There are many reasons why Social Security privatization is a terrible idea. Here is a look at just one.
Market forces are essentially forces of nature. Policy changes, such as Social Security privatization, that would funnel vast amounts of new investors or investments into the stock market could badly distort the natural market forces that underlie the market's performance.
Imagine that you know a special little creek for fishing where the trout are plentiful and big. Now imagine the government told everyone that if they would go fishing in that spot, everyone could always catch lots of nice, big trout. Is that believable? Of course not, because if everyone goes fishing there, the conditions that make it a good spot will be ruined.
The stock market is similarly susceptible to contrived stress, and this is exactly the plan the Republicans are proposing for our Social Security. George Bush and his friends in Congress have a loony idea to slash retired citizens' Social Security benefits and push workers to invest in the stock market instead.
As someone who spent many years as a professional trader in the stock market, it's clear to me that this idea is nuts. This plan would manipulate and upset the natural balance between supply and demand that has made the stock market a good place to invest. It would initially cause a huge increase in people buying stocks, which would increase demand and cause workers to buy stocks at artificially high prices. And as baby boomers reach retirement age, millions would need to sell stocks at the same time, which would increase supply and cause retirees to sell their stocks at artificially low prices.
Because this plan would cause us to buy at unnaturally high prices and sell at unnaturally low prices, the gains we would be depending on for our retirement would be unlikely to materialize. Workers rushing into the stock market would be as disappointed by their stock market returns as a herd of new fishermen would be disappointed by a fished-out hole.
Of course, the really wealthy investors have access to sophisticated financial tools that would let them benefit from this scenario. The Washington Republicans always make sure the very rich are taken care of!
When John Boehner, the Republican Majority Leader of the US House of Representatives, was recently asked about this reckless scheme for Social Security, he said "If I'm around in a leadership role come January, we're going to get serious about this." If the Republicans stay in power, they have promised to feed everyone by telling us all to fish in the same special creek. Except it's not a fishing hole they are going to ruin--it's our retirement.