[Homestead] Personal Account disinformation
tvoivozd at infionline.net
Thu Dec 30 11:28:30 EST 2004
December 27, 2004, 10:05 a.m.
The Lesson of Thrift
Personal accounts already work (which might be why the critics are so
Critics of the Bush administration plan to reform Social Security with
personal accounts have a seemingly endless supply of reasons why it
can’t possibly work. You know the litany: It’s too risky. It’s too
expensive. It’s too complicated.
The critics never mention that there’s already a government-administered
retirement system that has shown for over 15 years that personal
accounts are prudent, inexpensive, and simple. It’s the Thrift Savings
Plan of the United States federal government, currently serving 3.3
million government employees. (AHA, the truth will out---3.3 million
GOVERNMENT EMPLOYEES---NOT the individual or collective sucker having
wages withheld and sweet-talked into the illusion of all-gain, no-pain
individual accounts shovelled into the clutches of those kindly,
benevolent traders waving pieces of paper on the floor of a commodity
exchange---and their accomplices in the back office of a Wall Street
Stock Brokerage firm.
The years since Thrift was first offered in 1987 couldn’t make for a
better laboratory to crash-test a personal-account system. During this
period there have been both bull and bear markets that were among the
most severe in history. Through year-end 2003, investments in Thrift
personal accounts have earned $44.4 billion in profits for system
participants — an average of more than $13,000 per participant.
Over time and on average, 65 percent of the value of Thrift participant
accounts has been invested in a special money-market account operated by
the U.S. Treasury. That’s been responsible for about $20.3 billion of
the total investment gains. But almost as much — $19.8 billion — came
from an S&P 500 Index fund. That’s remarkable because, on average, only
30 percent of the value of participant accounts has been invested in the
S&P 500 fund.
tvoivozhd---the above plan bears zero relationship to the Bush proposal
which should be deep-sixed out of hand. The Bush proposal is NOT
personal investment in a cheaply managed index fund----it envisions each
individual account be managed (as an individual account) by a stock
broker---20% being siphoned off annually as broker administrative cost.
I have never seen a rational explanation of how you can bleed off 20% of
your capital each year and make an investment account profit on the 80%
remainder. The odds of doing so are about five percent better if you are
yanking on the handle of a slot machine in Las Vegas.
A little truth in argument is always helpful---Bush is NOT advocating
that the poor working stiff has access to the U.S. Thrift Savings Plan
exclusively available to Federal Employees---now that would really panic
the Cato Institute and everyone in The White House.
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