No One Can Agree
Posted by jesselee
Friday, February 18, 2005 at 12:15 PM
Knight Ridder has an intriguing article out today on a privatization test run right here in Bush and DeLay's backyard:
Three Texas counties hugging the Gulf of Mexico voluntarily withdrew from the federal Social Security system in 1981, transferring the retirement taxes of county employees into private investment accounts.
Well, I'm surprised we haven't heard more about it! The problem is, though...
No one here can agree whether county retirees are better off than they would have been had they stayed with the Social Security system - a dilemma that precisely mirrors the emerging complexities of the national Social Security debate.
Indeed, it does "precisely mirror" today's debate. To show how, I'm going to go through the article and pluck out everybody on the anti-privatization side, and then do the same for the supporters.
Anti-privatization:
"I didn't come out ahead," said Evelyn Robison, who was the Galveston District Court clerk for 13 years before her retirement in 2004. "My chief deputy did not come out ahead. My bookkeeper did not come out ahead. I personally don't know anyone who has retired who came out ahead."[...]
"Our simulations found that low wage earners retiring today generally would have qualified for higher retirement incomes had they been under Social Security," the GAO report stated. "Many median wage earners, while initially receiving higher benefits under the (Galveston plan), would have eventually received larger benefits under Social Security because Social Security's benefits are indexed for inflation."
[...]
Critics maintain that instituting private accounts similar to Galveston's for all workers would cause harm for many.
"These plans won't work for most people and would destroy Social Security for the vast number of Americans who depend on it," said Eric Kingson, a professor of social work at Syracuse University who has studied the Galveston plan.
"What we can learn from the Galveston experience is who will win and who will lose if we move toward this privatization plan," Kingson added. "People who work long and hard at relatively low wages get a proportionately higher benefit from Social Security, and that's because its purpose is to provide a basic set of protections for Americans."
The bottom line for many Galveston County retirees is the size of their check every month. And some say they have been bitterly disappointed.
"I get around $460 per month now, but under Social Security, I would have gotten $1,000," said Joyce Longcoy, who retired in 1998 after 23 years working for Galveston County. "They are putting this up to be a model for the rest of the country. Some model."
Now the two pro-privatization voices. See if you notice anything about them:
Nonsense, countered Rick Gornto, a Houston financial manager who designed the alternate retirement plans for Galveston, Brazoria and Matagorda counties and still runs them."In every case we ever looked at, people end up better off in our plan," said Gornto, president of First Financial Benefits.
[...]
"I think what we have here is a model for the rest of the country," said Ray Holbrook, a retired Galveston County judge and one of the original proponents of the plan. "The philosophy behind it is that we're better off if we fund our own retirements."
How will we ever settle this dispute? It's "he says, she says"!
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Comments
OH, yes! However will it be resolved? Goodness gracious, we may actually have to make an HONEST JUDGMENT based on the FACTS!
Posted by: Florindo Troncelliti | February 18, 2005 1:50 PM
I am a 40 year resident of Galveston County and very familiar with the pension system.
The story you have quoted from the Chicago Tribune is a complete fantasy.
The reporter has absolutely no idea what he is talking about.
Evelyn Robison took $40,000 out of her plan to pay for a heart transplant for her husband.
Now she is running around telling everybody she got cheated.
We ran her out of office before her term expired, BTW.
Posted by: Tom Tyler | February 18, 2005 4:16 PM
Same go for the GAO?
Posted by: jesselee | February 18, 2005 6:53 PM
I am a 45 year resident of Galveston County and I'm here to tell you that Tom Tyler is lying. He's been yip-yapping about this all over because he's good friends with Gorno. I wouldn't be surprised if Gorno had sent him here actually.
Posted by: Tim Tayler | February 19, 2005 9:16 PM
It is probably worth noting that a quick google shows Tom to be a reliable GOP soldier, with a website whose motto sounds strikingly similar to Jeff Gannon's.
Posted by: jesselee | February 19, 2005 11:39 PM
Let's get down to the heart of the matter.
People had the option to leave municipal work and work for a private company that was in the SS plan. Ultimately they are unhappy as to what they saved in their plan and "want more" - so they look to the SS plan as a comparison. This is not accuate due to SS income redistribution effects. So basically the people complaining are ones that want other people to fund their retirement.
I noticed there was no mention of the fact that if the would pass on their nest egg could be passed to their children - not true with Social security.
Posted by: Reality | February 20, 2005 5:04 PM
If Evelyn Robinson really did take out $40,000 from her retirement plan for her husbands' heart transplant, then that is one more reason NOT to switch to private investment accounts - because your future retirment money can be used for other purposes and you may not have it in your account when you need it at retirement. Right now, you cannot borrow against or loan money from your future Social Security benefits, which is a plus for keeping the present system.
Posted by: Cindy | February 20, 2005 5:43 PM
That is correct. There is definitly a flaw in the Galveson System. She should not have had the ability to withdrawl funds from the SS replacement system.
SS private accounts should prohibit this correcting this flaw. This money should have come from her 401(k) or her 403(b)account.
Posted by: Reality | February 20, 2005 6:48 PM
Let's make it clear "reality" that none of us in this debate wants to have their retirement funded by others. And although primarily a retirement program, SS provides substantial disabled and survivor benefits. We simply want a plan that's as good as what our parents and grandparents had. Short of being a very low wage earner, no one expects Social Security to be their only source of retirement income. It's there as a guaranteed base to be built upon by other personal savings--those 401's and 403's to which you refer.
As for a nest egg to which you refer, under the President's plan most lower income workers would have to purchase lifetime annuities--guaranteed, but which could not be passed on. Perhaps an oversight by the President's speechwriters. Here are some good links: http://www.cbpp.org/1-4-05socsec.htm http://www.bopnews.com/archives/facts_social_security.pdf
And a couple links to the Diamond-Orszag plan which would fix Social Security forever (seriously) and would cost a $30,000 a year wage earner 87cents a week in increased taxes...not a bad trade off I think. http://econ-www.mit.edu/faculty/download_pdf.php?id=961 http://jollybuddah.mydd.com/story/2004/12/31/181720/31 http://www.cbo.gov/showdoc.cfm?index=6044&sequence=0
Posted by: Realitycheck | February 20, 2005 7:43 PM
Why haven't I heard anything about, raising minimum wages to cover poverty level, for a family of four, which would be, around $10. per hour, and how that would effect social security taxes. If we had a minimum wage that was a living wage, we would not see, the problem we are seeing with social security. Sure President Bush, don't see anything wrong with, aleins, legal or otherwise, coming into our country, because they are willing to work for the paltry wage we call minimum. Figure, how many wage earners, it takes at that wage to make a household, to come upto poverty level. I believe, our government, provides, information, that says, poverty level for a family of four is $18,800./ year. Enough said, thanks for the soapbox. Sincerely, Wilbur Strunk
Posted by: Wilbur Strunk | February 23, 2005 11:06 AM
Wilbur --
Exactly what I was thinking a minute and a half before reading your post!
Posted by: Peter Gaffney | February 24, 2005 6:37 PM
Isn't it our own responsibility to make decisions in our lives that take into consideration the financial impact prior to entering into actions?
If you raise the min wage to $10/hr would that not drive more jobs overseas?
Posted by: Cheryl | February 24, 2005 10:54 PM