Resolved: The United States Federal Government should privatize Social Security

Alright, thanks to lannan for kicking this off, and let's get started. Burdens: This debate hinges on the comparison of two cases. As the rules in R1 don't stipulate that I cannot run a counter plan, I am allowed to do so. It is my burden to prove that my case is superior to Pro's, and Pro's burden to accomplish the opposite goal. Evaluation should focus on the net benefits of our impacts since we're discussing a policy change. 1) Harming retirees Note: SS = social security. Retirees will lose their SS benefits and have it replaced with three options: spend it, save it, or invest it. Spending the money provides a short term benefit to retirees that quickly runs out. Pro might argue that this is still better than the public system because it affords them increased liberties, but running out of funds when one is retired drastically reduces their options. Individuals who spend all of their money will end up becoming dependent on help from the government, especially as their health issues become more dramatic. The most conservative thing that these people could do with their money is place it in the bank. If they do that, however, they"re still doing far worse than they would through the public SS system. At the moment, SS payouts are indexed to wages, which have historically exceeded inflation and thus provided a measure of protection against changes in the value of the dollar.[1] Banks don"t provide that protection. How about investment? Investing through a brokerage firm is expensive to start, costing people 1% of their investments every year (as opposed to the single payment of 0.8% in expenses for the SS system).[2] Most people aren"t professional money managers. They won"t have the knowledge base to manage their own investments. Hell, most people don"t even have the basic financial literacy to know what a stock market is or why diversifying investments is important (many believe it guarantees them success in the stock market).[3] This is really bad, because even professionals generally underperform indexes of the market as a whole.[4] This means that most people are going to be dramatically underperforming in the stock market. Even if they were experts, the basic fact that the stock market fluctuates will ruin lives. There are countless examples of market downturns that could absolutely bankrupt retirees, and if someone retires at an unlucky time right before one of these occurs, they will lose everything.[5] Even during times of plenty, picking the wrong stock can lead to a dramatic loss. However, all of this is beside the point because we"re not just evaluating outcomes based on whether they"re net positive. If the rate of return is lower after turning to the private system than it is right now, that"s reason enough for us to eschew this option. Remember that I mentioned inflation earlier " that"s important here as well, because if rates of return on investments aren"t high enough, then they won"t beat inflation and the value of all that money for retirees goes down over time. Pro has to prove that the returns will be high enough to cover for inflation. Pro also hasn"t talked at all about the costs of implementing his plan. The government is going to have to create a large number of private accounts into which this money will be deposited, that"s pretty much how every privatization scheme works. The cost of doing that is not small. It will take some 2 to 4% of the payroll tax out of the 12.4% that"s taken, which means up to almost a third of the revenue generated from this tax would be removed.[6]. This is largely the result of having to plunge into the trust fund currently being set aside for retiring baby boomers (which is the reason that SS is still alive and kicking), requiring that the government start borrowing from the private sector (increasing our debt), raise taxes, or slash benefits. (2) Failure of Privatization To start, I'd like to be clear that Pro's proposal has never been done anywhere. His system doesn't exist in any part of the world. An untried, completely theoretical system like his should not be employed anywhere, but if it is going to be employed, it shouldn't be country-wide where the opportunities and consequences of failure are at their absolute worst. That being said, there are examples of other countries that have implemented privatization schemes. I couldn't find an example of a country where something like this was employed where the governments didn't implement a subsidy system to ensure that workers who fail to accumulate enough money into their accounts earn a minimum pension, a plank that is not visible in Pro's plan. However, even with those protections, country-wide privatization has only resulted in dramatic failures. Both Chile and the UK have done it, and both of them have encountered tremendous problems. In Chile, "more than half of all workers [are excluded] from even a semblance of a safety net during their old age."[7] Their investment accounts are so low that 41% of those eligible to collect pensions continue to work. In fact, it"s so bad that their returns are less than if they"d simply kept their money in a savings account.[8] They"ve also suffered abnormally high transition costs, making just the process of transitioning in each decade cost a sizable slice of the GDP.[9] In the UK, people have become victims to poor investment choices and crooked brokers. The government itself has suffered major expense increases and lost tax revenues. According to Adair Turner, the head of a British government commission assessing reports on these problems, "[w]hat looked like a very good idea from a financial perspective in cutting costs has put pensioner poverty, which had been all but eradicated, back on the agenda."[10] But we can also look to an example from the U.S. Yes, some areas of Texas opted out of SS before the law was changed in 1983. This amounts to 3 counties: Galveston, Brazoria, and Matagorda.[11] Now, let's be clear that I'm not supporting the notion that the results of these 3 counties should be used as evidence for the effectiveness of such a program country-wide. They're all on far too small of a scale (they amount to roughly 674,000 people total [12]) to be comparable to implementation on a nationwide scale. Moreover, the Alternate Plan that they have in place is significantly different from Pro's proposal, since money is still taken out of their paychecks on a constant basis and placed into a separate account, meaning that this system bears far more similarity to SS than Pro's proposal does. But if we are going to compare them, it should be noted that even the creators of the Alternate Plan note that the options for rapid removal of funds end up depleting these accounts, leaving people unprotected and resulting in individuals becoming "wards of the state."[11] In other words, they just become wholly dependent on the system to keep them alive through other means. (3) Counter Plan To understand this, I first must explain that while SS is flawed, it is not inherent to the program. In fact, SS is not only currently solvent, but generating a surplus of some $2.8 trillion as of 2014 (and rising). [13] It will take at least two decades for this program to run up a deficit, by which I mean that it will deplete its reserves.[14] Pro"s system would utterly destroy SS, so he"s essentially responding to the problem by demolishing it early. But let"s be clear that SS does a lot more than just provide a safety net to 59 million Americans.[15] The government does use that money for a lot of important tasks, including other safety nets and military spending.[16] Removing that money from the government necessitates that they either borrow or tax more to cover them, or that they slash those programs, which adds to the various harms Pro"s plan incurs. However, I recognize that SS has its problems, and it"s because I do that I"m offering a counter plan. My fix is two-fold: (1) to eliminate the tax cap currently in place on SS payroll taxes, and (2) slightly increase SS taxation. (1) Currently, people who earn more than $118,500 don"t pay these taxes on any amount they earn above that.[17] This system is inherently biased for them, allowing individuals who probably will have more than enough money upon retirement to simply coast without SS to go free of payroll taxes on what could well be the vast majority of their earnings. This plank would be implemented over the course of 10 years, and they could even get a boost in benefit payments for their extra input. This comes out to a 74% reduction in the SS shortfall. It"s also a change that garners widespread support.[18] (2) Currently, workers pay 6.2% of their earnings into the system, with employers paying a matching amount. Simply increasing that amount to 6.9% over the course of the next 20 years would eliminate the remaining 26% shortfall. Note that this amounts to 50 cents more per week for someone earning $100,000 a year. This is also extremely popular.[18] Note that the CBO also did estimates of the effect of both of these, and came to similar conclusions.[19] Conclusion: While I do wholeheartedly support my counter plan, even the status quo stands as far better than Pro"s proposal. His case is a clear net negative. Meanwhile, the status quo keeps this system around for at least the next two decades, and my counter plan leaves it solvent for the foreseeable future. Back to Pro. 1. http://1.usa.gov... 2. http://theatln.tc... 3. http://1.usa.gov... 4. http://bit.ly... 5. http://slate.me... 6. http://brook.gs... 7. http://bit.ly... 8. http://bit.ly... 9. http://bit.ly... 10. http://bit.ly... 11. http://nyti.ms... 12. http://bit.ly... 13. http://1.usa.gov... 14. http://1.usa.gov... 15. http://pewrsr.ch... 16. http://cbsn.ws... 17. http://1.usa.gov... 18. http://bit.ly... 19. http://1.usa.gov...