August 14, 2010

What a dope. "I've since been studying, and Chile has done this..." During the time of Reagan, Chile's Social Security system was considered to be the wingnut Holy Grail. I guess Sharon didn't get too far in her "studying" and whatnot, or she'd know why the saner people just don't talk about Chile in much detail (of course, there's always the optimists at the Cato Institute):

Republican U.S. Senate hopeful Sharron Angle says the nation's Social Security system needs to be privatized, and she says it was done before in Chile.CBS affiliate 8 News Now reports on what the Tea Party-backed hopeful had to say on the matter in an interview on Thursday:

...Angle's new ads say she's out to save Social Security by protecting it from government raids.
But in the primary, she said that Medicare and Social Security needed to be phased out in favor of something privatized, saying, that it can't be fixed. 8 News NOW asked how is that not a flip flop.

"It is when we have a $2.5 trillion raid and pillaging going on and an empty trust fund and now we are upside down. As of last Friday, they said, (there was a) $41 billion shortfall in Social Security. $41 billion less going in than coming out. It's broken," she said.

Angle then referred to 1980s Chile -- then under a military dictatorship -- to explain her previous statements that the United States should phase out its current system.

"When I said privatize, that's what I meant," explained the Senate contender. "That I thought we would just have to go to the private sector for a template on how this is supposed to be done. However, I've since been studying and Chile has done this."

However, the pension system established in 1981 by right-wing Chilean dictator Augusto Pinochet is no longer a fully private system. Chile's system was revamped in 2008 to expand public pensions for groups left out of its system, including low-income seniors.

There are lots of reasons why, in the real world, a privatized system doesn't work.

For the first ten years, while Chile had high inflation, their investment funds did well, since about half was invested in government bonds that were indexed to inflation. But once the economy cooled down, returns fell and they now pay little in return.

Investors also pay very high fees, which hit the low wage earners harder. (Oh, and by the way? The funds are widely thought to be corrupt cartels, protected by the government. Of course, that would never happen here!) And low wage earners were notorious under-reporters of income. Another problem: the system isn't set up for short-term contract work, which is now a common form of employment.

The funds don't pay out much, especially for low wage earners. (Unlike our Social Security system.) Notice the stories the wingnuts quote all point to "average" return -- but that's artificially high due to the period of high inflation.

And it didn't pay, anyway. Because of transition costs and other factors, the Chilean privatized system costs three times as much to run.

But the regime knew what they were doing: They excluded the military from the private plans, members of which continue to receive pensions under the old, more generous system.

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