President Obama pandered for votes last weekend by trashing Social Security privatization. Americans have become used to government doing certain things. Building and managing roads, schools, prisons and so on. Naturally, the idea of privatizing any of these things is met with fear, because for most of their lives, these things have always been run by government. So, it's an easy rhetorical point for Obama to make, because of the big dip in the stock market since 2008.
But as I write in my syndicated column this week, despite the recent financial crisis, privatized social security remains a better deal -- and more sustainable -- than the current bankrupt approach:
For one thing, under the privatization plans backed by the Cato Institute and others, retirees and near-retirees wouldn't have been affected by the 2008 stock-market decline. Only younger workers would have diverted some of their money from government to capital markets. They would have had time to recover (unless government continued to screw up and cripple the private sector).
Second, even with the 2008 decline, the picture is not nearly as bad as Obama implies. Andrew Biggs of the American Enterprise Institute ran the numbers for a hypothetical worker who retired in 2008, right after the market crash, after a career under a partially privatized Social Security program.
"A typical retiree in 2008 would be entitled to a traditional Social Security benefit of around $15,700 per year," Biggs writes. "For workers who chose personal accounts, this traditional benefit would be reduced by around $7,800. However, the worker's personal account balance of $161,500 would pay an annual annuity benefit of around $10,100. This $2,300 net benefit increase would raise total Social Security benefits by around 15 percent."
Full column here.
8a TEA PARTIER:
How do you give a rebate to people who didn’t put any bate in?