Sunday, September 11, 2005

Selling Snakeoil, Part 3


Hyman continues the Social Security hocus pocus with two more “benefits.”

Hyman

Benefit #5 - A Social Security investment fund with personal
retirement accounts would actually provide ownership to workers. They actually
own nothing in today's Social Security fund.

Fact 5: Two things here: first, workers “own nothing” in the way you own nothing with your car, home, or health insurance. While you might not be able to put your hands on what your premiums pay for, you certainly get value for your investment (so much so that you are required to have car and home insurance to purchase those items). As with any insurance plan, Social Security offers financial security through pooling resources with other investors. Secondly, while the president’s privatization scheme would give people limited ownership of certain financial goods (e.g. bonds, stocks, etc.), it would also cause workers to own very real debt if these goods end up losing value. In other words, unlike with Social Security, a worker could very well end up owning (quite literally) less than nothing if the system is even partially privatized.

Hyman

Benefit #6 - Personal retirement accounts would allow workers to
control how their money is invested. A portion of investment dollars could be
directed to a variety of government-approved investment vehicles such as
federal, state and local bonds. Workers satisfied with the lowest rate of return
on their investments could keep all of their money in an investment account that
looks like today's Social Security fund. Whereas, other workers could invest a
portion -- not to exceed a predetermined percentage -- of their contributions in
sound government projects.

Fact 6: Hyman touts individual control as if it’s a good thing, but in fact it’s not. Economists at both Yale and Princeton have found that most individuals (including those who truly think they know what they’re doing) consistently under perform the market generally. For individuals to squander their own investment money is one thing, but if the system responsible for keeping millions of the nation’s seniors is put in the hands of individual investors, there will almost certainly be a rise in poverty among the elderly. This will put a huge drain on families who must use their savings to take care of retired family members, as well as society as a whole, which will need to pick up the tab to take care of those who don’t have enough money to get by in their retirement (unless we are collectively willing to let the losers of the privatization lottery go hungry—perhaps Hyman has no problem with that possibility, but most Americans would).

And those are the Counterpoints.

Hyman Index: 2.54

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