A Forum for Grinches and Ho-Ho-Hoes

[Tyrone Slothrop]

Originally posted by Adder
Yes, but that doesn't mean it has to be.

No, but it means that "privatization" isn't really a reform of what we're doing now -- it's completely different, apart from the "private" aspect, in that individuals are saving for themselves instead of paying for the retirement of others.

Yup. And the biggest obsticle I see to a transition is the totall cowardice of our leadership to admit that while privatization might be good, it will also be costly. And I don't think it is a huge a problem as you think (but it get huger every day).

It's a much bigger cost than the shortfall Social Security is expected to face down the road, although of course that depends on how much revenue is diverted.

These people are predicting, at best, substantially reduced market returns (or, in other words, they are being highly conservative). That makes more sense to me that saying that even these super-conservative estimates are way too positive, which seems to be what you are saying (i.e. the better guess is that things will be largely the same, rather than radically different).

Again, this is what we are talking about. One need not think the demographic factors are going to substantially hurt the larger economy in order to think it might be a good idea to privatize (note: the historical stock market return is something around 11%).

Drum's posts suggest that they are hardy being super-conservative, so that's where we appear to differ. And that 11% figure is only for certain periods, I think. Read Drum's posts. How do you explain stock market returns over time that outpace economic growth by so much?

This is the promise of privatization: Everyone's investment grows faster than the economy as a whole! It's like Lake Wobegone -- we'll all be above average.

Or because, having watched what has happened to private pension plans (the near complete replacement of defined benefit with defined contribution, with much larger retiree resources) over the last 30 years, they believe that actually setting aside funds to pay future benefits, and earning a return (any return) on them makes for better off retired people.

Well, no kidding. I'm certainly doing that for my retirement. But then who's paying for our parents' retirement? Because the social compact we inherited, borne of the Great Depression, is that we pay for current retirees, and anothe generation will pay for us.

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What I don't get is the dogmatic democratic committment to the current system. I certainly don't believe that social security should be removed as a safety net. But I absolutely believe that people would be better off, and the system would be more sustainable, if people were investing the funds instead of loaning them to the government to pay for current expenses. [/QUOTE]

It's not a loan.

We inherited this obligation to our parents. No one is suggesting that we shirk the duty. So the question, in essence, is whether the government should borrow a lot of money now to invest in the stock market. It's hard to believe that so-called "conservatives" want to do this, but there it is.