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Forum Post: The High Risk Of Privatizing Social Security

Posted 10 years ago on Dec. 1, 2011, 6:07 p.m. EST by arealpolitik (154)
This content is user submitted and not an official statement

Posted by: http://thelimingview.blogspot.com/

Anyone who pays any attention at all to the news is probably aware that some Conservatives in the American Government have been on a campaign to have Social Security “Privatized.”

I understand that the reason they want to privatize Social Security is because they believe that it would allow some Americans to enjoy even greater benefits than they do under the present system because they would have the Social Security tied to the Stock and Bond markets so that income for Beneficiaries could fluctuate with the Money Markets.

My contention has always been and remains that if Social Security were made dependent on the fluctuations of the Money Markets it would tend to destabilize individual situations as markets rise and fall.

For example: As I view it, when the Money Markets are doing well and dividends are being paid on investments, the Social Security benefits could rise significantly. My objection to privatizing the system, however, has always been based on an expectation that the Money Markets will never likely sustain continued unabated growth, but that there will be inevitable downturns.

I feel that if a person has a privatized Social Security Account that he or she would suffer potentially dramatic losses in an economic downturn. I have never felt that would be good. I am on Social Security and I know that I prefer to receive a set amount each month in my check. That is how I manage my budget. I would hate to have a situation where I never know from month to month how much cash I am going to have. I would hate to live with the fear of an economic downturn if my Social Security were tied to the Money Markets like some Conservatives wish to have done.

Would privatizing Social Security be good for the economy?

Well, I suspect that it would allow some Brokers and Money Management firms to expand and to profit from it. I am certain in my heart that if Social Security Accounts were privatized, there would be some need for some professionals to “Monitor and Administer it.” In my view, this would result in the Social Security Beneficiary having to pay fees that are not now part of the equation. I think there would be, for example, “Account Maintenance Fees as well as Brokerage Fees and even commissions on investments made on behalf of the account holder. Businesses can be quite artful in inventing new fees for services rendered as anyone with certain types of institutional accounts might attest.

Recently I have been reading of a plunge in the general situation...

Continue reading: http://www.thejeffersontree.com/the-high-risk-of-privatizing-social-security/



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[-] 2 points by PandoraK (1678) 10 years ago

Very few have paid 16% in FICA taxes. SS is currently solvent and will remain so for many more years. At the present time FICA taxes are at 4.2% employee and 6.2% employer, self employed are taxed at 10.5%, all earnings over 106,800 are exempt from this tax. Medicare is taxed at 1.5% employee and employers and at 2.9% for self employed, there is no cap and all income is liable for Medicare tax.

There is currently over $2 trillion in the Social Security Trust Fund, there is also $2.8 trillion in US debt owed to the fund. The interest the fund earns on deposits is currently directed into the general fund, this has occurred for the last 30+ years.

The reasoning behind the claims that the current FICA with holdings are being disperse to current recipients is simple, maintenance of the principal, the appearance of this makes it easier to continue to direct the interest into the general fund without outcry for mismanagement by government.

Privatizing SS would mean that the government would loose billions of redirected interest income, it would also mean that the current government debt to SS would be dissolved, there by saving the government several billion dollars.

The end result would be the current beneficiaries would be short changed in dollar amounts of what they would receive as a lump sum as the interest accrued not be not available to them.

We've witnessed the current market instability, a situation that has been ongoing for many years. This instability would reduce the income of each beneficiary as would the fees attending investing in the market. (including the money market)

A temporary return to the previous tax rates of 7.5% employee and 7.5% employer and the interest due the Social Security Trust Fund being paid into the fund and no longer to the general fund would insure SS for the foreseeable future, repayment with interest on the governmental IOUs would enable SS to be solvent indefinitely with no further with holdings from payroll.

MaryS, they want you to take your money and gamble with it as explained above.

FrogWithWings, technically the Social Security Trust Fund is worth several trillion dollars, interest (general fund), IOUs (government borrowing) and capital balance.

[-] 2 points by cmt (1195) from Tolland, CT 10 years ago

All the plans for privatizing also cut out:

  1. Supporting the disabled, including children disabled from birth.

  2. Payments to children who have had a parent die. For the vast majority of young parents, this is the only "life insurance" they have, and most of them don't even know about it.

[-] 2 points by MaryS (529) 10 years ago

So they want to take our money and gamble with it.

[-] 1 points by FrogWithWings (1367) 10 years ago

Gee, how can that be worse than forcing all to cough up 16% which has been stolen and long since gone even before it's there?

And then when you want or need it, you have to fight these thieves to NOT get it back?

Do you know what the first three years of SS, if it had been properly managed and dispersed as intended, would be worth today? Several trillion dollars from just the first three years.

[-] 1 points by MaryS (529) 10 years ago

so what do you suggest the elderly who have paid in all this time do?

[-] 1 points by FrogWithWings (1367) 10 years ago

Sue the government for what is theirs. The contract is based on fraud and deception. A class action to make "them" cash everyone out would be prudent.

[-] 1 points by MaryS (529) 10 years ago

How about if we stop exploration on Mars and stop fighting wars for a few years. Surely that would generate a little cash flow.

[-] 1 points by FrogWithWings (1367) 10 years ago

"We"??? I'm not in on any of that! It would seem none of the people that owe me are either because they are patently unable to pay me.

[-] 1 points by barb (835) 10 years ago

Absolutely, we wouldn't want it to be privatized since this would reduce the amount of interest earned if it was divided by becoming privatized. I have enough problems with gambling so I definitely would not want retirement being gambled in any way.

[-] 1 points by ZenDogTroll (13032) from South Burlington, VT 10 years ago

It's a simple grab for that pot of gold, plain and simple.

The economy is finite - they are looking for new sources of cash. That can either come from new products, new markets, or from cash reserves sitting on the sideline.

They want to get it off the sideline - and in all likelihood, it will disappear.

[-] 2 points by cmt (1195) from Tolland, CT 10 years ago

The smaller the account, the higher the percentage that Wall Street rakes off. This has made 401(k)'s and their ilk hugely more profitable for W.S. than pension funds, even if the total pot of money is the same.

[-] 1 points by NintyNiner (93) 10 years ago

Anytime the Politicians and lobbyists see an opportunity to make money they going to try. Trust me this will make alot of people poorer, and the top 1% richer!!!