I'm not sure what "privatize social security" means. My concept is not to force people into one system or another, but to give them a choice of what to do with their own retirement money. Is that what it means?

If Deborah Kromins hasn't been collecting SS retirement for some time, she'll find out that "her" pension was looted as it was collected. If she tries to collect from younger folks as others collected from her, she'll learn another lesson.

The only question is whether Kromins will figure out that the folks doing the collecting weren't doing her any favors.

i think kromins should fund senior executive's 100 million dollar severance package.

Exactly how does someone (executive or otherwise) loot a pension plan? Monies contributed into these vehicles (401(k)/defined benefit plans) are placed into a trust whose assets are either managed by the beneficiaries directly or trustees. Company management is unable to access these funds. Even in the event of termination of the plan, the funds remain in the trust.

In the case of Enron, the collapse of the stock (due to the frauds committed by senior management) and the poor decisions of beneficiaries who declined to diversify their holdings out of Enron stock lead to the destruction of the employees retirement plans.

Whatever your opinions of golden parachutes, these are funded by stockholders, who by holding equity positions, implicitly bless these contracts with senior management.

Exactly how does someone (executive or otherwise) loot a pension plan? By directing the pension plan to invest in something you have control over and then taking the money from there. Bush is doing it with Social Security. Most pension plans invest in the company's stock, leaving the officers to steal the value of it.

Education alone is not enough. You need timely and accurate information in a form that is both meaningful and understandable. An investor who has another job is never going to be able to overcome the advantage of the CFO in making decisions about whether or how much to invest in a company.

Simon is partly right. AFAIK most company pension plans are NOT invested in company stock, but some are. If a CEO invests the pension money in company stock in order to prop up the stock price, and if he sells his personal company stock at the inflated price, then he has effectively looted the pension plan.

I don't see how this applies to Bush and Social Security. Long before Bush, excess SS monies have been lent to the federal government. Nobody is "looting" SS.

The real problem is that as more people retire, SS will produce a smaller and smaller surplus, and eventually a bigger and bigger deficit. Then SS will ask the federal government to pay back the loans. This will put pressure on the federal budget, requiring some combination of cuts in SS benefits, cuts in other federal spending, and increases in taxes. Otherwise, the National Deby will escalalate.

Medicare is in a similar condition to SS.

Simon:

Can you describe where Bush is directing the investment of SS funds into something over which he has control? With the current pay-as-you-go system, current intake of 'contributions' are paid to current retirees. T-bills are sold when necessary to run a debt.

On another note:

It seems that the root of the problem of SS is that your contributions are never really attached to you as an individual. If a private insurance company were to offer retirement policies with the exact same criteria as SS operates under, they would be jailed for running a Ponzi scheme.

Listen to the uproar from statists about even directing a mere 6% of your SS contributions into a private account, controlled by YOU, YOURSELF. It's all about perpetuating the 'lockbox' myth. There is no trust fund.

gary b: i'm surprised that you have concluded that the enron management committed fraud. perhaps that conclusion is premature.

Trustees manage pension funds. These are not the province of the companies general management.

Yes, some of these plans invest in company stock because they form the basis of these companies contributions to these plans. But as an employee, shouldn't you exercise some thought about the compensation package which may include these kinds of plans) before working in that environment?

As for other investments of pension plans, there are many Federal rules against over concentration and against investments in related party vehicles in which company management has a personal interest.

Of course Enron's management was involved in fraud, the Ashcroft Justice Department has got convictions of Fastow and his wife for their involvement in the off-balance sheet partnerships used by Enron to move debt off it's balance sheet and has Ken Lay and Skilling under indictment.

"privatize social security" means, as best as i can tell, to make it neither social nor secure, ie. to destroy it. I don't think thats what americans want, I think americans want to receive social security when they retire. But don't let that stop people from wrapping it up with nice words like private and choice and whatnot.

I don't think people want to be helpless sheep. I think they want the golden parachutes to pay up. And like most victims, I don't think its a sign of helplessness to get help from the government in doing that.

The privatization proposals boil down to establishing some real property right's like a 401(k) with a diversified portfolio of bonds and stocks invested in a market index fund. This would enable to "owners" and see market rate returns on their Social Security "contributions." Market rate returns would boost the retirement pay significantly over it's current meager or negative rate (black males experience negative returns on their "contributions" due to higher mortality rates) and a property right would mean undistributed assets would be passed on to heirs.

Of course, many of these privatization proposals would make participation voluntary. Those that want their economic lifelines subject to the whim of elected officials could continue to do so. For me, I'll take independence.

From what I have read in the past year or so, it appears that some companies are not making pension plan payments, in order to "pad" the bottom line of the company(i.e., make it look more profitable, via cash flow figures).

Also, unfortunately I forget the details, but within the last six months (or thereabouts), Congress voted to allow corporations to not fund mandatory pension disbursements.

Furthermore, in the case of Farmland (and a few others), their pension obligations were negated via bankruptcy.

I don't think it fair to blame employees for believing that their pension "guarantees" were, in fact, guarantees. I assume that in at least some cases, lower wages were accepted in light of pension benefits.

Somewhere out there is a website for the Pension Benefit Guaranty Corp. (a quasi-gov't entity). I think you'll see that corporations are bailing on their pension obligations, leaving an ever-larger I.O.U funded by taxpayers, ala the Savings & Loan scandal of a decade (plus) ago.

Now you may be able to say "buyer (employee) beware." But when many of these workers signed on decades ago, a pension was a pension was a pension. They worked for years/decades, and thought there was a contractual arrangement --- i.e., they thought they were being "responsible" in providing for their retirement.

And don't think for a minute that if the "rules" for Guaranteed Pensions via corporate employers can be changed this late in the day, they won't be changed in the future for "individual" retirement instruments.