Houston Democrats

Our local club started a blog about a month ago. We haven't been able to get a lively conversation going yet, but I am still working on the club members.

I will go ahead and blogroll you guys. I would appreciate the same in return.

Hi Bert. Thanks for visiting. You're on our blogroll!

The New York Times published an analysis of Galveston's private system today. Not surprisingly, higher income workers did better with private accounts while lower income workers would have received higher benefits with Social Security. On Texas' Coast, a Laboratory for Private Accounts

Good eye, Lyn.

Although critical of the WH position, Simon Romero still writes the article in a way that the WH frames the issue.

The program Romero describes as "an alternative" to SSI is a 401K plan. This is like saying a screwdriver is an alternative to a hammer. I would hammer home the point that it's Social Security Insurance. A 401K is not insurance, nor is it a replacement for insurance. A 401K is an investment instrument.

You shouldn't evaluate insurance by the standards of an investment; and you shouldn't evaluate investment accounts by the standards of insurance.

Doggone Post Button!

Re-reading my last post, it looks like I'm attributing Romero's POV to Lyn Wall. That wasn't my intention at all, nor do I think that Romero doesn't know the difference between insurance and an investment. Rather, I'm pointing out that the way Romero frames the issue in the article, it does not create a bright enough line for those who are confused about SSI.

The second feature of the SSI retirement benes: they behave like an annuities. We don't want granny buying Alpo because she's afraid she'll live too long and spend all of her savings! An annuity is a defined benefit with an indefinite duration. With a 401K at retirement, you either have a pile of x amount of cash that last you the rest of your life, or you are forced to assume risk to get more than x. In addition to the problem of the uncertain life-span, there's investment risk and inflation risk.

Watch Dubya tell us all that we could buy annuities. Well, we already have annuities if the R's don't mess it up.

Here's the Washington Post's take on the Galveston system: "In Texas, A Model For Bush Proposal"

It says that workers earning less than $17,100 per year in 1999, would have benifited more from Social Security because it makes annual cost-of-living adjustments while the Galveston plan does not. Such adjustments help to protect participants against inflation while also keeping up with wage increases. Clearly, Social Security is still the better deal for low-income earners.

Social Security builds in annual increases that not only protect participants against inflation but also allow them to keep pace with wage increases. Factoring that in, analysts have found that Social Security is a better deal for low-income workers.

It also points out that those who were in the Galveston plan for a short time or those who withdrew money from their accounts for emergencies were greatly impacted in a negative way.

I think the biggest negative of privatizing social security is the fact that you lose the 'security' part of the deal. I didn't notice it in the New York Times article, but the Washington Post reported that the insurance company managing the Galveston retirement system ran into serious financial trouble a couple of years after the program began and the County had to wait three years to regain the lost money. Apparently, no one lost any money, but there wasn't anything that could have prevented everyone from losing their savings.