Shy retiring type wanted for Social Insecurity. Don't Ask Questions!
Much verbiage is being expended on the subject of Social Security and its reform. I think the noise evokes two responses in most people: Fear and Confusion or Systemic Overload. I worry about this because a mechanism which the whole community invests in for the benefit of those who have spent their lives contributing or, in some cases, who are seriously disabled, is very important. I believe this concept is one hallmark of our functioning as a civil-ization. Hyphen intended. The word "civil" implies community.
So. About this contentious noisemaking! What are some things worth thinking about?
President Bush has said that Social Security is "in crisis" because there's not enough money in the kitty. What's true? There are government IOUs in the kitty which total up to enough dollars to carry Social Security adequately for several decades. What's the discrepancy? The President and company say the "iou's are worthless". The fact is that they are Treasury notes.
If they are worthless, I ask you to take the green pieces of paper out of your pocket and throw them away. They too are simply iou's drawn on the Treasury. In fact, the entire government runs on iou's drawn on the Treasury! The national debt is financed on them! So. If those are worthless, then we'd better watch out because defaulting on them would make the dollar worthless.
So....Why would anyone put such a wild idea out there and work so hard to sell it? I ask you to think about who has something to gain if much of the money put into Social Security now is put into private stock investments instead. Recent reports have estimated that major brokerage firms in the country- which would be the only ones capable of handling the volume of transactions- stand to gain billions of dollars in fees if people are allowed to invest in their own 'retirement accounts. Hmmmm.....that's interesting.
If we could just put our money in our own investments, we'd be better off. I haven't done the math scrupulously, but I recall that if you invest a dollar and get a 7% return on it it doubles in ten years. If you look at the investment vehicles over a fifty or one hundred year time span, a seven percent return is a pretty darn good average. So if you invest that dollar at age twenty you'll have about $25 by the time you're 65. If you take the money now going into social security, and invest it well, you might indeed have a nest egg at retirement. So what's wrong with that?
I don't know because I'm not an economist, but I have a sense that the realities don't work out that simply. For starters, I believe that the money we're putting into Social Security now gets a return because it's being invested conservatively but safely. So I have difficulty thinking that the average joe private investor is going to earn much more. And if he doesn't, is he simply out of luck and we give her a cardboard sign to solicit dollars at the freeway exit?
I also suspect a different economic concept comes into play here. Suppose all the younger workers in the country get their own money. And the smart and market savvy ones go out and buy shares of CorporateEconomics Corporation because it's performing fabulously. Along with ten other companies just like it. If there are only a limited number of shares in those successful companies, everyone obviously can't put all their money in those stocks or else the price will go up. When the price goes up, the people who have the shares already get wealthy, but the ones who want to buy in don't. In fact, they may make a little or they may lose as the early buyers 'cash out' and the price drops. If everyone invests in the market with these extra dollars, are there enough shares of the 'winning corporations' stock that everyone can have them at a price that allows them to reap the continual average profit? I don't know the answer I have to admit, but I'm skeptical.
So if the first two observations I made are correct, perhaps we needn't delve into economic theory but just say "no". But if we do some delving, I think the whole house of cards raises big big questions.
I suggest we go back to the concept of being civil-ized. Let's think about what's good for the whole community and we'll be well off as a result. Keep asking questions.
So. About this contentious noisemaking! What are some things worth thinking about?
President Bush has said that Social Security is "in crisis" because there's not enough money in the kitty. What's true? There are government IOUs in the kitty which total up to enough dollars to carry Social Security adequately for several decades. What's the discrepancy? The President and company say the "iou's are worthless". The fact is that they are Treasury notes.
If they are worthless, I ask you to take the green pieces of paper out of your pocket and throw them away. They too are simply iou's drawn on the Treasury. In fact, the entire government runs on iou's drawn on the Treasury! The national debt is financed on them! So. If those are worthless, then we'd better watch out because defaulting on them would make the dollar worthless.
So....Why would anyone put such a wild idea out there and work so hard to sell it? I ask you to think about who has something to gain if much of the money put into Social Security now is put into private stock investments instead. Recent reports have estimated that major brokerage firms in the country- which would be the only ones capable of handling the volume of transactions- stand to gain billions of dollars in fees if people are allowed to invest in their own 'retirement accounts. Hmmmm.....that's interesting.
If we could just put our money in our own investments, we'd be better off. I haven't done the math scrupulously, but I recall that if you invest a dollar and get a 7% return on it it doubles in ten years. If you look at the investment vehicles over a fifty or one hundred year time span, a seven percent return is a pretty darn good average. So if you invest that dollar at age twenty you'll have about $25 by the time you're 65. If you take the money now going into social security, and invest it well, you might indeed have a nest egg at retirement. So what's wrong with that?
I don't know because I'm not an economist, but I have a sense that the realities don't work out that simply. For starters, I believe that the money we're putting into Social Security now gets a return because it's being invested conservatively but safely. So I have difficulty thinking that the average joe private investor is going to earn much more. And if he doesn't, is he simply out of luck and we give her a cardboard sign to solicit dollars at the freeway exit?
I also suspect a different economic concept comes into play here. Suppose all the younger workers in the country get their own money. And the smart and market savvy ones go out and buy shares of CorporateEconomics Corporation because it's performing fabulously. Along with ten other companies just like it. If there are only a limited number of shares in those successful companies, everyone obviously can't put all their money in those stocks or else the price will go up. When the price goes up, the people who have the shares already get wealthy, but the ones who want to buy in don't. In fact, they may make a little or they may lose as the early buyers 'cash out' and the price drops. If everyone invests in the market with these extra dollars, are there enough shares of the 'winning corporations' stock that everyone can have them at a price that allows them to reap the continual average profit? I don't know the answer I have to admit, but I'm skeptical.
So if the first two observations I made are correct, perhaps we needn't delve into economic theory but just say "no". But if we do some delving, I think the whole house of cards raises big big questions.
I suggest we go back to the concept of being civil-ized. Let's think about what's good for the whole community and we'll be well off as a result. Keep asking questions.
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