Is the SS Plan Just a Transfer of $$ to the Brokerage Houses?

Is that what this is about? Confused.

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On Social Security Reform, the Daring Policy Is Best
By Newt Gingrich, Peter Ferrara
Posted: Wednesday, February 2, 2005
ARTICLES The Hill (Washington)


<snip> Today, bond-market savants are raising similar questions about allowing workers a personal savings account option for Social Security. They argue that the government would have to issue trillions of dollars in transitional debt to cover promised benefits to today’s retirees while workers pay part of their payroll taxes into their personal retirement savings accounts. That debt, they again argue, would cause interest rates to soar, tanking the economy.

What these pessimists ignore is that the personal retirement savings accounts would guarantee huge sums in new investment funds moving into the markets as workers buy bonds and stocks for their accounts.

Consider the Social Security reform bill introduced by Rep. Paul Ryan (R-Wis.) and Sen. John Sununu (R-N.H.). The American Shareholders Association estimates that, under the Ryan-Sununu personal retirement savings account plan, if workers invested half their savings in bonds and the other half in stocks $85 billion would flow into the bond markets in the very first year alone. An increase of this size would double current annual investment flows into corporate bonds.

Moreover, the chief actuary of Social Security estimates that, after the first 15 years of personal savings under Ryan-Sununu, workers would have accumulated $7.8 trillion in today’s dollars in their personal retirement savings accounts, which is roughly the same amount invested in the entire mutual-fund industry today.

After the first 25 years of personal savings under Ryan-Sununu, the chief actuary estimates, workers would have accumulated $16.6 trillion in today’s dollars in their accounts. Yet, under the policies specified in Ryan-Sununu, the government would have issued only $1.25 trillion in new federal bonds at that point. Even that would be paid off during the following 15 years by the surpluses that would then be generated by the reform, according to the chief actuary’s official score of the proposal.

http://www.aei.org/news/newsID.21910,filter.all/news_detail.asp

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it is a rip off and a scam.

...that's the message (simple and to the point) that needs to get out there.

Certainly not limited to that, though.

were all big banks and brokerages like MorganStanley. Follow the money. Need I say more?

I just know that if the tables were turned, the right be lying up and down, mischaracterizing the proposal. (Think Clinton's health care plan.) Part of me wants to make our little bit of media do this with the SS plan. I mean, * is totally dropping the ball on this. He hasn't presented any details. Leaving it completely open for us to frame the debate. Look at all the Congresspeople up in arms over it all, while the sheeple wait to be told what to think.

The plan will probably be sold as something similar to the indexed funds that government employees use -- something like 4-10 choices as to what kind of fund you want to invest in. I think the option will be left open for people to opt out of the whole thing. (This is what I'll do if this goes through.)

It will undoubtedly spiral out of control, and Wall Street will have direct access to the funds. Transaction costs, fraud, and outright stealing will be rampant. I can't wait!!

Business Week, a conservative publication catering to the Wall Street crowd, reports that Bush's Social Security plan amounts to the biggest windfall ever for Wall Street--nearly a TRILLION dollars over the next 75 years.

Actually, I've just been following talkingpointsmemo.com and Krugman's statements on the whole thing. Everything seems to be lining up the way Krugman has described it. If this thing goes through, the only winners will be Wall Street. The losers? My generation when they hit retirement.

Edit: and by "retirement", I mean poverty.

so we can all be wage slaves until we die.

WINDFALL ON WALL STREET?

The Bush boondoggle could divert up to a trillion dollars from retirees’ Social Security fund into the pockets of Wall Street firms over the next 75 years, making it the biggest windfall ever for the financial industry, Business Week Reports:

(1/24/2005) -- As Washington begins to battle over letting workers invest a portion of their Social Security in private accounts, Wall Street's big guns are staying silent. Private accounts could pump vast sums into the markets -- $54 billion a year, by the Social Security Administration's estimate. Yet financial firms aren't endorsing the accounts, and their legions of lobbyists haven't descended on Congress. The reason: Financiers argue that running those accounts would be a low-margin, high-regulation business that's hardly worth the effort.

But don't think for a minute that the Street is giving up on that gusher. Private accounts could be a boon for some firms -- and their impact on stock trading will pump up the entire industry. Reform would further extend and entrench the equity culture that has taken root over the past 20 years.

Financial executives know that if their scandal-plagued firms lead the charge, they'll hand opponents of private accounts a killer issue. The AFL-CIO has already put 46 financial firms on notice that Big Labor will hammer them if they stump actively for the plan. "Social Security privatization is a risky scheme for America but a sure bet for the financial-services industry," argues AFL-CIO President John J. Sweeney. So Wall Street is lying low. . .
Industry executives point out that, at least initially, Social Security accounts would be modeled on the retirement plan for federal employees, which allows individuals to invest in only a clutch of low-fee index funds managed by a handful of firms. That could be a boon to such big index-fund managers as Barclays Global Investors, which has run the federal worker plan's index funds since 1988, and State Street Global Advisors (STT ).

But as accounts grow, the Bush Administration tilts toward letting owners put their money, 401(k)-style, into actively managed funds. Under that scenario, fee income could balloon. Goolsbee says that if funds charged 0.8% of assets -- close to the average for big equity funds -- Wall Street could rake in $940 billion in investment fees over 75 years. It would be "the largest windfall gain in American financial history," says Goolsbee….

http://www.businessweek.com/magazine/content/05_04/b3917014_mz001.htm

1. Asset inflation. Whether equities or bonds, that much money flowing into asset markets would distort market forces. Equity prices would be artificially high; interest rates artificially low. Might be good, but fundamentals would come into play: corporations high-rolling on cheap money, issuing mega-debt based on low interest rates. Think 1999 on steroids.

2: Result: crash. The market tanks & Joe Sixpack goes down the drain. But: Wall Street brokerages will make out like bandits in the first phase, and the insiders will have retired by the second phase. Result: everybody in America is fucked except the brokers & CEOs who will have cashed out by the time the shit hits the fan.

Any questions?

They have us in their sights.