Hmmm, because after a full four years of Coolidge prosperity securities values dropped 84%, and, one assumes, we're on our way back to those golden times?

Just what I was thinking, OJ. Some GOP plant must be composing phony Krugman columns and handing them to the NYT -- how else to explain such an out-of-touch opening sentence?

Oh, wait -- Krugman was a student of Paul Samuelson. I guess no conspiracy theory is necessary after all.

Harry,

The Dow at its lowest point in the early 1930s was about 40. At the start of 1960 it was at 679.06. At the start of 1980 it was at about 800. Today it's at 10705.64. That's not too shabby a record, especially when compared to the interest rate on T-bills.

Harry

There is a choice here. A person can duplicate the consistently lower returns that are exactly the same as the apparent "returns" from Social Security. So exactly what is your problem.

You feign being upset when the collective interferes with choices of individuals in the area of morality or religion, but then you are upset that the government should allow these same individuals choices in providing for their old age.

(it's a limited choice, since presumably individuals could "choose" to not save anything and that is not what is proposed, but that is not your criticism anyway)

Harry:

Who assumes? (Other than New Dealers?)

I think Harry is just being combative to generate discussion.

The only argument the anti-Social Security change group can come up with is that you can lose money in the stock market. True, but not for extended periods of time and there is nothing that would prevent people from investing in "safer" instruments like bonds or money market instruments.

And to Matt and OJ's point - if the public perceives that Bush wants to change SS so it is like a 401K plan (which many Americans are comfortable with) it will make changing the system that much easier.

AWW:

No, he really thinks capitalism failed in '29 and FDR's socialism could have saved us.

Harry is a soft Marxist, an American infected by the lure of 19th century "progressivism". The statist approach toevery issue will continue to operate under the law of unintended consequences causing more problems than it solves. There are solutions to every problem when the preservation of ordered liberty and the acknowledgement of the law of supply and demand form the basis for government policy. Progressives have been attempting to avoid those simple realities under the guise of their "better ways" since the revolution in France. It has been and will continue to an enormously expensive failure in social engineering. Progressives,like Harry, have to admit eventually that the premise is fatally flawed or the 19th century to the present will be looked upon as the "age of delusion" postscript to the "age of reason".

Yes, I've never heard him diverge from the orthodoxy of a 1930's-40's era New Dealer on any issue, from religion/secularism to economics to being pro-Stalin. It makes him kind of neat, like a living piece of history. He shows you how they went so wrong.

If you actually believe that you're going to end up better with your 401(k) than you would have with a pension... God have mercy on you...

Android:

What pension?

Android-

A balanced investment portfolio with a bias toward total return with qualified (untaxed) dividends and coupon payments will get you where you need to go. Defined benefit plans have been regulated to death. Investment grade bonds and solid equity investments will provide for you. Conservative mangement and reasonable costs are the way to go. It works in all market conditions.
Goverment sponsored social insurance and guarantees on private pensions are a fraud.

There has never been a 20 year period of time when the stock market has lost money. I still have over 40 years until I even think about retiring. I'm not seeing the downside of Bush's plan.

The problem with all of these points you're all making is that, while stock investments do grow over time, what happens if you turn 65 and want to retire during a down cycle? Either you take little gain (or even a loss) on your investments, or you have to wait the market out, which could be years.

The Dow is a meaningless index. The S&P 500 is the true measure of the market.

The biggest problems with privitization is 1) Very few people actually know anything about personal finance. The potential for these people to lose money is big, and when they do we are going to have a big political crisis, and 2) Social Security was implemented in the first place because of a stock market collapse. How exactly does a stock market SS protect against a stock market collapse?

To have effective reform, there needs to be 1) massive education on the basics of personal finance, 2) divide Social Security into its retirement and security functions, 3) keep the security function near to its current form (while "locking down" the fund and not making it part of the general revenue) while transitioning its retirement portion for privitizing, and 4) have sensible restrictions on the new privatized accounts, such as transitioning funds from stocks into safe bonds as one nears retirement. If people are foolish and want to keep their 401(k) in stocks as they enter retirement for mad money, OK, but don't let it happen to the national pension.

The sad fact is that the same people complaining about social security's medicore returns are going to be the first people complaining about a private system if a bear market wipes out their equity. The system should be designed to account for this.

Chris:

The Dow means what it means. Certainly, the S&P 500 is a broader index, but why stop there?

The market crash had nothing to do with establishing Social Security, except very indirectly (e.g., leading to the election of a Democrat and allowing some screwy theories of employment to spring up). Before SS, most people worked till they died, or died shortly after they could no longer work. SS allowed for a couple of years between work and death. It is, after all, longevity that is killing the system.

No one is suggesting taking all FICA taxes and opening up individual accounts at Schwab. Workers will have, at best, a small number of funds to choose from in which to invest a small portion of the money that would otherwise go to FICA. As long as we mandate a good diversification in all the funds, people ought to be protected.

Again, no one is suggesting doing away with the "security" function of SS. A minimum income benefit for the truly needy is part of the plan. Frankly, as someone has noted, simply means-testing SS benefits would be de facto privitization.

Chris and GInquisitor have 2 of the 3 main points down.

If you misinvest your retirement and end up broke, that's the creative destruction of capitalism, and I can live comfortably with that.

If I do it, it's a tragedy.

If 10 million people do it, it's a political crisis.

The third point, of course, is that you are going to give your retirement money to crooks, and bet that they will do so well that after they steal as much as they decently can, there will be some left for you.

I seem to recall quite a few howls from 401k owners when Enron went down.

I'll shut up now, if you guys will promise me, pretty please with sugar on it, that if you turn out to be wrong, you won't complain.

Enron was crooked and their getting what they got coming. Nevertheless, anyone, and particularly Enron employees, who put all their retirement savings into Enron stock were idiots. There is a social consensus these days that the government will bail us out of certain idiocies, but that's no reason to be proud of it.

An experienced financial consultant once opined on the simple rule which says a company's financials should be easy to comprehend. Enron's never made any sense. Those who stuck with that stock were motivated by nothing but greed and stupidity. Why someone would expose themselves to an Enron as opposed to solid, dividend paying concerns is beyond me. The bullish analysts and mutual fund managers who owned Enron were just dumb. Can't protect people from making stupid decisions.

Harry no problemo

psst. spea is the stock symbol. if you had bought $10,000 of the stock on Wednesday morning this week at .10 cents per share you would have $ over $1 millions dollars at close today. See how easy it is. Don't listen to these old fogies about diversifying and such.

By the way that Company (sport's entertainment enterprises) was a defunct golf course operation. They bought Lisa Marie Presley's right's to most of Elvis's estate for 100 million.

Harry:

If 10 million do it we bail them out.

With what?

We've plenty of money.

All the talk is about the dangers of social security reform. What are the alternatives? A confiscatory payroll tax increase or reducing the benefits already paid for. Sensible reform or privatization, whether partial or phased in over time with the longer term goal of removing the feds from the insuarnce business and eliminating the inefficient taxes, is, when one gets down to it, the only solution. Demographics should take care of the problem over time.

All the talk is about the dangers of social security reform. What are the alternatives? A confiscatory payroll tax increase or reducing the benefits already paid for. Sensible reform or privatization, whether partial or phased in over time with the longer term goal of removing the feds from the insuarnce business and eliminating the inefficient taxes, is, when one gets down to it, the only solution. Demographics should take care of the problem over time.

We won't if we manage to massacre the security markets again.

We never have--how would we now?

Coolidge did. Solvent businesses failed because there was no liquidity.

I'm figuring that Bush is on a roll and we're gonna see that again.

At least if he repeals the New Deal lender of last resort legislation.

He has not, so far as I know, said he wants to do that, but, as you like to remind me, ideas have consequences, and Coolidgeism requires it.

Harry:

That was the Fed. And the market just dipped for a few years.