tag:blogger.com,1999:blog-8213262.post6696561533866386281..comments2024-03-25T07:29:08.216-04:00Comments on 2 Political Junkies: More On ToomeyMariahttp://www.blogger.com/profile/10439330154875628083noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-8213262.post-64239968730514333782010-10-10T16:31:32.400-04:002010-10-10T16:31:32.400-04:00Reading over Weller's essay, I find points I a...Reading over Weller's essay, I find points I agree with and bits I disagree with on a theoretical level, but the conclusion that Social Security privatization is a bad idea is pretty solid. <br /><br />The potential for problems lie in the details of the program. These are going to be relatively small accounts compared to those from wealthier clients, so the safest course for them would be to aggregate them into big diversified market funds, with balances of (more aggressive) stocks and (more conservative but lower performing) bonds. I can see a 30 year program where for the first ten years the first ten years the stock to bond ratio was 75 to 25, then 50/50 and for the last ten years 25% stock to 75% bond. Or some slightly more complicated variation, but with the idea that changes are made in a programmatic fashion, to be very safe and to hold broker's fees down on these rather small accounts.<br /><br />The thing is that a dedicated fraction of savers will think they are smarter and want to directly buy a specific stock, or at least make changes to their accounts at their own pace. But in those cases, not only could the saver lose his or her money if a stock goes south, but a much larger portion of their return will go to transaction fees. <br /><br />This is not to mention the possibility of of a 1987 or 2008 drop in the stock market, that could wipe out a specific group of private account saver. Would the government step in and simply give money to those savers who were about to retire?<br /><br />So although Toomey could sort of be applauded for his honesty (<i>sort of</i>), not only would his privatization plan create billions or more of a debt shouldered by our children in the future that will be be transfered to Wall Street now, but Toomey would put the government in the position of allowing savers with an unknown amount of experience to make risky choices in the stock market. Whether the government decides to bail out those private account investors who make bad decisions or simply faces the wave of lawsuits that will occur, it will be a colossal waste of money. The only people who will benefit: Wall Street traders.EdHeathhttps://www.blogger.com/profile/09109361235271107574noreply@blogger.com