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Social Security



Editor's Note: The following is an exchange that occurred on this morning's Buzz that was spear-headed by the Social Security comments by Prof. Succo below.

What to do with social security? To answer this question we should first decide what we want it to be.

If we want an insurance program, one that protects our elderly and indigent from financial folly, we should not privatize: privatization has no place in insurance.

If we want a public pension plan, the serious question should be asked do we want our central government involved in controlling our retirement money at all. I suggest no and the answer then becomes just cut payroll taxes.

Privatization would be a boon to Wall Street. It is not surprising to see Wall Street lobbying hard for reform. We estimate that any theoretical outperformance on stocks over bonds will be eaten up by extra fees to manage the private accounts. We separately contest this "assumption" as flawed and ignoring increased risk.

Social security currently is running a $170 billion yearly surplus; this money is raided from the fund by the government every year for general purposes. There is no immediate funding crisis; this surplus will last at least a decade.

We should take our time and first identify then debate the real issue: what is social security, an insurance or a pension plan.

-- Prof. Succo

Responses on the Buzz...

I agree private Social Security accounts are not the way to go. I also know doing nothing solves nothing. While stopping the theft of dollars from the fund for general governmental uses might make things OK for a decade, the system is broken and must be fixed - entitlement, insurance, pension plan, or whatever description we want to paste on it. -- Prof. David Miller


You exactly hit the nail on the head r.e. social security...shall it be a brokerage account or a safety net?? I agree with every word you wrote. I can't improve one word so I'll shut up...vbg -- Prof. Bill Fleckenstein

I agree with Succ's point---what are we trying to accomplish here? If it's as simple as giving the drunk (liquidity driven economy) another drink (and prolonging the hangover from hitting), it could serve its purpose.

We never fully took our medicine--that seems to me to be an elephant in the room. Now we're looking for alternative medicine without side effects, a difficult (if not impossible) proposition. - Toddo

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