Posted on 10/08/2011 4:15:06 PM PDT by xzins
The country of Chile has proven that through individual choice and privatization of public programs that economic freedom is achieved. The revolutionary privatization of Social Security in Chile has bulldozed big government and has allowed the economy and individual freedom to flourish. This country serves as a perfect model for America to look to.
Chile transitioned from an unsustainable public pensions program to an incredibly successful private program by ushering new workers into it. The new system is based on individual decision making. Entering into the work force, workers were given a private pension fund that requires them to contribute 10 to 20 percent of their income. The amount put into the fund depends on the age the employee wants to retire.
At retirement, the private fund is transferred into an annuity with an insurance company. The individual is given the choice to decide what insurance company to work with and what plan best fits the circumstances. If the individual is not satisfied with the company or plan, they have the freedom to change companies. This also allows competition between insurance companies, which would lead to better service and greater returns over time.
Chile set up transitional rules for insurance companies to ensure safety. Due to the radical nature of the privatization, the government wanted to direct companies into safe investment agreements in order to prevent the loss of large sums of money. Risky investments increase the chances of system failure. “If the system had failed in the first years, we would never have been able to try it again,” said Jose Pinera, Chile’s minister of labor. However, these rules provided the roots for a continual, successful retirement system. As insurance companies continue to grow more secure, they will have more freedom to broaden investment.
For those who were already paying into the public system, they were given a choice to stay public or to enter the private system. The major cost created by the transition is the money Chile loses from the people switching to the private system. The cost was financed by the selling of state-owned enterprises that would provide for those who stayed on the public pension system. Due to the success of the privatization, around 93 percent Chilean workers switched to the new program. The public pension program will be completely eliminated the day the last person in the system passes away.
The system has had immensely positive effects:
• It generated surpluses without raising taxes, inflation, or interest rates
• Old-age pensions are 40-50 percent higher than the public pension system
• Disability and survivor pensions are 70-100 percent higher than the public pension system
• Significant decreases in the payroll tax have contributed to an unemployment rate below 5%
• Savings rates have sky rocketed and have deepened investment
• Growth rates have more than doubled in the past 10 years
At a critical time when America’s debt is upwards of $14.7 trillion and unfunded future liabilities are more than triple that number, isn’t this is the kind of growth and freedom we deserve?
On the one hand Cain says he wants to institute a Chile-style retirement system. Under his 9-9-9 plan he eliminates all taxes that would fund such a program. So which is it going to be?
His 999 does not fund social security. That is probably why he brings in only about 1.2 trillion with his plan. Social Security will be funded by another required deduction going to your personal retirement account. In Chile that is from 10-20 percent of your income.
So, we really have 9-9-9-15
And we haven’t talked yet of Medicare, either.
There is a bubble danger with everyone suddenly dumping tons of new money into the stock market.
Its all a crap shoot, I guess.
Yeah I said so in 24
many believe the stock market to be one part gambling.
That’s why interest in a bank is a little safer. they spread the risk out over a lot of investments, but they pay a lower interest rate.
If they really vet their mortgage borrowers, then that is fairly sure money coming in over a number of years.
Thanks for the ping!
“You social security lock box didn’t because its EMPTY!”
I think that that you are the only one here that has made that point. Our Social Security payments have been going right into the general tax fund, ever since the Johnson Administration. The same media columnists that used to talk about a lock box are now telling us that Social security never was intended to be a public pension fund.
It has been just a few years since the Dems opposed Bush’s effort to privatize five percent of Social Security on the grounds that ordinary citizens are too stupid to be trusted with their own money. When you see Obama using stimulus money to shore up public union pension funds it becomes clear that a monkey would do a more responsible job of handling its own money.
Is this an open-ended annuity? If you die before the payout, do your heirs get the remainder of your investment? What happens if the insurance company goes belly up? Since poor people can't invest much, is their some kind of minimum retirement pay?
I need to know much more about this before I can say whether or not it's a good thing.
Medicare needs reform more than SS. In fact, I wouldn’t mind debating this issue for 5-10 years, but medicare and healthcare costs need to be debated NOW and worked on in the next 3-5 years!
This is a summary of the Chilean plan that is touted by more than just Cain.
I wish I could answer your questions, but like you, I’m going to have to await more details. The payment is to be 10-20% of an income. Does that mean the government will withhold 10-20% of a welfare check the same way they withhold 10-20% of a worker’s check? I don’t know.
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