Has any modelled

[james_davis_nicoll]

The consequences had US social security been privatized in the early '00s?

Comments

[tx-cronopio.livejournal.com]

I'm sure someone has...I remember lots of "thank God we didn't privatize Social Security" when the bottom fell out two years ago.

[sinboy.livejournal.com]

Lots of it depends on how the money was put into the market. But several models with best case/worst case scenarios could be worked out.

I don't know who's done any modeling, though.

[carloshasanax.livejournal.com]

It's a nice little transfer payment to professional financial managers. That's immediately apparent. Austan Goolsbee pointed that out almost immediately (but really, anyone could have).

Beyond that, you have the problem that the size of the individual accounts very quickly becomes comparable enough to stock market capitalization to change the forecast -- you can't use a small-number ceteris paribus approximation.

It would be extremely odd if the new extra money did not go into bubble formation.

[mmcirvin.livejournal.com]

I suspect the popular belief "I won't see a cent from Social Security" has largely been spread by financial planners.

[carloshasanax.livejournal.com]

Nah. It's just at a toxic intersection of generational and partisan politics.

People of all political alignments fret about the lack of long-range planning in the world, but the truth of the matter is, humans are badly inconsistent in how we value future events. Our internal discount rate is something of a funhouse mirror. This has been known since the 1970s, but very poorly publicized.

[izeinwinter.livejournal.com]

And then they recommend putting savings into investment funds that are almost entirely invested in US assets, thereby providing absolutely no protection against that eventuality. SS is immensely politically important, which means the government will only give up on it if the US economy is in really dire straits.. in which case, the savings veichles sold by these financial planners will not pay out much either.

Heck, due to the structure of most private pension plans, social security being fine while your private pension fund largely collapses is a far more likely event than the opposite- pension plans are invested in particular firms, after all, while SS taxes the economy as a whole, so a decade or two of high economic growth caused and accompanied by high levels of disruptive technological innovation and creative destruction in the market would make SS stronger, while burning a lot of investment funds. - Basically, in a world where by 2050 all energy is produced licened indian fast breeder designs, manufacturing is mostly done by public domain nanotech technologies perfected by a EU /China project at the university of Ankara, the largest food producers on the planet are the greenhouses in North Africa, and the second american revolution ended copyright, your stockportfolio is not going to be worth beans, but the tax base of the US is fine.

It is certainly /possible/ to put together a savings profile that would provide some security against the economy of the US doing badly enough to imperil SS.. but no finanical planner is likely to sell it to you.

[mmcirvin.livejournal.com]

I'm putting all my money into Franklin Mint Civil War Chess Sets.

[death4breakfast.livejournal.com]

I'm expecting a better ROI on the Classic Trek Chess Set.

[beamjockey.livejournal.com]

I suppose you have all heard about the guy who bought both? "...so the South can fight the Klingons."

[beamjockey.livejournal.com]

(I wish I knew to whom that joke should be attributed.)

[le-trombone.livejournal.com]

It was someone's USENET tagline for a while. A quick Google for it says Mike Chary, and he credits Dave Spensley:

"I bought the Star Trek chess set and the Civil War chess set. Now I have the South fight the Klingons." -- Dave Spensley

[beamjockey.livejournal.com]

Thank you for that bit of scholarship. I see Mr. Spensley using it in his own sigfile at least as early as 21 August 1994.

I wonder whether people will be retelling any of my jokes seventeen years from now.

P.S. Why must Google Groups be so unreliable?

[realinterrobang.livejournal.com]

The problem with having the South fight the Klingons is, who do you root for? :)

[mmcirvin.livejournal.com]

http://www.youtube.com/watch?v=Z6zDg0dKygE

[traviswells.livejournal.com]

As a southerner, lemme just say that's an easy question to answer.

Definitely the Klingons.

[montedavis.livejournal.com]

It was about states' rights, dammit, not about corrugated foreheads!

[avram]

I imagine it would produce a flood of right-wingers swearing that Social Security privatization was a scheme of the Democratic Party, and we should all be glad the Republicans managed to prevent it. Exhibit A would be a series of newspaper articles/blog posts/etc from Dems using the word "privatization" (carefully picked from the period after the right discovered that word polled badly, and stopped using it).

[chaotic-nipple.livejournal.com]

But don't you understand? Had Social security been Privatized, the market would never have collapsed! Failure to do so has cost the economy Billions! Will no one Learn from History? Please, Think Of The Children!

[icedrake.livejournal.com]

I applaud your use of capitalization.

[neowolf2.livejournal.com]

That's capitalism for you!

[agent-mimi.livejournal.com]

AAAAAAAAAAAGGGHHH

[http://users.livejournal.com/krin_o_o_/]

Capital response, capital!

[filkerdave.livejournal.com]

[goingferal.livejournal.com]

It would have been bad. Very, very bad.

There is an article about it that I edited from around 2004/2005, if you're really interested I'll see if I can find it. It was pre-2008 credit crisis and global economic crash, however.

One of the author's main points, however, was that if everyone put their savings into the market, the market would literally be overwhelmed. That is, the supply of things to be bought would be lower than the amount of money looking for something to buy.

[asyouknow-bob.livejournal.com]

Well, that's a feature, not a bug. (At least for the people pushing the idea of privatization.)

Drop a trillion dollars of SS money on the stock market, and - lo-and-behold - the prices of stocks will go up. And all the rich people who already held stock will see their portfolios soar.

slightly interesting

[laetitia-apis.livejournal.com]

A form that asked for my Social Security Number the last time I filled it out now asks for my Taxpayer Identification Number.

[sillymagpie.livejournal.com]

I think it sorta has been modeled...by Venezuela? Not good.

[carloshasanax.livejournal.com]

Chile, based on Milton Friedman's ideas. It has been problematic -- all political sides agree that it needs major reform -- but not catastrophic. This has been partly a matter of luck: the funds lack diversity, and some years of high returns have been due to copper price spikes (much like other boom years in the Chilean economy).

I think it's fair to say that if an American worker was faced with the Chilean program, with its large investment fees, that they would be extremely pissed, compared the very small cost of administering the Social Security program.