February 07, 2005

Social Security

Dammit! I hate it when this happens. I have to admit I was wrong about sumpin'.

I had my friends Michael and Cindy over for dinner on Saturday and we got to discussing Social Security. It seems all three of us are having second thoughts about private accounts.

Let's look at a difference between conservatives and liberals.

Conservatives believe in personal responsibility. Liberals don't. Get knocked up? Have an abortion. Make poor choices and have more children than you can afford? Look to gummint for help.

Conservatives think that people are smart enough to make good choices in managing their lives. Liberals think people are stupid and need gummint to tell them how to run their lives. Unfortunately, liberals are partially correct. There are people too stupid to manage their own lives and finances, like people who drop out of school and try to raise a family on minimum wage.

Last week the Atlanta Urinal and Constipation ran a series of articles about predatory lenders taking advantage of poor people. There was one example of a woman who quit her job at the airport after 9/11 because she was afraid to work there anymore. When she was unable to find another job, she fell behind on her mortgage payments and was shocked to find out that the bank could repossess her house and sell it at auction. I'm supposed to feel sorry for this woman? Maybe if she got laid off, but she quit her job without having another job lined up. Employment 101: Don't quit a job unless you have another one waiting. This is an example of someone too stupid to manage a private Social Security account.

Another example from these articles was a man who used a medical settlement to buy a Cadillac Escalade. He then turned around a few months later and had to take out a title loan on the vehicle. When he couldn't make the payments he lost the vehicle. Cause, meet effect. This is someone too stupid to manage a Social Security account.

Private accounts would be a boon to many young workers today. They would be a much better deal than the current system and they would allow the money to be passed on to descendants.

Unfortunately, they would not work with stupid people. Many of the poor in this country are that way for a reason. They made bad choices. They dropped out of school. They had children at an early age. Some of them continued to have children even though they couldn't afford the ones they had. Private accounts would not work for them because they would make the same type of bad choices with the accounts as they made with their lives. If they did manage to even have anything in their accounts at retirement they would probably take all the money and blow it and then cry because they didn't have any money.

Now we would have a whole shitload of stupid poor people and guess what we would have to do? We would have to support them. And where would the money come from? The same place it always does. It will come from the people who made good decisions. That will mean higher taxes. It always does.

So Michael, Cindy, and I don't think the partial privatization of Social Security is a good idea after all. Anyway, I'll be dead in 2042 when it goes broke so why should I care? I'll get mine. Let's do what the Yabbuts want to do and tweak the system. Yeah, that's the ticket.

Gen X and Gen Y, you are gonna be so fucked!

Posted by denny at February 7, 2005 05:15 PM  

Good post, how many people would do it? Not many, I worked for Kerr McGee for 30 years and when they offered a 401k plan, only one third of the employees joined up. I joined and make a lot of money on my accounts. Some of the ones that signed up, has already gotten out and cashed in, who needs a rainy day? Not me. I never took anything out of mine and now I have a little money at my hands. Needs to be improved and if the government stops stealing money from it, it may be broke in 42, who cares. At one time SS had money money than they knew what to do with it, so those smart asses in Washington started ;oaning it out to every program they could get there hands on, fuck those bastards, people making millions a year don't need it, Cat.

Posted by: Catfish on February 7, 2005 05:52 PM

I disagree with your post because there will be a limited number of options to choose from. Even if the stupids pick a moneymarket account, they'll come out better than the current system. Younger participants are guaranteed to lose money under the present system.

Posted by: Papapete on February 7, 2005 06:14 PM

Seems to me that the following would protect even the stupid:

1) The money would be taken out of paychecks just like SS taxes are now - ensuring pay-in

2) If participating, the contributor doesn't get to invest in get rich quick schemes.

3) The contributor CANNOT withdraw the funds until retirement

4) At which time the funds CANNOT be withdrawn at once, but only in increments

So Johnny I-Won-And-Spent-The-Lottery-On-The-Same-Day can't do the same with his retirement fund.

Posted by: Lark on February 7, 2005 06:34 PM

Why should the options of responsible people be limited by the anticipated actions of the stupid? Reminds me of high school, when we'd get a little freedom (like leaving campus during lunch) and some assholes would abuse it, so it'd be taken away from us all.

Screw em.

Posted by: daniel on February 7, 2005 06:52 PM

I believe the people you refer to in your post will be the same ones who will opt to stay in the old system. But I would rather have the private accounts and support the stupid than not. We are always going to support the stupid.

Posted by: Kim on February 7, 2005 07:18 PM

I may be wrong but isn't participation in the plan for partial privatization purely voluntary? If you choose to participate and you're too fucking stupid to manage your account well that's just too fucking bad. If you're a Nervous Nellie and want Nanny Gov't to manage your account you can do that, too.

Either way it takes an active instance of stupidity to fuck yourself. And isn't true freedom the freedom to fail?

Posted by: Ralph Gizzip on February 7, 2005 07:39 PM

Sure is! And Denny, sometimes people end up in the poor house by way of accident and tragedy. That happened to me. When I took a 30 foot fall that changed my life, my now-ex-wife took me to the cleaners and left me worth only my debt. I am still scratching my way back up the hill.

P.S. I am NOT stupid. (I.Q. 180+) I am not ruthless either.

Posted by: The Moose on February 7, 2005 08:05 PM

I know you are having fun making a point, but let me just state for the record:

Give me the private account!!!

As Kim pointed out above, the government will always continue to support the stupid. Neither House nor Senate will support a "privatized" account that allows the individual sole discretion to spend his or her 2%. I'm no seer, but I expect any successful legislation to include the following caveats:

1. Any percentage of monies allocated to "privatized" retirement accounts must be invested in some kind of diversified funds that will be "risk" approved by government or a government appointed oversight agency.

2. The individual will be required to have "privatized" investments deducted from payroll and deposited directly into an approved fund.

3. Approved funds will not include stock from a single company or from so called "high risk" funds.

The only clear difference likely between social security retirement funds as they exist now and "privatized" investment is that deductions will not be a tax. Accumulated funds will belong to the investor, even though the investment will be required of the individual by fiat. It is from this that other benefits, such as rollovers and inheritance rights devolve.

Now, you may think you are a bit cynical by anticipating that too many people will invest unwisely. Perhaps you are being charitable instead. Given completely unfettered choice, far too many people will not invest at all.

Posted by: Ryan G on February 7, 2005 08:27 PM

I forgot to list the fourth caveat of "privatization":

4. "Investors" will likely be restricted from withdrawing "privatized" retirement funds until reaching some government mandated minimum retirement age.

Posted by: Ryan G on February 7, 2005 08:34 PM

Moose - I do not mean to imply that all poor people are stupid. I grew up poor, not because my father and mother were stupid, but because my father was an alcoholic and couldn't hold jobs. I have always advocated some kind of safety net for people who through no fault of their own, like catastrophic disease or acccidents, become poor.

To all - Yes the program would be purely voluntary, but say Bubba voluntarily participates, makes bad investment choices and loses his shirt. Yeah, I would hope there would be safeguards but who knows? If enough Bubbas and Bubettes screw up they will cry to the gummint to "do sumpin'".

Ryan - You're too old for private accounts.

Posted by: denny on February 7, 2005 10:23 PM

I also agree with partial privatization, primarily because it will provide a better rate of return than the present system, which is of course a big fat negative return. Yes, stupid people will do stupid things. That's why the system should have some kind of "stupid proof". I propose restrictive distribution rules. That is, we can't draw until we retire, and we can only draw at a certain rate. This is identical to the current system isn't it? Why change the distribution options?

The investment options should be limited to indeces and not actively managed funds, thereby reducing risk and costs. The investment options should also perhaps focus on equity or mid to large-cap funds and not growth funds. I'm no financial expert in the slightest, but I do know that there are plenty of low to mid-risk funds out there that would work for this kind of program. Participants should also be restricted on how often they move their money around within the investment options in an effort to control costs and stabilize the system. Anything damnit anything is better than what we've got now.

Also, we should not look at this reform as some kind of viable substitute to 401ks, IRAs, etc., but rather as additional resources for our retirements. I'm open minded about this, especially since the Democrats are against it. Whatever the Dems hate must be good for America.

To all those morons out there demanding that the government pay back what it stole....hello...where the hell do you think the money is going to come from?

Posted by: Paul on February 8, 2005 01:11 AM

How 'bout T-bills and bonds, too?

Posted by: Paul Jackson on February 8, 2005 01:13 AM

I agree with you 100%,did you read the other report in the ajc about the 11 million for the King center (think our tax money) while the family members get six figure incomes,and no I dont have any problem with the King family but I dont want my tax money going to his tomb while the family members get six figure incomes.

Posted by: Pharaoh on February 8, 2005 04:37 AM

My retirement account was designed the right way. I could only invest 25% back into the company, so if they tanked, I was still afloat. They require diversification, no more then 50% in any one fund. I can select S&P, or one of several others, but not one company to invest in (except my former employer).
Investments in Dow Jones industrials have historically been safe. even during the great depression these companies paid dividends. My grandfathers becams millionaires while much of the nation sank. Saddly, one grandfather passed it on to his kids, who had it spent by the time they died, the other grandfather had a mistress. When he died, my grandmother wouldn't touch the money, refused her share, and it went to the mistress, who died with out a will, and it now belongs to her sisters, both of whom disowned her when she ran off with grampa. They went from being destitute to being millionaires. I have built my own fortune outside my employer, and am worth somewhere arround $1.5 Million. Although its technically not a retirement account, its my plan. My exwife got half when she divorced me in 2001. I laugh myself silly knowing she has blown most of it. She is down to her house which she cannot mortgage because she bought it before the divorce without disclosing its purchase, and What ever she got in insurance money when our daughter died last fall.
I'll support privatization as long as its done like my retirement account was.
TTFN, gotta get ready for court, off to deal with the exwife again. (she filed a lein on the houses I own in an effort to get more money).

Posted by: Jeremy on February 8, 2005 08:48 AM

Nicely written, good points, however I believe the benefit of allowing those who are responsible increase their retirement options, thus rewards is still worth a good look.

Stupid people can simply opt to stay under the regular system or be limited in their choices. With limits in place,despite their best efforts to screw up, maybe they will come out ahead for a change.

Posted by: Ken Gunn on February 8, 2005 08:59 AM

So what is the difference between some dumbass pissing away their social security now with poor investing ability and the dumbass 50 years in the future taking their social security check to the indian casino to make sure they can be rich? A dumbass will always find a way to screw themselves. I say "piss on 'em". Lets just skip the whole social security farce and phase it out. I am relatively young, so I pretty much figure on never seeing a check anyway. And even if I do, what I will be getting will maybe pay for a bag of cat chow per month, after inflation fixes it. Quit punishing the majority of people who have an ounce of common sense to bail out the dumbasses.

Posted by: Chris Van Dis on February 8, 2005 12:24 PM

On a completely unrelated note, this link is a must:


Posted by: Erik on February 8, 2005 12:57 PM

No one is saying, implying or even 'hinting' that anyone..stupid or not, MUST invest on their own. I'm surprised you could miss that key element. If the stupid don't want to try and invest, up to...4%..wich will only be available after a sloooooww rise to that point, then they do nothing. The regular 8% will come out of their pay just like always. Of course, that's assuming they aren't too stupid to have a job that withholds taxes and SS.

Drink less wine. Being able to keep some of my hard earned cash, to use as I see fit, instead of handing it over to the government, to blow leaving me with nothing, is a GOOD THING. Stupid poor people won't bother trying to invest since they are stupid. Anyone who takes a chance, pays their money. The thing that gets me, is those against the idea of being responsible for their own lives, pretend that the government will 'always' be there to pick up the pieces.
What bullshit.

Posted by: radtec on February 8, 2005 02:30 PM

Wow. I did not know that, Erik. Excellent link. I'll have to frequent that site often. Good info. Those bastards should give that money back. The Democrats on that list who are harping about budget cuts on their pet programs should STFU.

Posted by: Paul on February 8, 2005 03:49 PM

I'm not that worried about stupid people, they will always be stupid. "As soon as they building something idiot proof, they will build a better idiot" fits rather nicely here. Another point I didn't see anybody mention in my quick skim is the term 'Partial'. The figure was like what, 2-3% or something like that. If if Bubba Redneck lost everything in this private account, he's still left with the majority of regular SS, even if it's not quite as much.

Posted by: Vymn on February 8, 2005 04:18 PM

YOU'RE WRONG! BUsh's plan for saving social security is the ONLY thing that will work. It's obvious. If poor people are stupid and loose money, why should ANYONE help them? No taxes, nothing.

Posted by: The General on February 8, 2005 04:28 PM

Great post...

The trick to privatizing Social Security to make it work is by forcing people to invest through payroll taxes. Consider:

* In 2003, Social Security and related programs (disability, medicare, etc.) took in over $950 billion in payroll taxes.
* Cut the SS payroll tax by 50%, putting nearly $500 billion back into the economy.
* Rather than being wage-based, give each living U.S. citizen $1,500 in a "retirement fund" (regardless of age). This would cost the same as the 50% of current SSA payroll taxes.
* Assume a 5% rate of return (about the norm for virtually guaranteed US Treasury bonds).
* Assume a 1.5% average inflation rate.
* At age 65, each person has $650,000 -- or $320,000 in inflation-adjusted dollars. That is enough to give the inflation-adjusted equivalent of $30,000 per year for at least 14 years (to age 79) before there is no money left.

Makes you wonder...

Posted by: Mr. Wizard on February 8, 2005 05:36 PM

We borrow from the future of SS. Now we see that the future is almost the present, and we want to escape our debt?

This sounds like the action of a teenager that can't handle the responsibilty of a credit card.

What would be so horrible about cutting some current spending elsewhere, and pay it back? Or how about borrow from the future budget of some other program, say, the military? At least it would create a timetable to get out of Iraq. We'll make democracy till the last buck's spent!

Posted by: Jimmy on February 8, 2005 05:37 PM

Re: "Ryan - Your'e too old for private accounts"

Dammit! I just hate it when that happens!

Still, my 20 year old son need the option.

Posted by: Ryan G on February 8, 2005 05:50 PM

Bwahahahaha! Jimmy, you just crack me up. Typical liberal blather. Cut defense spending. I got a better idea. Why don't we eliminate the Department of Education? It's job of destroying the public school system has been completed. Let's eliminate farm subsidies. There's a whole lot of other things I'd cut before defense.

Posted by: denny on February 8, 2005 06:12 PM

It seems as if a lot of people are under the impression that the Stupid are few. I find that to be quite the opposite.
So it only makes sense to implement a "Stupidity Tax." Just tax the Stupid people! That way, you and I are exempt and the country is rolling in dough!

Posted by: annie on February 8, 2005 07:49 PM

The Georgia Lottery is a "Stupidity Tax". It's putting my kids through Georgia Tech. Thanks, Stupid people!

Denny, if SS is not reformed, it's going to be one of the many possible catalysts of a genuine tax revolt. In my lifetime. The productive in this country are grossly overtaxed, and there is no sign of change in "W"ashington. The budget submitted this week is depressing as hell to this Reagan Republican. The Bush family is typical New England Liberal when it comes to growing the size and scope of Government.

I agree 100% that the Dept. of Education must go. As well as the Dept. of Energy. Will it happen? Uh huh. People, this country must SPEND LESS MONEY. Much less. There is no other credible option.

Posted by: marcel on February 8, 2005 10:03 PM

So, I've been studying this in school. Bush's plans not only privatize the accounts, they also change them from a wage index to a price index. This means that rather than having your SS money taken out based on your pay, they base it on how much you would be making if your pay kept up with inflation. what this means in the end, is that the social security system will collect something like 40% less money than it does now. thus, in order to make your private social security account pay you as much as the way we have it now, you would need to make 40% interest. Thats a pretty impressive feat, even if you know what you are doing. As far as I can tell, it looks like they are trying to promise people more based on how smart people think they are, when there is no more to give. I guess thats one way to save money.

Posted by: Laura on February 10, 2005 06:08 PM
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