinton and the gang, all the way back to FDR. They've talked about this over and over and over. Clinton proposed almost exactly the same numbers in 98 or 99 with solid support and standing "O's" from BOTH sides - Then dropped it.

I never understood it... One of several reasons I removed the "D" from my card. I'm not quite ready to put an "R" there yet, but if the Pubs keep doing this bizarre "say something, then actually do it" thing, I might consider it.

[eeldip]

no, they both supported some degree of privitization. but the plans are totally different.

clinton backed plans that included benefit cuts AND tax increases AND 2% privitization. well actually its all speculation.. i dont believe that he went so far to support a definate plan.

also clinton did not have advisors who wrote policy papers about dismantling SS. so it was fairer to assume he had SS's interests at heart. while it is fair to assume that there is pressure on the bush administration to totally dismantle SS.

privitization in itself isnt evil. its never worked, but that doesnt mean it CANT work.

also let me add that the general argument that "clinton supported it" is a red herring. i really dont care what clinton supported. i care about the proposals on the table right now.

[wrenhunter]

also let me add that the general argument that "clinton supported it" is a red herring.

Ditto, and leave off the FDR propaganda, MM. You pals with Andrew Card? For someone who's "not quite a Republican", your talking points are eerily similar to the White House's.

Private sector higher-ups have stockholders to answer to, and have a financial interest in their companies, and can be fired ... A cynic would point to corporate abuses and golden parachutes that do indeed exist, but that stuff doesn't prove that there is not accountability in the private sector. Look what happened to Kenny-boy.(and Martha Stewart!)

Lambs, though, man. That's just the low hanging fruit. What about the several industries, not companies, that Spitzer is going after in NY?

I'm really talking about CEO's who get paid, proportionate to the average worker, the highest rate since 1929. Who get to pick their own compensation board (hello, Richard Sasso) hence dictate their own salary. Who get paid giant bucks whether the company succeeds or not (many recent and galling examples).

Who enjoy a revolving door between industry and government (e.g. recent Boeing case), so really, get their pick of private vs. public sector. (Bush has been really egregious in appointing outspoken pro-industry types to "bureaucratic" posts (EPA, Parks Service) so your point is also ironic.) Who get giant subsidies when prices are low, and gov't purchases of their product when prices are high (e.g. agribusiness). Who lobby to remove all regulation (one has to be accountable to something, right?), then when regulation cannot be swept away, work with the gov't to write it themselves (energy bill). Who get paid by the gov't even when the latter finds the company has been ripping them off (today's Haliburton decision by the Army).

We have a legal system where corporations are "persons" but never admit guilt, who routinely set up offshore operations to avoid paying US tax while enjoying our infrastructure, even getting gov't contracts. (I believe the ratio of corporate tax to personal is at a 30 year low.)

So if you can't fail, get paid whether you do or not, always have another job handy, never admit wrongdoing, pay token fines, and can cheat on taxes without fear of getting caught -- where, pray tell, is the accountability?

[foley]

Accountability arises from stake holders being close to decision makers.

Wow. A true believer. Good for you!

Accountability on Wall Street means how many people have you laid off this month, how many old growth forests have you clear cut for toilet paper, how much formula have pushed on newborns in Guatemala. If you want <i>your</i> retirement "security" to be based on those kinds of choices then go right ahead and turn the blind eye. Hey, at least your're making 3%!

But screw the everyone else, right? At the core of this "ownership" society is the idea that <i>you</i> are way more important than anything else. Why should your money go to support old people? Why should your kids be forced to go to school with <i>those</i> kids? Why should you have to pay <i>someone else's</i> medical bills? Who cares about that wildlife refuge, don't <i>you</i> need gas?

This kind of narcissism underlies almost every aspect of the Bush agenda. The fact that this man calls himself a Christian is shameful.

Social Security was designed as a program in which we all sort of throw our money together to take care of the people who need it the most. Eventually we get out money back. The program works, so conservatives hate it.

The rest is just details.
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[swingdoc]

I'd like to point out that the people engaged to "fix" this system dont even use this system.

The first point on my reform bill would be to dissolve all of the pensions of the legislators and make them have to look forward to their own SS benefits.
Granted they're all wealthy regardless, but that'd be a good starting point.