Craig Williams (D)
Social Security in its present form is an insurance policy against deprivation in our senior years. The critical distinction to make about Social Security is that it is an "insurance policy" not an "investment plan."
To illustrate the difference it is helpful to compare various "life insurance" plans. You can buy "term life" insurance, a "whole life" insurance policy, or the euphemistically labeled "universal life."
TERM is very easy to understand; you get the maximum insurance benefit at the cheapest price for a given period of time. As you get closer to the Pearly Gates the cost increases in direct proportion to the certainty of your own expiration.
WHOLE life allows you in effect to spread out the cost of those later years by paying some of the insurance premium in your younger days. Sort of a "lay-away" insurance program.
And then there's UNIVERSAL LIFE. A life insurance marketing executive came up with this idea quite a few years ago. The pitch was that you pay an exorbitant amount in monthly payments, much more than the actual cost of your insurance, but you are building a "cash value" nest egg with the extra money. The idea is that if you never die you can withdraw the cash value you've built up and spend it at the mall on sporting goods. The catch, once you really get into the numbers, is that your real return on investment is minuscule. It hardly makes it worthwhile. As a newly married 18 year-old in the 60's I swallowed that deal hook, line and sinker. And it wasn't until three weeks later that I realized I had been taken to the cleaners. A week later I canceled the policy.
The Bush proposal of investing 2% of your payroll taxes into a private investment plan seems very much to me like universal life. Perhaps under ideal circumstances it would work. But the drawbacks are obvious:
First, it will decrease current Social Security revenue required to pay today's retirees. I firmly believe all existing commitments must be kept. Second, imagine the overhead cost of a Government Accounting Program that manages 250 million SEPARATE stock market investment programs. Every year we see financial irregularities from the most respected investment houses in the world due either to avarice or incompetence. Can a government agency filled with civil servants do a better job at lower cost? If outsourced, will the requsite oversight be financed by the contributors (in effect a double duty transaction charge) or as an extra government subsidiezed program?
Out Social Security program is not intended to make me rich. It is simply term insurance, intended to keep me from being destitute when I'm too old to generate my own income. I believe the cost of that insurance policy should be kept as low as possible.
I am absolutely in favor of personal savings and investment. There are some benefits to the Gore proposal that provides matching funds for low-income people, but that program needs significant study.
I have not seen convincing documentation or statistical analysis that convinces me private investment of Social Security funds will produce a cost-effective retirement program. I oppose the privatization of the Social Security Insurance Program.