2005-01-28 / Editorial/Opinion

Private Accounts Are Not The Social Security Fix

On the face of it, private accounts for Social Security sounds like a good idea – a way to guarantee payments for younger workers when they reach retirement age at the same time giving those younger workers more control over the money taken from their pay checks each week. We believe, however that however good the plan sounds, the benefits to those workers is really illusionary. Think about it for a moment. If you were told by your financial advisor that you will not have enough money for a decent retirement and that the solution is for you to take a huge loan, put the money into a mutual fund run by that advisor’s best friend and pay that friend large fees for his service, hoping that your capital gains from the fund will power your retirement, what would you say? You would probably tell that advisor to hit the road. That is what you should tell President George Bush when he comes to you supporting his Social Security Privatization Plan. Bush’s plan assumes two things that are not necessarily true: that stocks are a much better investment than government bonds and that the private sector will sell lots of stock to private accounts while, at the same time buying government bonds for itself. Bush is beginning to look a lot like Sid Stone, the pitchman on the old Milton Berle show in television’s infancy. He would stand there with his case, urging viewers to buy his wares. When they didn’t he would say, “You say you’re not satisfied, you say you want more for your money? Tell you what I’m gonna do.” Bush and his administration have become pitchmen for a plan that will benefit not the younger workers, but those who sell stock and those whose companies will benefit from the large stock sales.

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