Get rid of social security?

I believe that I already mentioned using the Payroll taxes for individuals that select privatized investment account as a means for providing a safety net. All of the "Payroll" taxes would still go to the government and would actually be used for two purposes. First being to provide funding for anyone choosing to remain with the current welfare program and also to provide the safety net.

A note on the "Safety Net" for privatization though. As I mentioned privatization has be be better in all regards when compared to Social Security and that applies to the "safety net" as well.

I can toss out my thoughts but certainly welcome other thoughts on this.

As we know with Social Security the minimum annual payment is about $7000/yr and this payment can be established by 40 quarters of minimum FICA taxes being paid by the individual. That is the "safety net" that Social Security provides.

With privatization the "Safety Net" is based upon a combination of personal income from assets as well as a government subsidy payment if the income generated is not enough to meet a minimum income threshold. Because it is a combination of personal income from assets as well as a possible subsidy the minimum can be much higher.

Previously I mentioned that the lowest safety net I would recommend would be at least twice that of the current Social Security minimum of $7,000/yr but let's just make it an even $15K/yr.

If we assume a that a general "life-time" annuity will pay about 5% of investment (which reflects both interest on the investment as well as depriciation of the principle) then to meet a $15K/yr minimum would only require $300k in assets. That is not very much in assets to accumulate over a 45 year working career or even a 35 year working career. A person earning minimum wage would have well over this amount in just 35 years of investing. If someone fell short then the government would pick up the difference in retirement income. For example if the person only had $200K in assets then they would receive $10K from the annuity and $5K from the government. Virtually no one, based upon accepted performance numbers for diversified and age adjusted retirement accounts, would ever need a government subsidy under this criteria which is over twice the benefit of Social Security.

Because virtually no one works for minimum wage their entire lifetime and because I would actually raise the mandatory contribution to 10% of wages for privatization then I would personally set the "safety net" at roughly $25K/yr which is equal to roughly the top benefits of Social Security today. It would require $500K in personal wealth to fund this retirement. The same "rules" apply as the government would be responsible for the difference between a life-time retirement annuity and the $25K/yr minimum annual income. Once again the projected wealth accumulation even from someone earning $20K/yr is far above the necessary $500K in assets so the likelihood of anyone ever needing a government subsidy is extremely remote.

The point being that the subsidy is there but is very unlikely to be required.

One point though. I would be willing to give people some time to decide if they want to go to privatization. They could start out with the current welfare program as a default and then have to select privatization. A benefit of early selection could be the "safety net" level. If a person selects privatization at age 20 it could be $25k/yr but if they wait until 30 it could be reduced to $20K/yr. The point being that someone that invests longer should have more wealth and the government's safety net can be adjusted based upon that. The higher "safety net" also encourages people to start "investing" sooner as opposed to later. If they don't decide until age 30 then all of the FICA taxes they paid between 20-30 go into the general Social Security pool. After 30 they would not be allowed to change their minds, period.

Of course I welcome comments as this is just my take on it. How could it be improved even more?

 

Both just dogma! To make the first comment you'd have to show that its Pareto improving. You cannot. To make the second comment, therefore, you'd have to show that privatisation has a redistribution gain for the poorer groups. Whilst you play silly beggars with raw data, the evidence has always questioned that conclusion. Niggle in the Journal of Economic Issues summarises it up with:

The privatization schemes would not be likely to raise the rate of return, properly estimated and adjusted for risk, either socially or to individual contributors...The privatization schemes would probably increase inequality, aged poverty, financial insecurity for the aged, and macroeconomic financial instability...The privatization schemes would not raise the aggregate rates of saving or investment, and so would not raise productivity gains; under plausible hypotheses, they might even reduce investment and economic growth.

 

Welfare programs are exclusively about taking from the "haves" and giving to the "have-nots" while private investments don't take from anyone. The Social Security welfare programs is even worse than most welfare programs in that it is often funded by taking the wealth of the poor and giving it to those with more wealth. Why, for example, should a person earning $20K/yr be paying so that someone else can have $25K/yr in income? That makes no sense whatsover.

Private investment accounts do not cause any harm to anyone and the belief that an additional several hundred billion dollars in annual investment capital would reduce world-wide investments is absurd beyond belief. Privatization increases the capitalization of enterprise and diversification of ownership of corporations. It reduces neither of those not even by imaginary standards.

 

You're just repeating yourself to ignore the comment made. Your "privatization doesn't reduce living standards" doesn't make sense as SS has been found to be pareto improving (i.e. you will necessarily be making someone worse off). Your "privatization greatly reduces poverty over time" isn't supported by the publication I quoted from. Deal with it

 

A person paying 7% of gross wages to the government doesn't lose one dime of disposable income if that same 7% of gross wages is invested instead. Their standard of living is not reduced because their disposable income is not reduced.

The accumulation of individual/family wealth reduces poverty over time. A fairly good definition of poverty is the lack of personal wealth.

 

This doesn't actually say anything. We have you ignoring that SS is found to be Pareto Improving (all because of the wage shocks you've chosen to ignore). we now have you ignoring the published analysis into poverty effects. Why is your position so reliant on ignoring the published evidence?

 

Getting rid of our wasteful and non-specifically and therefore extra-Constitutional, War on Drugs could be a start.

 

Providing for the general welfare is a form of social welfare spending and potential safety net. To my knowledge, no one is required to apply for or accept social security. How does you plan for any poverty inducing natural rate of unemployment above one percent?

 

Perhaps we should examine the fallacy of the referenced quotation:

Let's start with the false claim that privatization does not lead to higher return on investments when compared to Social Security. This is absolutely false. Based upon the gross revenues of Social Security from 1985, when surplus revenues were generated by a tax increase, to it's peak a total of about $3.5 trillion in principle and interest was accumulated. The same amount of gross revenues over the identical time period if privately invested would have generated about $68 trillion in principle and interest. Social Security resulted in about 5% of the capital (wealth) accumulation when compared to Social Security. The reason is obvious. Social Security is not an investment plan and has virtually no return on investment. Of note not a single dime of Social Security revenues today are generating any return on investment because SSI/Medicare is revenue negative and has been for a couple of years.

The claim states, "The privatization schemes would not raise the aggregate rates of saving or investment." This is absolute poppycock. Currently the median savings of a head of household at age 55-64 is a mere $100,000.

http://www.financialfreedomadvantage.com/average-retirement-savings.html

A minimum wage earner contibuting only 7% of gross income to a mandatory privatized (diversified and age-adjusted) investment plan over a 45 year working career would have many, many times this amount based upon all historical investment data. A person with median income would have a retirement account in excess of several million dollars.

We could go on but the piont being that this cited quotation is so full of BS that a person would have to be a complete idiot to accept that anything in it is accurate.

 

So the publication, in a top journal, is all fake? Be serious! You continue to allow your dogma to sideline you into ludicrous statement. Unlike you, the academic isn't making half-baked raw data comparisons. Again, why do you ignore the evidence?

 

SSI doesn't address unemployment except in the case of disabilities which is merely an insurance plan. Unemployment is unrelated to the retirement benefits that are being addressed because retirees don't work (or shouldn't have to work) for a living. Unemployment is unrelated to the topic.

Of note though, with more capital investment in enterprise we can assume more employment.

 

I stated the quotation is false on numerous statements. Perhaps the article, which was only cited in part, was referring to privatization "schemes" in the context of being "an underhand plot" because such "schemes" have existed as proposals for privatization of Social Security. Related to such "schemes" the statements made might be accurate but that is not what's being proposed.

What I propose here is not a "scheme" in the sense of being "an underhand plot" because it is based upon proven investment stategies that mitigate all risks associated with long term investing. Highly diversified and age-adjusted are the two criteria cited by every investment expert and they unanimously endorse this because it never fails!

To me, for example, it is a government "scheme" to raise the age for Social Security retirement. They cite longer life-spans but ignore the fact that the human body still "wears out" by about age 65. Physically most people need to retire at about age 65 regardless of how long they might live.

 

You can state it as much as you want but it will be nothing more than hot-air. Again, you make bogus raw data comparisons incapable of assessing the effects of privatisation. The economic studies referenced both show that your conclusions are nonsense. Interestingly, the second article is also motivated by assessing who is in favour of privatisation despite the likelihood of a deterioration in efficiency. Its therefore essentially about how an inefficient result could be coerced to the detriment of individual well-being (as shown by that pareto improving result, the backbone of making comment over individualism without being polluted by equity concern, that you showed contempt for).

 

Since you don't factor for any rate of unemployment above one percent; your line of reasoning may work no better than anything that is already on the market today. Why would we need any more social safety nets beyond one which ensures full employment of resources in the market for labor?

 

I short the two articles mention, which no links were provided for, are by economic theorists that are opposed to privatization. Is that a correct assumption since I have no clue who the authors are or what the foundations are for their arguments.

For example, how can there be coercion when all decisions are made by the individual related to their choice of a specific investment portfolio when numerous portfolios are offered by numerous private investment firms all seeking to provide the best possible outcome for their clients? Where is the coercion? Is individual choice now coercion? Coercion is when the government forces a person to do something so there is limited "coercion" in mandating the investment but the person still owns their money as they are 100% vested in their accounts. The government controls nothing except to ensure the protections of the Right of Property of the Individual. That is the fundamental limit of government coercion.

 

They're objective economic studies, the basic requirement for making any hardcore comment on this topic. That you haven't bothered with that evidence is revealing in itself.

Look up pareto improving. You're essentially trying to deny a superior result where we can make one person better off without making someone else worse off. That is of course coercion.

 

With voluntary privatization please identify who is worse off. Anyone that selects "privatization" will be better off than someone staying with the "welfare" program while those staying with the "welfare" program will be treated identically to what they're already being treated like. Since it is completely voluntary as to whether a person stays with the existing program or chooses privatization there is no coercion by anyone.

 

That would reflect the impact of the wage shock. Every comment you've supplied has been about ignoring the actual evidence published in this field. I appreciate your need to do that. You've allowed yourself to make statements that aren't supported by that evidence. There is no question in that

 

This argues the system we have today in which there are many private instruments for saving/investing as well as SS.

What would be the sales point for people to choose privatized SS over our current private retirement instruments?

 

What "wage shock" is that?

No one's wages are affected by voluntary privatization. If anything the increase investment in private enterprise would create more enterprise resulting in more demand for labor which would decrease unemployment and increase wages based upon the supply and demand of labor. Of course the investments would be world-wide so the benefits to third world economies could be very beneficial to the residents of those countries improving their standard of living as well.

What some people seem to ignore is there can be win-win-win situations were everyone is better off. Capitalism does not require someone to "lose" and ideally all parties benefit from caplitalism. Capitalism was always based upon all parties to a contract benefiting from the contract which is something the socialist seems to forget.

 

Any! That's the whole point: your raw data comparisons are completely useless as you haven't factored in risk.

A ludicrous statement given your previous dismissal over pareto efficiency.

 

Several points.

First of all they are going to spend the same amount or perhaps slightly more to go privatized but the money is already being spent as taxes but instead of an average $13K/yr from Social Security they could anticipate an average of over $50K/yr in income at retirement. An average income earner would probably recieve over $100K/yr in income at retirement.

Second is that there is no "retirement age" but instead there would be "retirement criteria" that would require them to at least receive a specified guarenteed income. That "guarenteed income" would be the "safety net" level that, as I proposed, would be roughly the maximum Social Security amount as opposed to the minimum Social Security safety net amount.

Finally, it's their money! Not only could they make the mandatory investments they could also supplement those with additional investments and employers would be encouraged to offer matching funds like 401K's. In the end the government doesn't get to touch a dime of it and the individual can select from numerous diversified and age-adjusted investment accounts. We could anticipate that even with just ten investment firms involved with ten plans each that there would be 100 or more different investment plans to choose from at any given age (i.e. the investment options do change with age probably every ten years).

Personally I'd like to see all contributions and payments tax exempt to add to the reason to invest more for greater wealth accumulation by the People.

 

Diversified and age-adjusted long term investment accounts mitigate all risks. There are no examples of them ever failing.

 

Again you simply ignore the evidence. Its those wage shocks (and the risks involved) that ensure SS is pareto improving. You merely continue to go round in circles in order to avoid the evidence. Answer a simple question: why do you have such strong views on this subject when you haven't read the available economic analysis?

 

Why would anyone need a "welfare" program if they are not in official poverty and can choose how to invest their money on a longitudinal basis, even if they are on a hypothetical minimum wage for simply being unemployed, their entire adult working life?