Powered by TypePad

« Third Time Lucky | Main | The Equity Risk Premium »

February 04, 2005



Boston is also the center of America's mutual fund industry....


1. they don't expect any help from social security
2. they think people are too unschooled to be able to do it themselves ...

so either the government is going to take care of them
or they are smarter than the average bear so they will be able to ignore assumption number 2

Lurking Observer


Don't forget that the NYT now owns the Boston Globe. This may have been a matter of simply calling an affiliate and having them do the story.

Admittedly, an affiliate in the heart of Blue-state-land.

Joe Mealyus

But it's not a comedy classic because she went to Boston. What truly makes it funny is that she interviews "15 workers in their 20's and 30's" but betrays in her article not the slightest hint of a raised eyebrow that her small, random sample was able to recapitulate current Democratic Party talking points in such a natural, unaffected fashion.

Patrick R. Sullivan

"But many said they preferred other solutions...meting out benefits on a sliding scale according to income level."

Hey, there's a novel idea.

Joe Mealyus

"There was general agreement that Social Security had to be fixed. But many said they preferred other solutions: raising the retirement age, or meting out benefits on a sliding scale according to income level."

I am always struck by the way in which the debate is ultimately between a certain upper-middle-class Democrat version of things vs. a certain Republican version. This article lays out the upper-middle-class Dem take quite well: we like our office jobs and don't mind working a few more years if we have to (not that we'll have to, thanks to our IRA's and 401K's), and for the lower-middle class and poor, give them welfare.

I've never cared much for the Republican side of this debate either, because of their insistence on ignoring the true point of the system as it stands (which is not to provide for your own retirement, but to insure that you don't have to provide for anyone else's - thereby eradicating elderly poverty). But it seems to me that a truly "progressive" Democratic party would have some sort of interest in exploring how Social Security could better serve the (true) interests of the lower-middle class and poor.

Instead, there seems to be this massive, rigidly-maintained pretense that the interests of those groups are perfectly well served - to the point of insisting that investing in the stock market is "too risky" but that your uncertain lifespan presents no risk at all, because obviously with regard to the latter issue it's just wrong and illogical to think of Social Security in terms of an investment....

TJ Jackson

Let me understand this we should listen to some workers in Boston, a city where they envision Mordor as an ideal, are to be taken seriously? I may consider Massachusetts opinion when they elect senators who do not have magic hats and are olympic class auto swimmers.

Robert Brown

Joe Mealvus,

Democrats have a bit of a problem: I am sure most of them would love a system that benefits only low and lower middle income retirees paid for only by high income workers. But, they fear the system will loose support over time if it is seen as a welfare program and the benefits will dwindle.

So, the system was designed to look and feel like an investment system when in fact it is mostly a direct redistribution system from young to old and high income to low income. The redistribution from high to low income is hidden in the benefit formulas that the general public is largely unaware of. People are generally lead to believe there is a "Trust Fund" analogous to the private sector holding assets for their retirement when in fact their taxes are mostly transferred directly to current retirees (how often do you hear reasonably intelligent people shreiking about the government raiding the SS trust fund?). The cost of the system is hidden from the public by making their employer pay for half of it.

Democrates really don't like private accounts because they partially defeat the income redistribution in the benefit formulas, but they can't say that out loud because they don't want to tout income redistribution so, they complain about "risky schemes".

They are leary of plans to lift the cap on payroll tax wages (without commensurate benefits) because it may expose the payroll tax as truely a tax, not an investment.

Likewise, they don't like to talk too loudly about means testing benefits because, again, it sounds like welfare.

So, they are left with arguing that the system is just fine as it is, looking foreward to the day when the demands of the SS trust fund will bring pressure to raise taxes on the rich (their ultimate wet dream fantasy) to meet SS benefit demands.

Rob Crocker

Is it a tad ironic for young people to be distrustful of government retirement savings account while they're planning on retiring on their 401(k) earnings?

It's really precious when they fret about how uncertain the stock market is...

Teresa McMains, yeah the one from the article

Boy, this is a bit outdated but I googled myself and found this site and others discussing how ridiculous my comments were and feel compelled to reply.
Allow me to note that it is hard to get a full sense of my comments to the Times reporter when two sentences of a 15 minute discussion were printed somewhat out of context. So to sum up...
I do believe that Social Security was designed to be a safety net for those who could not or would not save on their own. I think it benefits society in general to NOT have old the old and sick lining the streets, begging, and what have you.
Given that, I don't believe it should be invested in the stock market. I feel that's pretty irrelevant, however, to whether I invest my own personal savings in the stock market, bond funds, and other instruments -- secured or otherwise. It's irrelvant because I've gone through the effort of researching my investments and diversifying my risk. If I didn't have outside investments, I certainly wouldn't put all my money in stocks. It's basically the same reasoning behind shifting assets into guaranteed investments as one ages. The more you are depending on the income from those investments, the more secure they should be.
Could Social Security be designed to follow such a model? Sure. Do I think most Americans would go through the trouble of aligning their chosen investments to their degree of acceptable risk? Not so much.
Beyond that, I just think it's an awful lot of money generating an awful lot of fees that is going to greatly benefit someone. So my question is, aside of course from the average American, who benefits?

The comments to this entry are closed.