Wall Street Welfare

The NEOCON approach to Social Security is to tell us that the current surplus in the Social Security Trust Fund is irrelevant. To some extent they have a point. Whenever pensions are invested in the very organization that is issuing the pension you have what is called an unfunded plan. Since Social Security funds are invested in US Government Notes and Bonds we can say that Social Security is unfunded. That is why regular pension plans have a limit on the percentage that can be invested in the company sponsoring the plan. Bankruptcy would leave you without a pension if all you had was the company's guarantee or investment in the company's stocks and bonds. Look what happened to the ERON employees who kept their 401k money in ENRON stock.

Governments have an easier time of it when getting out from under their obligations. They merely need to change the law. If you want to get away from paying the debt to Social Security you merely need to declare that there is a crisis and tell people that they can do a better job investing their own money than government can. Then change the law. Unfortunately, many younger people who do not know history seem to fall for this argument.

Privatization can be called the "Wall Street and Corporate Welfare Act". It will help brokers, investment advisors, and current shareholders. In addition, placing government (Social Security) funds into the stock market will tend to raise stock prices. This would help firms with under funded pension plans meet their obligations through higher stock prices. It will also help top executives meet the goal of rising stock prices and increase their incentive compensation. People, on the other hand, could find that their investments are withering due to high transaction costs and fees. This is what happened when Chile converted its Social Security to private accounts.