Yes, a lot more money would have flowed into the stock market which would have done more to artificially inflate stock prices. I guess the operative word is “artificial”.
With the huge downturn (the DJIA is far below where it was when GWB took office) would we be on the verge of a second and more dramatic crisis of retirement funds evaporating before our eyes? I realize that SS is underfunded and remains a looming problem. No argument there. But if GWB’s plan of privatization had been implemented would the retirement fund problem be a crisis today, not years in the future?
GWB tried to sell his agenda on the basis that the stock market “historically” returns 10% on investment. Well, after almost 8 years of his leadership we see where that is.
I’m not under that impression but that’s the basis on which the idea was sold. If a huge amount of money suddenly flowed into the market then prices would have to go up. Free market, supply, demand and all of that. That doesn’t mean that it has to continue to go up and, as we’ve seen, wealth can disappear.
So what would the current scenario be if the privatization had occurred. For the sake of argument I’ll say that instead of a market that went from 10,000+ to 8,000+ we would see a market that went from 15,000+ to about 9,000.
Yes, it’s hypothetical but I feel it’s worthy of debate.
It’s been a while, but if I recall the amount of money that would’ve been invested annually by Bush’s privatized SS plan was pretty small potato’s compared to the total amount of money that flowed in and out of the market every year. So I’d say the plan would’ve had a pretty minuscule affect on the level of the Dow or whatever.
Suppose you know this is horseshit, and social security is nonetheless cancelled for future retirees and you are free to do with your money as you wish. So let’s say, you know you want a safe investment. You pick government bonds. “Hell,” you figure, “if the government goes under I got bigger worries than my bonds being worthless. And besides, if the government went under, I’d be screwed under social security anyway.” And because it isn’t taking in social security taxes, it has to sell more bonds to make up for the decreased revenue to fund the last batch of retirees, anyway. Which means you’re still paying for those that are retired, only now it is a “loan” instead of a “tax.”
But then, 50 years from now (or whatever), you retire, and start cashing in these bonds. Of course, the government has to continue to sell bonds to fund the payment on the bonds it sold you 50 years ago…
nope, more like huge amounts of big cars moving very slowly from the “sunshine” southern/southwestern states toward the white house. all you would see would be steering wheels with 2 hands wrapped around them. but those tightly clenched hands would soon be leaving steering wheels and going for necks.
Most likely exactly where we are today. I don’t see how it would have made much difference one way or the other.
Um…no. Most of the people who are collecting today would have been in exactly the same shape. For the rest, investing in the stock market is a long term thing…so, whatever loses you get today will most likely be made up for in the long run. Bush’s privatization would have been more like mutual funds than straight up stock investments anyway…and those are fairly diversified.
Not saying whether it would have been a good thing or a bad thing in the short, medium or long term…but you seemingly don’t understand the plan OR the market. Which is not a good thing considering the leading ‘questions’ you are asking and the way you are asking them.
Where are we? Over those 8 years has the market made or lost money overall? Has investment in things like mutual funds been a net negative or positive? Answer those questions and you will have a better gage on whether or not the plan to offer a privatize OPTION would have been a good or bad thing.
I will leave it to you to figure out the answers to those questions as this seems to be yet another of the ‘OMG! I don’t understand the market but I think it doesn’t work and we should get rid of it! Oh…and Bush sucks donkey dick!’ type threads.
It’s not a dumb question…but the way you ask it implies you already know the answer. Well, I’m sure you’ll get the very answer you want…no doubt The Usual Suspects, left wing style, will be about soon to give it to you.
OK, you don’t like the way the debate was presented. On the other hand, I get my statements on the 529 plans for my kids’ education. These statement don’t even take into account what has happened this month. The value of the plans haven’t moved beyond the initial investment. Now they are ready to go to college and I realize it’s all been a sham. They were sold on the idea that the growth in equities (and mutual funds) would provide a safe haven to make sure that college education was affordable. I would have been better off putting the money in a money market account.
The same thing is happening with 401K’s, pension plans and Keough’s. What’s going to happen when the states have to recognize the drop in the value of their guaranteed pensions? It’s going to be the subprime mortgage crisis all over again but worse.
Let’s get real here. Wealth has disappeared. Predicted appreciation in the equities markets looks like a pipe dream today. The idea that we can invest in the market and get a return on investment is a fiction in the short run and we all don’t have an infinite amount of time.
So again, where would we be if the Bush privatization plan had been adopted. I don’t need a political lecture I want a debate.
No worries. I actually got the Usual Suspects thingy from a recent Pit thread…so, it was mostly said tongue in cheek.
I’m just letting my investments ride for now. No where really seems safe from the lightning and I’m not expert enough to do short term manipulation. I’ve definitely taken my lumps in the last 2 months and I’m at the point where I hate to even look at the market trends…or get notices from my mutual fund or investment brokers.
I just keep telling myself that I have 20 years to retirement and that if the economy doesn’t tank to the point where we go back to caves and bartering shells and shiny rocks for mammoth steak that eventually things will look better…
This is absolutely correct, and I wish more people would realize it. I see many 30-35 year olds at work crying that their 401ks are disappearing and that they won’t have any money when they retire. Sure, they will.
Like you said, unless we are forced to go back to a hunter/gatherer society (in which case, your money doesn’t matter anyways) then the market will rebound and your investments will rise. Right now, your 401k contributions are buying more stock, since the prices are reduced. When it goes back up, you will own more shares than you otherwise would have had. Wait it out and we will be fine.
Now, if you are 55-60 and want to retire in the next couple of years, your money should have been moving progressively toward safer investments like bonds and money markets.
There can be rational arguments against privatizing SS, but the argument that the stock market is too risky is not one of them.
Bush did not float a plan to privatize Social Security. Many people think this, but it simply isn’t true.
Here’s a summary of Bush’s plan: Participation would be voluntary, so anyone who wanted to stay with the current system could do so. Also, only 1/3 of your FICA taxes would be allowed to be invested in personal accounts, with the rest going into the current system. Anyone who chose to do so would be limited to 5 funds that were specifically chosen to be broadly invested in stocks and bonds, plus a very conservative “Lifestyle Fund”. Further, investors would be forced to move all their funds into the most conservative fund once they turned 47.
It should also be noted that the plan would not even be available for anyone until 2009. Then, it would be phased in for people by birthdate, with only those born between 1950 and 1965 eligible the first year. So, not one American would have a penny of their SS funds in a personal account today.
I would suggest that before you go spouting off about how stupid a plan was, it would behoove you to actually understand what the plan was.