Mover Mike

I haven't commented on the Social Security debate in awhile, because a) there is a problem, every one knows it! b) how could any proper thinking person object to a private retirement account. To emphasize the point, the NYT on April 26, had The Proof's in the Pension by John Tierney.

In 1981, Chile, in response to its social security system going broke, privatised its social security. The US about the same time in response to the same pressures, chose to raise taxes and cut benefits. Tierney visited his old college friend in Chile and compared plans.

After comparing our relative payments to our pension systems (since salaries are higher in America, I had contributed more), we extrapolated what would have happened if I'd put my money into Pablo's mutual fund instead of the Social Security trust fund. We came up with three projections for my old age, each one offering a pension that, like Social Security's, would be indexed to compensate for inflation:

(1) Retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age.

(2) Retire at age 65 with an annual pension of $70,000. That would be almost triple the $25,000 pension promised by Social Security starting a year later, at age 66.

(3)Retire at age 65 with an annual pension of $53,000 and a one-time cash payment of $223,000.

There should be NO debate. We are a capitalist country. Capitalists champion private vs public solutions to problems. It is amazing that other countries without our traditions can show us the way and remind us to be Capitalists.

Update on Social Security as practiced by Chilean private accounts. Last week John Tierney wrote here about social security here in the US vs private accounts in Chile. We would be better off there! Some asked him about the risks of the market in Chile. He says in Place Your Bets the greater risk is in the US:

But there's also another kind of risk to consider, one that Chilean workers kept mentioning to me. The best part of their private accounts, they said, was that they'd put "la plata donde mis ojos la vean" - the money where my eyes can see it. They knew they might lose some of it in the stock market, but they preferred that to watching it all disappear into politicians' hands.

Amen to that! How can you trust politicians when they have squandered 5 million ounces of silver, rung up $8 Trillion in debt, trashed the dollar, and borrowed all the money in the Social Security trust fund replacing the money with IOU's.