Fed governor opposes private retirement accounts
A question that is being asked is how a president that was supposedly elected with popular support is so unpopular on the question of privatization of Social Security. As Chris Rock joked on Oscar Night, a president who dragged America into a war with a made-up story about weapons of mass destruction and literally emptied America's wallet again on a made-up story about preventing a severe recession, is having a hard time selling his idea to the same people who voted for him and believed everything he said. In fact, now even his own party members do not support his idea. So only those who are either privatization fanatics or poorly informed are the ones left on his side.
The answer lies in how American people think. We are proud of our, "What is in it for me?" value system. "If the president thinks that Iraq has WMD, we will be safer if Saddam is taken out, and if someone else is going to face the bullets, hey, I support it," said many Americans who still think that Iraq had WMD and 9/11 hijackers were Iraqis. If the same folks were asked if America should go to war and they will need to fight the insurgents in Fallujah, the response will be quite different. (Related article: Social Security crisis as imaginary as the Iraqi WMD)
That line of thinking explains that private retirement accounts excite only a handful of young (the ones that never saw how billions were lost in the 90s alone) Americans who plan to fly on private jets after retirement using their stock market gains, courtesy President Bush who has discovered the greatest secret on the planet so that one can beat the market all the time. (Related article: Bush fails to convince skeptical Americans)
In fact, apart from conservative groups that are driving the push for privatization, not many reasonable people think that it is a good idea. In a recent survey of CFOs by CFO Magazine, while 56% support a reform of social security that includes private investment accounts and a reduction in guaranteed benefits, 49% are concerned that employees don't invest wisely in their existing 401-k plans. This is based on other studies that have shown that vast majority of Americans lose money in their retirement plans. "This raises the question of how well average citizens would be able to manage their own assets in a partly privatized social security system," said Don Durfee, research editor for CFO magazine. (Related article: Americans not yet ready for the stock market)
And like the millionaires who are worried about the dangers of privatization, even CFOs worry that employees in their firms may not be able to retire comfortably. And even worse, half of the CFOs themselves are not confident that they will be able to retire comfortably. Mind you, these folks crunch numbers on a daily basis and know very well how markets work. No wonder they would stick to their guaranteed income. "Private retirement accounts are nice, but Mr. President, keep them to yourself," is the message.
Fed Chairman Alan Greenspan did not offer his full support to President Bush's proposals but the master of words that he is, each side could interpret his remarks anyway they want. But Federal Reserve Board Governor Edward Gramlich does not talk Greenspeak. "I am quite nervous about carve-out individual accounts as proposed by the President," he said today at a panel discussion at the Urban Institute in Washington. In his opinion, carving out private retirement accounts from Social Security is simply a terrible idea. As we have argued all along, in principle private retirement accounts are a wonderful idea and that is exactly the position of every other sensible American. "I think individual accounts are a fine idea. I'd like to do it in my way -- which would be as a complement to Social Security, not to replace Social Security," Gramlich pointed out in his remarks. (Related article: Americans advised to avoid personal retirement accounts to ensure retirement security)
Bill Mann of Motley Fool seems to have put it in the clearest manner possible. First, like most other analysts, he agrees that there is no Social Security crisis. "There is a demographic one, and the problem cannot be solved by simply raising Social Security taxes, or by lifting the cap on salaries subject to Social Security taxes. And it certainly cannot be solved by allowing younger workers to set up personal accounts," he says.
Recommended article: Younger Americans will see no net gain from private retirement accounts
The answer lies in how American people think. We are proud of our, "What is in it for me?" value system. "If the president thinks that Iraq has WMD, we will be safer if Saddam is taken out, and if someone else is going to face the bullets, hey, I support it," said many Americans who still think that Iraq had WMD and 9/11 hijackers were Iraqis. If the same folks were asked if America should go to war and they will need to fight the insurgents in Fallujah, the response will be quite different. (Related article: Social Security crisis as imaginary as the Iraqi WMD)
That line of thinking explains that private retirement accounts excite only a handful of young (the ones that never saw how billions were lost in the 90s alone) Americans who plan to fly on private jets after retirement using their stock market gains, courtesy President Bush who has discovered the greatest secret on the planet so that one can beat the market all the time. (Related article: Bush fails to convince skeptical Americans)
In fact, apart from conservative groups that are driving the push for privatization, not many reasonable people think that it is a good idea. In a recent survey of CFOs by CFO Magazine, while 56% support a reform of social security that includes private investment accounts and a reduction in guaranteed benefits, 49% are concerned that employees don't invest wisely in their existing 401-k plans. This is based on other studies that have shown that vast majority of Americans lose money in their retirement plans. "This raises the question of how well average citizens would be able to manage their own assets in a partly privatized social security system," said Don Durfee, research editor for CFO magazine. (Related article: Americans not yet ready for the stock market)
And like the millionaires who are worried about the dangers of privatization, even CFOs worry that employees in their firms may not be able to retire comfortably. And even worse, half of the CFOs themselves are not confident that they will be able to retire comfortably. Mind you, these folks crunch numbers on a daily basis and know very well how markets work. No wonder they would stick to their guaranteed income. "Private retirement accounts are nice, but Mr. President, keep them to yourself," is the message.
Fed Chairman Alan Greenspan did not offer his full support to President Bush's proposals but the master of words that he is, each side could interpret his remarks anyway they want. But Federal Reserve Board Governor Edward Gramlich does not talk Greenspeak. "I am quite nervous about carve-out individual accounts as proposed by the President," he said today at a panel discussion at the Urban Institute in Washington. In his opinion, carving out private retirement accounts from Social Security is simply a terrible idea. As we have argued all along, in principle private retirement accounts are a wonderful idea and that is exactly the position of every other sensible American. "I think individual accounts are a fine idea. I'd like to do it in my way -- which would be as a complement to Social Security, not to replace Social Security," Gramlich pointed out in his remarks. (Related article: Americans advised to avoid personal retirement accounts to ensure retirement security)
Bill Mann of Motley Fool seems to have put it in the clearest manner possible. First, like most other analysts, he agrees that there is no Social Security crisis. "There is a demographic one, and the problem cannot be solved by simply raising Social Security taxes, or by lifting the cap on salaries subject to Social Security taxes. And it certainly cannot be solved by allowing younger workers to set up personal accounts," he says.
Recommended article: Younger Americans will see no net gain from private retirement accounts
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