President Bush’s Proposal to Privatize Social Security: It Will Create Winners and Losers, But Be a Wash for Most Participants

President Bush’s proposal to privatize social security relies on the stock market to make it viable. Long-term swings in the stock market will create social security winners and losers however, leading to fierce interest group infighting.

(PRWEB) March 22, 2005

President Bush’s proposal to privatize social security relies on the stock market to make it viable. As the proposal is currently understood, investing solely in a mix of government bonds and investment-grade corporate bonds will not produce the level of returns necessary to make this concept practical, and the results over the super long-term of 30-to-40 years will be a wash at best compared to the current social security (SS) system. Even a mix of 50% stocks and 50% bonds may not be enough.

The compounding of the higher returns from the stock market, both from capital appreciation and dividends paid, would have to be almost exclusively used to significantly better the current SS system. Due to long-term swings in the stock market however, when a worker retires - through no fault of their own – will now determine their retirement benefits under Bush’s proposal. This random occurrence will create both winners and losers, compared to the current SS system, and lead to fierce interest group infighting because the proposed SS system would no longer be considered fair for all.

Dr. Eric L. Prentis is the author of "The Astute Investor" ISBN: 0-9759660-0-6, and is an expert on the stock market. He has held a professional position as a registered investment adviser, and was on the faculty teaching in the graduate business program at the University of Southern California. This makes him superbly and uniquely qualified, from the standpoint of the stock market, to comment on President Bush’s proposal to privatize social security.

###


Contact