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Spitzer On Social Security Privatization

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Today, New York Attorney General (and NY Gubernatorial candidate) Eliot Spitzer came out with one of the most important criticisms of President Bush’s Social Security privatization plan. Chiding the Bush administration for opposing his efforts to clean up corruption on Wall Street in the wake of a number of high-profile scandals, he cited the instability of the market and the danger such a dramatic change would cause.

“You have an administration that failed to protect investors. Failed to protect them. And yet they are the administration that is saying take the safety net that we have and invest it in a system that was fundamentally broken before others stepped in to try to save it,” Spitzer said.

“On the one hand, they are saying the system does not need to be fixed, there was nothing wrong with it, they fought against the changes that we wanted, and then they say, ‘Take your savings and put it into that very system.’ Where would we be if those who are retiring had had their money in Enron and Worldcom?”

This, to me, is the more important point in the argument against Social Security privatization. People can haggle all year about which studies suggest what kind of timeline for what percentage of benefits decrease. The most pointed reason to avoid privatization — aside from the enormous amount of money it would cost to enact — is the fact that the stock market just isn’t safe enough.

Social Security was created to support those whom capitalism had failed. It wasn’t an attack against capitalism, it just served as a lifeboat for people that had trusted the stock market with their life savings.

Creating private accounts essentially takes that lifeboat and nails it to the larger ship that sails through icy waters. Sure, there’s a good chance you’ll get to your destination, but if the Titanic hits an iceberg, you’re going to want those lifeboats away from the wreckage.

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About Travis Marshall

  • Nicely done, Travis. I suppose the counter-argument is that people would be guided toward “safe” investments, but I’m not really convinced on that score, and Spitzer’s remarks help to solidify my view.

  • Maurice

    This is going to take an enormous amount of patience, but here goes.

    Spitzers first sentence is incorrect:

    “You have an administration that failed to protect investors”.

    The administration did not fail because it is not their job to protect people from making bad investments.

    Privatizing SS now makes sense because the cost of fixing it goes up everyday.

    Mutual Funds have always gone up over any 40 year history. True you will have some down times but the overall value will increase.

    Sooner or later SS will be updated/privatized.

  • Tom

    What’s not safe enough. The 10% plus over 30 years, or the 1% the way it is. Sure there are ups and downs, but overall the stock market is a better deal than doing absolutely nothing, which all you guys seem to be able to suggest.

  • Tom

    And here’s another boat reference since you love them so much.

    If a Tsunami is approaching you at 5 mph, and your boat goes 1 mph, woudln’t you rather get into one that goes 10 mph?

    Or what about the 100 peole that will want to get into that boat that only holds 10 people. Won’t you want a bigger boat?

  • Richard Porter

    Maybe I should add that all Government employees have this type of account already and I haven’t heard any complaints or problems over the last twenty years.
    In addition, alot of companies offer similiar plans and again as indicated by Eric, they would be pointed to “safe” investments and advised to avoid the riskier ones.

    And the most important question should be:
    Do you want your children and their children to be able to retire without worry about the collapse of an antiquated system that went the way of the dinosaur?

  • bhw

    Spitzers first sentence is incorrect:

    “You have an administration that failed to protect investors”.

    The administration did not fail because it is not their job to protect people from making bad investments.

    It’s not incorrect. The sentence is referring to protection of investors from FRAUD by large corporations [Worldcom and Enron, for example], not from making bad investments.

  • Woldcom and Enron are not the same thing. Worldcom was obviously a disreputable company to anyone who did even the tiniest amount of market research. Their business practices had been exposed time and again on major TV news shows. Enron, on the other hand, while much worse, also made an effort to disguise their bogus business practices. Unlike Worldcom which was just sleazy and incompetent, Enron was actively fraudulent. But in neither case was it necessarily the administration’s job to go out of their way to uncover the flaws with those companies. If the companies were for real they would make money. If they were fraudulent or poorly run they would fail, and in the aftermath of failure the administration could and did step in and figure out who if anyone to punish. My point being that there’s only so much investigating that the SEC can do when there are a zillion companies and these two presented a fair appearance at least on the surface.

    That said, whether certain companies did bad things is irrelevant to the Social Security issue, because the plan for privatizing Social Security would involve investing in mutual funds or bond funds not individual companies. If a mutual fund had Enron in it and Enron crashed and burned the fund might still do just fine or at worst would suffer by a fraction of a percentage point. Even when a mutual fund has management problems – like the Strong funds – the investor doesn’t suffer. I’ve held two Strong funds since before their CEO was dragged off in chains, and they continued to perform well – one exceptionally well – throughout that period.


  • Social Security was created to support those whom capitalism had failed.

    Capitalism isn’t a Being whom hands out goodies to those that please It. Capitalism isn’t a Force that pushes people along to destinations they don’t wish to arrive. Capitalism, in its proper configuration, is merely the absence of people (your neighbor or your government) stealing from you and messing with your property in the name of the “greater good,” among other things. It is the state of freedom to take responsibility for your own self and the things you value. Capitalism doesn’t “fail” anyone because it can’t act for or against anyone. Only individuals can.

    I don’t like Bush’s plan for Social Security because it doesn’t do what ought to be done: ending it, not mending it. Where does anyone have the right to *force* me to save for my own benefit? Even more pertinent, by what right does someone have to *force* me to pay for someone else’s retirement?

    YOUR retirement is YOUR business. If you need help with it, there are friends and family to turn to as well as investment advisors. Stop looking at the rest of the working population of the country as your own wallet!

  • Tom French

    It is easy to say ” I don’t want to pay for other people’s retirement” when you don’t have to worry about it. Social Security is not for the bulk of the population, it is for the group of people, who, for whatever reason, didn’t, couldn’t , weren’t smart enough, to save for retirement.

  • by what right does someone have to *force* me to pay for someone else’s retirement?

    You’ll pay either way. What do you say to people who have no income and no one to support them, tough?

  • I say Are There No Workhouses?

    Referencing my earlier article which got too little attention…


  • Not in America

    On the surface sounds Bush’s SS plan sounds like a great idea, but lets talk about facts and details, cause that’s where this plan hits a snag.

    So far, this is what Bush’s senior administration official who continues to brief the press on this issue had to say last week:


    The federal government will privitize your account, but in reality it means they will limit you the taxpayer to place your money into a narrow range of mutual stock and bond funds. Who would decide which ones? Who would decide what those funds would invest in? The federal government, once again intervening, this time telling us where to put our money. What if they’re wrong, well then, you lose.

    Next, the federal government will retain the first three percent per year of all earnings the money accrues, so this money doesn’t go to you. If you’re lucky, you make more than three percent earnings per year, you will earn baby cash.

    This is by far the stupidest plan out there, social security is a pyramid scheme and should be terminated period. Capitalists have to plan ahead for themselves because the federal government only borrows this money to pay for it’s outrageous defecits and is now defaulting on their promise to pay SS because they can’t balance a fucking budget…

    As for Wall Street and Spitzer’s comments, let’s be real, capitalism is based on greed, period and greed makes people do everything under the sun EXCEPT to provide for the everyman. So don’t expect privatization of SS to provide for America like it was originally intended to do as a social welfare program, at least not in America.