It has always been pretty clear to me that the notion that we could fix our retirement system by handing it over to Wall Street was, well, nuts.
Taking a relatively stable and secure retirement account and opening it to the vicissitudes of the market, which may have seemed like a good time when the Dow Jones Industrial Average was spiking up through the roof, always had a dark side — one we are witnessing now as the markets crumble and major investment firms bite the dust.
And while most Americans — to their credit — oppose the plan, keeping it from gaining any real traction in the political realm over the years, despite support of it — in one form or another — from politicians of both parties. But it hasn’t died, remaining a goal of conservatives — including Republican Presidential Candidate John McCain.
Here is the language from the national Republican platform:
We are committed to putting Social Security on a sound fiscal basis. Our society faces a profound demographic shift over the next twenty-five years, from today’s ratio of 3.3 workers for every retiree to only 2.1 workers by 2034. Under the current system, younger workers will not be able to depend on Social Security as part of their retirement plan. We believe the solution should give workers control over, and a fair return on, their contributions. No changes in the system should adversely affect any current or near-retiree. Comprehensive reform should include the opportunity to freely choose to create your own personal investment accounts which are distinct from and supplemental to the overall Social Security system.
McCain had long been a privatization proponent — though his approach has changed from strict privatization to a mix of the current system and private savings accounts tied to cuts in benefits. Here is an excerpt from a March story in The Wall Street Journal (I was alerted to this by OurFuture.org):
A centerpiece of a McCain presidential bid in 2000 was a plan to divert a portion of Social Security payroll taxes to fund private accounts, much as President Bush proposed unsuccessfully. Under the plan, workers could manage the money in stocks and bonds themselves to build a nest egg and, at retirement, also receive reduced Social Security payments from the government. Proponents say the combination of the nest egg and government payouts could give a retiree more than the current system, but opponents say the change would undermine the Social Security system.
Sen. McCain’s 2008 presidential campaign Web site takes a different view, proposing “supplementing” the existing full Social Security system with personally managed accounts. Such accounts wouldn’t substitute for guaranteed payments, and they wouldn’t be financed by diverting a portion of Social Security payroll taxes.
Mr. McCain’s chief economic aide, Douglas Holtz-Eakin, a former head of the Congressional Budget Office, says economic circumstances forced changes concerning Social Security policy. Vast budget surpluses projected in 2000 evaporated with a recession, the Bush tax cuts and the cost of responding to Sept. 11.
As a result, the McCain campaign says the candidate intends to keep Social Security solvent by reducing the growth in benefits over the coming decades to match projected growth in payroll tax revenues. Among the options are extending the retirement age to 68 and reducing cost-of-living adjustments, but the campaign hasn’t made any final decisions.
“You can’t keep promises made to retirees,” says Mr. Holtz-Eakin, referring to the level of benefits the government is supposed to pay future retirees. “But you can pay future retirees more than current retirees.”
Asked about the apparent change in position in the interview, Sen. McCain said he hadn’t made one. “I’m totally in favor of personal savings accounts,” he says. When reminded that his Web site says something different, he says he will change the Web site. (As of Sunday night, he hadn’t.) “As part of Social Security reform, I believe that private savings accounts are a part of it — along the lines that President Bush proposed.”
And that’s the key line — “along the lines that President Bush proposed.” Here is what the president proposed in 2005, when he pushed hard for his version of reform:
As we fix Social Security, we must make it a better deal for our younger workers by allowing them to put part of their payroll taxes in personal retirement accounts.
- Personal accounts would be entirely voluntary.
- The money would go into a conservative mix of bond and stock funds that would have the opportunity to earn a higher rate of return than anything the current system could provide.
- A young person who earns an average of $35,000 a year over his or her career would have nearly a quarter million dollars saved in his or her own account upon retirement.
- That savings would provide a nest egg to supplement that worker’s traditional Social Security check, or to pass on to his or her children.
- Best of all, it would replace the empty promises of the current system with real assets of ownership.
I don’t raise this out of the blue. The Wall Street Journal wrote about this last week and the Obama campaign has been hitting McCain on the Social Security issue of late. OurFuture.org, though, has offered the toughest critique, along with a report explaining the impact that a privatization scheme would have on retirees.
The main findings are that for future generations, Social Security privatization would:
- Cut lifetime benefits by $240,264
- Make 8.6 million senior citizens vulnerable to poverty.
And these numbers do not even reflect the recent volatility of the markets.
American workers shouldn’t have to face this kind of uncertainty. The cautionary tale is before us — listen to this NPR Morning Edition report on soon-to-be retirees who thought they would live off their savings and investments, but whom the experts now council to “keep on working.”
Hank Kalet 
Arghhh! So let me understand this. It\’s OK to rob poor black men to pay off rich white women? (Who designed this one out, the KKK?)It\’s OK to rob the future generations in an intergenerational transfer of wealth. (Like eating your young?)It\’s OK to have a forced savings plan that has an implied interest rate of negative 2 percent. (OK, you may not have enough left from your job, but nanny gooferment will save you some dog food for your retirement.)It\’s OK for a poor person\’s largest asset (i.e, \”their\” social security accrued benefits) to \”evaporate\” when they die. Absorbed back into the gooferment till for a $225 \’death benefit\’. (Even a passbook savings account can be inherited.)Argh!Yes, save us from the Stock Market that earns an average of 8% a year over LONG periods of time. Save us mommy gooferment from the big bad real world. The fact the the gooferment — specifically the congress critters took payoff from the monsters they created — caused the problem and you seek to save us by MORE gooferment.Really explain it to me again. Use littler words. Cause I\’m getting screwed by all you socialists and I can\’t stand it any more.Explain to me how Chile privitized their social security in 1970 with a population so illiterate they had to use pictures for the investment companies because people could NOT read the names. (Haven\’t heard about dying old folks in Chile lately. Maybe everyone died of privitazation there and we have NOT had it reported yet?)Argh!It must by the fault of those Liberty loving dead old white guys.I\’m sure they must have mentioned Social Security in the enumerated powers.Please give me a break with this circular logic on an un-Constitutional un-Liberty disabling disempowering Socialist program. Karl Marx must be laughing in his beer at us! Him and his cousin Groucho. They couldn\’t have made a funnier skit.
I think I just heard someone throwing up in Aisle 3.Anyway, I think it important to note two things that the privatizers have managed to obfuscate: 1. Social Security doesn\’t need to be fixed, because it isn\’t broken. It\’s Medicare that needs some attention. 2. Social Security is not a retirement plan or investment plan and is not meant to be; it is insurance, and it covers not only against the risk of poverty in old age, but also against long term disability. I\’m 47 years old and on Social Security and Medicare, due to medical conditions; something like a third of Social Security goes to disabled people like me.Social Security insurance is personal risk management by communal pooling of resources; it is not wealth investment. Only the ignorant or foolish would think that the point of insurance premiums is to maximize what you get back, and only fools don\’t want this kind of insurance.
Also, listen to the comments about retirement investment that my identity thief makes in this video: [link]
I agree with Barry.The GOP and all the right wing corporate shills have been against Social Security from day one and even before day one. Thank God for Social Security, it is a 72 year old success story, no thanks to the GOP and all the right wing think tanks. Even libertarian Alan Greenspan has admitted that Social Security\’s relatively minor long term problems can be easily fixed by any number of readily available non-drastic fixes. If you are working class, the working poor or the middle class, Social Security is a great deal. Bush failed in his attempt to kill Social Security because most Americans were not fooled by his snake oil sales pitch. In 1978, Bush said that Social Security would go bankrupt in 10 years. He lied then and he\’s lying now about Social Security and so are all the other anti-Social Security jerks. Social Security never goes bankrupt because it is an intergenerational program that is funded by FICA taxes.
Chile\’s privatizing of it\’s version of social security was rammed through by the right wing fascist DICTATOR Pinochet. It is an abject failure that has winners and losers, mostly losers. Mr. libertarian seems to admire a fascist dictatorship. I thought Mr. Libertarian was against gooferment but he admires the Pinochet dictatorship. What a lying hypocritical GOOF.
Fjohn admires a fascistic brutal dictatorship (Pinochet\’s Chile) which rammed through a privatized social security but hates the US government which he constantly calls gooferment. Maybe he also admired Mussolini for making the trains run on time? What a flaming hypocrite.
Regarding fjohn\’s vile filthy lie that Social Security hurts blacks.This is from the NAACP web site not the KKK web site:\”Commenting on President Bush\’s claim that privatizing Social Security would benefit African Americans because their average lifespan is shorter than whites, Bond said: \”It isn\’t Social Security that\’s a bad deal for blacks, dying too early is the real bad deal! They would rather play the race card than actually address blacks\’ shorter life expectancy. Using shorter black life expectancy as an excuse for privatizing Social Security isn\’t just offensive; it is also misleading.\” The black-white disparity in life expectancies practically disappears at retirement age. If they really cared about black life expectancy, they\’d fix health care, which is really broken. They\’d fix the black-white unemployment gap, joblessness for blacks is always twice the rate for whites.\” He added: \”They\’d find ways to end the numerous threats to long life and to extend our lives. Instead, they want to turn Social Security into broker security.\”
Two points of clarification: (1) Fact: black men die before white women. Fact: they get NOTHING but the $225 benefit. Fact: Honest accounting demonstrates these numbers. Fact: Anecdotal evidence abounds. All the other stuff is spin. Although, they make an interesting point that the gooferment should fix its healthcare. Is that an argument for or against gooferment socialized medicine?(2) Chile privitized their Social Security. Illiterate population and all. Dictatorships are as bad as most other forms of gooferment. You don\’t think yours is killing you? At least, dictators are out front about it; not wrapping it in \’government service\’ \’for the children\’ \’by heroes of the gooferment\’. I\’m going to throw up.Finally, calling Greenspan a \”libertarian\” is a joke. Right? The man presided over the fiat currency empire for decades. It\’s true that in his early days he was a gold bug as a way of controlling gooferment spending. But, he went over to the dark side where he was amply rewards for his perfidy.Social Security Insurance was sold as a lot of things. Revisit all the promises made. What it is an intergenerational Ponzi scheme that will collapse of its own weight. Look at the \”trimming\”. It\’s taxable. It\’s ages have been expanded. It\’s expectations have been manipulated. (i.e., a retirement supplement).No, it a welfare program! And a very bad one at that. Price out what those benefits would cost even in the semi-free market we have and you\’d be stunned.Sorry, but just a bad road we are traveling down. The Austrian economists predicted doom from \’moral hazard\’ of bailouts starting with Chrysler. Fannie, Freddie, AIG. Economics is a science. And in this case, social security is dismal.Oh, and just for the record, most libertarains don\’t want \’privitzation\’; we want \’elimination\’.See we have the quaint idea that folks can save on their own without the force of gooferment telling us \”it\’s for your own good, stupid little person\”. And charging us an obscene \’handling\’ charge to rob us.If I starve, it\’s on me; You robbing me, is on you.