Debaser: [SS is] based on the premise that there will always be increasing numbers of workers (both from births and from immigration) to always provide good returns for the retirees.
SS is not based on the premise that the worker/retiree ratio will always be increasing. In fact, for the last several years SS has been running a large surplus despite the fact that the worker/retiree ratio has been decreasing.
As I said, the predicted sustainability of SS depends on there always being more workers than retirees in absolute numbers, with a worker/retiree ratio predicted to stabilize at about 2:1. (And in your most recent post, you say you don’t contradicting this.) This is a perfectly reasonable assumption, since, as I said, there is no reasonable scenario in which the absolute number of over-70 retirees would be larger than—or even approximately equal to—the absolute number of workers between 18 and 70.
Debaser: *My biggest problem with it is that it doesn’t take advantage of compounding interest and that I’m dependant on the goverment for bennies. It’s not my money, it’s theirs. *
You’re right about the compounding-interest advantage, and as I’ve said before, I wouldn’t have a problem with switching very gradually—over many generations, say—from our current “pay-for-your-parents” system to a “pay-for-yourself” one, as long as we did it gradually enough to avoid being hammered by the transition costs. In all the actual privatization proposals I’ve seen, though, the transition costs are just way too big a burden on the transitioning generations.
And the argument that you don’t want to be “dependent on the government for bennies” because under the current system it’s “their money” is simply silly. As you said yourself two posts ago, if we had a privatized scheme, it would still be “the government tak[ing] a portion of your payroll taxes and invest[ing] them in an index fund”. Any realistic privatized scheme would not give you significantly more individual control over “your” retirement money than today’s SS contributors have.
Debaser: *It’s obviously unrealistic for the average life expectancy to go past 120? Not to me it isn’t. This seems entirely possible. *
But it’s certainly not going to happen while the retirement age is still at 70. Yes, retirement ages need to go up as life expectancies go up, and in fact they already are. There is not going to be a sudden huge 40-year jump in longevity that catches the SS system off guard. (And if there were, of course, it would impact a privatized system just as badly, because the chance of getting lifetime support from the annuity you’d buy with your private account would be shot completely to hell.)
Debaser: There has never been a period of 20 years or longer where the stock market lost money.
But there have been ten-year periods where that was the case (I did say “10- or 20-year periods over which the market hasn’t kept up with inflation or has even been negative”, remember), and in fact, your own cite admits that there have been periods as long as 16 years where stocks have failed to beat inflation.
And of course, there have also been significantly longer periods when the market, although growing faster than inflation, has not achieved the comfortable 6–7% average rate of return calculated over the very long term of 75 years.
Debaser: *I don’t agree that if the economy is doing well enough to produce robust returns on stock investments that this somehow means that all the huge problems with social security go away. How well or poorly social security does is linked to the worker to retiree ratio. The overall health of the economy is quite a seperate thing. *
It’s irrelevant whether or not you feel like “agreeing” with it. The same calculations that you rely on for the prediction that SS will have a funding shortfall if economic growth is very slow for the next several decades also predict that the funding shortfall won’t happen if economic growth is robust. It is not “quite a separate thing” from the worker/retiree ratio, because economic growth is linked to productivity, which affects the minimum size of the worker/retiree ratio.
Debaser: As I’ve already stated, the fact that Social Security is heading for bankrupcy is only a secondary reason to privatize it.
In the first place, the Administration’s current plan for privatization will not actually do anything to remove the predicted funding shortfall. They plan to eliminate the shortfall simply by cutting traditional SS benefits. So privatization by itself isn’t projected to do anything to stop SS “heading for bankruptcy”.
In the second place, your primary reason for supporting privatization seems to be mostly an emotional commitment to an experiment in social engineering. You would feel more comfortable if you could think of a certain part of the government’s money as somehow being earmarked for you personally.
Of course, in reality-based terms, this would do absolutely zilch, zip, nada to prevent the government from changing the laws in future so that your “private account” could be restricted, reduced, or eliminated. Just as the SSA’s pledge to current workers to provide them with retirement benefits in the future doesn’t necessarily prevent the government from trying to cut those benefits (as the Bush Administration’s current SS privatization plan would do). The “your money” rhetoric is simply PR, and you seem to have fallen for it in a big way.
Stumping for privatization because it would provide the advantage of compounding interest, while ignoring the burden of transition costs and other expensive issues (like how a privatized system would provide disability/survivor benefits, and what would happen to investors who got poor returns) is short-sighted and irresponsible.
Stumping for privatization because it gives you warm fuzzies to think of some of the government’s money as your vewwy vewwy own is simply childish and silly.
