My chiropractor is a nice guy - a Republican, but open-minded. But because he's so busy, he doesn't know that much about what's going on (like the majority of Americans). I think he's fairly representative of the interested but under-informed voter.
Anyway, he asked me if I'd seen the Republican presidential debate; he wanted to know what I thought. "If I were a Republican? The only one I'd consider voting for is Huntsman," I said. "But of course you have to be a nut to win the Republican primaries."
"I thought Herman Cain seemed pretty smart. He was talking about making Social Security like the Chilean model," he said. "What do you know about that?"
"Oh, jeebus," I said. "The Chilean model. The same one that right-wingers have been trying to shove down our throats for 30 years." (This was all mumbled, since I was face down on his table at the time.)
"First of all, it was a mess. It was imposed by Pinochet under his military dictatorship, and the generals revolted. They insisted they get to keep the old plan, and they did. Second, a lot of people didn't get anywhere near the money they actually needed to retire, but the administrators made a fortune."
I didn't even get into the meat of it. Chileans were charged exorbitant fees (15 to 20 percent for all costs) in order to choose which pension fund association in which to invest. Depending on which risk level they choose, they're equivalent to our mutual funds, IRAs or CDs; by law, they have to have a minimum return. From Contingencies, the magazine of the American Academy of Actuaries, March/April 1998:
There are currently 13 privately run AFP's authorized to manage a private pension fund covering a group of workers. The original 12 in 1981 grew to 22 in 1993, but competition caused this to fall to 13. Investments now totaling around $30 billion are regulated by law, and about 28 percent is currently invested in equities, 42 percent in government bonds, 30 percent in Chilean financial institutions and companies, and a small amount in foreign securities.
So it's not like you get to watch CNBC all day and make a killing in the stock market -- you're limited to the official funds, and they all have roughly the same investments. And it's a much better deal for someone with a big paycheck. (IIRC, a big shortfall was caused by the fact that women, especially poor women, dropped out of the job market to raise children or take care of a sick relative. So when it came time to retire, they had very little money from which to draw. They since added a minimum benefit -- gee, sounds almost like their original Social Security program!)
The article goes on to warn about the private plans being pushed by Republicans at the time: