Friday, January 21, 2005

pinions of buddy don: war on ss

i half to add mitt to bein impressed so far by how them that wonts to perteck soshul securty have dun gut out lots of thar arguments agin privatizayshun. bes analyst in that job is paul krugman, witch he has a articull in todays ny times name of The Free Lunch Bunch (free registrayshun required). his basick point is splained thisaway:
President Bush is like a financial adviser who tells you that at the rate you're going, you won't be able to afford retirement - but that you shouldn't do anything mundane like trying to save more. Instead, you should take out a huge loan, put the money in a mutual fund run by his friends (with management fees to be determined later) and place your faith in capital gains.
he then points out whut folks who thank ye kin make up fer a secure investment n reduced benefits with a risky one mus bleeve bout them that invests the big dollars, that fer the hole scheme to wurk, sumbidy is a'gone half to buy bonds to make up fer all the money borried n diverted to stocks to finants the hole ruse:
So privatizers are in effect asserting that politicians are smart - they know that stocks are a much better investment than bonds - while private investors are stupid, and will swap their valuable stocks for much less valuable government bonds. Isn't such an assertion very peculiar coming from people who claim to trust markets?
corse, that ain even takin into account how much it costs to git yer wall street folks to manage such accounts. as luck wood have it (not that yer seein much bout this on tv), a nuther cuntry dun tride this trick, witch that wood be britain under maggie thatcher. are they happy bout it? have they made moren they lost? not hardly:
Today, the value of a typical company's stock is more than 20 times its profits. The more you pay for an asset, the lower the rate of return you can expect to earn. That's why even Jeremy Siegel, whose "Stocks for the Long Run" is often cited by those who favor stocks over bonds, has conceded that "returns on stocks over bonds won't be as large as in the past."

But a very high return on stocks over bonds is essential in privatization schemes; otherwise private accounts created with borrowed money won't earn enough to compensate for their risks. And if we take into account realistic estimates of the fees that mutual funds will charge - remember, in Britain those fees reduce workers' nest eggs by 20 to 30 percent - privatization turns into a lose-lose proposition.
ifn ye wonta know a lot more bout how thangs went in britain, ye kin read bout it in a articull in the american prospect name of A Bloody Mess. tiz a long articull, but the crux of the thang is in this here quote:
But whatever the solution to that challenge, there is little disagreement within the United Kingdom that the path chosen by successive governments over the past 25 years is not the right one. The Pensions Commission recently completed the most comprehensive review ever of the U.K. system and concluded that there are only four possible solutions for the difficulties ahead: cutting state retirement benefits, increasing taxes, increasing savings, or delaying retirement. While noting that there is no political support for the first choice, the commission concluded that each of the three other choices, on its own, is too painful. Only some combination of them is likely to help Britain’s elderly obtain retirement with dignity. Adair Turner, chairman of the commission, a vice chairman of Merrill Lynch in London, and the former director general of the United Kingdom’s biggest business lobbying group, says, “There are no other choices.”

And so, at the exact moment that America contemplates replicating this disaster, many in Britain -- some conservatives included -- are looking more and more kindly on American Social Security as a model for reform. The National Association of Pension Funds, a group of employers who sponsor the nation’s largest schemes, is urging government not to expect the private sector to shoulder the burden of keeping the nation’s elderly from poverty. Chief executive Christine Farnish notes that it’s “actually cheaper for the state to carry the risk,” adding that in looking for a system that offers the best combination of modest guaranteed retirement benefits delivered at low cost, the U.S. Social Security program seems the best model. “It doesn’t have to make a profit, and it delivers efficiencies of scale that most companies would die for,” she says.

And that is how the British eye, wearied after beholding decades of privatization “reform,” views the American system, which has served the United States so remarkably well for seven decades but which supposedly is now in dire crisis and must be overhauled by the time the forsythia bloom. It’s a point of view Americans would do well to take in.
ye reckon we amurkins larn frum miss takes other folks has made? or do we half to make em ourself before we git the point?

No comments: