Privatizing Social Security - Insanity or Genius?
The View from the Middle
In case there is any confusion about how I feel about our federal government, let me make my position perfectly clear. I believe it is a “waste, fraud and abuse” machine. During her presidential campaign, Carly Fiorina suggested that our government is too big, too costly, too complicated, too corrupt and too inept and that it is crushing the dreams and aspirations of our people. I’m a Carly Fiorina fan.
In the governmental world of $100 hammers, shrimps on treadmills and bridges to nowhere, what makes you think that it would be any more effective at managing your retirement funds? Social Security may have begun with good intentions, but as with anything connected to big government it has been perverted and mismanaged through the years. In the beginning, for example, SS funds were to be put in a “lockbox” and to be protected from the greedy hands of politicians in Washington. But in true government fashion, these funds have been spent leaving nothing but US treasury IOU’s behind.
Today, our government is spending those funds faster than they are coming in and has to admit that the SS trust fund will be insolvent by 2035. At that point, I predict that our federal government will simply raise taxes to cover the difference, not because it is right, but simply because they can.
If we really want the concept of “Social Security” to be recognized, why don’t we take these funds out of the greedy, unscrupulous hands of our government officials and put them in the hands of financially astute managers who can invest that money for the participants? Let me help you with that decision by making a comparison that our government is counting on no one making.
Let’s look at a Jane or John Doe who began working in 1970 at the age of 21, and retired at 66 in 2015 making America's median income every year. The Social Security trust fund will guarantee (not really – remember that this fund will be insolvent in 2035) a monthly income of $1,874. This is certainly not enough to live on unless you plan to live in a tent and eat PB&J sandwiches for the rest of you life. It is intended, however to supplement any personal savings or retirement programs you may have or be eligible for.
There are a number of flaws in this system. First of all, if Jane or John dies a month after their 66th birthday, he or she will have contributed to the trust fund for 44 years and received a whopping $1,874 in return. That kind of sucks! Even if they lived to age 79 (current life expectancy in US) SS would deliver only $292,279 in their lifetime.
Now, if they had made the same payments/investments (personal plus matching employer contributions) into an S&P 500 index fund, Jane or John would have retired with $935,978 given the 8.1% average return of the S&P 500 over their working lives. The benefits to this approach are abundant.
First, if you died the next month, your beneficiaries would inherit almost a million dollars vs. a big goose egg from the current SS plan. Next, that money could generate a monthly income for you. Let’s say that your investments continue to produce the same 8.1% return that it did for Jane and John’s lifetime, this would produce a monthly income of $6,318 or more than three times your Social Security payment PLUS you still have your $935,978!!! These are not projections. This is reality, and given this reality, who would choose less than a third of the monthly income and no nest egg vs. the simple privatized plan described above.
Let’s be honest, the government has totally perverted the idea of Social Security. First, by spending your hard earned money to buy votes instead of putting into the “lockbox” they promised to get the SS bill passed. Then Washington dramatically underperformed the private market and in effect stole hundreds of thousands of dollars from every American that has retired under their plan. If Washington were a person, it would be in jail fighting with Bernie Madoff for the title of “scammer of the century”.
If politicians really cared about the American people they would develop a program that could deliver the results I described above. They could provide the disciplined investing by taking the money out of all our paychecks every month as they already do (this may be the only thing the government is good at). They could also offer a few investment plans (high, low and medium risk) that we the citizens could choose from. Believe me, the financial industry would fiercely compete for the opportunity to manage these funds. Even a tiny fee of .25% (that’s a quarter of 1%) would yield them billions in profits every year.
I’m with Carly. Why would we trust a government that has proven itself to be both corrupt and inept (a deadly combination) when we could invest in America and create a retirement income with real buying power? If we can’t even call Washington on this con, there may be no hope for us until they take all of our dollars and they give us back 30 cents worth of services in return while THEY live in mansions, feast on $300 burgers (yes they do exist) and guzzle $1,000 bottles of wine. Have you seen The Hunger Games?
Monday, July 24, 2017
Friday, July 14, 2017
The Healthcare Debate
Here’s to Your Health
The View from the Middle
What if the government decided to make “free cars” to the list of unalienable rights listed in the Declaration of Independence? Of course, the government would have to become the sole provider of these cars and control production because they are so much smarter and more honest than we the citizens. The end result, in my opinion, is that everyone in the country would be driving a used Taurus, which our government would happily pay $100,000 for. Why, you ask, am I such a cynic?
The government loves the one thing that it is supposed to protect us from, and that is a monopoly. In a monopoly, there is no need for innovation. The shoppers have no choice. They have to come to the government for their free car. Why should the government offer choices? The cars are free! Take it or leave it. But why would they cost so much? A monopoly, which this would be, eliminates the incentive to be efficient, because there is no competition. Who needs to keep costs down? There’s only one choice, and we give the cars away for free (except for those pesky taxes they would have to take out of your paychecks every month).
And if you think a single payer health care system (which is what the Dems really want) would be any different, you are just kidding yourself. Costs would skyrocket. Patients wouldn’t care what tests are done. They wouldn’t care what those tests cost. After all, it’s free…isn’t it? And services would get worse. Doctors would be flooded with patient visits, because they’re free, right? Doctors would get paid less because they would have to accept whatever the government offers. This would cause these very smart people to choose other professions and eventually lead to a shortage of doctors.
I don’t know what is eventually going to be in the Republican healthcare bill, but I do have common sense and have talked to several doctors, so I have a strong opinion. First of all, it should allow people to choose what they are insured for or if they should even be insured at all. With Obamacare, for example, whether you are gay or 80 you must buy maternity care insurance. Really? Second, the government requires that you buy health insurance. Remember, in year one of Obamacare they made a big deal that the “fine/penalty/tax” for not buying was only $95 or 1% of your gross income, whichever was greater. Today, that fine can be as high as $5,000 for a person and $12,500 for a family. Who wants to bet that the “fine/penalty/tax” will eventually be higher than the insurance itself?
Next, we need to give our citizens the incentive to shop for services and doctors by giving them control of the money. Health Savings Accounts (HSA’s) are a great way to accomplish this. Medicaid and Medicare could put money into accounts for their participants that can be spent on health care or even other needs if they have a balance at the year’s end. This will cause people to think about how much a procedure costs or how much a doctor charges and to compare prices. This will drive competition up and prices down as consumers take ownership of their healthcare dollars. It would also stimulate the economy as left over dollars are spent in the open market.
Finally, we must provide coverage for what people want, and the reality is that some people only want catastrophic insurance. Let’s admit it that is what insurance is about anyway. People want to be protected from the impact of a cataclysmic disease or accident that could lead to financial ruin. However, we have perverted the concept of healthcare insurance into something that pays every penny of every procedure and every doctor’s visit. That kind of insurance conceives patients who don’t ask what treatments cost or if they are even necessary. It drives up costs, which someone will eventually have to pay for. Remember, there is no such thing as a free lunch and the government has NO money. The taxpayer eventually pays the piper.
When the details come out for this new bill, look for the presence of HSA’s and catastrophic coverage while eliminating the mandates. Tort reform may have to come later because of the limitations of reconciliation process, but ask any doctor about this aspect of health insurance and the tremendous impact it could have on costs. Doctors want to run tests that will actually help the patient, not just to protect themselves from litigation. In the end, common sense is the answer.
The View from the Middle
What if the government decided to make “free cars” to the list of unalienable rights listed in the Declaration of Independence? Of course, the government would have to become the sole provider of these cars and control production because they are so much smarter and more honest than we the citizens. The end result, in my opinion, is that everyone in the country would be driving a used Taurus, which our government would happily pay $100,000 for. Why, you ask, am I such a cynic?
The government loves the one thing that it is supposed to protect us from, and that is a monopoly. In a monopoly, there is no need for innovation. The shoppers have no choice. They have to come to the government for their free car. Why should the government offer choices? The cars are free! Take it or leave it. But why would they cost so much? A monopoly, which this would be, eliminates the incentive to be efficient, because there is no competition. Who needs to keep costs down? There’s only one choice, and we give the cars away for free (except for those pesky taxes they would have to take out of your paychecks every month).
And if you think a single payer health care system (which is what the Dems really want) would be any different, you are just kidding yourself. Costs would skyrocket. Patients wouldn’t care what tests are done. They wouldn’t care what those tests cost. After all, it’s free…isn’t it? And services would get worse. Doctors would be flooded with patient visits, because they’re free, right? Doctors would get paid less because they would have to accept whatever the government offers. This would cause these very smart people to choose other professions and eventually lead to a shortage of doctors.
I don’t know what is eventually going to be in the Republican healthcare bill, but I do have common sense and have talked to several doctors, so I have a strong opinion. First of all, it should allow people to choose what they are insured for or if they should even be insured at all. With Obamacare, for example, whether you are gay or 80 you must buy maternity care insurance. Really? Second, the government requires that you buy health insurance. Remember, in year one of Obamacare they made a big deal that the “fine/penalty/tax” for not buying was only $95 or 1% of your gross income, whichever was greater. Today, that fine can be as high as $5,000 for a person and $12,500 for a family. Who wants to bet that the “fine/penalty/tax” will eventually be higher than the insurance itself?
Next, we need to give our citizens the incentive to shop for services and doctors by giving them control of the money. Health Savings Accounts (HSA’s) are a great way to accomplish this. Medicaid and Medicare could put money into accounts for their participants that can be spent on health care or even other needs if they have a balance at the year’s end. This will cause people to think about how much a procedure costs or how much a doctor charges and to compare prices. This will drive competition up and prices down as consumers take ownership of their healthcare dollars. It would also stimulate the economy as left over dollars are spent in the open market.
Finally, we must provide coverage for what people want, and the reality is that some people only want catastrophic insurance. Let’s admit it that is what insurance is about anyway. People want to be protected from the impact of a cataclysmic disease or accident that could lead to financial ruin. However, we have perverted the concept of healthcare insurance into something that pays every penny of every procedure and every doctor’s visit. That kind of insurance conceives patients who don’t ask what treatments cost or if they are even necessary. It drives up costs, which someone will eventually have to pay for. Remember, there is no such thing as a free lunch and the government has NO money. The taxpayer eventually pays the piper.
When the details come out for this new bill, look for the presence of HSA’s and catastrophic coverage while eliminating the mandates. Tort reform may have to come later because of the limitations of reconciliation process, but ask any doctor about this aspect of health insurance and the tremendous impact it could have on costs. Doctors want to run tests that will actually help the patient, not just to protect themselves from litigation. In the end, common sense is the answer.
Subscribe to:
Posts (Atom)