Hours before being greeted by the biggest crowd of his campaign, Democrat Barack Obama quietly told a small group of seniors Sunday that Republican John McCain would threaten the Social Security they depend on because he supports privatizing the program....
"We have to protect Social Security for future generations without pushing the burden onto seniors who have earned the right to retire in dignity," he said.
Now, let's leave the utter hypocrisy and cynicism of this statement for a minute. Anyone that believes that Barack Obama is what he claims to be isn't reading this blog and nothing I say will change their opinion anyway. While this statement is everything he claims to be against, that is not the issue I want to focus on.
The fact is that private social security accounts are demonized is because those that support their existence can't explain them well enough to the masses. I am of the opinion that if I am the one that needs to defend private social security accounts then the problem is that the politicians that support it aren't doing a good job.
First, if you did calculations of Social Security, you would find that your social security taxes return something in the neighborhood of 2% yearly in future cash flows. That assumes that you live something near eighty years old. Furthermore, social security returns aren't transferable. If you die, everything you have put into the system is gone. I have already pointed out that Social Security is nothing more than a complicated government mandated Ponzi Scheme. Of course, it is. The retirees will have their social security income provided for by the current workers and so on and so forth. That is how Ponzi Schemes work. One sucker pays for the income of another sucker and everything is fine as long as there are new suckers to find.
Privatizing social security will turn social security into something like a 401k plan or a Roth IRA. I don't know anyone that thinks that those two vehicles will threaten the retirement income of anyone. In fact, they provide the retirement income of almost everyone. Keep in mind that a 2% yearly rate of return, about what Social Security provides, is about what a reasonable money market fund will get you. In other words, if social security were privatized, we could earn the same return just by putting our social security taxes into a money market account.
What privatization gives to seniors, and everyone in social security, is control. Rather than having the government control even more of your money, you will control it. The only difference then between social security and a 401k (besides those 401k plans that are matched) is that social security will be forced savings. I wouldn't much mind the 7.5% tax if I had control over that money. If social security became a sort of forced 401k, then it would become the best kind of tax. It would be a tax that only benefits the tax payer themselves. Rather than having my social security pay for someone else's retirement, like it is now, it would pay for my retirement.
Now, here is the other thing that privatizing social security will stop. It will stop the government's brazen looting of the social security fund. If social security is privatized, then each individual has their own account. No more can the government loot the fund and hope that they will pay it back later.
In fact, the only thing that will eventually save social security is full privatization. That' s because full privatization removes the faulty Ponzi Scheme it is currently on. If each individual fully controls their own account, it no longer pays for the retirement income of someone else. In fact, full privatization is the only thing that makes sense in saving social security is full privatization. If social security becomes a forced government mandated 401k then that is something I can support. Too bad its detractors demonize it and its supporters don't know how to defend it.