Arlen says:

Dan, that’s an argument that just doesn’t work. What other markets are there than private? It’s *all* based on the private markets, any so-called “government” market is an illusion. The interest on government paper is set by the “private” market, not by governemnts. SSA invests in government paper, just like private citizens do. The current SSA holdings are averaging about 5% as of Oct 07 (latest numbers the government will publish). Just as an example from today’s numbers, FGMNX (a bond fund based off Ginnie Mae) did about the same over the past year, even after including today’s numbers. In fact, over the same Oct06-Oct07 period, the average privately-managed bond fund actually doubled the performance of the SSA.

You see, that’s the major fault with this kind of argument. You can’t isolate the downs from the ups and just talk about the downs. You can’t use the past 48 hours of fund performance as an exemplar and ignore the past year’s performance or the next year’s. The inescapable truth is that if the SSA had simply invested in an index fund, a fund that tracked S&P or DOW numbers, they would have made far more money during the past year, even after the recent downturn, than they made investing in government paper.

The argument you make is the one those who want to “privatize” the fund *want* you to make, because it’s too full of holes to stand up to rational scrutiny. Aside from the long-term performance issues, saying the “private market” is bad, simply because of days like today is just silly, because the private market includes the same kind of paper the SSA holds. For that matter, even if a bond’s price fluctuates, the amount of money it pays doesn’t, so income doesn’t drop, even if the market does. There are just too many holes in that kind of argument.

The real reason to oppose the privatization schemes that have been put forward is because they are based on an incorrect model of what the SS “Trust Fund” is. They somehow think it’s based on the money that we’ve been paying in over the years. That’s not the way it was ever supposed to work. It’s working people today paying the pensions of retired people. It’s the way it’s always worked, and when you go back and check the language of those who established it, they knew it.

It has nothing to do with markets, because we’re all in the market, one way or another. It’s because the “fund” was never an investment or pension fund to begin with. It was deemed the moral debt the current generation owed to those who came before, to keep them out of poverty. The intent of the act has been lost for decades in the rhetoric around it. And the idea of a moral responsibility has lost its sheen in the greed-filled halls of today.

I doubt we’ll ever recover the real meaning of the SSA. Instead we’ll be doomed to hearing the same old tunes played by the same old bandleaders, eternally.

Smitty says:

Dan,

You’re using the standard argument of liberals everytime there’s a bull market.

There are no Social Security “eggs”, the government does not make any real investments, it just takes money from current taxpayers to benefit earleir, now retired taxpayers. The only way top keep Social Security afloat is to raise taxes
on current wage earners; e.g. raise the current tax cap beyond the current $90,000 threshold and eliminate the 2003 tax cuts. Eventually, however, the system will fail because there won’t be enough taxpayers to fund the social security pensions of the growing ranks of the retired and disabled. Can you say “Ponzi scheme”?