At 3:50 PM 2/17/96, [EMAIL PROTECTED] wrote: >Hi everyone, I'm baaaack! > >The way I understand the 'privatizing' of soc. sec. recommendation is >slightly different than portrayed by Doug, though I agree with his >conclusion. The policy suggestion is not that the government would invest >the monies, but that individuals would have the option of taking a portion of >their mandatory soc. sec. wage deduction and invest it themselves, leaving a >portion with the government. So, say you have $3000 mandatorily deducted >from this year's income for soc. sec., you would have a choice of taking part >of that and investing it yourself -- but, you would have to invest it, you >would not have the option of spending it. The implication of this for Wall >Street is thousands of small investors being told they have to invest in >corporate profits -- so Doug's conclusion is correct. However, I saw a stock >broker interviewed on television (I forget the guy's name, but he was playing >golf -- how fucking typical) and the broker said that this would lead to >greater inequities in the system because people with low incomes paying less >social security would not be able to invest at the same level as those with >greater incomes. Strange source for an honest comment. Oh yeah, these would be officially sanctioned, or even officially mandated, IRAs, though there's also talk of investing the SS surplus in stocks as well as T-bonds. The stockbroker's point is right, of course; a privatized system would reinforce existing income disparities (unlike the public system, which is mildly redistibutionist), and leaving the investment choices up to individuals is kind of scary (the affluent are used to it, but the non-affluent could easily get clipped by con artists and/or a bear market). But I'm trying to divine the economic rationale behind it (aside from the simple historical return argument): how can a claim on future assets/profits (i.e. the stock market) be substantially more fruitful than a claim on future incomes (which is what SS is)? It has to assume, covertly, that the market capitalization/GDP ratio will rise over time, which is why I said it raised Ponzi finance to the level of public policy. The peristent high return of stocks is also a bit of a mystery (the equity premium puzzle), since it's much higher than it should be, based on CAPM-based pricing models. But in this case, I'll concede the historical return point in return for a theoretical/logical explanation. Doug -- Doug Henwood Left Business Observer 250 W 85 St New York NY 10024-3217 USA +1-212-874-4020 voice +1-212-874-3137 fax email: <[EMAIL PROTECTED]> web: <http://www.panix.com/~dhenwood/LBO_home.html>
