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Tuesday, February 01, 2005

Social Security

Read this.


Anonymous Anonymous said...

The points made in the article are good ones. I especially liked the amendment proposal that Social Security Trust funds could only be used for Social Security. That just makes common sense to me. The former governor of Louisiana raided a trust fund that the state had set aside for the protection of barrier islands that would act as a first defense against continued encroachment by the Gulf of Mexico into the wetlands. I was involved in the preparation of plans that would have protected those islands very well and would have done it within the monies available in the trust fund. However, due the governor's raiding, the funds disappeared, the plan was never implemented, and the wetlands continue to disappear affecting the very valuable fisheries of Louisiana. A similar result (i.e., no monies available to be used for the purpose for which they were set aside) could happen with Social Security.

I have concerns, however, with some other statements made in the article. First, from the suggestions I have heard to date as to how the plan could be implemented, the private funds would be a net benefit for young people of today by the time they get to retirement because they would have more money available for retirement benefits than the same amount of money would have generated if they were left in the current Social Security investments. For example, a single $10,000 investment made in 1973 would be worth almost $170,000 today if conservatively invested in an index mutual fund. Did anything bad happen during that time? What that says to me is that, for long term investing like retirement, your money is better off in the market than anywhere else. I agree that there is the matter of a funding shortfall currently if some of the Social Security money is taken out of the system to be invested in the private accounts and I have not heard of any proposals to fund that shortfall. However, I think that problem could be resolved and is easier done now rather than later.

Secondly, Taylor's comments about the administrative nightmare of taking the money from payroll for investment is a red herring. Such a system already exists and is done millions of times daily. These payroll deductions go for all sorts of things, not the least of which is 401(k) accounts. These do not have to invested daily or even with every payroll deduction. Most often, they are accumulated in the employee's name and invested quarterly. There is no reason that such a system could not be established for private Social Security accounts. Most employers already do this and would not be difficult to implement in this case. --Chuck

2/02/2005 02:29:00 AM  

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