Monday, February 28, 2005

State Privatization Programs Unpopular, Unsuccessful

President Bush has said that Americans want to join the "ownership society," and his Social Security privatization plan counts on two-thirds of those eligible diverting funds into private investment accounts.

But public employees in seven states -- offered the chance for similar private accounts over the past decade -- almost universally rejected the opportunity.

Of more than 1.5 million public employees offered the choice of accounts at various points in the last decade, about 125,000, or 8%, have signed up, according to a Feb. 22 story in the Los Angeles Times, with the vast majority of those during the stock market boom of the late 1990s.

Furthermore, the employees were found to lack investment knowledge -- putting them at risk to underperform their colleagues avoiding the private accounts. That apparent lack of comfort was often cited as a reason for the private accounts unpopularity.

***

How unpopular are the privatization efforts at the state level?

Consider:

-- In Florida, early surveys suggested more than half of the state's 600,000-plus public employees suggested would go for accounts. But since the accounts' introduction in 2002, 43,000 employees, or about 7%, have enrolled.

-- In Michigan, in spite of the state offering to contribute generously to the accounts, about 3,000 workers out of 57,000 signed on since the format was created in 1997, according to state officials.

-- In Ohio, teachers and state and local workers were given a choice starting in 2001 of private accounts or a hybrid that combined a pared-down pension with an account. Less than 5% picked accounts.

-- When Montana made a similar offer to 30,000 state workers in 2002, it spent $1.5 million to set up the new system, conducted more than 600 seminars and gave people a year to decide. The result, according to Michael J. O'Connor, executive director of the state's Public Employee Retirement Administration: 900 chose accounts.

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In many cases, state and local pensioners felt uncomforatable making their own investment decisions -- the very power that Bush touts when he trumpets the privatization program.

"We get individuals into our training sessions and ask them about basic investment terms — What is a stock? What is a bond? — and they rate themselves as practically unknowledgeable," Washington state retirement director John F. Charles told the Times. The result, Charles and others said, has been a series of investment choices that officials fear will leave many workers without adequate funds after they retire.

In West Virginia, teachers who shifted from pensions to accounts plowed 40% of their money into investments so conservative that they effectively ensured that they would get a pension-like payment in old age — but at a lower benefit level than in the system they had left behind.

In Montana, those who chose accounts allowed the majority of their money to flow into a default investment set by the state, a balanced fund of half stocks and half bonds. While that may seem like a sensible decision, O'Connor told the Times that it showed account holders were not actively managing their money.

In Nebraska, state and county workers failed to outperform those with fixed-benefit pensions. The Nebraska Legislature quickly ended the program.

"If people have private accounts in Social Security and they're left to make the decisions themselves, the results likely will not be positive," Anna Sullivan, executive director of the Nebraska Public Employees Retirement Systems, told the Times.

Joseph Jankowski, executive director of the West Virginia Consolidated Public Retirement Board, echoed Sullivan's remarks: "The vast majority of people don't have the inclination or comfort level to be responsible for their own retirements." The Times reports that West Virginia board officials are currently debating whether to drop the state's private account plan.

10 Comments:

Anonymous Anonymous said...

Certainly news the Bush Administration doesn't want you to see.
This privatization plan will go the way of Hillary's national healthcare proposal. But it was easier to define Hillary's motivations than those of Bush. Does anyone really believe that Bush truely believes in his heart social security is in as much jeopardy and warrants as drastic a measure as he represents? I think not.

Just as no one believed Bush truely was convinced Sadaam had WMD and he had acted another agenda -- and evidence shows Bush intended to do something about Sadaam well before 9-11 -- Bush has another agenda here. Could it be creating a winfall for his buddies on Wall Street?

10:53 AM  
Anonymous joe said...

The basic problem with the president's expected SS privatization plan is that it doesn't solve the problem of solvency. If anything, it makes the system less solvent. Even the administration has admitted that, at best, the privatization plan will be "revenue neutral" over 75 years.

So essentially, this is a glorified way to reduce benefits. But the GOP spin machine doesn't mention that. It only talks about how great it will be for all of us to be in the "ownership society."

And if the stock market always performed as it did in the Clinton years, I'm sure privatization would be a great idea. Bush, don't forget, first hooked onto the idea of privatization in the late 1990s -- in the midst of that bull market. But that's not the way the market generally works.

11:58 AM  
Anonymous Anonymous said...

what is the reference above to WMDs doing here.....didnt the entire world didnt think Hussein had WMDs. I am against the war but lets please not make up stories.

I agree with the above blogger response. privatization does nothing to solve the problem.

One, possibly unintended byt nonethless important, aspect of Bush trumpeting his SS plans is that he has basically forced congress to act on an issue it otherwise may not have touched for years. That is a good thing. Hopefully, they can fix the problems now in some bipartisan fashion.

1:45 PM  
Anonymous Anonymous said...

If Congress acts on it -- and that's a big if -- it will be interesting to see how many up for re-election in 2006 support privatization.

Will Democrats (and perhaps some moderate Republicans) dare vote against the president, and then be faced with ad campaigns about how they "believe in big government," favor "allowing SS to become bankrupt" and so on?

Will the AARP and other anti-privatization groups support these reps and senators?

Because if the American people are convinced that Congressman X is trying to single-handedly wipe out their retirement savings (just because Congressman X didn't agree with the president), then the Congress will merely shift further right in 2007, and privatization will be that much closer to passage.

3:49 PM  
Anonymous Anonymous said...

To the above blogger.
It is a complete, absolute falsehood and fabrication to even hint "the whole world thought Sadaam have WMDs." You have been brainwashed within the GOP bugle call to war.
Sorry to be redundant, but it is apparantely not getting through.
There was plenty of dissention on the subject of whether Sadaam had weapons at the time Bush first aimed cannons at Bagdhad. As I recall it, the dissention came from many global intelligence and military experts, UN representatives, Democrates, and even those within Bush's own party.
The big problem is that Bush refused to listen while the mainstream media intentionally relegated the dissention, which turned out to be accurate, to the back pages.
I know this because I counted myself among those skeptical of Bush's claims at the time. I then applied a magnifying glass to the daily newspapers and turned my radio dial to the left to find those buried stories disputing Bush's WMD claims.
And it needs to be said again because some never seem to get it. As I recall it, Bush represented to congress and the country that war would be pursued as a last resort and careful steps encompassing the UN inspections would be concluded prior to any attack.
Bush violated the spirit and intention of the so-called war resolution, which many believed was designed to give Bush leverage in dealing with Sadaam and the UN.
If Bush had followed the resolution, the WMDs would not have been found and Sadaam would have most likely been dealt with in a less costly and deadly way.
People seem to forget that the insurgency we are fighting in Iraq is a creation of Bush administration policies. Bush created the enemy we are wasting away valuable resources and human lives attempting to quash.
The whole thing was mishandled from the beginning.

Sorry for the interruption. Now back to our regularly scheduled program on social security.

5:32 PM  
Anonymous Anonymous said...

wait a minute....let me understand something. Put aside the issue of whether or not we should have gone to war when we did--i do not necessarily disagree with you.

I can accept the fact that many thought that hussein did not present an imminent danger etc...

But are you telling me that most thought that he didnt have WMDs. My recollection is that his own people thought he had them, other arab countries thought he had them, france thought he had them, russia and germany too. The UN passed resolutions to allow inspectors into his country because they thought he had them and had not accounted for them. I would venture to say that most people are shocked he didnt have them. Evidence (other than the argument that it was fabricated by Bush and amazingly pushed upon the entire civilized world) suggested he had them. Past presidents thought he had them. Are you living on the planet earth?

The fact that most thought he had them does not mean they thought there was justification for going to war. That is a different issue.

I also seem to recall Kerry thinking he had them as well.

The issue at hand at the time was to give the inspectors and peace more time--fair enough. But to suggest that most people thought he did not have these weapons is like suggesting the moon is made of cheese.

and back to the discussion at hand, a bi partisan "fix" to SS does not necessarily mean private accounts. I do not believe private accounts will be in the mix when all is said and done. not enough support for them, too costly, and too politically charged. If anything, will be a mix of reduced benefits, higher rate, increased wage base for paying in etc... and i hope they can fix it. instead of focusing on bush and team strongarm stuff as mentioned above, i am rooting for a bipartisan response.

7:03 PM  
Anonymous Anonymous said...

Maybe the moon is made of cheese.
I never said "most" people thought he had them, I said there was an educated and informed group of people who rightfully using supporting evidence doubted he had WMDs, or at least any significant numbers of them. These people were silenced by the Bush drumbeat to war.
I also said enough countries, France and Germany included, believed the proper thing to do was to allow the UN inspections to run the course to erase any doubts as well as deal with any potential problem. Yes, many thought Sadaam had WMD, but just as many had doubts.
There were also people in Sadaam's own cabinent who did not believe he had WMDs. Sadaam himself repeatedly denied publicly he had WMDs and warned UN inspectors they would not find anything. (Yes, but why should anyone believe a "terrorist" was the Bush spin. Never mind the U.S. supported him while he gassed the Kurds). There were also a fair number of people, who history would prove turn out to be right, who insisted Sadaam got rid of WMDs following pressure from the UN during the mid-1990s.
If you think the world uniformly indisputably believed Sadaam had WMDs at the time Bush attacked the country, then it's time for you to review history. It you believe it's true the world was undeniably, indisputably convinced of an imminent threat from Sadaam, then why did most of the world reject Bush's preemptive war on the country? Consider yourself among those who brought and sold the Bush administration spin.

9:58 AM  
Anonymous Anonymous said...

so wrong.....read my post again. i do not suggest the world indisputably agreed on anything about imminent threat, they did not. you are twisting words--not uncommon on this blog.

however, most of the world, and the positions of most every country, was that he had the weapons. The fact that Hussein said one thing or another really is irrelevant in large part as he had consistently lied about everything....and the idiotic mention of our support of him against the kurds is irrelevant. that comment is the typical liberal response about how when america chooses to support one leader versus another, that it somehow justifies that leaders position later. Such a tired and worn out statement. And unintelligent and naive. we are certainly not perfect in our actions but listening to some people, you wonder why they live here.

this entire argument is absurd. Believe what you want. I just hope the democrats wake up soon and recognize what they sound like these days.

3:33 PM  
Anonymous Anonymous said...

I have always thought that this blog had potential. I am interested in a balanced discussion of Social Security. I will check back some time later to see if you have started one. So far, you have not. You have mostly repeated the partisan talking points.

surprise me. give us all the facts, and the arguments on both sides.

Averroes

9:10 AM  
Anonymous joe said...

I think JABBS has done a good job pointing out facts -- not spin points -- that haven't been on the news, or at least not that much.

Is it balanced to repeat GOP spin points that are factually inaccurate? Should JABBS be required to say that the transition costs are "$1 billion to $2 billion," rather than citing the GAO report saying the costs may be $15 billion over the decades?

Should JABBS overlook that the SS privatization plan is "revenue net neutral," as admitted by an administration official?

What GOP spin points are there that actually can be proven factually true?

12:11 PM  

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