Social Security R.I.B Should be Privatized

Rules: No kritiks or semanticsBoP sharedContention: Privatization of Social Security Retirement Insurance Benefits (RIB) would be disastrous due to risk, the need to raise taxes and its contribution to the national debt.http://www.youtube.com...Risk: Looking at past recessions, stock market crashes and changing monetary policy in just the last 30 years proves there’s risk involved in changing Social Security RIB to a Private Plan (PP). A person can lose initial investment as well as gains in the markets. The early 1980’s recession was due to monetary policy [1]. In August 1987 markets began to slide, by Oct. 19th, Black Monday, the market took a 22.5% loss in one day; measured total fall of 36.7% [2]. In 1990-92 there was the S&L crisis with a Fed bail out [3]. The DOT com bubble burst of the 90’s is another example [4, 5]. Lastly, the more recent 2008 housing and financial crash where the stock market fell 2400 points in a week [6]. At each occurrence those with mature investments ready to retire took a big hit. Waves of unemployment resulted with decreased or halted contributions, and sometimes liquidation of retirement assets was enacted to stay afloat. In the last crash, those within 10 years, or broaching retirement loss 20% of their retirement investment with little or no time to recoup losses. Either way, that money is lost never to return; recoup means to get to a previously held level [7]. If you retire during an economic down turn you may not have sufficient funds to last. The risk defeats the purpose of the social security safety net. Under Funding Current Insurance Liabilities: Shifting funds to individual accounts, a PP, would take away funds from the current millions of spouses, dependent children of the deceased, as well as the disabled [8]. Furthermore, current influx of funds supports the now retired. How would the government fund current RIB payments of the near future and presently retired? A PP would only apply to those coming into the work force anew. All those currently working and contributing to the traditional RIB would be a part of the old system for decades to come. The Social Security RIB is estimated to take 75 years for complete solvency if privatization is enacted [14]. No one has a crystal ball on the changing tide of the economy, the government or the will of the people over that span of time. For a PP to be implemented the Gov would need to decrease current payouts and borrow to cover current liabilities with the diversion of taxes going to individual accounts [17], also raise payroll taxes [11]. Currently a portion, approximately 1 out of 5 SS dollars, goes into the SS Trust Fund to pay future benefits [9]. If current money goes into individual accounts contributions to the Trust Fund will cease and its present balance will be depleted far more quickly that the expected 2058 [10, 15]. A.) Net Loss: To fund current and near future payments government borrowing and cut in services will not be enough. A raise in SS taxes would be needed. Monies will go into PPs for the future and the tax increase will support the current pool as well as subsidize low income workers contributing to PPs to ensure minimum retirement income [14 p.27]. Privatization will have the payer contributing to both ends rather than the current pay-as-you formula. The increase in tax against balance in private accounts could produce a negative gain effect [13]. Government borrowing for transition cost, which is estimated to be 10 trillion, will contribute greatly to the already ballooning national debt [14 p.29]. Various proposals have been made on how privatization would be structured, either by a centralized government entity or open market competition. I’ll examine the lesser of two evils in this round.Issues with Centralized Privatization: A centralized government plan would certainly decrease some of the administrative and broker’s fee associated in typical investment market purchases, but who will decide what the options for privatized accounts will be? Financial institutions will have political influence in Washington [15, 16]. Considering the S&L debacle of the early 90’s, the financial industry’s complicity in the 2008 crash and following bail out at tax payer expense, they can’t be trusted to act in our best interest. The lure of all working Americans contributing to private accounts where profits that can be made is too tempting. To say a reoccurrence of a stock market or financial institution crash and bail out will not occur again is a fallacy; history has bore this out [14]. Not only will we, the tax payer, be bailing out the financial sector again, loose all or most of what is in our PPs but, also have to pay to replenish the system for it to continue.1. 1. http://vm136.lib.berkeley.edu...2. 2. http://www.stockpickssystem.com...3. 3. http://vm136.lib.berkeley.edu....4. 4. http://www.investors.com...5. 5. http://www.thebubblebubble.com...6. 6. http://money.usnews.com...7. 7. https://www.ebri.org...8. 8. http://www.disabilitysecrets.com...9. 9. https://en.wikipedia.org...10. 10. http://www.npr.org...11. 11. http://www.nytimes.com...12. 12. http://www.ncpssm.org...13. 13. http://www.fedsmith.com...14. 14. http://www.actuary.org...15. 15. http://business.time.com...16. 16. http://www.ourfuture.org... 17. 17. http://www.brookings.edu...