Italians slapped down by privatizing Social Security
By John Amato Friday Jan 09, 2009 4:30pmRemember when Bush tried to privatize Social Security? Let's ask the Italians how that worked out for them.
Italy did for retirement financing what President George W. Bush couldn’t do in the U.S.: It privatized part of its social security system. The timing couldn’t have been worse.
The global market meltdown has created losses for those who agreed to shift their contributions from a government severance payment plan to private funds meant to yield higher returns. Anger is rising both at the state, which promoted the change, and money managers such as UniCredit SpA and Arca Previdenza, which stood to profit.
Prime Minister Silvio Berlusconi’s administration is now considering ways to compensate as many as 1.2 million people who made the switch, giving up a fixed return for private plans linked to financial markets. It’s also letting people delay redemptions on retirement funds to avoid losses after Italy’s benchmark stock index fell 50 percent in 2008, destroying 300 billion euros ($423 billion) in wealth...read on
(h/t Paul Krugman)
Login or Register to post comments.
if that had happened here.
There would be posters here on C&L saying that those who had opted to privatize should just shut up about their losses.
What would it teach if we bailed them out? Yeah, I can just hear it now.
Oh, and frist.
[emphasis added]
If forced into privatizing I'd say, yeah, they deserve a hand-up from someone. But when someone opts to ignore risk for
dollarlira signs, why should wiser, safer investors foot the bill? I stand to make some big money on Derby Day, but if I blow my paycheck at the track on fifth place finishers should I be able to dig in your purse to pay my rent in full?BTW- nice fristies! :D Glad to see someone remembers...
I'm kinda wondering how it will all play out. At least we will have an example to point to when anyone brings up privatizing Soc. Sec. here.
I always loved that Frist thing and hadn't seen it for awhile.
Definitely!
Now if we could turn back the clock and get people to pay attention to Greenspan's "Irrational Exuberance" speech (he was talking about the then-recent real estate bubble-burst in 1990's Japan), maybe we could get Americans (circa '01-'02) to quit taking risks on those over-valued houses.
is a straight-ahead corporatist who has only disdain for the Italian citizenry. He controls the country's media and sees himself in that disconcerting Mussolinian light of the "electric", nationalistic Hero. The scamming of some portion of the Italian citizenry to buy into a market-based social net for the working class and subject that social program to the whims of the market make perfect sense. The only problem with the simian warmonger's attempt is that he was too inarticulate and muddled in his best Harvard MBA logic to smoke it by a surprisingly resistant populace.
Time for Berlusconi to get the Il duce treatment.
The Bush Crime Family want to destroy this Country. Render its Constitution useless. And loot the Treasury for their business friends. They are succeeding. If we didn't oppose the privacy of Social Security effectively, Thomas Jefferson would have been proven right...
“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”
— Thomas Jefferson
by the mainstream media, once again. Just as the march to war on Iraq, the mainstream media has allowed the meme of Soc. Sec. in Crises. It is not and with a bit of tweaking it can stay safe for decades to come.
Completely aided and abetted and this should never be forgotten. Hopefully blogs like C&L can make up for the dismal performance of the corporate owned media. We still have a lot of work to do.
Haven't heard it myself, lately, but that talking point is as stale as the one about "the fairness doctrine".
I expect Senator Al Franken to take the lead in smacking down the SS "crisis"- once he's seated. Hell, even if he's never seated the guy could drone on about Social Security until my kid is eligible.
Not that that's a bad thing. It's just Al's thing.
If I have to read that BS Jefferson quote one more time...
Please don't buy into made up quotes that libertarians used to justify their cuckoo policies.
I can just hear him saying Berlusconi's name in that hokey Texas accent. Oh Nooooooooo!! Save me! Save me!!
Social Security needs to raise the cap and raise the benefits to a livable income.
Social Security should be paid into by ALL forms of income, not just wages.imho.
your US government backed Social Security is going to go belly up.
SS is a pay as you go system. Your FICA deductions today fund SS payments for recipients, TODAY, not for you, not tomorrow but today.
Up to this point the total receipts have exceeded payments by $2.2 trillion. This goes into the Social Security Trust Fund. The money is held in special non marketable Government Bonds which have helped finance our continuing deficits.
The Treasury guarantees the principle and interest on the bonds but not the implicit benefits due from them.
All told the current SS liability is something like $53 trillion.
$2.2 trillion versus $53 trillion. There is the stark truth of the matter.
Obama has already said he plans on addressing this.
The amounts as predicated today, cannot be paid.
We cannot repay our National Debt of over $10 trillion, we cannot pay our SS debt.
We will default on both of them. How it plays out is anyones guess.
It will not be pretty.
restricted to just the US. Seems all nations were doing the let's spend this cashola now, and worry about it later with pensions.
Society is having less children. Less children, less people paying in.
They should remove the cap.
Obviously the SS liability is much, much higher than the receipts. What is misleading is that it is inferred that the account liability and the account balance should be equal. SS works on the idea that current funding pays for people who have retired and are not paying in. As long as the system is solvent there is no problem. If the system starts approaching insolvency (and I believe the writing is on the walls), that's when something needs to be done. It like saying that because we have a huge national debt, the US is bankrupt. It's not bankrupt until we can't service the debt. Debt does have it's uses, it's not inherently bad, it just needs to be managed properly, ask any businessperson.
Our politicians, all of them, won't fix it because the immediate choice is too politically painful and it's so much easier to push the problem off on the next generation. So the message, in my opinion, is that everyone should plan their future as if the government is going to go broke. This way if you retire and SS is there for you, you'll be even happier. Those who bury their heads in the sand will get left behind (except those who are too big to fail, ha!).
of course the account balance and the liability do not need to be equal.
But once payments exceed receipts, then the down-draft begins.
It is not that far away.
My key phrase was:
The variables are:
The retiree to worker ratio, which is in a steady upward trend.
The National debt, which is in a steady and accelerating upward trend. Alarmingly so.
If we have a run on the dollar, which given our profligate ways is a virtual certainty, in my mind, the interest on the debt is going to balloon.
Those all going to stress the system.
Throw in an steep economic decline and there is more stress.
What they will have to do is raise the FICA income cap and lower the income benefit limit threshold.
If we have runaway inflation then I don't know what.
As for planning for retirement with a Government gone broke. I wish I had made so much money.
I have a small pension, if it still exists.
I have some assets, in todays market they appear to worth maybe half of what I previously thought they were.
There are lots like me, or even worse.
The Fat Cats are being bailed out in toto.
...but if the US government actually goes "broke" as you put it (as in there's a total economic collapse, dollar goes belly-up, etc.), how would one plan for a future??!
I had been diligent in planning for my future, which arrived about seven years earlier than I expected when my job was eliminated. I'm not quite old enough for SS, my savings are about gone, the total in my IRA is unrecognizable since the crooks in DC have worked their magic, and the value of my house has dropped about 15% or more.
Like you, my future arrived earlier than I quite expected.
I am six months away from taking my pension early, and two years away from SS, early.
My house outside of Detroit has dropped 40%. The Metro Detroit market was not overly inflated, the economy is just so bad that property values have fallen.
My savings are also shot.
---
Governments do default on their debt, Argentina did it. The US is the largest economy in the world by far and we are going in the wrong direction rapidly and accelerating. When we default the world financial markets are going into another tail spin.
The run on the dollar will probably happen first. This was beginning to happen before the 'financial crisis' which some sources have begun to wonder out loud if it wasn't manufactured, certainly it was manipulated.
As the dollar drops and people, countries start pegging their products to other currencies, we will then as a country pay a lot more in interest to borrow money. We are constantly borrowing money to roll over our debt.
The dollar will drop against world currencies, probably by at least a half. It will not be uniform, those that drop with us will also be the basket cases, like Great Britain.
That will drive up the price of everything we import, which is a lot.
Oil, which we import, will go up, a lot, probably more than even recent highs.
We have a petroleum based economy, fertilizer, plastics on and on, all petroleum. Transport of food. Everything goes up. We started to see that last year.
All of the money that is being printed to bail out the Fat Cats will come back to haunt us in further devaluation.
This is all the bad news BEFORE we default. At that point the World Financial system melts down again.
We, the country, maybe not you and I, will still have money, it just won't buy much.
Kevin Phillips who knows exponentially more than I do has written a highly regarded if entirely ominous sounding book 'Bad Money'.
Here he is with Bill Moyers (this one has bad sync, there are probably other copies out there):
Part 1
Part 2
Part 3
Here he is at Huffington.
He also had an interview with Amy Goodman in May which you could find in their archives.
How does one plan for a turbulent future, if you are a Fat Cat you take you all of your assets out of dollars and put them somewhere else.
China or India.
Then after the US crashes, you come back and buy it all up at fire sale prices.
That is the way Fat Cats think. Capital, as the capitalists say, knows no border.
You just don't want to be caught with the wrong currency.
That isn't an option here. For me it will ride the financial waves.
And so I realized after I have posted this that you were actually replying to Usimian, you and I sound like captives of the same abode of diminished circumstances.
Usimian as a self described employer (if I read that correctly) would be an able fiscal planner for those already capable of escaping the foibles of a government gone bust, I wonder how his employees would view that.
There are multiple things that can be done to save the social security system, or any other social program for that matter. One non-radical sollution would be to raise the social security tax ceiling, which is ridiculously low and highly regressive. Another option would be to tax the overbloated and parasitic financial markets. The financial markets have exploded in size in recent decades, many times bigger than what they used to be. The vast majority of this "wealth" was literally created out of thin air, by creating debt for others. Nothing was added by these parasites to the real world. You could tax a fraction of this and cover the money needed. Financial capitalism has destroyed economies, undermined democracy and done nothing but leach off of productive institutions, countries and people. The wealth they've created should be confiscated. I'm not saying that this, amongst other options, is likely, but it is possible and just. It's amazing that we would sit here and debate allowing the poor elderly to exist in dire poverty when the resources are there to pay for it. It would just require possibly radical measures.
Are people anyway given REAL options by those in government and on Wall Street? Of course not. What politician is asking people, do you want healthcare or more weapons that we don't need & and to continue the funding of anti-democratic groups in developing countries (like we do through the NED in places like Venezuela, Bolivia and now El Salvador)? Would you like pensions covered or to continue to subsidize big business (if you want to know the extent read Dena Baker's "The Conservative Nanny State", free online)? Should we allow financial capitalism to run our lives, or tax ficticious wealth to pay for services backed by the vast majority of the country? None of this is asked because the crook politicans and the parasitic capitalists are making hand over fist and have little incentive to fundamentally change the system. People might sit on their ass now, and do nothing as theft happens in front of their eyes. Watch how people will react if SS is privatized (effectively eliminated for a large portion of the public), and most social programs that don't enrich elites are eliminated. Argentina blew up in the early part of this decade when something like that happened. Attempting to eliminate SS when there are options, albiet relatively radical options, available to save the system will not happen. People are already angry, that would push many over the edge. SS was something the working class fought over to get, it wasn't given to them, they aren't going to sit there and do nothing to protect capitalist fat cats.
If you want some clues as to how people respond to their social programs being eliminated, lets look to Latin America, which has attempted (many times forced to accept) "free market" policies more than any other region. What are their attitudes towards these changes (outside of who they've voted into office in the last decade or so)?
http://www.alertnet.org/thenews/newsdesk/N144...
"According to the annual Latinobarometro survey, more than 80 percent of those living in continental Latin America and the Dominican Republic -- a region of 400 million people -- believe the government should control and oversee public services such as pensions, health and education, the annual survey showed."
"...In Argentina, Chile and Uruguay, some 90 percent believe that pensions should be in the hands of the state. All currently have private pension systems. Seventy-eight percent of respondents in Chile also believe the telecoms system, privatized 20 years ago, should be in state hands."
Latin America increasingly has functioning democracies.
Venezuela, Bolivia and Argentina. Chile again after so long.
Uruguay, Brazil have made progress. Peru, Ecuador even Paraguay has progress. Progress in Colombia is more difficult to point to.
There have been instances in past of the expression of wide democratic support for left heading governments, but we were right there to subvert them. Guatemala, Chile et al.
I was in Chile in '71 for sometime. I was there because I wanted to see first hand the politics of social justice in action. Later, when I came back, I had a case shipped separately which took a month to arrive. I went to the customs in Detroit, they inspected it, the officer said 'Chile, are they as communist as is said'. My reply was, 'they are Social Democrats'. Which is of course not to say there were not communists, but they were not satisfied with Allende. Very few here know what a Social Democrat is, 50 years of war propaganda. It makes for black and white anti political science and a terrified easily malleable electorate.
Manufacturing consent for the military industrial complex.
It was common knowledge in Chile then that the CIA was passing money around to destabilize Allende. It has never been common knowledge here.
We are much weakened now, and in saying that as a matter of not subverting the democracies of our neighbors, I would say that is for the good.
But it is not good for our own citizens. We DO NOT have a functioning democracy.
We have a crashing economy and living standards which are in an accelerating rate of decline.
And an enormous spread between the top and the bottom incomes. The minimum wage even after increase in '06 is still less than 60% of the poverty level.
How was it that the Congress without so much as one single public hearing pushed through $700 billion for the Fat Cat Financiers in two weeks time?
$700 billion would fund a single payer health care system twice over.
Feinstein stood up and said there had been ninety thousand calls to her office, eighty five thousand were against. She then proceeded to say she was voting yes.
I agree with you that people are going to be very unhappy with their social safety net going in the tank.
The politicians know it which is a reason they have not addressed the issue.
This is a government for and by the corporations. Hence my doom and gloom.
I'm just saying that there are many options available, and people in power will only repsond if they feel that if they don't at leat partially comply and institute fundamental change they'll lose far more than the next election. For themself and who owns them.
Allende was popular enough in Chile to gain seats after he took power in the '73 election, and that was with an economic crisis largely caused by the same capitalist fat cats I'm talking about. I'm sure you know of McNamara at the World Bank, and what he did to Chile. He, along with the other financial institutions, the banks and the front groups created by corporate interests here (admitted by the US government) largely caused Chile's economic woes.
You're not illogical for being pessimistic. I am too. I do think it is possible, if the left gets its act together, to use the current economic situation to crystalize some of the problems facing us, as well as the causes of those problems. People like Robin Hahnel, Herman Daly and Chomsky have some good ideas, maybe we can propose some alternatives. Maybe not, we'll see.
was ELECTED President September 4, 1970, he died in a US sponsored coup on September 11, 1973.
The first 9 11.
The Fat Cats take the money out of our pockets, out of the third worlds pockets, everyone else's pockets in the legion of ways they have to succeed at doing so and put it in their own pockets.
It is the first and last law of the jungle, it is by hook or crook. They do it because they can and we fail to stop them.
As for our entrenched politicians losing in the next election, I am all for it.
But, who are they going to lose to? The Republicrats are in control.
The unwashed masses are busy watching their teevees.
They are unaware that it is mind control.
"Prime Minister Silvio Berlusconi’s administration is now considering ways to compensate as many as 1.2 million people who made the switch,"
Why? They bought into it and I'm sure they wouldn't want a government handout.
The ones who bought into it are the anti-gov'mint types.
Yet, when push comes to shove, they are the ones who yell the loudest when they don't get theirs.
There are no anti-gov't, free market types anymore. They only spout that shite when times are good and they are making money. Then when things go south they are the first whining bastards to run to mommy, sorry the gov't, for a hand-out. F&^%!n hypocrites.
they came to this country as refugees, and got plenty of help.
Ain't that a bitch.
If social security becomes privatized, it's best to have a personal traditional or roth IRA so that you will have money when you're much older. It's probably safer than a 401K.
As for W and his privatizing mafiosos, they're FDR's - and our - worst nightmare if social security really does go bust sometime by 2041.
The U.K. and Chile did something similar with their pension systems, and they're more than likely paying the price.
I'm still surprised that the Dems didn't cave in on Bush's Social Security "reform".
Then that's a relief!
Just think what a world of hurt Americans would be in if the had gotten away with privatizing social security?
The stock market is a ponzi scheme. It produces nothing, it does nothing but make a few at the top wealthy.
Everyone else loses in the end.
As dan acroid said never let a banker go!
.....The dollar will drop against world currencies, probably by at least a half. It will not be uniform, those that drop with us will also be the basket cases, like Great Britain......
Ah, were you not paying attention in Spring 2008 when the Euro was at 1.60 against the Dollar? That was before we felt the economic crisis in Italy. Now, just like in the USA, shops are closing up and the Euro is down to 1.34 today against the Dollar and at parity with the British pound. And the Dollar is expected to gain even more against the Euro in 2009. It is down against the Yen but I recall Joe Biden saying that he doesn't want to trade at all with China. Good idea since all we get from the Chinese is junk. Enough with your doom and gloom. Things have already improved substantially and the USA WILL have a big recovery.
Chile privatized their social security system and it is a disaster, to the point that the CONSERVATIVE, right wing, candidate for president in the last presidential election said a radical change to the system was in order. The government, when the privatization went through years ago, said that if the market didn't perform well that it would step in and provide funding to make up the difference. The market did so bad that the government is spending more now than before the privatization, with massive amounts lost to waste (fees charged by corporations, many times to lose the people's money for them, not present in non-privatized systems). A recent survey by Latinobarrometro (probably spelled wrong) showed that about 90% of Chilean's want the system in the government's hands. The president of Chile, from the Socialist Party, just extended state covered pensions. Argentina privatized their system, with the same horrible results and the same support for radical change to a system close to ours.
In the UK the system did just as bad. A member of the government who pushed for the privatization noticed that elederly poverty, which wasn't an issue before the privatization, is now an issue again.
Again, there are plenty examples of the failure of this idea, and it shows how sociopathic the right wing is in that they know this and don't care. Like in Chile, there are fees to be made, and waste to create for parasites to eat up.
they deserve what they vote for
It is also quite succesful. Look at Galveston Texas. Privatizing does not mean you have to invest in the stock market. The governement could allow you to only put money into a guaranteed fixed annuity and you would still be better off than the ponzi scheme that is in place today.
Social Security is a pay as you go system. You pay in and it goes out immediatley to retirees. With privatization you keep the money you set aside in your own personal retirement account. In Galveston there monthly payout is around 3 times the monthly amount that social security would provide.
Login or Register to post comments.