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Originally posted by Adder
I don't see how your last sentence is relevant unless you see privatization as a bail out. In other words, privatization might be good even if there is no no need to save anything.
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Social Security is an intergenerational transfer, or, if you like, a Ponzi Scheme. Payments to the old are funded by the young, with the promise that when the young grow old, they too will be taken care of. "Privatization" is something completely different -- the notion that this compact should be replaced with a system in which the young are permitted or compelled to invest for themselves. So the fundamental problem is that if we adopt "privatization," who pays for the old until today's young are old? Whether or not "privatization" is "good," you have this (huge) problem.
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Perhaps I will need to go back and actually read what you are referring to, but I am highly skeptical of anyone who believes they can predict what the market will do, especially if they are predicting that things will be susbtantially different than they have been in the past.
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Then you should be "highly skeptical" about the claims made by privatization advocates that investments in the market will earn 6% or 7%. But obviously there is a connection between the performance of the stock market and the performance of the larger economy, and if the privatization advocates are claiming that the latter will suffer in coming decades, as a result of demographic factors, it's hard to see how they could think that returns in the market will keep ripping along at past rates.
The answer is, of course, that they don't -- they are wedded to privatization for ideological and venal reasons, not because they believe in these numbers.
