Mustang Parts
   Carrying Saleen wheels and Bullitt wheels.

Tuesday, May 03, 2005

Social Security Exceptions

Another quick note on Social Security.

Did you know that millions of workers are exempt from Social Security? State and local government employees are not required to participate unless their employer chooses to. Many state employees have state-run pension plans.

Some of these states even invest their employees retirement funds in... the stock market!

So, where is the outcry? Why aren't state employees yelling about how their money has been diverted to a "risky scheme"? Why aren't they forcing all government units to buy into Social Security?


Anonymous said...

So *many* state employees have state-run pension plans and *some* even invest their employees retirement funds in the stock market. Are you telling me that there was no grumbling among state employees who lost ground during the late '90s/early '00s when the market tanked?

Anonymous said...

Sigh. Like many private pension plans, state plans sometimes invest in the stock market and T-bills. However, ultimately they're backed by the states themselves against catastrophic failure. No such guarantee would exist with private accounts such as President Bush semi-proposes.

Two, you evidently don't understand the difference between an investment plan and a social insurance plan.

Three, most sensible Republicans (if any still exist) quake in terror at the thought of the Social Security Administration investing in the stock market, because they would suddenly become the 800 pound gorilla who could dictate to private companies how to operate at the risk of a massive pullout. This would be tantamount to the nationalization of public companies by the SSA, which is why Alan Greenspan (among dozens of other experts) view this as quite possibly the most insane SS option ever considered. In fact, because of the coercive power the federal government would gain under such a plan, it's favored mostly by socialists and their nutter fellow travelers.

You obviously have a lot of rightwing axes to grind here, and it's your blog, but comments like these aren't especially enlightening. My 2 cents.

The Auto Prophet said...

Just one big right wing axe :-)

Your point is taken about the insurance aspect of state pension funds. Corporate pension funds are also insured by the feds, through the PBGC.

It is true that a private social security account would be open to market risk, especially over the short term. However, over the long term, market investments have performed well. Also, there is nothing to say that the government couldn't attempt to insure the private accounts in the case of a catastrophic failure.

In the case of a catastrophic failure, however, there is nothing the government can really do, even for social security recipients, other than print more money.

I do understand the difference between social insurance and investment. I don't understand why Social Security necessarily has to be a pay-as-you-go, wealth transfer system.

I agree that having the SSA be the holder and manager of the hypothetical investment accounts would be dangerous. I don't know who is seriously proposing it.

The way I would do it is require all workers to have a certain portion of their income invested in a privately controlled account. Basically, forced retirement savings. The account would be a legal structure, like a Roth IRA, with rules, administrated by private investment houses, with limits on fees. Participants would be limited to certain types of funds, designed by the investment houses, under strict rules with regards to the kinds of assets allowed.

If people wanted to invest only in guaranteed instruments like CDs or government bonds, and have minimal risk, they could do so. If people wanted to accept more risk for more potential return, they could invest in stock and bond funds.

Another example of this type of thing in real life is the 529 college savings plan, offered by many states.

The Auto Prophet said...

I am deleting any comments that resort to childish name calling, or obnoxious whining.

Make your points with reason, or don't bother wasting the key clicks.

Anonymous said...

I think we actually agree. I have no problem, in theory, with add-on private investment accounts, sort of a national 401(k) limited to index funds or T-bills. However, there's no way to pay for it. That's the hang-up for me - a 2+ trillion dollar conversion pricetag that will add to our already immense national debt.

The Auto Prophet said...

The problem is, we will have debt no matter what--debt now, or debt later. Better take on a smaller debt now, and wean people off of the old system, rather than have huge debt to pay later, when the system goes belly-up.