Wednesday, December 31, 2008

So, what if Bush had gotten to "privatize" social security?


So, where would we be now if we (as American society) had taken up George W. Bush and the “neoconservatives” on social security reform?

I won’t get into the debate on when the trust fund runs out, other than to say that there could be future pressures to means test benefits and reduce benefits, even for some existing beneficiaries. It’s even possible that family law revisions could reduced benefits for retirees, although, ironically, the “conservative” movement in many states to limit the definition of marriage and particularly hinder the concept of domestic partnerships or economic sharing (however detrimental to LGBT families) could (very ironically, again) actually protect the financial independence and even benefits of some people. This (as I think John McCain once said) is more complicated and trickier than people think.

But what if we really had converted part of social security to private accounts? Besides the accounting bridge problem, we would have, according to naysayers, had a catastrophe because of the financial collapse in the markets this fall. Well, not so fast. Had this been done starting with younger workers only, they could use dollar-cost averaging and in the long run should be fine. Furthermore, the investments allowed in private accounts for social security replacement could have been regulated (the big bad R word). Many riskier investments could have been prohibited, but it’s still true that many reputable companies that would normally belong in a privatized retirement portfolio have been hammered and are getting government bailouts.

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