Your Letters: Privatizing Social Security is 'worst idea ever imagined'
What do Drexel Burnham Lambert, Lehman Brothers, Madoff Investment Securities, Wachovia, Washington Mutual, CIT Group, Merrill Lynch, Bear Stearns, AIG and Citi Group all have in common? They were all highly regarded private investment firms that were incorporated after the Social Security Administration was established in 1932 and went bankrupt or were bailed out before going bankrupt in the last 30 years. The main reason for bankruptcy was greed, which made them blind to the high level of risk they were taking with their customers' money. In some cases, it was outright criminal fraud.
People who had money invested in the market with these companies, either lost it all or recovered pennies on the dollar due to the incompetence of people who claimed they knew what they were doing.
Even if the company you invested with managed to stay in business between 2007-2010, your IRA or 401k, in many cases, lost as much as half of its value, even though you continued to put money into it. The 10-year period from 1999-2009 (when most of this high-risk investing started) was the first 10 years in the history of the stock market to lose money (You, in fact, would have been better off putting your money in your mattress for 10 years than investing it.)
What happened to Social Security recipients during this time? Most people received cost-of-living raises so their income increased. In spite of having to fund Medicare (which is the largest provider of medical reimbursements in the country), Social Security not only continued solvency but is $3 trillion in the black.
Social Security has never missed paying a check, has never been accused of fraud and has never been embarrassed by making investments that have lost huge sums of money.
Even though Social Security has over 60,000 employees (who make a middle class wage), the administrative costs to run the program are less than 1 percent. There is no private investment firm that can even come close to this. Some private hedge funds charge 20 percent up front. This is about the only industry where a single person can command a salary of over a billion dollars a year and only pay taxes in the 15 percent bracket.
Social Security is the best-run investment company in the United States, hands down. Anyone who lives long enough will get back all the money they ever contributed through FDIC plus thousands more. When one looks at the track record of private investment companies over the past 10 years, the idea of privatizing Social Security is the worst idea ever imagined. With almost $1 trillion going into Social Security every year, the fees and commissions charged by private companies alone would amount to the largest wealth transfer from the middle class to the richest Americans in the history of the U.S.
Oh, by the way, when the Social Security money is all tucked away in private accounts, who do you think will pick up the tab for Medicare, Social Security disability and all the folks who won't have enough money for retirement when the market goes down the next time?
Donald A. Johnson, Detroit Lakes