Does Anyone Still Want to Privatize Social Security?

One good thing to emerge from this week’s market turmoil is that it lays waste to the argument that privatizing Social Security is in everyone’s best interest. Ask yourself how you would feel if your retirement took place during a bear market like the one we are now in.

Why would you want to gamble with your future security when you can have the assurance of a steady fixed income from Social Security as it is now structured to supplement anything you manage to save and any private pension to which you are entitled—a private pension that is subject to market whims?

You would not want to take the risk, but those who push for privatization must have reasons for doing so. Well, Dean Baker of the Center for Economic and Policy Research reports that “according to a recent World Bank analysis, the financial industry pocketed 15-20 percent of the money paid into the privatized Social Security system in Chile, which has often been held up as a model by privatizers in the United States. Given the losses that the millionaire Wall Street bozos have incurred with the housing crash,” it is clear that privatization would help those “very rich needy.”

Thus, it should be no surprise that the Republican Party continues to support privatization even in the wake of the turmoil on Wall Street that has resulted in a precipitous fall in the stock market. And the party does so even though its candidate for president suddenly has derided the very people we would have to depend on to manage those private accounts as greedy. He also is backing away from the Bush position on privatization that he has long supported, instead calling for a commission to look into solutions to the dreadful problems he thinks face Social Security, despite ample evidence to the contrary.

The truth of the matter is that small adjustments to the Social Security system are all that is needed to keep this system, one that has served the American people remarkably well for three-quarters of a century, solvent. Economist Bernard Wasow of The Century Foundation explained in a Taking Note column on the Foundation’s website that

• Without any special appropriations or rescue packages, Social Security can be expected to meet all its commitments until close to mid-century.
• With modest adjustments to the payroll tax, Social Security coverage, retirement age, and other tweaks, this period of financial security can be extended to the end of the 21st century. 

However, the position of the Republicans, who favor every kind of possible tax cut for the wealthiest Americans, should not be surprising since privatization means even more money for those who are already wealthy. What makes their position when it comes to Social Security even more dangerous is that they support not only privatization, but privatization without imposing regulations on markets.

Anyone who has listened to or read about the events taking place in our financial markets this week now understands the dangers inherent in the market and is likely to have learned that it is time to put an end once and for all to the idea that privatizing Social Security is a certain road to a more secure retirement.

Comments

[Dan]

I read your blog post about how its a good thing the Social Security system is not privatized. Did you happen to notice one of componets of the Bernard Wasow column you cited in your blog called for improving, "the return on Social Security funds by investing part of them in equities, as just about all other public and private pension plans do". The experts you sight in your blog suggest one of the "tweaks" needed to fix social security is to follow the example of the, "Federal Reserve Board, the Federal Railroad Retirement Board, and the Tennessee Valley Authority" and "invest directly in stocks".

Are you sure you don't think privitaization doesn't have some roll in efforts to revamp/reform Social Security? The experts you cite seem to think it is.

[Johnny]

You asked, "Why would you want to gamble with your future security when you can have the assurance of a steady fixed income from Social Security?"

My answer of why I would like to choose what to do with my retirement investment was recently highlighted in a mailing by the Social Security Administration. They say that the shift in ratio of workers to beneficiaries will deplete the fund, such that in 2041 your investments will pay out $780 per every $1000 you put in.

Your investment will pay out $780 per every $1000 you put in.

You called it a gamble to choose my own way to invest. The government's investment plan with my money is a sure bet... but one that is sure to loose you money.

Even if you hid this money under your mattress it would be a better investment than Social Security.

I don't know that i support disbanding Social Security entirely–-if someone feels their investing skills are not good than they should remain in Social Security. However, myself and surely another half of other Americans, can confidently make investment choices that make more than 78 cents to the dollar.

I merely assert that these confident investors should be able to choose to not be in a program like this. We should be able to choose whether or not we want the government to manage our investment.