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Originally posted by Mmmm, Burger (C.J.)
I don't necessarily disagree with what you say, but I still fail to see how privatization solves those problems.
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It doesn't, necessarily, except in the assumption (reasonably sound but by no means certain, which is a clear problem) that private investment of the funds currently being deducted from people's paychecks will, on average, earn better effective returns than the SS taxes the G will be able to wrest from the then-available-worker tax base in the future.
The first problem is the gap - someone will have to pay twice, paying both for current retirees' bens and then again for their own retirement. But privatization doesn't create that problem - it will happen anyway, because of the huge chunk of people who will be retiring soon and have been promised the moon, but who haven't paid enough surplus into the system over their working lives to draw down, and don't have enough workers coming behind them to support, the benefits they claim to have been "promised." Privatization is just one of a number of mooted schemes to manage the problem. I have no strong opinion on whether it is the best one that has been suggested, but it is more realistic than most.
Right now, the group that will bear the brunt of that inevitable gap is probably us (those colloquially know as X-ers and Y-ers), simply because demographically the boomers may well be able to demand extra funds from us for their own benefit, sucking the funds out of the system so there isn't a cushion left for us when our turn comes, and having taxed us much more heavily and therefore reduced the amount we have been able to save ourselves (I love the idea of a massive Gen X/Y tax revolt, but sadly I don't think it is likely). Most privatization schemes (and most "individual SS account" schemes, whether they propose investing those individual account funds in the private sector or not) attempt to shift some of that burden off of us and onto boomers (and pre-boomers, if they live long enough) in a politically manageable way, by (i) pulling some of our retirement tax money out of the pot going to older generations during our remaining working life and applying it toward our own future retirement (i.e.: protecting a portion of our income from current retirees and preserving it for our own retirement) and (ii) putting a good face on reducing the benefits to those older generations, which presumably have not have saved as if they expected it (the "putting a good face on it" part is calling it "reform" rather "benefit reduction," which obviously would be just as (or more) effective but politically untenable). Since those age groups are, on average, a lot wealthier than our age group, this seems to me like a decent and reasonably equitable idea to try to work from.
Then comes the problem of dealing with the members of those unprepared groups who are not, in fact, relatively wealthy, and dealing with the members of future generations who will not, in fact, save enough in a private system to retire on (either through bad luck or because they just never earned enough).
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If SS goes too much to the rich, cut the benefits at the top end, or means test, or tax (this despite promised made to the generation).
If all we want is a safety net, create that. Lower taxes adn benefits, and promise a much lower benefit that's right at the poverty line.
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I advocate both of those measures, with or without private retirement accounts or other SS "reform" measures.
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Privatization does not mean no savings. It means forced savings without a gov't guarantee.
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Yes.
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If you're going to force people to save--that is pay for their own retirement--you might as well make sure it will be paid for no matter how incapable they are.
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Not sure what you mean, but if you mean "guarantee a liveable minimum amount so no one will starve to death or freeze in their tenament because their account took a bad hit on a sure-thing Nigerian investment when they were 66," I agree, though I think it should be rigorously means tested (requiring the liquidation of assets before sucking off the public teat).
Of course, I note that I think SS payments should be rigorously means tested right now. I also note that I have never claimed to be remotely mainstream or moderate in my views on SS.
