Social Security privatization mathematically certain to fail- Mike Kinsley

[papau]

Social Security privatization is not just unlikely to succeed, for various reasons that are subject to discussion. It is mathematically certain to fail. Discussion is pointless

http://www.latimes.com/news/opinion/sunday/la-oe-kinsley19-proof,0,7948674.story
Kinsley's Proof That Social Security Privatization Won't Work
By Michael Kinsley

<snip>1. To "work," privatization must generate more money for retirees than current arrangements. This bonus is supposed to be extra money in retirees' pockets and/or it is supposed to make up for a reduction in promised benefits, thus helping to close the looming revenue gap.

2. Where does this bonus come from? There are only two possibilities-- from greater economic growth or from other people.

3. Greater economic growth requires either more capital to invest or smarter investment of the same amount of capital. Privatization will not lead to either of these.
a) If nothing else in the federal budget changes, every dollar deflected from the federal treasury into private Social Security accounts must be replaced by a dollar that the government raises in private markets. So the total pool of capital available for private investment remains the same.

b) The only change in decision-making about capital investment is that the decisions about some fraction of the capital stock will be made by people with little or no financial experience. Maybe this will not be the disaster that some critics predict, but there is no reason to think that it will actually increase the overall return on capital.

4. If the economy doesn't produce more than it otherwise would, the Social Security privatization bonus must come from other investors, in the form of a lower return.
a) This is in fact the implicit assumption behind the notion of putting Social Security money into stocks, instead of government bonds, because stocks have a better long-term return. The bonus will come from those saps who sell the stocks and buy the bonds.

b) In other words, privatization means betting the nation's most important social program on a theory that cannot be true unless many people are convinced that it's false.

c) Even if the theory were true, initially, privatization would make it false. The money newly available for private investment would bid up the price of (and thus lower the return on) stocks, while the government would need to raise the interest on bonds in order to attract replacement money

[ananda]

1. not news

This is not news to anyone with half a brain.

Also, anyone could also figure out that huge deficit spending and massive debt would mean fewer to no social entitlements.

So.. I wonder how the poor children are going to eat at school.. how poor families will find a place to live.. how anyone will be able to retire.

Sue

[burythehatchet]

2. He just had a great segment on Franken's show

very funny and informative. Its still on

[chelsea0011]

4. I loved the lemonade story

A man dying of thirst runs into Bush in a desert. The man asks for water. Bush says, "have lemonade instead, it tastes better and is better for you. Bush then gives the man lemonade powder and tells him to just add water and stir.

[dweller]

3. He's the guest currently on with Franken/AAR n/t