Wednesday, August 15, 2012

Why Rs Want to Privatize Social Security

For some time now, Republicans have wanted to privatize Social Security and have used the growing wave of Baby Boomers aging into retirement as a fear factor to try and make changes they want. Republican VP pick Paul Ryan is one of these people and has recommended privitization.

My assumptions when hearing of these plans are that Republicans want to do this because:

1) They fundamentally believe that the government has no role in providing any saftey net to retirees and want to turn the clock back to pre-Great Depresion policy.

2) While doing so, they would make it so that their backers on Wall Street...the big banks and investment firms...benefit by forcing individuals to buy privately managed funds for retirement that lack any of the guarantees and risk reduction that the current Social Security System does.

I am still sure that both of these to thigns are true. However, I saw something online that adds depth to my point #2 that I thought worth sharing...

In 2016, the first of the Baby Boomers MUST begin withdrawing from the retirement accounts. This will begin years of withdrawals by Social Security recipients out of the stock market as, say what you will about the market, Social Security still parks its money on Wall Street in the Social Security Trust Fund. But a Baby Boom run there will leave the banks deficient of captial to make their nut on.

Wall Street bankers know this and that the only way to truly replace those withdrawals is with new money. So the push is on to replace those Baby Boomer withdrawals from the Trust Fund with Generation X, Y, and Millennial deposits of their retirement money in a new, privatized system that would not only infuse them with cash but free them much more than the Trust Fund to "be creative" with the money. Naturally, this would be far, far riskier than the current system.

This makes (evil) sense to me. It explains the real motivation for the push for privatization...the "why" behind my point #2. It's a policy recommendation of convenience. Republicans want to destroy Social Security in the name of their "small government" fantasies, but they're dependant on Wall Street backers to run and win elections. Wall Street knows the Social Security Trust Fund will be depleated, but also knows it has bought some serious access and pull in DC. So, together...the Rs and the Wall Streeters have found something that will help both.

What's scarier is that Democrats - while traditionally the defenders of Social Security - are almost as beholdent to Wall Street as the Republicans are. Will the stick to their guns or cave?

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