Personal Retirement Accounts should replace Entitlements

Thanks for your fast response. Rebuttals R1: Personal Accounts Generate Higher Returns "Flaw 1: Gov't has lower risk, shares are known to be a higher return, higher risk instrument." All financial instruments have risk, we both know this. For the stock market, it's fluctuations in value. For the government entitlement scheme, it's the government fiddling with your money, to spend it elsewhere on things like the Iraqi War, reducing the deficit, earmarks, etc. And the risk of gov't cutting Social Security benefits. However, the stock market (S&P 500) had an average CAGR of 9.62% from 1957 - 2011. [1] However, lets be more conservative. Based on the average CAGR, we can expect a healthy return in the about 5-9% range with an investment horizon that spans an average working period. For government, as I sourced last round, only provides a return of 1.23%. This is diastrous. Most of the time it doesn't exceed inflation. This means we are losing money via this process. The return for many people, especially the poor as I showed last round, is negative. So, risk is inherent to both retirement plans. That's a fact of life. However, you can use your money better than the government can. And the CAGR has been much higher than Social Security.CAGR: Compounded Annual Growth Rate "Flaw 2: ... My point here is that though the average return may be 7%, as my opponent claims, the affect would be massively different for someone that joined in 1968, someone that joined in 1991 and, god forbid, someone that joined in 2007." Remember, the growth rate of roughly 7% is over time. It's the average of all years. From what you put, in June 1968 the closing level was 100. Then 25 years later it was 400. This is still growth, that occurred while the vast majority of people would still be working. The 5-9% CAGR is the average again. This includes the awesome and horrible years. Since the rate of return is much higher than gov't, and this growth rate is the common standard for the market, it should be preferred. "Flaw 3: The return you receive from the Government is not the "true" return merely what they decide to payout to you. ... The "excess" is used for other state operations." True. My opponent admits that the government does steal our money through coercion, and instead of dedicating it to our retirement like they said, through the political process portions of it are distributed elsewhere. This is obviously dangerous to retirement prospects. If we want true retirement security, gov't has a failed track record. This return oh so does matter. The amount taken from Social Security/Medicare for other things is still negligible (probably less than 25%), but it still threatens the prospects of their future plans. R2: "Government Can Achieve a Higher Rate of Return" Sub1: Yes, expert investors are prone to getting a higher return. But remember that the risk for the stock market over time is not historically high. The problem of having gov't hiring professional experts to manage the pension pot is several. Assuming you meant that gov't collected payroll taxes and THEN invested in the stock market, this is very open to the political process. If GE lobbyed hard enough, they could get an infusion of hundreds of billions of dollars. Trusting politicians with people's money, and choosing which company to invest it in makes government pick the winners and losers. Consumer choice, rather than cronyism, should be the route to take. Sub2: I don't get this part of your arguments unfortunately. Though I do not see how gov't exercising purchasing power is fair. It's not fair that gov't can take money from one person, and through various rules, transfer it to somebody else. In all inherent political processes, one person's loss is usually another person's gain. If Paul gains $5 through this gov't process, that $5 must come from Jane. By using coercion to carry out these acts, it's simply wrong -- it's legalized theft from one person. Sub3: The negligible current 15% tax on investments is just that - negligible. Let's assume that the 1.23% return on Social Security was already taxed. The return would be really 1.414%. Just because gov't investments are not taxed doesn't mean they are inherently good. Quite the contrary, evident by their low returns and misguided usage. Sub4: Remember, Social Security benefits are subjected to the political process. Social Security benefits are not guaranteed — they can be cut at any time. Private pensions are one thing, personal accounts could be and would likely be an addition to this system. All financial instruments have an element of risk. So does Social Security, and it isn't absurd to say the same or more risk than regular shares, without the benefit of high returns. R3: Improves the Economy If gov't does try to get a higher return (if possible), it means much more taxation to get that kind of money, cronyism by picking the businesses in which to invest in (imagine the horrors), and more redistribution and coercion. Redistribution crushes the investments which makes the economy grow and thrive, coercion reduces freedom and human dignity. So, more taxation, regulation, special interests. None of which are good for the economy or freedom, as you are not free when your payroll taxes must go up, that reduces your economic freedom. Payroll taxes do have a real drag, which I've proven, as their elimination (proved last round) would create millions of new jobs. Also, this huge infusion of capital, by the free choices of individuals picking where they want to invest, not gov't picking the winners and losers — would vastly improve economic growth. From 1940 to 1980,about half of U.S. economic growth came from the increase in U.S. capital formation. [2] With literally an infusion of trillions of dollars, America would prosper. R4: Economic Freedom/ Tax Relief There is an alternative, that has been suggested to fix both solutions if people don't save enough. Automatic enrollement, [1] where workers are automatically enrolled into a personal account plan that they control, like what I'm advocating. They are part of this individual retirement scheme unless they explicitly decline. And once most people are in there, they are likely to stay, since most people are rational individuals and not full out crazy to squander all their money. "There can be no argument that a state pension is safer than a private one" I agree. ===============Restatement of Argument=============== Personal Accounts fully invested in the S&P 500 generate much higher returns, about a 5-9% CAGR. This means that if you set aside 10% of your income, rather than than current 15.6% of your income, you could have a secure retirement plan with a balance of $636,027.88, which would mean higher take home pay (5.6%), and retirement income over triple the payments from Social Security. Triple. ---------Government Financing of Pensions:I don't see why gov't financing of a national pension plan would help increase interest rates. This would mean a huge increase in payroll taxation, a huge political challenge of Cronyism (which company should get billions of the hard working taxpayer's money?), and still less security - look at the returns. For personal accounts, it's fair that you get to keep what you earn. You have the liberty to choose how it is invested, and you have the real opportunity of retiring wealthy. Conclusion: Personal Accounts have Higher Returns, Could Triple Benefits (7% vs 1.23% CAGR, or 469% higher) Improved Economy: Higher Take-Home pay, Millions of New Jobs, Capital Infusion Are Historically Safe, average of 5-9% CAGR vs 1.23% for Social Security Protect and Restores Individual Freedom Increases Economic Opportunity Enhances Retirement Security (and) Would Eliminate Our $121 TRILLION in Unfunded Liabilities (unrebutted) Thank you for reading. Sources: [1] http://tinyurl.com... [2] http://www.econlib.org...