Ed Morrisey writes about New York City’s private retirement accounts program that replaces Social Security and has delivered a consistantly higher rate of return than Social Security. Meanwhile, the city of Galveston, Texas also has a similar system that has produced similar results. As Judge Roy Holbrooke of Galveston notes:
In today’s debate about whether to partially privatize Social Security, the Galveston County plan is sometimes demagogued. But our experience should be judged factually and fairly, not emotionally, politically or on the basis of hearsay. We sought a secure, risk-free alternative to the Social Security system, and it has worked very well for nearly a quarter-century. Our retirees have prospered, and our working people have had the security of generous disability and accidental death benefits.
Most important, we didn’t force our children and grandchildren to be unduly taxed and burdened for our retirement care while these fine young people are struggling to raise and provide for their own families.
The cities of New York and Galveston have both been able to opt out of Social Security for their workers (thanks to a loophole that was closed in 1983 – those cities and others were allowed to grandfather in their programs) and have used private retirement accounts to provide greater benefits for everyone. Such systems can and will work just as well on a national level, provided that Congress has the fortitude to pass these badly needed reforms.
On a philosophical level, Social Security reform restores the program to what it should be. Congress should not have the right to spend money that is earmarked for the retirement of American citizens. Yet that’s precisely what has been done for years. The Social Security system does not have the assets to cover its liabilities. Beginning very soon the Trust Fund will begin to be depleted. Eventually it will be gone. Congress will have to go back and take more money from our pockets in order just to keep their heads above water.
Yet for two and a half decades New York and Galveston have been providing their workers with a better system. Congress can’t spend the money in your private account. They can’t steal from your retirement like they can under the current system. So long as Congress holds the key to the “lockbox” they’ll find a way to spend the money. Private accounts give workers more choices to do with their money, gives them a far higher rate of return than the current system ever could, and keeps Congress’ grubby little hands off our retirements. If these programs are good enough for Galveston and New York, why aren’t they good enough for the rest of America?
Private accounts wind up costing everybody more. For every system in which there are individual winners, there will be individual losers, and other social welfare programs wind up having to absorb their losses.
SS works, and costs less, because the risks are shared. You’re going to have a hard time explaining to the American people why they should shoulder significant personal risk without significant reward.
This demonstrates the abject economic ignorance of a large part of the Democratic Party. The economy is not a zero-sum game. New wealth is being created all the time. If you’re not willing to take a certain amount of risk, then don’t use a PRA. The proposed reform packages are strictly voluntary.
The idea that there’s some great amount of risk and little reward is completely wrong and utterly contradicted by the facts. The rates of return in Chile, Galveston, New York, and the Federal Thrift Savings program have all been far greater than anything that Social Security can offer.
“The proposed reform packages are strictly voluntary.”
Except for the fact that Social Security will be bankrupted sooner than 2042 if trillions of current trust fund dollars are allocated towards establishing private accounts and paying for the double-digit adminstrative accounts. There’s no certainty in the minds of serious people about whether Social Security really will go broke in another 40 years. However, it’s virtually assured that it’ll go broke if Bush’s “solution” to the crisis becomes reality. Basically, the “choice” here is private accounts or nothing.
The economy is not a zero-sum game.
Unless they changed the laws about printing your own money, by definition, the economy is a zero-sum game.
The rates of return in Chile, Galveston, New York, and the Federal Thrift Savings program have all been far greater than anything that Social Security can offer.
Oh, right. That’s why Chile is sending its seniors back to work and why our Social Security system is the envy of the rest of the world, right?
I should point out that even Bush has had to admit that private accounts don’t solve the issue. (His exact words were that “they don’t fix the solution”, whatever that means.”
.3% is not “double digits” by any means. Just more Democratic FUD.
No it isn’t. This is basic Economics 101 stuff. There isn’t a finite amount of wealth in an economy. There is a theoretically infinite amount of wealth. See all those people at Google making 6 and 7 figures a year? They’re making their money on something that didn’t exist 20 years ago. Making the argument that the economy is zero-sum is absolutely and totally idiotic. If the economy is zero-sum, than the GDP can never grow and the whole entire economy doesn’t exist, in which case Social Security is the least of our problems.
Chile’s system only apples to 20 years of work, which is where it differs from the American system.