Privatization of our SSN!

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It is argued that Social Security is in trouble and unless something is done about it immediately, it will not be around for our children when they retire.

Well there is no question that the way social security fund is managed poorly and it will be in trouble, but not the way President Bush has been going around the country and scaring the people. According to President Bush the social security will go bankrupt by 2025 and will not be able to pay the retired people. This is far from truth. According to all the experts, social security will continue to be financially sound till 2042 at which time it will pay for 75% of the people who are eligible to receive it. With a minor tweak it could last for another 20 years or so without any problem. If that is the case, then why does president Bush is so gong- ho on privatization of social security?

There reason could be that he wants to leave a legacy behind apart from war in Iraq, which is not going very well, and social security privatization or reform as he likes to call it is one way of doing it. Then there is Wall Street that will benefit tremendously from privatization of social security. If President Bush’s plan is implemented, then billions of Dollars will be poured into Wall Street by individuals to buy stocks and other annuities, etc. which will generate billions of dollars commissions and fees for the stock brokers each year. Wall Street has strong lobbyist.

Or it could be that Mr. President truly believes in the privatization of social security and honestly believe that it is good for the people. That is a far-fetched assumption, but one needs to make it anyway.

What President Bush is promoting does not sound a bad idea, after all it allows individuals to have a portion of their social security contribution instead of giving it to the federal government as a deposit, they can go ahead invest it any which they like for their retirement. If this is a good plan, then why so many people as well as politicians of both parties are against this plan?

Couple of years or so ago there was study done that showed average American family has less than $1,000 in their saving accounts.

Couple of years or so ago there was study done that showed average American family has less than $1,000 in their saving accounts. It is also very well known that average American family lives from paycheck to paycheck. In fact most Americans spent their paycheck before they even get it.

Bearing this in mind, does one truly believe that giving these people the control of their retirement money, they would invest it? The answer is a resounding “No”. Simply put, American people could not be trusted to invest for their retirement. Social security forces working people to save for their retirement. What would happen these people will end up becoming public charge, that is when they retire, they do not have sufficient saving and government has to assist them, which defeats the whole purpose of social security and Mr. Bush’s plan which is financial independency.

Furthermore, assuming that people go ahead and take the social security refund and invest it, there is no guarantee that when they retire, their investments would still be there for them. All we have to do, is to examine Enron, MCI/World Com and other companies like them that cause their employees lose most if not all of their retirements and for those who were close to the time of retirement, it was devastating.

Then there is “crowding out” issue. What it means is that when the government enters into the investment market, then usual investors will be crushed out and have to leave the market. Imagine a bunch of people is swimming in a pool in a nice sunny day and suddenly a big elephant dives into the pool. What do you think will happen to those people? They will be pushed out of the pool. This is what could happen to those investors and as the result many investors have to abandon the market, which creates its own financial problems. The professional investors leave the investment market and the rookie investors (average American family) comes in.

The national debt currently runs about $7.5 trillion ($7,300,000,000,000.00) which is Borrowing another $2.3 trillion dollars will undoubtedly create the worst economic situation for the US and put the US economy on the verge of collapse.

Having a sudden rush of tens of billions of dollars into the stock/investment market would create disastrous situation. Also since suddenly there are tens of billions of dollars are available for investment and since there are so many stocks to buy, soon there will not be any more stock available and then the junk stocks become valuable. The stocks prices start rising, not because the companies are doing fine job and making lots of profit, but because of scarcity of stocks to buy for investment.

We should not forget the 90’s and the .Com era, whereby many companies opened up shops and went public and having their stocks traded at ridiculously high prices. Remember Amazon.com? This company did not make a dime of profit for many years, but their stock being traded over $150.00 a share during 90’s. Junk bonds and stock become valuable and there could be lots of fraudulent companies setting shops to take advantage of these downpours of billions of dollars per year.

Then of course we have over two trillion dollars ($2,000,000,000,000.00) that will cost the government to make the switch. It is because when the government stops collecting the usual amount of social security, there will be a vacuum in the social security funds, but the current recipients need to be paid and since less money is being collected and deposited in the social security trust funds, the government has to make up the difference, which is estimated to be over two trillion dollars ($2.3 to be exact). Where does the government get this money? The national debt currently runs about $7.5 trillion ($7,300,000,000,000.00) which is Borrowing another $2.3 trillion dollars will undoubtedly create the worst economic situation for the US and put the US economy on the verge of collapse.

So does it mean that we should leave the social security alone? No, there is no question that the social security needs a fix in the long term, but not privatization plan that the President has talked about, as it is too risky and costly.

If one could believe that Social Security is in trouble and needs an immediate fix, then one could also believe that there are weapons of mass destruction in Iraq.

Let’s not forget the con artists who will pop up like poppies after rainy seasons to defraud uniformed average consumers (investors to be) the government must come up with a better solution that does not make the government go bust. What does it need to be done to secure the social security’s future? The fact is there is no simple solution. Finding a solution for this highly complex problems requires the best brains in the nation coming together and leaving their political affiliation outside the door and drafting a solution for securing the social security and American peoples’ future.

What needs to be done is the very least to inform the American People properly and not to scare them off with claims that Social Security is going bankrupt. If one could believe that Social Security is in trouble and needs an immediate fix, then one could also believe that there are weapons of mass destruction in Iraq.