Privatize Social Security, Absolutely

Ever since the instability in the market started last week with its subsequent government bail outs I have heard a number of Democrats blame the entire mess on Republicans. I am not going to pretend that the problems belong solely to one party. There is enough blame to go around but Democrats can’t seem to understand that. While blaming George Bush and John McCain they conveniently forget that Clinton Administration policies that relaxed the requirements to get loans led to a lot of people borrowing more than they could ever hope to afford. Democrats also seem to have forgotten that it is hard to manage a business when it is shoveling truckloads of money in your direction and when your friends are making millions because they are bilking the system.

In the last week I have also heard that George Bush and John McCain supported privatizing Social Security and then that statement was usually followed by, “Imagine where your money would be right now after this market collapse.” Yes, we are led to believe that Bush and McCain’s idea of privatizing Social Security was to invest it in the highly volatile housing market and hedge funds (where Chelsea Clinton could manage them) when the fact is, the plan has always been to allow investment in a range of securities from those with no risk to those with moderate risk. The government already allows investment in those kinds of funds for its workers. The program is called the Thrift Savings Plan (TSP) and there are five funds in the family of investments. Workers are able to allocate their money between the funds and to determine how their earnings are invested. There are also life cycle funds which incorporate the five funds in an automatically adjusting format that goes from higher risk when one is younger to little risk as one gets older.

What does all this mean? First, there are risks with everything. The federal government cannot insure that people will get their Social Security checks. There is no guarantee that the money you paid in will ever be paid to you. The program can be reduced or increased at any time and Congress can continue to raise taxes in order to fund a program that earns less than 1% interest. Congress can also pilfer from the money at any time. In fact, Social Security is in bad shape because Congress has raped it over the years.

So there is risk even with the government. But there is also the injustice that the money is taken from you and if you die before you can collect, it goes away. There might be survivor benefits but if you had been able to invest the money yourself you would have made more and could have passed it to your heirs.

How does all this square up with the volatility in the market this week? The price of the shares in the TSP have remained steady since the problems began. There have been minor fluctuations in price as there are in any stocks but the change was less than a dollar. This chart at the TSP website shows the daily price for each fund in the program. Notice that the five individual funds and the life cycle funds remained constant.

Of course, almost all investments carry risk. The G Fund is the only one that is protected from market changes but even with the potential risks the other funds did not fall. So for those who say that if we had privatized Social Security we would have a bunch of bankrupt old people eating cat food, they are just plain wrong. Old people will still receive money under the current plan and younger people would transition into a TSP kind of plan over time. As the elderly die off the current system would gradually fade. It will work and those who believe otherwise are wrong.

Social Security is a system that allows the government to have control over your money and your lives. It is a weapon used to scare old people during elections and it is a socialistic system where money is redistributed. People who believe in this system are use to having the government take care of them instead of taking care of themselves. Social Security is not guaranteed and it is no safer being controlled by the government than it would be controlled by you. It is your money. You should be able to say where it is invested and where it goes when you die.

Just to drive the point home, the G Fund is the safest fund in the portfolio therefore it has the lowest rate of return. The 10 year monthly average for the G Fund is 5.12% and it has not been negative in that period of time. So people would have the opportunity to invest in a fund like this paying just over 5% or they could just stick with the government run program that gets less than 1% return on its money.

People work to grow personal wealth and by letting invest their own money and take control of their own destiny we will have a whole lot more they retire. Additionally, there would be little need to have a retirement age that continues to rise in order to meet the needs of Social Security. The government should not be able to keep raising the retirement age, you should decide when you will retire. As it stands now, the government controls YOUR money so it can make the rules. If you controlled your own money, you could make the rules.

To further illustrate the point, assume a person starts working at 20 and will retire at 60. This person has $100 taken from his check for Social Security each month. At 0.08% (best guess for the less than 1% return) the person will have $48,774 when he reaches 60. If that person invested in a fund like the TSP G Fund the amount after 40 years would be $157,469. A hundred dollars a month would equate to an income of $10,000 a year. Certainly no one will make that amount of money for an entire working career. Besides, minimum wage is $4000 higher than this. The point is, while it would be unreasonable to think a person could retire on $157,469 it is also unreasonable to think that the same person would only make 10 grand a year for 40 years. It is also unrealistic to think that a person would even see an increase under Social Security. They have formulas to determine how much you get. If you invest your own money, you get to keep what you make.

There are safe market investments and those who are trying to make an issue out of the current market and how Social Security would have been affected are not paying attention or don’t understand.

I will make a deal though. I am willing to take the risk. Let me keep the money I would be required to pay into Social Security and I will invest it myself. I have no worry that I will not retire a wealthy man and I will absolve the government of any responsibility should I fail.

UPDATE: Newsbusters reports that Newsweek has caught Obama in a blatant lie while trying to scare the elderly in Florida:

[OBAMA] And I’ll protect Social Security, while John McCain wants to privatize it. Without Social Security half of elderly women would be living in poverty – half. But if my opponent had his way, the millions of Floridians who rely on it would’ve had their Social Security tied up in the stock market this week. Millions would’ve watched as the market tumbled and their nest egg disappeared before their eyes. Millions of families would’ve been scrambling to figure out how to give their mothers and fathers, their grandmothers and grandfathers, the secure retirement that every American deserves. So I know Senator McCain is talking about a “casino culture” on Wall Street – but the fact is, he’s the one who wants to gamble with your life savings.
~snip~
That’s not true. The plan proposed by President Bush and supported by McCain in 2005 would not have allowed anyone born before 1950 to invest any part of their Social Security taxes in private accounts. All current retirees would be covered by the same benefits they are now.

Obama is pulling the same scam I discussed earlier; lie to seniors about Social Security in order to scare them into voting for Democrats. Obama is a liar. I wonder if the liberals will hold him to the same standard they demand of McCain?

Big Dog



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