John Moltz

I'm still waiting for more specifics on this plan, but I do not see "the destruction of Social Security".

This reform plan is one I've heard proposed by others, most notably Louis Rukeyser of "Wall Street Week" at his annual conference in Las Vegas. In fact, he was a proponent for it pretty much annually for the last several years I attended.

The first thing to note about the plan is that it is _voluntary_. If people want to stick with the existing contributions to Social Security, they may.

The second point is that the plan talks about a very small percentage of Social Security contributions. Like 2 percent. (That's the figure I remember Rukeyser propounding).

The theory is that you could still let the government handle 98% of your Social Security contributions. But on the chance -- albeit a slim one -- that the government (controlled over the years by both parties at times):

(a) might not be the most efficient investor of your money, and,

(b) would not necessarily have more of your self interest at heart than even you might have

...you'd get to invest 2% of your retirement money. You'd have control over that 2% like you do now for 401Ks and IRAs. But again, only if you wanted to.

That's not terribly unreasonable or risky, and it's one way to try and save Social Security. Why then, is there so much hysteria (and apparent partisanship) about this plan? All it does is take a bit of control away from the government and gives a bit more freedom to the taxpayer.

The Washington Times provides a bit of detail, postulating up to 4 percent:

http://washingtontimes.com/national/20041209-113215-1362r.htm

The president's plan would allow younger workers — generally those younger than 55 — to invest from 2 percent to 4 percent of their payroll taxes into private accounts that will be invested in safe stock-market funds. White House advisers have told The Washington Times that the administration is leaning toward the 4 percent figure.

Well, that's Rukeyser's plan, which may or may not be anything like what the president will try to push through.

There are two overall problems with this, I feel. One is that it will cost money to shift to this system. If we fund this shift by increasing the deficit (generally the president's preferred approach), we're simply telling future retirees they can put an investment in the stock market on their credit cards. This actually puts more burden on the system which, I believe, they hope to use as ammunition later for another phony crisis.

Second, the people who make out the best in the stock market are the sophisticated players. Average players often do not have the discipline or the knowledge to come out ahead. How many storied have you heard of people who dumped all their money into some high-flying tech stock in the late 1990s because they thought they could get a high return, only to have it tank?

There's a reason social security is a government-managed program. It's to make sure people have at least *something* they can live on in retirement. For years the large companies in this country used to have retirement programs where people would get paid on a monthly basis by the company. One by one these failed and what was most often the reason? The companies invested poorly in the stock market.

If they can't hire a guy to make it his job to do it, why should we think average people can do it?

Note that I'm not anti stock market. My father works on Wall Street and I've worked for an excellent investment management company for years. But it's a disciplined approach that ensures your investment and taking away a safety net to let people take their chances is a bad idea. They should be doing that with other funds if they want.

And I know that sounds patronizing to the American taxpayer, but that was the whole point of this program. Retirees were dying on the streets before social security and the idea was to build a safety net for them. That can easily happen again. It's hard enough to live on $900 a month - they don't need even 2% at risk.

Retirees were dying after social security too.

As I understand it, the program was modeled after a German Kaiser program, which was a bit cynical to start with and made even more brilliant. People lived into their 50s at the time the program was considered, so the government chose a payout starting at, what? 62? No prob, Bob! The system has cash flow.

Now people are living longer, so even a change to 65 doesn't buy much, except a little time. That's why SS is in trouble. Dagnabbit, them old baby boomers want to collect!

Don't get me started on the defiicit. I live in a state (CA) where every election has bond issues -- which are deficit spending second mortgages -- and are positioned as dire needs ("For the children! For the schools! For transit!") and everyone votes for them almost every time, not questioing where the _last_ bunch of morgage money went. But there will have to be a money shift somewhere, sometime to prevent SS from going broke. More taxes isn't the answer.

I'd still prefer a plan that let me choose to stay with the original, and safe plan, or if I liked to put a bit of money into play. One would hope people would invest in safer funds, since stock market trends up over time. Sure, hi-tech plunged in 2000 (nailed me! I had lots of nice Apple stock options ready to go at $75!), but over 40 years, it should go up, and better than a government rate. (in fact, my Apple stock is near that figure again. Y(es, Enron and the sock puppet startups can't say that...)

Yes, it will cost money in the future. Maybe if the Bush admins come out with real specifics, we can better evaluate the costs of staying with the status quo or trying what is not a radical modification.

Clearly, of course, the devil is in the details and I have little confidence that the current set of players sufficiently has the retiree's interest in mind, rather than the interests of the investment community.