The New York Times reported the crisis now gripping Chile. During the heyday of Pinochet’s love affair with free-market forces, when Chilean economists trained at the University of Chicago loved Milton Friedman’s libertarianism, Chile privatized social security.
President George W. Bush, like other conservatives, admired Chile’s solution. Eliminate guaranteed defined-benefit pump signs and direct a portion of employees’ wages to the stock market, where they were sure to win greater growth even as they fed the stock market. Bush tried to privatize Social Security, with Chile as a model of success. But now we learn that Chile did not succeed. Its privatization has been a disaster for workers.
Another epic fail for privatization.
“SANTIAGO, Chile — Discontent has been brewing for years in Chile over pensions so low that most people must keep working past retirement age. All the while, privately run companies have reaped enormous profits by investing Chileans’ social security savings.
“The bubbling anger boiled over in July when Chileans learned that the former wife of a Socialist Party leader was receiving a monthly pension of almost $7,800 after retiring from the prison police department. That figure dwarfs the average monthly pension of $315, which is even less than a monthly minimum-wage salary of $384.
“In a country already battered by widespread political and corporate corruption, this was the last straw.
“Hundreds of thousands of people marched through Santiago, the capital, and other cities to protest the privatized pension system. More than 1.3 million people, according to organizers, turned up in August, the largest demonstration since Chile’s return to civilian rule in 1990.
“One protester was Luis Montero, 69, whose monthly pension is about $150. Like many Chileans, Mr. Montero has mainly worked informal jobs without a contract at wages too meager for him to save enough for retirement. He still does maintenance work at a school to make ends meet.
“I’ve worked my entire life and I’d like to stop and rest, but I can’t,” Mr. Montero said. “I have no idea what I will do when I get older.”
“In 1981, the military dictatorship of Gen. Augusto Pinochet privatized the old pay-as-you-go pension system, in which workers, employers and the government all contributed.
“Under the privatized system, which President George W. Bush hailed as an example to follow, workers must pay 10 percent of their earnings into accounts operated by private companies known as pension fund administrators, or A.F.P.s, the initials of the term in Spanish. The administrators invest the money and charge workers a commission for transactions and other fees. Employers and the government do not make any contributions to the workers’ accounts.
“Chileans were given the option of keeping their old plan or switching to the new system. Most switched. But those entering the work force after 1981 had to invest in the privatized system. (The armed forces and the police were exempted from the change and today enjoy pensions several times higher than those available in the privatized system.)
“The money invested by the administrators bolstered Chile’s capital markets, which stimulated economic growth and yielded reasonable returns. Today six A.F.P.s — half of them owned by foreign companies — manage $171 billion in pension funds, equivalent to about 71 percent of Chile’s gross domestic product, according to the office of the supervisor of the pension funds.
“But the pioneering privatized system has failed to provide livable pensions for most retirees. If the stock market dips or investments go awry, workers’ savings and retirees’ pension checks decline.
“The pension system is unfair,” said Romina Celis, a 28-year-old teacher who marched in one of the protests. “I don’t know what formula we can use, but there has to be more state participation. We must continue protesting. The thought of reaching old age so precariously is scary.”
“Women fare worse than men do because they earn less, are more likely to work intermittently, retire earlier (the retirement age is 65 for men and 60 for women) and have a longer life expectancy.”
Diane Ravitch's blog 
If not for a blue dress Clinton I would have privatized our Social Security.
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Dienne: Didn’t Clinton want private accounts as an addition to the regular SS account, not as a replacement? Clinton was certainly a corporate friendly president and was to the right of Eisenhower.
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I think what Dienne’s referring to discussions within the administration that were never made public. There have been at least a couple insidery-type books that describe this. The social security plan that Clinton unveiled to the public was post-Lewinsky.
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Billionaires like Pete Peterson have spent millions over decades to destroy Social Security. The corporate elites really resent the fact that working class Americans have such a program. SS makes all the difference in the world to retired working class Americans, without it, they would be destitute and begging in the streets. SS does not need major surgery just some minor tweaking such as raising or even eliminating the SS wage tax cap. IRAs are no replacement for SS, they are a scam and can not supply enough money for retirement. Private accounts create winners and losers while SS is a dependable source of income for millions of retirees through ups and downs in the general economy. The retirement age should NOT be raised but SS should be strengthened not cut or trimmed.
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Whoops, I goofed, meant to say 401Ks, NOT IRAs.
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The billionaire oligarchs, you know the less than 1 percent of the total population, benefit from this and they will not back off from privatization of everything, even public toilets where we’ll have to pay to use one, and the Donald Trumps of the world will figure out a way to charge us for the air we breathe.
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We should watch and learn from Chile’s disastrous mistakes. First of all, do not privatize and monetize your public schools as they are the life blood to a better future for all citizens. Secondly, privatizing Social Security would plunge millions of senior citizens into deep poverty as most Americans depend on this social safety net. Privatizing would send many elderly into freefall as they would no longer have a source of dependable income. In Chile the financial services industry grabbed up to 50% of the pensions in “fees,” essentially robbing the elderly. After our 2008 meltdown and the recent Wells Fargo scandal, we cannot trust financial services any more than we can trust charter managers to “do the right thing” because their main goal all about profit at any cost, not providing a social safety net or protecting and serving young people.
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Social Security is actually in very good shape with $2.8 TRILLION, with a T, in assets. SS is not in crisis and it will not go bankrupt or bust in about 2034. The trust fund will be depleted in 2034 IF nothing is done. As I stated before, the solution to the future trust fund shortfall is to simply raise or eliminate the SS wage tax cap. Even if the trust fund were allowed to be depleted, SS could still pay over 75% of benefits. Even that would be better than privatizing SS.
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The only reason SS is perceived to be broke by too many ignorant people, thanks to endless political propaganda, is that the Congress spent all of SS’s money as it flowed in.
SS is funded by its own tax stream and cannot be supported by the general fund just like the U.S. post office has to support itself with revenue from postage and shipping supplies sold at post offices. The trillions SS has is all based on Congressional IOUs and any funds flowing in from the SS tax that Congress keeps spending because of expensive wars based on failed nation building and lies, tax cuts to the rich, and the massive federal debt launched by President Reagan and fed by the two Bushes.
The federal debt is like a huge bonfire that the GOP feeds the most while blaming the Democrats. Conservatives are much better organized at fooling the public.
SS can be easily fixed but the current, extremist, foolish, hate-everything that is working class from unions to minimum livable wages with health care benefits, grid-locked Congress will never let that happen because it would cut into the weatlh growth of the less than 1 percent who are arguably all psychopaths. For sure, Donald Trump is a psycho. If he wins the White House forget about the American working class having anything beyond support for poverty wages.
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The investments (securities or special issue savings bonds) held by the SS trust funds are backed by the full faith and credit of the U. S. Government just like savings bonds. The government has always repaid Social Security, with interest. The special-issue securities are just as safe as U.S. Savings Bonds, just as safe as the savings bonds that millions of Americans own, just as safe as the currency in your wallet. The special issue savings bonds that are in the SS trust fund earn interest; if there were just a big pile of cash in the trust fund, it would not earn interest. The SS wage tax that is collected is more than is needed for the retirees, so the overage is placed in the SS trust fund(s).
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That’s good to know, but … Donald Trump has said that he is willing to default on the national debt, and what will he do to Social Security? DT has a history of bailing out of debts by using bankruptcies for his failed ventures while he always walks away with more money then he had at the beginning of the failures.
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“Bush tried to privatize Social Security,” Playing fast and loose with the facts, aren’t you? Why is it so difficult for you to be honest with the facts?
Bush had a SUGGESTION to ALLOW people who VOLUNTEERED to use a PERCENTAGE (20) and put that in a market account.
The Social Security fund will be depleted within about 30 years, unless something drastic takes place. Since you are already part of the “older segment of society,” YOU do not have to worry about it, because it will not take place until after you have passed away.
You may have, however, benefited from the cap on Social Security contributions (for this year, that is a maximum “taxable” income of $118,500). Anything you make over that, does not get “taxed” for Social Security.
But my children and grandchildren will be the ones who will have to bear the cost. So, if (and that is a guaranty, pretty much) I can get more out of a 30 year open market investment than Social Security will be able to pay out, why is that such a bad idea?
Or, what about this: People get “taxed” on their income for Social Security, forget the cap of $ 118,500.00. How about making that suggestion to your friend? Of course, that will raise her SS contribution from a measly % 16,353 (@ 13.8%) per year (IF she pays her full percentage, rather than an employee part) to a whopping $ 1,380,000 (Based on $ 10,000,000) Now there is a fair share I can get behind!
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I read the item and the responses. However, here’s another side of the coin:
I’m single. Between myself and my employer who is making contributions on my behalf, I have paid into Social Security an extremely handsome sum of money over the past 40 years. Based on the market returns over those 40 years my account should be worth millions. I have no children and have never been married. If I die right now, the government keeps all of my money. If my Social Security account was invested in a fund of my choice, I could give it the loved one of my choosing, listing them as my beneficiary.
Now there are politicians who want to “means test” Social Security. These are both Democrats and Republicans. So since I have a pension as a teacher; since I never gambled away my earnings, took expensive vacations, bought jewelry, etc., I am labeled “rich” and these politicians believe I should get less in Social Security than I am currently entitled under the law.
First off, I don’t even want to be in Social Security. As I wrote earlier, if the money was in a private account I could leave it to a loved one instead of to the bureaucrats in Washington, DC. But not only have I am my employer been taxed to the hilt, but not the politicians would love to be able to steal a portion of my Social Security.
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I don’t know anything about stocks, as far as I’m concerned, the stock market is nothing more than a lottery or casino game. There are winners and losers in the stock market. Good for you if you are a savvy investor. There’s nothing stopping anyone from investing in the stock market. SS has never missed a payment in all its years through wars, recessions and the almost depression of 2008. The stock market, on the other hand, has ups and downs, many people’s savings were wiped out in the great recession of 2008 but SS just kept chugging along. If your money was in a private account that was devastated by the recession, you would have nothing to leave to loved ones. No one ever seems to consider that possibility. Private accounts invested in ENRON, for example, went poof. SS is good as it is, private accounts are not the way to go. I am thankful for SS, it has made my life much better by far.
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Priovatizting such a system will always be a disaster because the bottom line of the money holders is more important to them than to the retirees.
WHY are people so hooked on privatization as the bee’s knees? Well, maybe just the rich are hooked on this ideology.
Social Security should be a system of guarantees to prevent poverty. It is, as you Americans say, a “no brainer”. I love that expression.
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Takk så mye! It’s not only a retirement program but it’s also an insurance program for those who become disabled and can no longer work.
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The lies being told about Social Security by politicians and pundits who are owned-and-operated by Wall Street have a single goal: To convince voters to allow converting Social Security’s mammoth $3 trillion surplus and huge ongoing revenue streams into 401(k) accounts from which Wall Street banks can reap billions in various types of “service charges.”
There are four key false claims that Wall Street wants to convince voters about: 1. “Social Security adds greatly to the federal deficit.” 2. “Social Security is spending more than it takes in.” 3. “Social Security’s surplus is nothing but IOUs.” 4. “Social Security is just another wasteful government bureaucracy.” Each of these claims is untrue, as shown below:
FALSE CLAIM #1: “Social Security adds greatly to the federal deficit.”
THE ACTUAL FACT: AARP reports that “Social Security operates at a surplus and has not contributed one dime to our nation’s budget deficit.” The facts are that Social Security is self-funding from three income streams: 1. Huge amounts of interest earned on Social Security’s $3 trillion surplus that’s safely invested in United States Treasury Bonds; 2. Huge amounts of income tax that’s paid on Social Security benefits and that goes directly back into the Social Security fund; and, 3. Huge amounts of income from payroll deductions.
FALSE CLAIM #2: “Social Security is spending more than it takes in.”
THE ACTUAL FACT: The Los Angeles Times reported in “The myth of the Social Security system’s financial shortfall” that even when Social Security income from payroll deductions dipped during the depth of the recession, the interest from investment earnings on the Social Security surplus not only paid all the temporary shortfall, but even added another $122 million to the surplus. Enemies of Social Security ignore that fact that Social Security has three sources of income: 1. Huge amounts of interest earned on its $3 trillion surplus that’s safely invested in United States Treasury Bonds; 2. Huge amounts of income tax that’s paid on Social Security benefits and that goes directly back into the Social Security fund; and, 3. Huge amounts of income from payroll deductions.
FALSE CLAIM #3: “Social Security’s surplus is nothing but IOUs.”
THE ACTUAL FACT: The Los Angeles Times pointed out in the article entitled “Social Security isn’t broken, so don’t ‘fix’ it” that Social Security’s nearly $3 trillion surplus is invested in United States Treasury bonds, the most secure security in the world and the security in which all the governments of the world, including China, put their surpluses. If United States Treasury bonds are “IOUs,” then the entire world is bankrupt. Calling United States Treasury bonds “IOUs” is nothing but pure deception.
FALSE CLAIM #4: “Social Security is just another wasteful government bureaucracy.”
THE ACTUAL FACT: In its above-cited article The myth of the Social Security system’s financial shortfall, The Los Angeles Times reported that Social Security’s administrative costs are less that 1% of expenditures, which is more efficient than the administrative and other charges that banks collect from people who have 401(k) plans and is well below the management costs of corporations.
SO, WHY THE LIES? It’s simple: Powerful Wall Street interests want to “privatize/personalize” everyone’s Social Security account by converting them into 401(k) accounts so that the banks can reap a windfall of profits from the management and other charges that banks drain from people’s 401(k) accounts.
The only thing that Social Security needs to keep it paying 100% of earned benefits to all who belong is for the taxable income ceiling to be raised so that those with high incomes pay their fair share. However, even if nothing is done, Social Security can provide 100% of benefits for another two decades and thereafter would still pay 75% of benefits.
LIES ABOUT PUBLIC PENSION PLANS
The same Wall Street strategy is behind the lies being told about how public employee pension plans are “bankrupting” states and therefore should be converted into 401(k) plans: There’s also about $3 trillion in public pension plans, and Wall Street banks would reap billions in so-called “management” and other fees that they drain from worker’s 401(k) plans if the public employee pension plans were converted into 401(k) plans.
THE ACTUAL FACT IS that nearly all of most states’ public employee pension benefits are paid from (1) the investment earnings on the pension’s trust fund, plus (2) payroll contributions from the pension plan’s active members, leaving only a very small percentage to be paid out of tax dollars. In fact, the non-political Boston College Center for Retirement Research reports that the national average state contribution to public employee pension plans is only about 5% of the typical state’s annual budget. That’s just 5 cents out of a state budget dollar, and that’s never going to “bankrupt” a state.
The figure that Wall Street’s owned-and-operated politicians and pundits use to shock voters into thinking that their state is deeply in debt to a public pension plan is something called an “unfunded liability.” The banks get away with this scare tactic because no one but an actuarial accountant knows what an “unfunded liability” really is. Here’s what it really is in simplified terms: To actuarially calculate an “unfunded liability” you take that small 5-cents-on-the-budget-dollar annual contribution to the pension plan and add it up for the next 30 years, increasing each year’s contribution to allow for inflation and other economic factors. The sum total of that 30 future years of small annual contributions is the “unfunded liability.” It’s typically a large amount — large enough to panic voters who think it’s an actual current debt, when in fact it’s only the 30-year sum of small annual contributions that are easily afforded, like a car payment.
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Excellent, well said, Scisne!
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In most cases privatization cost more than if the government operated the program There are a few exceptions to this but they are rare. Privatization is simply a way to transfer public wealth to private interest. It is championed by republicans and Wall Street democrats. They both favor policies that favor the 1% over the 99%.
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If they privatize Social Security millions of people will be living on the street in 10 years. Can you imagine the risk Wall Street would take on if they got their greedy paws on the safety net funds? They’d gamble it away in a decade.
Stop thinking these people are smart- they’re not. We watched them tank the world economy based on bad predictions of real estate values and borrower capacity to pay debt. They had tens of thousands of analysts and they made ridiculous errors.
They can’t even manage looking at income and determining whether someone can make the monthly payment on a mortgage, which is addition and subtraction.
Their intelligence and savvy has been WILDLY over-promoted. 99% of them got a simple debt to income calculation wrong which is how they ended up with all that bad debt. Any one of you could do one of those with a piece of paper and a pencil in ten minutes. The finest minds in finance screwed it up.
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That XQ superschools competition turned into yet another charter promotion event:
https://www.edsurge.com/news/2016-09-14-xq-institute-announces-ten-winners-of-super-schools-competition
I should have known- the board is packed with Obama people. Every week is charter promotion week in DC!
I don’t mind that all the Obama appointees promote charter schools 24/7- I mind them lying about it and saying they’re “agnostics”
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Ayn Rands ideas
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