https://theruggedindividualist.wordpress.com/2016/10/16/hillary-and-social-security/
Hillary and Social Security.
Posted on October 16, 2016 by Roy Filly
On February 5, 2016, Hillary Clinton emphatically stated, “I won’t cut Social Security. … I’ll defend it, and I’ll expand it.” The quote is directly from her website. She went on to say, “We can never let Republicans… privatize Social Security.”Let’s look at these two “issues.”
Our nation’s largest entitlement program is headed for insolvency. It is not a matter of “if,” but “when.” When it happens it will likely will lead to both large benefit cuts and large payroll tax increases. Unfortunately, the Democrat Party cannot tax its way out of this mess.
[Source: Projections Differ, but Social Security Is in Deep Trouble, by Lauren Bowman and Romina Boccia]
Current Congressional Budget Office projections for Social Security predict the program’s combined Old-Age and Survivors Insurance (OASI) and Disability Insurance trust fund will be exhausted in 2029, while the Social Security Trustees project the combined trust fund will be exhausted in 2034.The differences arise simply out of the demographic and economic assumptions used to make their predictions. They use different fertility rates and lengths of time that workers remain in the workforce. However, the bottom line is insolvency regardless of the assumptions chosen.
If Hillary “expands” social security the date of insolvency only moves forward. Who cares? She will be out of office!
The second exclamation by Hillary is the more interesting. Let’s look at what would have happened if those evil Republicans had “privatized” Social Security back in the 1980s.
There are now many real world experiments in Privatized Social Security. So, let us check the results. Merrill Matthews, a resident scholar with the Institute for Policy Innovation, recently published the following analysis under the title, “Social Security by Choice.” His analysis is telling.“The experience of three Texas counties can offer a realistic demonstration of how Social Security can be successfully reformed. Galveston, Matagorda and Brazoria counties opted out of Social Security in the early 1980s, and have since developed and implemented what they call the Alternate Plan.
- Like Social Security, employees contribute 6.2 percent of their incomes, which the counties match with the option of providing more (as Galveston does).
- Unlike a traditional IRA or 401(k) plan, which account holders can actively manage, the contributions are pooled, like deposits to a bank savings account.
- Top-rated financial institutions then bid on the right to manage the funds, offering minimum interest rates that yield significant protection from market downturns.
- The plan avoids the pitfalls of pay-as-you-go systems by giving workers only what they pay in AND NO UNFUNDED LIABILITIES.
The experience of the three counties’ employees over the past 30 years speaks to the effectiveness and efficiency of the plans:
- A lower-middle income worker making about $26,000 at retirement would get about $1,007 a month under Social Security, but $1,826 under the Alternate Plan.
- A middle-income worker making $51,200 would get about $1,540 monthly from Social Security, but $3,600 from the Alternate Plan.
- And a high-income worker who maxed out on his Social Security contribution every year would receive about $2,500 a month from Social Security compared to $5,000 to $6,000 a month from the Alternate Plan.
In addition to protecting the… government from large debts to retirees, the plans also protect participants from bad markets via the aforementioned minimum interest rates.
- Most plans have written into them a minimum 3.75 percent minimum rate.
- Over the last decade, the accounts have earned between 3.75 percent and 5.75 percent every year, with an average of around 5 percent.
- The 1990s often saw even higher interest rates, from 6.5 percent to 7 percent.