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SHOULD SOCIAL SECURITY BE PRIVATIZED?

© Beth Skinner

Social Security was started in 1935 and at that time was a fully funded system, which meant that all taxes collected were used to finance future benefits. In 1939, Congress changed the system to one that paid benefits to retirees and other government programs from current contributions. This means that the government is no longer investing your money, which would benefit from interest compounding, but paying out benefits as they go.

Did you know that you have no legal claim to your Social Security benefits? The Supreme Court ruled in 1960 that you have no property rights where your Social Security is concerned. A system into which you have paid for how many years? You can bet your private investments are protected! Another question to ask yourself is, if government-funded social security is so great, why did Congress set themselves up with a very lucrative pension system?

Many people are worried about investing their money privately and think that at least social security is "guaranteed." Another argument against privatization is that people who are not required to save will not, and will then end up sucking off those who do, when it comes time to retire. Think about it this way: if you knew that there would be no social security waiting for you when you retired, how much money would you start saving today? Would you honestly run about happy-go-lucky and just let the chips fall where they may? I know of one senior citizen in particular who knew next to nothing about the stock market before he retired. Yet now that he has retired, and rolled over his retirement funds into private investment, he watches the financial cable channel daily, has regular discussions with his stock-broker, and follows the market like a hawk. Yes, this is only one example but I have to believe that others would behave in a similar manner.

During an argument with a former professor of mine (who shall remain nameless) over the issue of the privatization of social security, I posed the following question, "Do you honestly believe that when people's incentives change their behavior does not?" He answered with a shout, "Yes!" Poor man, he obviously never had a course in economics. That type of belief system is akin to saying that when a pint of Ben & Jerry's ice cream goes up to $7.50 he will continue to buy exactly the same amount as he did before. When people's incentives change, their behavior changes - this is how the free market works.