The Finch Formerly Known As Gold

11 November 2003

More money for you and me

Dean Esmay makes the case for privatizing Social Security, a case you've heard before and are likely to hear again and again, at least until the Washington scaremongers catch on.

Just for the sake of argument, here are the points likely to be raised by opponents, as described by me five and a half years ago in Vent #94:

Opponents of privatization point out that bull markets don't last forever, which is true; that not everyone understands how markets work, which is likewise true; and that moving all these funds into conventional investments will make billions of dollars for Wall Street bigwigs, which is pretty much inevitable.

It's possible to make money when the market is down, although it does require some knowledge of how markets work. Still, it's nothing you can't figure out by reading the financial pages in the Daily Doorstop. And if you want to complain that people shouldn't have to know anything to have a retirement income, well, fine, but if you insist on a right to be uninformed, you also must accept the consequences that come from exercising that right.

(Disclosure: We've had two years of a down market; I've lost essentially nothing, and I'm a semi-talented amateur at best.)

The objection that Wall Street might profit is also bogus, unless you have the time to monitor your investments yourself 24/7 and swap them around as needed in which case you probably don't have time for an actual job in the first place.

And one more thing I'd like to mention while I'm at it: should I drop dead at work, I will get basically zip from everything I've put into the Social Security system. That's zero. Nada. Bupkes. If I owned these funds, at least the kids would get something for my trouble.

Posted at 10:45 AM to Political Science Fiction

I dont trust wall street. I think its a pyramid scheme. The push to privitize is akin to those letters asking you to send a dollar to every one above you on the list and putting your name at the bottom.

Privitizing would leave a generation of people who paid in left holding the bag as the younger people who would have been paying in to keep the system viable would leave and the current recipient would get the following letter:

Dear Former Social Security Recipient,

We are sorry to inform you that due to privitization the money that you would have normally received today is being used to gamble in the stock market. The money you paid while you were working has already been spent and there is none left for you. Good luck in your old age, and once again sorry about leaving you in the cold.

The arguement is that you could get a better investment by saving your own money versus relying on SS. This assumes the market doesnt crash, which could be facilitated by a massive new inflow of speculative capital.

The other arguement is that employers would pay better if they didnt have to support social security. This ignores the effects that safety nets have on wages. Those who didnt save, or got ripped off by the market (it will happen)will have to stay in the workplace longer and put downward pressure on wages. Which i suspect is the side benefit of getting rid of SS.

my thoughts on this would take hours, but thats a brief and insufficient sumamry of some objections. IN short, I think it would be a disaster of epic proportions. I recall a turn of phrase my dad uses. "See, we don't need Social Security, you don't see any old people out begging on the streets do you?"

Ask yourself, if SS was such a bad idea, why is it so popualar and why do we have in the first place. It was a good idea at one time wasnt it. And it probably fixed some problem didnt it?

We dont need safety regulation, nobody gets hurt at work anymore!

We don't need unions because employers will gladly give us shorter hours, overtime pay, benefits and vacation time.

bah! Playing in the larket is like throwinmg penny over your shoulder in the wishing well. Good luck.

Posted by: bruce at 11:48 AM on 11 November 2003

Funny thing being, Bruce, that over its entire history, the market has done just fine, and has never been just a crap shoot. For responsible investors.

You don't believe it? That's fine. Just let me and my family have the option and accept the risk you describe, and you stay in the system that takes funds from your kids instead. Then we'll both be happy. Right?

Posted by: Dean Esmay at 6:34 PM on 11 November 2003

It's not really anything like a pyramid scheme, because there is money changing hands outside the stock system (ie-buying goods and services). In a pyramidal scheme, the entire stock market would have to be entirely comprised of buying and selling stocks in companies that existed solely to trade stocks (with no commissions, etc). The system would break down in something like that.

What is puzzling, however, is that a company who's sole purpose is to create useful intellectual property that is entirely based on the whims of the stockholders with little regard to its own feelings on any matters, doesn't do this nearly as well as it should, but it has survived for over 225 years. Go figger.

Posted by: Terkish Payne at 8:40 AM on 12 November 2003