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A Bet on 2016: Private accounts for Social Security

By Tom Morgan


Would you like to take me up on a small bet? Private accounts for Social Security. One or both candidates for the White House in 2016 will promote them.

Private accounts are where some or all your Social Security contribution goes into your own account. For your control. To be invested in stocks and bonds. Probably in funds that are managed for your benefit.

Yawn. Why bother to think about this? After all, the Social Security fund is only the largest mass of money in the world’s history. And Social Security only affects anyone who ever works. Or survives a worker.

Here is why I believe it will be a hot issue.

1. Politicians need and want the votes of millennials — people born after 1980. They are nearly 30 percent of the population. They are not yet set in their political ways. They swing either way politically. Not like old Uncle Fred and Aunt Tillie, whose votes are already cast for all elections until they die.

2. Over half of millennials believe they will get zero from Social Security when they retire. Consider that. Over half. Only 6 percent feel they will get benefits similar to current payouts, according to a recent survey from the Pew Research Center. In other words, they figure the system is worthless for them.

3. Meanwhile, 86 percent of millennials favor allowing private accounts for Social Security, according to the Pew poll. Not often do politicians see that 86 percent of prime voters agree on an issue.

4. Older voters are not so keen on the idea. But most are like Uncle Fred, set in their political ways. And most will see that a new system won’t affect their checks. Whoever proposes private accounts will make sure nobody over the age of 50 is affected.

Here is other material to support the idea. Chile switched workers to such a system 33 years ago. Their version of social security contributions go into their own accounts. They choose from different programs of stocks and bonds. And system safeguards keep workers from doing stupid things. 

It has been wildly successful. On average, Chileans draw retirement checks equal to 87 percent of what their salaries were. Americans’ draw is about 30 percent. And, when Chileans die, they pass along their account to their families. They build family wealth.

What is the annual return on what you contribute to Social Security? Close to zero. Chileans’ return has been 8.7 percent per year. And we are supposed to be champions of capitalism? In truth, we are wimps. We have listened to scaremongers on the left who loathe capitalism. “Oh my god, what will happen if the stock and bond markets crash? Our retirement savings will go down the drain.”

Right. Markets have always recovered. And while they are down, your paycheck contribution buys more stocks and bonds while they are cheap and on sale.

“Yeah, but what if we have Armageddon? What if for once they don’t recover?” Well, do you suppose your Social Security fund will pay out after Armageddon? 

Incidentally, 30 nations have followed Chile’s lead. They have more faith in markets than we do. And incidentally, the Chileans who fashioned their program? They learned their economics at the University of Chicago.

The Republican candidate is more likely to promote private accounts. Because the idea is promoted by economists on the right. A smart Democrat might seize the idea first. For the reasons I cited above. For younger voters, without much fear of losing older voters over the issue.

Beyond the bet, I dream we find the courage to take this course. The return our current system gives people is insulting. It is theft. And even while it offers nearly a zero return, it will go broke. Unless it increases contributions from workers. Or cuts their benefits.

We should be ashamed that so many other countries have done so much better for their workers. Ashamed that we listen to the fears of anti-market people. They keep us from making sensible reforms to Social Security.

We should end the era of E Pluribus Wimpus. I know my Latin doesn’t make sense. Neither does our Social Security system.

From in Morgan.

Tom Morgan writes about political, financial, and other subjects from his home near Oneonta, in addition to his radio shows and new TV show. For more information about him, visit his website at

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