Hazards I see with privatisation:
- The financial soundness of it is based on the expectation of outsized returns in the stock market, or elsewhere.
Not if the contributions are limited to appropriately conservative investments. Although I cannot put my finger on it at the moment, I read somewhere that the SS fund returns are so paltry, that if it was in the hands of a private fiduciary, he would have been sued for mismanagement.
If the funds, or a substantial portion of them, are required by law to be kept in Treasuries or money market equivalents, or some other equally conservative instrument, the only risk would be losses due to inflation, a risk which probably pales in comparison to the "returns" the SS fund has obtained in the last few decades.
If people expect that no matter what, the government is going to bail them out in their golden years, what's to stop them from (perhaps literally) going for broke with their investment plans?
Legal strictures on the types of investments and transactions that can take place. These can include penalties on financial institutions that allow seniors to break the rules.
The scheme could effectively make US government administrators the largest stakeholder in many companies and funds, an alarming prospect to those of us who would like to see the central government wield less power over the economy, not more.
Why not treat privatised SS funds much like IRAs or 401(k)s and avoid this problem?
I'm not a financial type, but your post was intriguing. |
