Social Security privatization approach questioned

President Bush’s recent proposal to privatize Social Security has caused an uproar around the nation. With the media in a frenzy and clashing opinions in the air, concerned citizens trying to find impartial information on the issue are having difficulties. “Anyone who’s trying to research what’s going on in Social Security is not getting all the facts,” says financial planning expert, Jim Trippon, CPA, “It’s important to have unbiased and sound information, but unfortunately most of the stuff out there is slanted.” (Related link: Social Security privatization news center)

Trippon, a former senior Price Waterhouse CPA, who recently completed an extensive study of American retirees, found that 21 percent of those who have retired in the past five years have been forced to return to the workforce due to insufficient finances. Like other analysts, he too believes that the current Social Security system is not sufficient enough to support future retiring Americans. According to experts, there are three choices to fix the problem:

1. Cut benefits
2. Increase taxes
3. Improve the rate of return

“Our system needs to be changed in order to survive,” says Trippon, “I don’t think it’s a good idea to raise taxes on younger Americans and removing benefits isn’t the solution either. We’re left with improving the rate of return.” Trippon believes the answer is this: citizens should be allowed to privatize their retirement funds using only Treasury Inflation-Protected Securities (TIPS). With TIPS, citizens can invest their money in five, 10 or 20 year terms. Owners receive interest payments every six months and the bonds are protected from inflation, meaning the worth of their retirement investment ultimately cannot be depleted in value. This is, in my opinion, the safest investment anyone can have in their future,” says Trippon, “It has nothing to do with South American-style privatization and it will put an end to this media freak show Bush has caused.”

But others are opposed to the very idea of privatization of social security. Most Democrats and groups of senior citizens, including AARP, are horrified with the prospect of social security funds invested in the volatile stock market. "Once again, Republicans and the Bush Administration have demonstrated that they will stop at nothing to push their partisan political agenda. The Administration has distributed fake video news reports and paid a conservative journalist to support its education agenda. Now nonpartisan employees of the Social Security Administration are being forced to engage in partisan scare tactics by spreading false information about the future of Social Security to create a crisis and promote the President's risky plan for private accounts," says House Democratic Leader Nancy Pelosi.

Indeed, as charged by Pelosi, the website of Social Security Administration does indicate the same line of argument that President Bush and others in the Administration have been presenting for weeks. It seems that the SSA website has been redesigned by the Cato Institute, a libertarian group that launched its Project on Social Security Choice in August 1995. "The American people deserve an open and honest debate over the future of Social Security. All they are getting from the Bush Administration is half-truths and misinformation. There should be a full investigation into the charges made by employees of the Social Security Administration and any illegal political activities being conducted by the Social Security Administration should immediately cease," Pelosi demanded.

Economist and author Allen W. Smith, Ph.D. agrees with Pelosi and Trippon. He says that the worst hit will be the baby boomers, "By the time they retire, the baby boomers will have paid for their own retirement in addition to having paid for the retirement of the previous generation. The trust fund should contain a large enough reserve to pay full benefits until 2042 when the youngest of the baby boomers will be 78 years old."

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