I know what you're thinking. "Oh boy! Eighteen-hundred words on Social Security! Where's the back of the line to start reading THIS!" And I can promise you it's going to be about ½ as entertaining as it sounds. Still, like a rash in shape of Tom Delay, it's topical and funny, if a little irritating.
The problem with Social Security is that there aren't any good places to go and get free publicity. Condi can't run out in front of the United Nations and say "We don't want the first sign of trouble to be poor, dead senior citizens lining our dumpsters." Actually... that's not bad. I bet I could make some good money with that if I were still a conservative. But I digress...
Others will explain more eloquently why there is no crisis. Hell, someone's already called Rush Limbaugh from this site asking why the Paris Hilton's and NBA Thug's of the world get to avoid paying into Social Security what we `normal humanoids' have to pay (BRILLIANT take, by the way). No, what I want to do is give you a heads up as to the verbal diarrhea soon to be spewed by the `dittiots' in your life. Also, I'd like to explain why I, personally, oppose this particular idea for privatization.
(It should be noted that `NBA Thug' is a Rush-ism, which he uses instead of `Those Damn Darkies' for political reasons. Personally, I LOVE me some NBA thugs. I go to about 30 Grizzlies games a year, and got to play golf with Pau Gasol at their charity tournament last year. Absolutely fabulous human being. Another story, another day...likely another website.)
To quickly summarize the privatization plan as I understand it: Social Security doesn't have enough money to meet future obligations. Therefore, we must take money out of Social Security to make it more solvent. Am I missing something, or is that about it?
With that kind of logic, I'm starting to understand why Bush failed at every business venture he's ever been involved in. As a matter of fact, it's only logical that he's running the United States as poorly as he ran any business from baseball to wildcatting.
As with most things Bush has come up with, the principle is great but the execution sucks. Your dittiot (didiot?) friends are coming at this from a most unique perspective. "It was okay when Clinton proposed it, why isn't it okay now?" This may be the first time the dittiot (I've decided I'm going with dittiot whether it's right or not) nation has ever pointed to something Clinton did and said "See! That was a GREAT idea!" I'd be interested to find out what else Clinton proposed that they were against at the time but are for now (like starting wars with no exit strategy for example).
What they fail to mention is that Clinton wanted to have the Social Security Trust Fund buy things other than U.S. Treasuries with the surplus dollars raised by Social Security taxes, but not spent on benefits. "Oh," your smarmy dittiot coworker intones, "so it's okay for the government to invest in the market, but it's not okay for me to invest it!?" Yup. That's right. That's absolutely what I'm saying.
To explain why, I'll have to go into my background a little. As I've hinted at from time to time I am money manager. Specifically I'm a Certified Financial Planner TM. That's a fancy way for saying "I tell people what to do with money."
I've been doing this for five years, and I dare say I'm pretty damn good at it. My portfolios aren't revolutionary or sexy, but they consistently make money year after year. I do my homework, I watch my investments, and I don't take unnecessary risks with my client's money. I figure out what kind of return they need to reach their goals, and then I design a portfolio to get that return. In five years I've hit or exceeded my necessary returns 98% of the time, and every one of my clients is currently on-target.
I'm not saying this to brag. This isn't an advertisement. My practice is closed (meaning I'm not adding any new clients). I'm telling you this to establish that I know what I'm talking about, and to make the following point--the average investor is a moron.
The average investor buys at the top, and sells at the bottom. They lack patience, discipline, and the information necessary for good decision making. They're reactionary, greedy, and easily frightened. Ask the average investor why they picked this fund over that fund, and the answer will be "because it did better last year." Never mind the fact that it was a tech fund, and tech funds were in vogue, and now the tech sector is overvalued, and the manager that actually got that return doesn't work for that fund anymore. It did better, so it gets all my money. Then it goes down 50%, and the average investor gets nervous and sells at the bottom of the market. What will our average investor do now? Will they invest the time to figure out how to create a balanced portfolio? Nope. They'll look and see what did good last year and invest it that. And so the cycle continues with the average investor playing Tina to the market's Ike (Side note: There's nothing funny about spousal abuse. Shame on you for laughing). Don't worry, baby. The market's different now. It's not gonna hurt you.
Keep in mind, there is no shame in being an `average investor.' In the 8 years that led up to my becoming a financial advisor I was one of the worst of the worst. The shame comes when you keep doing the same thing but expect different results (also known as `insanity'). And the larger problem with the President's plan is that no one is willing to cop to the fact that they're a moron.
So let's fast-forward 50-odd years to when this alleged crisis is supposed to come to a head. Joe Investor (who today is 16 years old) has managed to set enough aside in his private account to buy an annuity that will pay him $17,000 / year. Those suckers who didn't take the private account option will only be making $15,000 / year. HA! In your face, pinko commie libs! But alas, Joe Investor is invested entirely in a NASDAQ index fund, and over the next 12 months promptly loses 50% of his original investment. Now Joe is 67, but if he buys his annuity today he'll only be making $13,500 / year. "Crap," Joe thinks, "I've got to make that money back fast." And so Joe begins the investment equivalent of playing the lottery, investing in penny stock after penny stock hoping to hit it big. At the end of the day Joe's left with the ability to purchase an annuity paying him only $11,000 / year (the $10,000 guaranteed benefit plus the paltry $1,000 annuity his remaining funds buy). Of course Joe can't afford food AND medicine on such a stipend, so now Joe is society's problem. Boy...it's too bad we don't have some kind of program to keep society secure from such a sad situation.
One last thing, and this is great because I think it further points out how intellectually dishonest Rush is (We can all run around and point to where he's wrong, but I think you score big points against the dittiots when you point out where he's intellectually dishonest). Let's parallel the Social Security crisis with global warming.
Rush has long pointed to "The Population Bomb" as evidence that global warming is a bunch of crap. Back in the 70's some egg-head said if the human population ever exceeded 2 billion we'd all die. Flash forward to today, and we're able to sustain almost twice the population due to increases in farm yields and advances in medical science.
His point (and mine to a certain extent)--the farther you project into the future, the less accurate you're going to be. It's like predicting the weather. I can tell you within a couple of degrees what the temperature will be tomorrow. I can probably tell you whether or not it's going to rain this weekend. Beyond that, all I can say is it's going to be hot in the summer and cold in the winter.
The current Social Security forecast says that for every 1 retired person in 2050 there will be two working people providing revenue. It seems to me that `working people providing revenue' would consist in part of those between the ages of 18 and 45. Those people do not yet exist. So how in the name of Hell can you tell me that we have a crisis because people who don't exist won't exist in sufficient numbers to float the system?
Why is it okay to make assumptions about the population in 45 years, but it's not okay to make assumptions about pollution and climate conditions? Could it be that it's only okay to make assumptions that fit your worldview? Oh, and it sure would suck if a member of the Bush clan once warned in the 70s that Social Security would be broke by the 80s. If that happened we'd have an almost perfect parallel to "The Population Bomb." And that would make Rush a hypocrite, which we all know is not the case.
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The funniest thing I've read is that by 2050 in order to keep from reducing benefits we'd have to raise taxes by 4%! [Gi-normous GASP!!!!!] Why...why...that'd wreck the economy! We can't raise taxes by 4%! What about the children!? Oh, wait...conservatives don't care about them...sorry, forgot. What about the corporations!? They'll have to fire people rather than pay 2% more in taxes (because you split your Social Security taxes with your employer). We'll have food lines! Unemployment will reach 50%! The streets will flow with the blood of the non-believers (which is going to happen anyway, but this will no doubt hasten it)!
My 2 cents--if you want to shore up Social Security let the trust fund invest in things other than treasuries (via government employed professional money managers who have a proven track record of knowing what they're doing...a guy like Fayez Sarofim), and raise the employee portion cap to $200,000. That generates more revenue and keeps corporate lobbyists quiet. But what do I know. I'm a pinko, commie, liberal. My answer to everything is raise taxes.
Social Security is a safety net. Allowing the government to buy things other than treasuries with its surplus makes it one of those cool `air bag' thingies that stunt people land on. Bush's plan makes it a safety net with pieces missing--not only will some people miss the net entirely, but even if you hit the net the thing's gonna tear because it's full of holes.